Hexion ups pricing; Berry Plastics price talk emerges; Carmike cuts revolver size; Secondary gains persist

By Sara Rosenberg

New York, May 19 - In the bank loan primary market, Hexion Specialty Chemicals Inc. raised pricing on all tranches of its $775 million credit facility (B1/BB-) Thursday by 25 basis points, Berry Plastics Corp. set price talk on its newly launched term loan C that has already been met with strong demand, and Carmike Cinemas Inc. reduced the size of its revolver by half and set covenants.

Meanwhile, in the secondary market, things continue to look up as all the indexes were higher and paper in general has been steadily chugging along to better levels with the momentum first starting Wednesday afternoon and continuing all through Thursday's session.

Hexion flexed pricing higher on all three tranches contained in its credit agreement, with spreads on the $500 million seven-year term loan, $50 million synthetic letter-of-credit facility and $225 million six-year revolver all going to Libor plus 250 basis points from Libor plus 225 basis points, according to market sources. The revolver has a 50 basis point commitment fee.

This is the second round of changes to this deal since launch. The first modifications involved tranche sizes, at which time the term loan was upsized to $500 million from $440 million after the company downsized its proposed bond offering to $150 million from $250 million, and the $50 million synthetic letter-of-credit facility was added to the structure after the revolver was downsized to $225 million from $275 million.

On Monday, Hexion priced its downsized $150 million issue of second-priority senior secured floating-rate notes due July 15, 2010 at 98.846 with a coupon of Libor plus 550 basis points. Price talk was Libor plus 575 basis points, having been upwardly revised from Libor plus 475 to 500 basis points.

J.P. Morgan Securities Inc., Credit Suisse First Boston and Citigroup are joint bookrunners and joint lead arrangers on the credit facility, with JPMorgan Chase Bank also acting as administrative agent, Citigroup as syndication agent and CSFB as documentation agent.

The credit facility and the bonds are being obtained in connection with Apollo Management Group LP's acquisition of Bakelite AG from German chemical maker Ruetgers AG. Bakelite will be combined with Columbus, Ohio-based Borden Chemical Inc., which is already owned by Apollo, Resolution Specialty Materials Inc. and Resolution Performance Products Inc. to form a new company called Hexion.

In conjunction with the mergers, Hexion will come to market with an $800 million initial public offering of common stock.

Proceeds from the term loan will be used to repay portions of debt of the predecessor units that Apollo is forming into Hexion.

Revolver borrowings will be available for working capital and other general corporate purposes.

Berry price talk

Price talk on Berry Plastics' $465 million term loan C (B1) - a new tranche that is being added into the company's existing credit agreement - surfaced as the deal launched via a bank meeting Thursday with an opening spread of Libor plus 225 basis points, according to a market source.

Furthermore, the bank meeting itself was said to have gone "great" as early commitments have already started coming from investors, the source said.

"Lots [of orders] and in size - investors know what they like and like what they know," the source added.

Proceeds from the term loan C will be used to fund the $445 million acquisition of Kerr Group Inc., a Lancaster, Pa.-based maker of plastic packaging. Closing of the acquisition is scheduled for the second quarter.

The company is also looking to amend its existing revolver and upsize it to $150 million from $100 million. This revolver is being syndicated on "offer - 50 basis points for $10 million and 75 basis points for $15 million," according to the source.

Berry's existing term loan B, which according to a recent 10-Q filing is now sized around $330 million, will remain in place as is.

Goldman Sachs & Co. and JPMorgan are the lead banks on the deal.

The Evansville, Ind., maker of plastic containers said that on a pro forma basis its leverage is expected to be similar to the level after its acquisition by Goldman Sachs Capital Partners and JP Morgan Partners in July 2002 and after it acquired Landis Plastics in November 2003.

Carmike cuts revolver size

In a second round of tweaks this week, Carmike downsized its revolver to $50 million from $100 million on Thursday but left price talk at Libor plus 225 basis points, according to a market source.

Furthermore, the syndicate set covenants, including total debt to EBITDA at 5x and EBITDA to interest at 2x, the source added.

Earlier this week, Carmike revised the ticking fee on its delayed-draw term loan as investors needed a little extra push to fill out the book on a tranche that has a lengthy two-year draw time limit. The syndicate sweetened the fee on the $185 million delayed-draw term loan to 75 basis points for six months, 100 basis points for the next 12 months and 150 basis points for the last six months, as compared to the original proposal that was for a fee of 50 basis points for the full delayed-draw period.

Price talk on the delayed-draw tranche, which has a final maturity of seven years, is Libor plus 250 basis points - unchanged since launch. Proceeds are only available for future acquisitions.

The company's $405 million facility (B1/B) also contains a $170 million seven-year term loan talked at Libor plus 250 basis points.

Both term loans are being offered to investors at par.

Bear Stearns is the lead bank on the deal. Wells Fargo Foothill signed on early as documentation agent committing $50 million to the deal.

Proceeds from the revolver and term loan will be used to refinance existing bank debt and help fund the previously announced acquisition of George Kerasotes Corp. for $66 million.

Pro forma for the George Kerasotes purchase, senior leverage will be 2.1x, total leverage will be 31/2x and EBITDA to interest coverage will be around 4.4x.

Columbus, Ga.-based Carmike is the second largest theater operator in the United States in terms of number of theaters, with operations in 36 states.

Spanish Broadcasting upsizes

Spanish Broadcasting System Inc. increased the size of its first-lien term loan (B1/B+) to $325 million from $300 million and essentially reverse flexed pricing by 25 basis points, according to a market source.

The tranche is now priced at Libor plus 200 basis points. Originally the deal was launched with pricing of Libor plus 225 basis points but there was a step down to Libor plus 200 basis points conditional on completion of a contract asset sale and the deleveraging associated with that sale. However, because the tranche was oversubscribed, the syndicate decided to take pricing down to that lower level and eliminate the grid entirely, the source said.

Proceeds from the additional $25 million of first-lien term loan debt will go on the balance sheet for general corporate purposes.

Spanish Broadcasting's $450 million credit facility also contains a $25 million revolver (B1/B+) with an interest rate of Libor plus 225 basis points and a $100 million second-lien term loan (B2/CCC+) with an interest rate of Libor plus 375 basis points.

The second-lien term loan contains call protection of 102 for two years, 101 in year three and par thereafter. However, there is a carve-out that if the company completes the already contracted sale of its Los Angeles KZAB-FM and KZBA-FM radio stations to Styles Media Group within a year it can use proceeds from the sale to repay its second-lien loan at 101 (as opposed to at 102).

Allocations on the credit facility are expected to go out some time next week.

Lehman Brothers Inc. is the lead arranger on the deal, and Merrill Lynch and Wachovia Securities are agents.

Proceeds from the new term loans will be used to repay existing bank debt and retire all the company's 9 5/8% senior subordinated notes due 2009.

Spanish Broadcasting is a Coconut Grove, Fla., radio broadcaster.

Canon ups spreads

Canon Communications LLC increased pricing across the board on its proposed $129 million credit facility, raising first-lien spreads by 100 basis points and the second-lien spread by 150 basis points.

Canon's $10 million five-year revolver (B3/B) is now priced at Libor plus 375 basis points, compared to original price talk of Libor plus 275 basis points, the $85.5 million six-year term B (B3/B) is also now priced at Libor plus 375 basis points, compared to original price talk of Libor plus 275 basis points, and the $33.5 million unrated 61/2-year second-lien term loan is now priced at Libor plus 750 basis points, compared to original price talk of Libor plus 600 basis points, according to a syndicate document.

The revolver has a 50 basis point commitment fee.

Credit Suisse First Boston is the sole lead arranger and sole bookrunner on the deal.

Proceeds will be used to help fund the leveraged buyout of Canon by Apprise Media LLC, a niche media company backed by Spectrum Equity Investors. Currently, Canon is owned by Veronis Suhler Stevenson.

Canon is a Los Angeles-based producer of print publications, trade shows and digital media for the medical device manufacturing market and allied packaging, plastics and electronics markets.

Secondary improves

Levels in the secondary loan market continued to rally on Thursday as market technicals have improved now that hedge funds have stopped selling and buyers have been flooding into the market looking for some relatively cheap deals.

"Things really feel stronger. It really kicked in yesterday around noon and has just continued to get better. From yesterday's lows the market in general is up about half to three quarters of a point today," a trader said.

For example, Metro-Goldwyn-Mayer Inc., a Los Angeles-based entertainment content company, saw its paper consistently trading back around par on Thursday, with offers even going as high as par 1/2, whereas on Wednesday morning investors could buy the paper at 991/4, the trader said.

Another example is Select Medical Corp., a Mechanicsburg, Pa., operator of specialty hospitals, which saw its paper also trading around par - with levels closing out the session around 99 5/8 to ¾ bid, par offered - whereas on Wednesday morning investors could buy the paper at 991/4, the trader added.

On Wednesday, by close, the market as a whole was said to be up about 3/8 of a point, meaning that levels gained another 1/8 to 3/8 during Thursday's session.

Kerr-McGee closes

Kerr-McGee Corp. executed definitive documentation on its new $5.5 billion senior secured credit facility consisting of a $2.25 billion senior secured six-year term loan B, a $2 billion senior secured two-year term loan X and a $1.25 billion senior secured five-year revolver.

The term loan B, which was upsized by $250 million during syndication, is priced with an interest rate of Libor plus 250 basis points and contains a step down to Libor plus 225 basis points under the condition that the company repay its term loan X and leverage is below 2x. At launch, the term loan B was talked at Libor plus 200 basis points and then price talk headed up to the Libor plus 225 basis points to 250 basis points range during syndication.

The term loan X is priced with an interest rate of Libor plus 225 basis points, flexed up from original price talk of Libor plus 175 basis points during syndication as well.

The revolver, which was also upsized by $250 million during syndication, is priced with an interest rate of Libor plus 225 basis points and contains a step down to Libor plus 200 basis points under the condition that the company repay its term loan X within nine months. After nine months, regardless of whether the term loan X was repaid or not, revolver pricing will be determined by a leverage-based grid. At launch, the revolver was talked at Libor plus 175 basis points.

By increasing the total size of its credit facility by $500 million, combined with the fact that the company had over-funded by $500 million, Kerr-McGee eliminated its need for the $1 billion unsecured bridge loan that was originally part of the financing package. The bridge loan was intended to be taken out with a bond offering.

Security for the credit facility is basically a perfected first-priority interest in all tangible and intangible U.S. assets and all of the capital stock of direct and indirect subsidiaries.

Proceeds are being used to refinance debt, finance a $4 billion modified Dutch auction self tender offer for the company's common stock and for general corporate purposes.

The credit facility will officially close and fund when shares tendered in the tender offer are accepted for purchase.

JPMorgan and Lehman Brothers acted as the lead banks on the credit facility, with JPMorgan the left lead.

Kerr-McGee is an Oklahoma City-based energy and inorganic chemical company.

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