Source Interlink, Vertrue set talk; Asurion, Hercules tweak deals; Jacobson breaks; Sirva slides; Lear rises

By Sara Rosenberg

New York, June 19 - Source Interlink Cos. Inc. and Vertrue Inc. came out with price talk on their credit facilities as both deals were launched with bank meetings during Tuesday's market hours.

In other primary news, Asurion Corp. widened price talk on its first- and second-lien term loans, added an original issue discount to the first-lien term loan and added an extra year of call protection to the second-lien term loan, and Hercules Offshore Inc. lowered pricing on its term loan B.

Meanwhile, over in the secondary market, Jacobson Cos.' credit facility freed up for trading, Sirva Inc.'s term loan continued to head lower in the wake of the company's recent amendment call, Lear Corp.'s term loan B was higher as 2007 guidance was revised and Intelsat Ltd.'s term loan was lower after a buyout deal was announced.

Source Interlink held a bank meeting on Tuesday, with a 10 a.m. ET start, at the Rainbow Room in New York to kick off syndication on its proposed $1.18 billion credit facility, and in connection with the launch, price talk on the transaction was revealed, according to a market source.

The $880 million seven-year covenant-light term loan B (B1/B+) was presented to lenders with talk of Libor plus 250 basis points and the $300 million six-year ABL revolver (Ba3/BB-) was presented with talk of Libor plus 150 bps, the source said.

Citigroup and JPMorgan are the lead banks on the deal.

Proceeds from the credit facility, along with $465 million of subordinated notes, will be used to fund the acquisition of Primedia Inc.'s Enthusiast Media division, which is comprised of over 70 magazine titles and 90 web sites, for $1.178 billion in an all-cash transaction.

When the acquisition was announced in May, the company said that based on the expectation that the deal would likely be a single-B credit and subject to market conditions, the bank deal was anticipated to carry pricing of Libor plus 250 bps and the bonds would likely price in the high 9% area.

However, official price talk on the credit facility had not been available until the bank meeting took place.

Pro forma adjusted EBITDA is $203 million.

Source Interlink is a Bonita Springs, Fla., provider of merchandising and fulfillment services for home entertainment products.

Vertrue price talk

Also announcing official price talk on Tuesday was Vertrue, as it launched its $660 million senior secured credit facility with a bank meeting that was held in the afternoon hours, according to a market source.

The $30 million six-year revolver and the $430 million seven-year first-lien term loan are both being talked at Libor plus 225 bps to 250 bps, and the $200 million eight-year second-lien term loan is being talked at Libor plus 550 bps to 575 bps, the source said.

This guidance is pretty close to the expected pricing that the company outlined in filings with the Securities and Exchange Commission, which had the first-lien tranches at Libor plus 225 bps and the second-lien term loan at Libor plus 550 bps.

The revolver has a 50 bps commitment fee.

The second-lien term loan carries call protection of 102 in year one and 101 in year two.

There are no financial covenants under the term loans; however, there is a maximum total leverage ratio under the revolver.

Lehman and JPMorgan are the joint lead arrangers and joint bookrunners on the deal, with Lehman the administrative agent and JPMorgan the syndication agent.

Proceeds will be used to help fund the buyout of Vertrue by management, One Equity Partners, Oak Investment Partners and Rho Ventures for $48.50 in cash per share of common stock. The transaction is valued at about $800 million.

Other buyout financing will come from a $175 million equity commitment.

In connection with the buyout, Vertrue will redeem, repurchase or defease all of its outstanding 9¼% senior notes due 2014.

A portion of the second-lien term loan can be delayed draw for 45 days if a defeasance deposit needs to be made for the notes.

In addition, immediately after the buyout, the company will deposit in a segregated escrow account an amount equal to the aggregate principal amount of its 5.5% convertible senior subordinated notes due 2010 that have not been converted into equity on or prior to the date of the buyout.

The buyout is expected to be completed in the first fiscal quarter of 2008, which ends on Sept. 30, and is subject to receipt of stockholder and customary regulatory approvals as well as satisfaction of additional customary closing conditions.

Vertrue is a Norwalk, Conn., internet direct marketing services company.

Asurion reworks deal

Asurion made a round of changes to its credit facility, including increasing price talk on both its first- and second-lien term loans, adding an original issue discount to the first-lien loan and revising call premiums on the second-lien term loan, according to a market source.

The $1.755 billion first-lien term loan is now being talked at Libor plus 250 bps, up from original talk at launch of Libor plus 225 bps, and the paper is now being sold to investors with an original issue discount of 99½ as opposed to being sold at par, the source said.

In addition, the $580 million second-lien PIK toggle term loan is now being talked at Libor plus 575 bps cash pay, up from original talk at launch of Libor plus 550 bps cash pay, and call protection was changed to 102 in year one and 101 in year two from just 101 in year one, the source remarked.

As before, if PIK is elected on the second-lien term loan, pricing will increase by 75 bps.

Price talk on the company's $100 million revolver was left unchanged at Libor plus 200 bps, the source added.

Commitments on the credit facility are still due on Thursday.

Merrill Lynch, Bank of America and Lehman Brothers are the lead banks on the $2.435 billion deal.

Proceeds will be used to help fund the acquisition of a majority stake in the company by Madison Dearborn Partners, Providence Equity Partners and Welsh, Carson, Anderson & Stowe.

Asurion is a Nashville provider of enhanced services to the wireless telecommunication industry.

Hercules flexes

Hercules Offshore reduced pricing on its up to $900 million six-year term loan B to Libor plus 175 bps from original talk at launch of Libor plus 200 bps, according to a market source.

The company's up to $1.05 billion credit facility (Ba3/BB) also includes a $150 million five-year revolver.

Prior to launch, the term loan B was expected to carry a size of $1.1 billion, but it was reduced because the company is generating a lot of cash. In fact, the final size of the term loan B won't be determined until around closing at the end of June.

UBS is the lead bank on the deal. Other banks involved include Amegy Bank, Comerica Bank, Credit Suisse, Deutsche Bank, Jefferies Finance LLC and JPMorgan.

Financial covenants include maximum leverage and fixed-charge coverage.

Proceeds will be used to help fund the acquisition of Todco for an average total consideration equal to 0.979 of a share of Hercules Offshore and $16.00 in cash for each share of Todco common stock outstanding, or an estimated 56.9 million shares of Hercules Offshore and cash of $930.7 million. The transaction is valued at $2.3 billion.

In addition to financing the acquisition, proceeds from the facility will be used to repay in full and terminate Hercules' existing senior secured term loan facility and to refinance Todco's revolver.

Hercules Offshore is a Houston-based operator of jack-up drilling rigs and liftboats. Todco is a Houston-based provider of contract oil and gas drilling services.

Jacobson frees to trade

Moving to the secondary market, Jacobson's credit facility broke for trading, with the $295 million first-lien term loan (Ba3/B) quoted at par ½ bid, par ¾ offered on the open and then moving up to par 5/8 bid, par 7/8 offered, where it closed out the day, according to a trader.

The company's $135 million second-lien term loan (Caa1/CCC+) was quoted at 101¼ bid, 101¾ offered on the open and then moved up to 101 3/8 bid, 101 7/8 offered, where it ended the day, the trader added.

The first-lien term loan is priced at Libor plus 250 bps and the second-lien term loan is priced at Libor plus 550 bps.

During syndication, the first-lien term loan was upsized from $280 million, and the second-lien term loan was downsized from $150 million while pricing was reduced from original talk at launch of Libor plus 575 bps.

Jacobson's $460 million credit facility also includes a $30 million revolver (Ba3/B).

Bear Stearns, CIBC and Wells Fargo acted as the lead banks on the deal, with Bear Stearns the left lead.

Proceeds were used to help fund the acquisition of the company by Oak Hill Capital Partners, which was competed on Tuesday.

Jacobson is a Des Moines, Iowa, third-party logistics and warehousing company.

Sirva trades down

Also in trading, Sirva's term loan was once again active at lower levels as investors continued to react to the company's recently held amendment/update conference call, according to a trader.

The term loan ended the day at 95¾ bid, 96½ offered, down from Monday's closing levels of 96 bid, 96¾ offered, the trader said.

On Monday morning, Sirva held a call for the current lenders under its senior secured credit facility to request covenant relief through 2008.

The company said that it will need this relief because of the weaker-than-expected domestic real estate market and the amendment is necessary in order for it to be able to present auditors with an acceptable covenant outlook for 10-Ks and 10-Qs.

The weakness in the domestic real estate market resulted in higher-than-anticipated levels of home inventory for the company, increased losses on homes sold out of inventory, lower-than-expected moving volumes, increased reserves for loss on home sales and home sale expenses during the second half of 2006 and higher-than-expected gross investment in inventory homes.

Both the company's global relocation and moving services North America segments saw EBITDA negatively impacted by these events. At the end of 2006, global relocation's EBITDA was $24.6 million, down from $33.1 million at the end of the previous year, and moving services North America's EBITDA was $27.6 million, down from $28 million at the end of the previous year.

Sirva's consolidated EBITDA at the end of 2006 was $34 million, down from $42.2 million at the end of 2005.

Lenders were also updated on Sirva's progress to bring its filings with the Securities and Exchange Commission up to date.

The company filed its restated 2004 10-K and 2005 10-K in January, 10-Qs for the first three quarters of 2006 in May, and it expects to file its 2006 10-K in June. It anticipates being current with its second quarter 2007 10-Q.

Sirva is a Westmont, Ill.-based relocation services provider.

Lear stronger on revised guidance

Lear's term loan B gained some ground after the company modified its 2007 outlook higher, according to a trader.

The term loan B ended the day at 99¾ bid, par offered, up from previous levels of 99 5/8 bid, 99 7/8 offered, the trader said.

On Tuesday, Lear said that it is increasing certain financial guidance from levels provided on April 25 due to production levels on some key light truck platforms in North America being higher than expected, continued benefits from ongoing restructuring and productivity initiatives, and a slightly weaker dollar.

The company now expects second-quarter core operating earnings (income before interest, other expense, income taxes, restructuring costs and other special items) to be between $215 million and $225 million, compared with the previous outlook of between $180 million and $200 million, Lear said in an 8-K filing with the SEC.

Vehicle production levels in North America for the full year 2007 are still expected to be in line with the prior forecast, and the longer-term production outlook has not changed significantly.

For the full year, the company now anticipates core operating earnings, excluding the results of its interior business, to be in the range of $600 million to $640 million, with a corresponding improvement in free cash flow to approximately $260 million, as compared with the previous forecast of between $580 million and $620 million for the year's core operating earnings and $240 million for free cash flow.

Lear is a Southfield, Mich.-based supplier of automotive seating, electronics and electrical distribution systems.

Intelsat heads to par

Intelsat's term loan moved down to the par area on Tuesday after news emerged that a significant interest in the company will be bought by BC Partners, according to a trader.

The term loan closed out the day at par bid, par 3/8 offered, down from par 3/8 bid, par ¾ offered, the trader said.

Meanwhile, PanAmSat Holding Corp., which merged into Intelsat last year, saw its term loan stay at unchanged levels of par ¼ bid, par ½ offered, the trader added.

Under the purchase agreement, BC Partners is buying roughly 76% of the primary ownership of Intelsat in a transaction valuing the company's equity at about $5.03 billion.

The current shareholders of Intelsat, including Apax Partners, Apollo Management, Madison Dearborn Partners, Permira and management, are expected to receive upon closing approximately $4.6 billion in cash and will continue to hold approximately 24% of the primary ownership of Intelsat.

Taking into account roughly $11.4 billion of debt as of March 31, the enterprise valuation implied by the transaction is about $16.4 billion.

To help fund the transaction, a new entity junior to Intelsat (Bermuda), Ltd. will issue $5.11 billion in new high-yield bonds via Credit Suisse, Bank of America and Morgan Stanley.

Closing of the transaction is expected to occur within six to nine months, subject to customary conditions, including appropriate regulatory approvals.

Intelsat is a Pembroke, Bermuda, provider of fixed satellite services.

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