Cengage dips in soft market; Kinetic reworks structure; RegionalCare outlines tranching

By Sara Rosenberg

New York, Oct. 17 - Cengage Learning's term loan B was weaker during Monday's quiet trading session as the overall tone was negative - with some traders putting the market down by a quarter to a half a point in sympathy with equities.

On the new deal front, Kinetic Concepts Inc. took the reverse inquiries it was getting on a shorter-dated term loan tranche to heart and officially carved out a few hundred million from its term loan B into a new term loan C, while at the same time beefing up call premiums on the B loan.

Additionally, RegionalCare Hospital Partners Inc. came out with tranching details on its credit facility in connection with its morning bank meeting. Price talk, however, has not yet been disclosed as the leads are waiting on ratings.

Furthermore, Valeant Pharmaceuticals International Inc. upsized its credit facility due to strong demand, and Skillsoft Ltd. revealed that pricing on its incremental term loan will match that of its existing term loan.

Cengage loan slides

Cengage Learning saw its term loan B retreat in trading on Monday simply because the market in general was down, according to traders.

The term loan B was quoted at 82½ bid, 83¼ offered, versus 83 bid, 84 offered on Friday, traders said.

"Stuff just a little down with equity market," one trader remarked. At the close, Nasdaq was down 52.93 points, or 1.98%, Dow Jones Industrial Average was down 247.49 points, or 2.13%, S&P 500 was down 23.72 points, or 1.94%, and NYSE was down 161.8 points, or 2.2%.

Cengage is a Stamford, Conn.-based provider of teaching, learning and research services for the academic, professional and library markets.

Kinetic tweaks deal

Moving to the primary, Kinetic Concepts' revised its credit facility structure, creating a new $250 million to $300 million five-year term loan C and reducing its seven-year term loan B to $1.9 billion to $1.95 billion from $2.2 billion, a market source told Prospect News on Monday.

A shorter dated term loan is something that some CLOs and banks had expressed interest earlier in the syndication process, and while the term loan B has been attracting a good number of orders, the leads decided to listen to these investors.

Price talk on the term loan B remained at Libor plus 575 basis points with a 1.25% Libor floor and an original issue discount of 95½ to 96. The tranche, however, is now non-callable for one year then at 101 in year two, versus prior plans for soft call protection of 102 in year one and 101 in year two.

The term loan C, meanwhile, is expected to price 75 bps tighter than the term loan B, so if the spread on the B tranche finalizes at Libor plus 575 bps, the C tranche would come at Libor plus 500 bps. The C loan has a 1.25% floor, discount talk of 95½ to 96 and 101 soft call protection for one year.

Kinetic revolver, notes

Kinetic Concepts' $2.4 billion senior secured credit facility (Ba3/BB-), which is being marketed in the United States and in Europe, also provides for a $200 million five-year revolver, and the company intends to issue $1.65 billion in notes.

Originally, based on filings with the Securities and Exchange Commission, it was thought that the term loan B would be sized at $2.6 billion, but at launch, guys were told that it would be $400 million smaller, and as a result, the company's proposed second-lien senior secured notes offering was upsized from $1.25 billion.

The company is also going to get $900 million of unsecured debt, although the form in which this debt comes is still to be determined. It was thought that it would be issued in the high-yield market, but the tranche was dropped last week. There is a $900 million senior unsecured bridge loan backing this financing.

Kinetic lead banks

Bank of America Merrill Lynch, Morgan Stanley & Co. LLC, Credit Suisse Securities (USA) LLC and RBC Capital Markets LLC are the lead arrangers and bookrunners on Kinetic Concepts' credit facility, and they are seeking commitments by Oct. 19. Funding is expected on Nov. 4.

Total leverage is 6.0 times last-12-months EBITDA, and leverage through the first-lien is 2.9 times.

Proceeds from the new debt and $1.75 billion of equity will be used to fund the buyout of the San Antonio-based medical technology company by Apax Partners, Canada Pension Plan Investment Board and the Public Sector Pension Investment Board for $68.50 per share in cash. The transaction is valued at $6.3 billion, including outstanding debt.

Closing is expected in the second half of this year, subject to certain conditions, including shareholder approval that will be sought at a meeting on Oct. 28, and regulatory approval.

RegionalCare structure

Also in the primary, RegionalCare held a bank meeting at 11 a.m. ET on Monday to launch its proposed senior secured credit facility, at which time size and structure were announced, and lenders were told that price talk should be out once ratings surface, which should happen shortly, according to a market source.

The $460 million deal consists of a $100 million five-year revolver, a $295 million seven-year first-lien term loan B and a $65 million 71/2-year second-lien term loan that is already spoken for by a third party, the source remarked.

Citigroup Global Markets Inc., Morgan Stanley & Co. LLC and Deutsche Bank Securities Inc. are leading the deal.

RegionalCare leverage

RegionalCare's first-lien leverage is 4.1 times and net first-lien leverage is 3.38 times. Total leverage is 5.0 times, while net total leverage is 4.3 times.

Proceeds from the credit facility will be used to help fund the acquisition of Essent Healthcare from Vestar Capital Partners and Cressey & Co.

Commitments are due from lenders on Oct. 31.

Closing is expected by the fourth quarter, subject to customary regulatory reviews and approvals.

RegionalCare is a Brentwood, Tenn.-based owner and operator of non-urban hospitals. Essent is a Nashville-based owner and operator of non-urban acute care hospitals.

Valeant ups loan

Valeant Pharmaceuticals lifted its overall 41/2-year senior secured credit facility (BBB-) size to $2 billion from $1.7 billion as a result of good demand, and because of this upsizing, the company is putting a little more cash on its balance sheet, according to a market source.

Specifically, the revolver was increased to $275 million from $200 million and the funded term loan A was increased to $1.225 billion from $1 billion, the source said. The $500 million delayed-draw term loan A was left unchanged.

Initial pricing on the facility is still Libor plus 275 bps, with the delayed-draw loan having a 50 bps unused fee. The spread can range from Libor plus 250 bps to 300 bps, based on leverage.

Goldman Sachs & Co. and J.P. Morgan Securities LLC are the lead banks on the deal that will be used to refinance existing senior secured credit facility debt and is expected to close on Thursday.

Valeant Pharmaceuticals is a Mississauga, Ont.-based specialty pharmaceutical company that primarily focuses on the areas of neurology, dermatology and branded generics.

Skillsoft floats talk

Skillsoft's $90 million incremental senior secured term loan (Ba3/BB-) is being talked at Libor plus 475 bps with a 1.75% Libor floor - in line with existing term loan pricing - but the original issue discount is not yet available, according to a market source.

A conference call to launch the loan is set to take place on Tuesday.

Morgan Stanley Senior Funding, Inc. and Barclays Capital Inc. are leading the deal that will be used to help fund the acquisition of the Element K business from NIIT Ltd. for $110 million in cash.

SkillSoft is a Nashua, N.H.-based provider of on-demand e-learning and performance support services for global enterprises, government, education and small- to medium-sized businesses.

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