Kinetic Concepts deal breaks; UPC launches $500 million; outflows continue to moderate

By Paul A. Harris

Portland, Ore., Oct. 20 - Cash loans outperformed equities and finished higher on the day, according to a syndicate banker.

The LCDX17 index finished at 92½ bid, 92¾ offered, up 1/8 point on the day, a hedge fund manager said.

The loans of Kinetic Concepts Inc. and SkillSoft Ltd. allocated and broke for trading in the secondary market.

UPC Financing Partnership launched a $500 million six-year term loan tranche AB (expected ratings Ba3/B+).

And bank loan outflows continued to moderate.

Bank loan mutual funds sustained $26 million of outflows for the week to Wednesday, said a market source, who was citing a report from Lipper-AMG.

That outflow compares to the previous week's $146 million outflow.

Meanwhile, EPFR Global reported a $34 million outflow from bank loan funds for the same period.

In the previous week, EPFR Global reported a $141 million outflow.

Kinetic Concepts upsizes

The Kinetic Concepts upsized $2.3 billion package of term loans allocated on Thursday.

A $1.63 billion Libor plus 575 basis points 6.5-year term loan B term priced at 961/2, richer than price talk, which had been set at 95½ to 96. The tranche features a 1.25% Libor floor and a 101 soft call for one year.

The deal broke to 99 1/8 bid, 99 7/8 offered, according to a syndicate source.

Later, a hedge fund manager saw the tranche at 99 7/8 bid, par ¼ offered.

Meanwhile, a €250 million Euribor plus 575 bps tranche, with the same Libor floor and call protection, priced at 951/2.

And a $325 million, Libor plus 525 bps five-year term loan C priced at 97. It had been talked to price 75 bps inside of the dollar-denominated term loan B, at an original issue discount of 95½ to 96. The term loan C also features a 1.25% Libor floor and 101 soft call protection for the first year.

The less-liquid C tranche broke to 98 bid, 98¾ offer, according to the syndicate source.

Bank of America Merrill Lynch, Morgan Stanley & Co. Inc., Credit Suisse Securities (USA) LLC and RBC Capital Markets LLC are the lead arrangers and bookrunners on the deal, and UBS Securities LLC is a co-manager.

The entire $2.3 billion-equivalent loan package came upsized from $2.2 billion. Of the upsized amount, $50 million will be used to reduce the Kinetic Concepts senior unsecured bridge loan to $850 million from $900 million.

Dealers elected not to launch into the market the bonds intended to take out that bridge. The remaining $50 million from the loan upsizing will be used to offset the original issue discounts.

Kinetic well oversubscribed

The order book for the dollar-denominated term loan B was well oversubscribed, according to a syndicate source.

Although the deal priced tighter than price talk, it was nevertheless investor friendly, the source contended.

"The dealers didn't want to push the envelope too much," said the banker.

"The market is demanding a premium, which was given. It's trading well, which is also necessary, given the present situation in the market. And there are still bonds to price."

This was a reference to the Kinetic Concepts' $1.65 billion-equivalent amount of 7.5-year second-lien senior secured notes (B3/B/), which are being offered in dollar and euro denominations.

The high-yield market continues to await official price talk and timing on the bonds.

SkillSoft allocates

SkillSoft's $90 million six-year incremental senior secured term loan (Ba3/BB-) priced at 97½ and allocated. It bears interest at Libor plus 475 bps.

The deal, which features a 1.75% Libor floor, priced on top of price talk, which had been lowered from previous talk of 96 to 97.

The deal has 102 hard call protection until May 2012 and a 101 hard call the following year.

Morgan Stanley Senior Funding, Inc. and Barclays Capital Inc. are the lead banks on the deal.

Proceeds will be used to help fund the acquisition of the Element K business from NIIT Ltd. for $110 million in cash.

UPC launches $500 million

UPC launched a $500 million six-year term loan tranche AB (expected ratings Ba3/B+) on Thursday.

The spread is set at 350 basis points with a 1.25% Libor floor, and the deal is talked to come with an original issue discount of 97.

There is a 101 soft call for one year.

Commitments are due by 5 p.m. ET Tuesday, Oct. 25.

Citigroup Global Markets Inc. and Goldman Sachs & Co. are the joint bookrunners.

Proceeds will be used to repay the company's current revolver drawings.

Asset Acceptance launches

Asset Acceptance Capital Corp. launched its $175 million six-year term loan B with spread talk of Libor plus 725 basis point to 750 bps with a 1.5% Libor floor at a reoffer price of 93.

The deal comes with soft call premiums of 102 and 101.

Commitments are due on Nov. 3.

The $275 million credit facility also includes a $100 million five-year revolver.

J.P. Morgan Securities LLC is the lead bank.

Proceeds will be used to refinance an existing senior secured credit facility.

Neustar to launch Tuesday

Neustar Inc. will launch its $700 million senior secured credit facility at a lender meeting on Tuesday.

The deal, to help fund the company's acquisition of Targus Information Corp., is being led by Morgan Stanley Senior Funding Inc.

The facility consists of a $100 million five-year revolver and a $600 million seven-year term loan B.

Under the agreement, Neustar is buying Targus for about $650 million in cash, including repayment of outstanding debt.

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