Sorenson retranches; Northwest launches downsized DIP; ArrMaz flexes; Barrington, U.S. Shipping break

By Sara Rosenberg

New York, Aug. 7 - In primary happenings Monday, Sorenson Communications made some changes to tranche sizes under its credit facility, Northwest Airlines Inc. launched its DIP facility with slightly different tranching and a smaller size than was originally anticipated, and ArrMaz Custom Chemicals Inc. increased pricing on its entire credit facility while adding a step-down provision to the term loan B.

Meanwhile, in the secondary, Barrington Broadcasting Corp.'s and U.S. Shipping Partners LP's credit facilities freed for trading, with the Barrington institutional term loan and the U.S. Shipping strip of funded and delayed-draw term loan debt quoted in the upper-par context.

Sorenson announced some modifications to the tranching under its in-market credit facility as well as to its holding company mezzanine pay-in-kind loan, resulting in an overall increase to the credit facility by $25 million to $1.005 billion, according to a market source.

Under the changes, the first-lien term loan is now sized at $600 million, down from an original size of $660 million, the second-lien term loan is now sized at $385 million, up from an original size of $300 million and the holdco PIK loan is now sized at $75 million, down from an original size of $100 million, the source said.

Pricing on all three of these tranches was left unchanged, with the first-lien term loan at Libor plus 300 basis points, the second-lien term loan at Libor plus 700 basis points and the holdco mezzanine at Libor plus 900 basis points PIK, the source continued.

Sorenson's $20 million revolver was left unchanged in terms of size and pricing, which is currently set at Libor plus 300 basis points, the source added.

Both the second-lien term loan and the mezzanine loan carry call protection of 102 in year one and 101 in year two.

Just last week it was heard around the market that the first-lien term loan was struggling a little bit, with some pointing to the lack of company assets as a possible deterrent, and the second-lien term loan was heard to be fully subscribed - which would explain why the decision was made to move some funds into the second-lien loan and out of the first lien.

Goldman Sachs and RBS Securities are joint bookrunners on the deal, with Goldman administrative agent on the first-lien loan and RBS administrative agent on the second-lien loan.

Proceeds from the debt financings will be used for a dividend recapitalization.

Sorenson Communications is a Salt Lake City-based provider of video relay services and equipment for the deaf and hard-of-hearing community.

Northwest launches revised structure

Northwest Airlines held a bank meeting on Monday to launch its debtor-in-possession financing facility (BBB-), and at that time it was revealed that the transaction would carry a total size of $1.225 billion as opposed to the originally contemplated size of $1.375 billion that was announced prior to launch, according to a fund manager.

The deal was presented to lenders as a $250 million revolver and a $975 million term loan, with both tranches talked in line with prior expectations at Libor plus 250 basis points, the fund manager said.

By comparison, when news of the transaction first emerged, it was said that the DIP facility would be comprised of a $1.225 billion term loan and a $150 million revolver.

However, in the actual court document filed in July that described the DIP, the company had said that a commitment was received for a $975 million to $1.225 billion term loan and a $150 million to $250 million revolver, meaning that the latest structure doesn't fall outside the realm of the company's initial expectations.

Citigroup and JPMorgan are the lead banks on the DIP facility, which was originally scheduled to launch this past Friday but was then pushed off until Monday's session, with Citi acting as the left lead.

The DIP facility will be convertible into a permanent five-year exit financing facility upon the company's emergence from Chapter 11.

Once the DIP facility is converted into an exit facility, pricing may stay at Libor plus 250 basis points if the appraised market value of the collateral to the sum of the amount of the term loans, the commitments, the amount of all hedging exposure secured by the collateral and the amount of the pari passu obligations which is not replaced or cash collateralized is greater than 1.75x. However, pricing can move up to Libor plus 300 basis points if that ratio falls below 1.75x.

Proceeds from the DIP facility will be used to repay amounts owed under the company's existing DIP facility, and, at the company's option, some proceeds will be used to replace or provide cash collateral for the first-lien obligations.

Financial covenants include a minimum ratio of trailing four-quarter consolidated EBITDAR to consolidated fixed charges of 1.15 to 1.00 for the fiscal quarter ended Dec. 31, 2006, 1.20 to 1.00 for the fiscal quarter ended March 31, 2007, 1.30 to 1.00 for the fiscal quarter ended June 30, 2007, 1.40 to 1.00 for the fiscal quarter ended Sept. 30, 2007, and 1.50 to 1.00 for each fiscal quarter thereafter.

Under the covenants, the Eagan, Minn.-based airline company must also maintain a minimum cash liquidity of $750 million at all times.

ArrMaz flexes up

ArrMaz Custom Chemicals flexed pricing higher on all tranches under its $140 million credit facility during Monday's market hours and, at the same time, added a leverage-based step down to the term loan B, according to a market source.

Both the $15 million six-year revolver (B2/B+) and the $125 million six-year term loan B (B2/B+) are now priced with an interest rate of Libor plus 300 basis points, up from original talk at launch of Libor plus 250 to 275 basis points, the source said.

However, through the step that was added, pricing on the term loan B can drop down to Libor plus 275 basis points at 41/2x leverage, the source remarked.

UBS is the lead arranger and bookrunner on the deal that will be used to help fund GSO Capital Partners' leveraged buyout of the company from Wind Point Partners.

In addition to the credit facility, the company is also getting a $52.5 million second-lien term loan (Caa1/CCC+) that was self arranged by GSO and is fully subscribed at pricing of Libor plus 625 basis points.

ArrMaz Custom Chemicals is a Mulberry, Fla., specialty chemicals manufacturer for the fertilizer asphalt and mining industries.

Lower Wilgat pulls deal

Lower Wilgat elected to pull its $400 million credit facility from market as it did not like the terms/cost that the market was demanding, according to a market source.

The facility was launched in June as a $75 million revolver and a $325 million term loan B, with both tranches talked at Libor plus 350 basis points.

During the syndication process, talk was that changes were going to be made to the deal, including potential increases in spreads, but nothing official was ever announced prior to the transaction getting pulled.

Lehman was acting as the lead bank on the deal.

Lower Wilgat is an entity that was formed to back the development of three coal mines, which is what the proceeds from the new bank deal was going to be used for.

With the decision to cancel the bank deal, the company has decided to explore other alternatives for the financing needed to develop its coal mines, including possibly using equity for the time being, the source added.

Barrington frees to trade

Switching to secondary happenings, Barrington Broadcasting's credit facility broke for trading Monday, with the $147.5 million term loan B quoted at par ½ bid, par 7/8 offered, according to a trader.

The term loan B is priced with an interest rate of Libor plus 225 basis points.

Barrington's $172.5 million credit facility (Ba3/B) also contains a $25 million revolver.

Bank of America and Wachovia are the lead banks on the deal that will be used to help fund the company's acquisition of 12 television stations from Raycom Media, Inc. for a combined purchase price of $262 million.

Barrington is a Hoffman Estates, Ill., operator of television stations in mid-sized markets.

U.S. Shipping breaks

U.S. Shipping's amended and restated credit facility also hit the secondary on Monday, with the strip of funded and delayed-draw term loan debt opening at par ¼ bid, par 5/8 offered and then trading up to par ½ bid, par ¾ offered, where it closed the day, according to a trader.

Both the $250 million funded term loan and the $60 million delayed-draw term loan are priced with an interest rate of Libor plus 350 basis points, with the delayed draw carrying a ticking fee of 175 basis points. During syndication, pricing on these two tranches was flexed up from original talk at launch of Libor plus 300 to 325 basis points, the funded term loan was upsized from $235 million and before that from $210 million, and the delayed-draw term loan was upsized from $50 million.

The funded term loan had been upsized the first time after the company downsized its bond offering to $175 million from an originally proposed size of $200 million. Then, the company reduced its bond deal again, dropping it to $100 million, and in turn upsized the funded term loan for a second time and upsized the delayed-draw piece.

U.S. Shipping's $350 million credit facility (B1/B+) also contains a $40 million revolver with an interest rate of Libor plus 325 basis points. During syndication, pricing on the revolver ended up at the high end of original guidance of Libor plus 300 to 325 basis points and the tranche was downsized from $50 million.

Proceeds from the credit facility, the bonds and an approximately $77.5 million class B common units issuance were used to fund $182.6 million into an escrow account available solely for the construction of three new articulated tug barges, to fund up to $70 million of equity contributions to a joint venture, to refinance $152.1 million of existing debt and for general corporate purposes.

Between the bond downsizing and the bank deal upsizing, the company lost about $50 million in funds, and the reason behind that is that it is only building three articulated tug-barges as opposed to four as was originally contemplated.

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

U.S. Shipping is an Edison, N.J., provider of long-haul marine transportation services, primarily for refined petroleum products.

Iridium closes

Iridium Satellite LLC closed on its new $210 million senior secured credit facility consisting of a $98 million four-year term loan A (B3), a $62 million five-year term loan B (B3), a $40 million six-year second-lien term loan (Caa1) and a $10 million revolver (B3), according to a company news release.

The term loan A is priced at Libor plus 425 basis points and was offered to investors at a discount of 99, the term loan B is priced at Libor plus 425 basis points and was offered to investors at a discount of 98, and the second-lien term loan is priced at Libor plus 825 basis points and was offered to investors at a discount of 97.

The term loan B and the term loan A carry soft call protection of 102 in year one and 101 in year two, and the second-lien term loan is non-callable for one year and then at 102 in year two and 101 in year three.

During syndication, the term loan A was added to the capital structure as the term loan B was downsized from $175 million and the second-lien term loan was downsized from $50 million.

Also during syndication, pricing on the term loan B was flexed up first from Libor plus 325 basis points and then from Libor plus 400 basis points, an original issue discount of 99½ was added, which was later changed to 98, and call premiums were added to the tranche.

The second-lien term loan also went through revisions during syndication, with pricing flexing up first from Libor plus 650 basis points and then from Libor plus 800 basis points, the original issue discount being added, and call premiums being sweetened from 102 in year one and 101 in year two.

Lastly, during syndication, maintenance covenants were added to the transaction.

Lehman Brothers Inc. and Morgan Stanley Senior Funding, Inc. acted as joint lead arrangers and joint bookrunners on the deal, with Lehman Commercial Paper Inc. the administrative agent and Morgan Stanley Senior Funding the syndication agent.

Proceeds are being used to repay the company's existing credit facilities, to pay a dividend to equity investors and for general corporate purposes including development of new and advanced devices and services. The dividend was reduced by $25 million in connection with the facility's overall $25 million reduction in size.

Iridium is a Bethesda, Md., provider of satellite voice and data solutions.

United Surgical closes

United Surgical Partners International Inc. closed on its $200 million seven-year term loan B (Ba2/BB-), according to a company news release.

The term loan is priced with an interest rate of Libor plus 175 basis points and carries a step up to Libor plus 200 basis points if the company loses either one of its current loan ratings. During syndication, pricing was reverse flexed from original talk at launch of Libor plus 200 to 225 basis points with the addition of the step.

Bear Stearns and SunTrust acted as joint lead arrangers on the deal, with Bear Stearns the bookrunner.

Proceeds are being used to fund a tender offer for the company's approximately $160 million 10% senior subordinated notes due 2011 and to repay some revolver borrowings.

United Surgical Partners is an Addison, Texas, owner and operator of surgical facilities.

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