UAL rises on merger news; Sorenson nosedives; Dave & Buster's, Wendy's/Arby's whisper talk

By Sara Rosenberg

New York, May 3 - UAL Corp.'s term loan gained some ground during Monday's trading session following the company's announcement that it is merging with Continental Airlines Inc., and Sorenson Communications Inc.'s first-lien term loan plummeted on word of potential rate cuts by the Federal Communications Commission.

Also in trading, Avis Budget Group Inc., Dollar Thrifty Automotive Group Inc. and Hertz Global Holdings Inc. were all holding steady despite Avis' revelation that it is willing to pay more for Dollar Thrifty than Hertz.

Over in the primary market, Dave & Buster's Inc. and Wendy's/Arby's Restaurants LLC started circulating some price talk on their upcoming credit facilities, and Protection One Inc. came out with expected pricing on its proposed new deal as it publicly filed the debt commitment letter.

UAL heads up

UAL's term loan saw upward momentum in the secondary market as the company revealed that it entered into a definitive agreement to merge with Houston-based Continental Airlines in an all stock transaction, according to traders.

The term loan was quoted by one trader at 94 bid, 94¾ offered, up from 93 bid, 94½ offered on Friday, and by a second trader at 94 bid, 95 offered, up from 92½ bid, 93½ offered.

Under the agreement, Continental shareholders will receive 1.05 shares of UAL common stock per share. UAL shareholders would own about 55% of the equity of the combined company and Continental shareholders would own approximately 45%.

On a pro forma basis, the combined company would have annual revenues of roughly $29 billion based on 2009 financial results, and an unrestricted cash balance of $7.4 billion as of the end of first quarter 2010.

UAL anticipates synergies

Chicago-based UAL said in a news release that the merger is expected to deliver $1.0 billion to $1.2 billion in net annual synergies by 2013, including between $800 million and $900 million of incremental annual revenues.

The combined company is also expected to realize between $200 million and $300 million of net cost synergies on a run-rate basis by 2013.

Closing is expected to take place in the fourth quarter, subject to approval by the shareholders of both companies, receipt of regulatory clearance and customary conditions.

The Chicago-based holding company for the new entity will be named United Continental Holdings Inc., and the name of the airline will be United Airlines.

Sorenson drops

Sorenson Communications' first-lien term loan dropped in trading after the FCC put out a document that showed potential rate cuts for video relay services reimbursement, according to a trader.

The term loan was quoted at 86 bid at the end of the day but was seen in the low-80s earlier in the session, the trader said. By comparison, on Friday, the loan was quoted at 98½ bid, 99½ offered.

Sorenson is a Salt Lake City-based provider of industry-leading communications services and products.

Avis, Dollar, Hertz hold firm

Avis, Dollar Thrifty and Hertz saw their bank debt levels remain relatively steady on Monday even after Avis said that it sent a letter to Dollar Thrifty management saying that it would like to make a substantially higher offer to acquire Dollar Thrifty than the one that Hertz recently provided, according to traders.

Following the news, Avis' extended term loan was quoted by one trader at 99¾ bid, par ¼ offered, and by a second trader at par bid, par ½ offered, and its non-extended term loan was quoted by the first trader at 99½ bid, par ¼ offered, with all levels said to be flat on the day.

Dollar Thrifty's term loan was quoted by the first trader at 99 bid, par offered, also unchanged from Friday.

And, Hertz's strip of bank debt was quoted by the first trader at 98¼ bid, 99 offered, down a touch on the bid side from 98½ bid, 99 offered, and by the second trader unchanged on the day at 98¾ bid, 99¼ offered.

The second trader explained that the lack of movement was not driven by the news, but rather by the low volume of trading in the names.

Hertz paying $41 per share for Dollar

The acquisition that Avis said it would trump is Hertz's agreement to buy Dollar Thrifty for $41 per share in a mix of cash and common stock, which was announced on April 26.

Hertz plans to fund the cash portion of the Dollar Thrifty purchase price with existing liquidity from the combined company, and it will assume or refinance Dollar Thrifty's existing fleet debt.

The cash portion for Dollar Thrifty will be paid in two components - a $200 million special cash dividend representing $6.88 per share, to be paid by Dollar Thrifty immediately prior to the transaction closing, and $25.92 per share to be paid by Hertz at the closing.

The stock portion is at a fixed exchange ratio of 0.6366 per share, based upon a Hertz common stock closing price of $12.88 per share on April 23.

Avis is a Parsippany, N.J.-based provider of vehicle rental services. Dollar Thrifty is a Tulsa, Okla.-based renter and leaser of vehicles. And, Hertz is a Park Ridge, N.J.-based general use car rental brand.

Dave & Buster's floats talk

Switching to the primary, Dave & Buster's began whispering some unofficial indicative pricing on its proposed $200 million credit facility as the deal is gearing up to launch with a bank meeting on Thursday, according to a market source.

Both the $50 million revolver and the $150 million term loan B are expected to be talked at Libor plus 400 basis points, with the term loan B carrying a 1.75% Libor floor, the source said.

The revolver has a 75 bps commitment fee.

JPMorgan and Jefferies are the joint lead arrangers and bookrunners on the deal that will be used to fund the buyout of the company by Oak Hill Capital Partners from Wellspring Capital Management LLC in a transaction valued at about $570 million.

Completion of the acquisition is expected in the second quarter, subject to regulatory approvals and customary conditions.

Dave & Buster's is a Dallas-based owner and operator of restaurant/entertainment venues.

Wendy's/Arby's releases some guidance

Wendy's/Arby's is talking its proposed $500 million seven-year term loan due in the Libor plus 325 bps to 350 bps area ahead of the Wednesday bank meeting that will launch the deal into syndication, according to a market source.

The company's proposed $650 million senior secured credit facility also includes a $150 million five-year revolver.

Bank of America and Citigroup are the lead banks on the deal, which will be used to refinance the company's existing credit facility, redeem $200 million of Wendy's International Inc. 6.25% senior notes due 2011 and for general corporate purposes.

Wendy's/Arby's is an Atlanta-based quick-service restaurant company.

Protection One outlines pricing

Protection One filed its $415 million senior secured credit facility commitment letter with the Securities and Exchange Commission on Monday, and in the filing, potential pricing on the deal was revealed.

Both the $390 million six-year term loan and the $25 million five-year revolver are anticipated to carry pricing of Libor plus 400 bps with a 1.75% Libor floor if the corporate family rating is B2/B or better, and Libor plus 475 bps with a 2% Libor floor if the rating is lower than B2/B.

The original issue discount on the term loan is expected at 99 at B2/B ratings, and at 98½ at lower ratings, and the upfront fee on the revolver is expected at 98½ at B2/B ratings, and at 98 at lower ratings.

In addition, the revolver has a 75 bps commitment fee.

Financial covenants include a maximum total leverage ratio, a minimum interest coverage ratio and a maximum amount of capital expenditures.

JPMorgan and Barclays are the lead arrangers and bookrunners on the deal, with JPMorgan the administrative agent.

Protection One being acquired

Proceeds from Protection One's credit facility, along with $340 million in equity and $150 million of senior subordinated notes priced at 12.5% in cash plus 1% PIK that TCW/Crescent Mezzanine has committed to purchase, will be used to help fund the buyout of the company by GTCR.

Under the agreement, GTCR will tender for all of the outstanding common stock of Protection One for $15.50 per share in cash, followed by a merger to acquire all remaining outstanding shares at that same price.

The total purchase price, including the refinancing of Protection One's debt, is roughly $828 million.

Closing is expected in the second quarter, subject to minimum levels of participation in the tender offer and regulatory approvals.

Protection One is a Lawrence, Kan.-based provider of electronic security services to the residential, commercial and wholesale markets.

Live Nation tweaks deal

In other news, Live Nation Entertainment Inc. made some changes to its term loan B, including reducing pricing and adding a step-down, and firmed the original issue discount at the low end of talk, according to sources.

The $800 million 61/2-year term loan B is now priced at Libor plus 300 bps, down from Libor plus 325 bps, and pricing can step down to Libor plus 275 bps when leverage is less than 2.75 times, sources said.

And, while the 1.5% Libor floor was left unchanged, the original issue discount on the term loan B finalized at 991/2, the tight end of the initial 99 to 99½ talk, sources continued.

JPMorgan, Goldman Sachs and Deutsche Bank are the lead banks on the deal, with JPMorgan the left lead.

Live Nation getting pro rata, too

Live Nation's $1.2 billion senior secured credit facility (Ba2/BB-) also includes a $300 million revolver and a $100 million 51/2-year term loan A, with both of these tranches priced at Libor plus 300 bps.

The revolver has a 50 bps commitment fee.

Covenants include a maximum leverage ratio and a minimum interest coverage ratio.

Proceed from the credit facility, along with $250 million of senior notes that priced at par to yield 8 1/8%, will be used to repay the company's existing credit facility and the credit facility of its wholly owned subsidiary, Ticketmaster Entertainment LLC.

The completion of the notes offering is conditioned on the entry into the new credit facility.

Live Nation is a Beverly Hills, Calif.-based producer of live music concerts.

Securus Technologies closes

Securus Technologies Inc. closed on its $220 million credit facility (B1/B), consisting of a $185 million term loan and a $35 million revolver, according to a news release.

The term loan is priced at Libor plus 600 bps with a 2% Libor floor, and it was sold at an original issue discount of 98. There is soft call protection of 102 in year one and 101 in year two.

During syndication, the term loan was upsized from $170 million as a result of strong oversubscription, and the soft call protection was added, and the revolver was downsized from $40 million.

Jefferies acted as the lead bank on the deal that is being used for general corporate purposes and to refinance existing debt, including $194 million of 11% second priority senior secured notes due in 2011, an existing revolver and approximately $98 million of senior subordinated PIK notes due in 2014.

Securus is a Dallas-based provider of inmate communications services and offender and case management software design.

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