24 Hour Fitness, DaVita set spreads at high end of talk; Spanish Broadcasting opens for trading

By Sara Rosenberg

New York, June 1 - 24 Hour Fitness Worldwide Inc. and DaVita Inc. firmed up pricing on their term loan Bs, with both deals coming in at the upper end of previously revised price talk on Wednesday.

In the secondary, Spanish Broadcasting System Inc. freed up its new deal for trading with the first-lien term loan wrapping around 101 and the second-lien term loan trading in the upper 101 context.

24 Hour Fitness officially set pricing on its $600 million seven-year term loan B at Libor plus 300 basis points, according to market sources. Price talk on the deal had been revised to Libor plus 275 to Libor plus 300 basis points last week from original talk of Libor plus 250 basis points in order to successfully fill the book.

The deal had been met with some resistance because investors were grappling with what they considered to be a significant reduction in spread being that under the company's existing credit agreement, which will be cancelled in connection with completion of this new deal, term loan B investors received an interest rate of Libor plus 350 basis points on their investment.

24 Hour Fitness' $700 million credit facility (B2/B) also contains a $100 million six-year revolver with an interest rate of Libor plus 250 basis points.

Allocations are hoped to go out late this week, or early next week with closing targeted for next week as well.

Proceeds from the credit facility will be used to help fund Forstmann Little & Co.'s leveraged buyout of the company. Forstmann plans to finance the approximately $1.6 billion transaction with more than $900 million from its equity and subordinated debt funds.

JPMorgan and Merrill Lynch are joint lead arrangers on the credit facility, with JPMorgan on the left.

The leveraged buyout, which is expected to close in June, is subject to regulatory approval. It is not subject to financing.

24 Hour Fitness is a San Ramon, Calif., fitness center company.

DaVita sets pricing

DaVita finalized pricing on its $2.65 billion seven-year term loan B at Libor plus 250 basis points on Wednesday, with a step down to Libor plus 225 basis points under certain conditions, according to a market source.

The spread came in at the high end of the previously revised Libor plus 225 basis points to Libor plus 250 basis points talk.

Original price talk on the tranche at launch was Libor plus 200 basis points.

The deal was said to be having a hard time filling up at the initially proposed rate because in the current market environment lower-priced, large-sized deals have been trading just through par - a level that's considered no good for anyone involved in the transaction.

DaVita's $3.15 billion credit facility (B1/BB-) also contains a $250 million six-year revolver and a $250 million six-year term loan A, with both tranches priced at Libor plus 225 basis points, the source added. Spreads on these loans were also flexed up during syndication - with the original price talk having been Libor plus 175 basis points, the source added.

JPMorgan is the sole bookrunner on the deal, and Credit Suisse First Boston is involved in the transaction as well.

Proceeds from the credit facility along with proceeds from an already completed $1.35 billion bond offering will be used to help fund the $3.05 billion cash acquisition of Gambro Healthcare's U.S. assets and to refinance debt.

The two-tranche bond deal priced in March. The offering included $500 million of eight-year senior notes (B2/B) priced at par to yield 6 5/8% and $850 million of 10-year senior subordinated notes (B3/B) priced at par to yield 7¼%.

Net proceeds from the bond offering along with available cash were already used by the company to repay all outstanding amounts under the term loan portions of its existing credit facilities, including accrued interest.

Following the acquisition, the company's leverage ratio will be in the 5x to 5.2x EBITDA range, but DaVita hopes to reduce that ratio to around 3x to 3.5x in the next three to four years using anticipated strong cash flows.

Completion of the acquisition is subject to customary closing conditions, including Hart-Scott-Rodino antitrust clearance.

On Feb. 18, DaVita received a request from the Federal Trade Commission for additional information regarding the acquisition. The company continues to be involved in talks with the FTC, and although no agreement has yet been reached, based on discussions, DaVita expects that it will be required to divest about 5% of the combined number of Gambro Healthcare and DaVita centers, which represents the same percentage of the combined revenues.

DaVita is an El Segundo, Calif., provider of dialysis services.

Hughes Network ups spread

Hughes Network Systems LLC increased pricing on its first- and second-lien term loan and added original issue discounts to the deal, according to a market source.

The $275 million seven-year first-lien term loan (B1/B) is priced with an interest rate of Libor plus 375 basis points compared to previously revised price talk of Libor plus 325 basis points and original price talk at launch of Libor plus 300 basis points, the source said.

Furthermore, the first-lien term loan is now being offered to investors at 99.

The tranche contains - and has since launch - 101 soft call protection for one year.

The $50 million eight-year second-lien term loan (B3/B) is now priced with an interest rate of Libor plus 800 basis points compared to previously revised price talk of Libor plus 725 basis points and original price talk at launch of Libor plus 650 basis points, the source continued.

Furthermore, the second-lien term loan is now being offered to investors at 98.

The tranche contains - and has since launch - call protection of 103 in year one, 102 in year two and 101 in year three.

Hughes' $375 million credit facility also contains a $50 million six-year revolver (B1/B).

JPMorgan and Bear Stearns are the lead banks on the deal, with JPMorgan the left lead.

The $325 million of term loan debt replaces the company's previously pulled $325 million offering of eight-year senior notes. The notes, which were tabled because of the back up in the bond market, had been talked late in the April 11 week at 9¾% to 10%.

Proceeds from the term loans are being used to help fund the transfer of Hughes Network Systems' assets to Hughes Network Systems LLC, a newly formed company that is 50% owned by SkyTerra Communications Inc. and 50% owned by The DirecTV Group.

The completion of this joint ownership transaction was actually announced in late April, meaning that the new credit facility was already funded but is now being syndicated.

The revolver is expected to be undrawn at closing.

Hughes Network Systems is a Germantown, Md.-based provider of broadband satellite networks and services.

Spanish Broadcasting breaks

Spanish Broadcasting opened for trading on Wednesday, with the $325 million first-lien term loan (B1/B+) quoted at par ¾ bid, 101¼ offered and the $100 million second-lien term loan (B2/CCC+) quoted at 101½ bid, 102 offered, according to a trader.

The first-lien term loan, which was upsized from $300 million during syndication, is priced with an interest rate of Libor plus 200 basis points. Originally the deal was launched with pricing of Libor plus 225 basis points but there was a step down to Libor plus 200 basis points conditional on completion of a contract asset sale and the deleveraging associated with that sale. However, because the tranche was oversubscribed, the syndicate decided to take pricing down to that lower level and eliminate the grid entirely.

The second-lien term loan is priced with an interest rate of Libor plus 375 basis points. The tranche contains call protection of 102 for two years, 101 in year three and par thereafter. However, there is a carve-out that if the company completes the already contracted sale of its Los Angeles KZAB-FM and KZBA-FM radio stations to Styles Media Group within a year it can use proceeds from the sale to repay its second-lien loan at 101, as opposed to at 102.

Spanish Broadcasting's $450 million credit facility also contains a $25 million revolver (B1/B+) with an interest rate of Libor plus 225 basis points.

Proceeds from the new term loans will be used to repay existing bank debt and retire all the company's 9 5/8% senior subordinated notes due 2009. Proceeds from the additional $25 million of first-lien term loan debt that was added during syndication will go on the balance sheet for general corporate purposes.

Lehman Brothers Inc. is the lead arranger on the deal, and Merrill Lynch and Wachovia Securities are agents.

Spanish Broadcasting is a Coconut Grove, Fla., radio broadcaster.

Secondary continues to rise

The secondary loan market as a whole was once again stronger on the day with some putting overall levels up about a quarter of a point, including those of Kerr-McGee Corp. Some names even saw gains slightly above the norm in active trading, including UPC Financing Partnership and Trump Hotels & Casinos Resorts Inc.

Kerr-McGee, an Oklahoma City-based energy and inorganic chemical company, saw its term loan B bank debt levels rise to 101 3/8 bid, 101 5/8 offered on Wednesday compared to prior trading levels of 101 1/8 bid, 101 3/8 offered, according to a trader.

Meanwhile, UPC, a subsidiary of Denver-based broadband network business UnitedGlobalCom Inc., saw its U.S. term loan H bank debt levels jump three eighths of a point to par ¼ bid, par ¾ offered over the course of the session, the trader added.

And, doing one better, Atlantic City, N.J., hotel and casino owner and operator Trump Hotels saw its exit facility term loan gain about half a point on Wednesday with levels closing out the session at 101½ bid, 102 offered, but the paper was seen trading even higher than that earlier in the day, a second trader said.

"It was very active and strong. I'm hearing dealers are losing paper very quickly," the first trader added.

Hexion closes

Apollo Management Group LP completed its acquisition and/or merger of Bakelite AG, Borden Chemical Inc., Resolution Specialty Materials Inc. and Resolution Performance Products Inc. to form Hexion Specialty Chemicals Inc., according to a company news release.

To support the transaction, Hexion got a new $775 million credit facility (B1/BB-) consisting of a $500 million seven-year term loan, $50 million synthetic letter-of-credit facility and $225 million six-year revolver. All tranches are priced at Libor plus 250 basis points and all tranches were flexed up from Libor plus 225 basis points during syndication.

The revolver has a 50 basis point commitment fee.

Originally, the term loan was sized at $440 million but it was increased by $60 million after the company downsized its bond offering to $150 million from $250 million, and the $50 million synthetic letter-of-credit facility was added to the structure after the revolver was downsized to $225 million from $275 million.

J.P. Morgan Securities Inc., Credit Suisse First Boston and Citigroup acted as joint bookrunners and joint lead arrangers on the credit facility, with JPMorgan Chase Bank also administrative agent, Citigroup syndication agent and CSFB documentation agent.

Proceeds from the term loan are being used to repay portions of debt of the predecessor units that Apollo is forming into Hexion.

Revolver borrowings will be available for working capital and other general corporate purposes.

James River Coal closes

James River Coal Co. closed on its new $100 million credit facility (B1/B+) consisting of a $75 million 61/2-year synthetic letter-of-credit facility and a $25 million five-year revolver both priced with an interest rate of Libor plus 275 basis points.

Morgan Stanley and PNC Bank acted as joint lead arrangers on the deal, with Morgan Stanley the left lead and syndication agent and PNC the administrative agent.

Proceeds are available for working capital needs and other general corporate purposes.

The company got this new credit facility in connection with a common stock offering and a $150 million 9.375% notes offering.

Proceeds from the common stock and notes were used to repay amounts under the company's existing credit facility, fund the acquisition of Triad Mining Inc. and for general corporate purposes.

James River Coal is a Richmond, Va., producer of steam- and industrial-grade coal.

SemGroup closes

SemGroup LP closed on its $300 million add-on (Ba3/NA/BB-) to its credit facility, consisting of a $100 million add-on to the existing $625 million working capital revolver and a $200 million add-on to the existing $375 million term loan B.

Banc of America Securities LLC acted as the lead arranger and bookrunner on the deal.

Proceeds from the add-on were used to finance the Tulsa, Okla., midstream service company's acquisition of Koch Pavement Solutions' asphalt operations and assets located in the United States and Mexico.

MetroPCS closes

MetroPCS Wireless Inc. announced late Tuesday night that it closed on its new $750 million senior secured credit facility consisting of a $500 million six-year first-lien term loan with an interest rate of Libor plus 450 basis points and $250 million seven-year second-lien term loan with an interest rate of Libor plus 700 basis points.

The first-lien term loan contains call protection of 103 in year one, 102 in year two and 101 in year three, and the second-lien term loan is non-callable for two years and then is callable at 102 in year three and 101 in year four.

The first-lien term loan has a $50 million greenshoe, and the second-lien term loan has a $100 million greenshoe, with the additional funds available only after MetroPCS' audited financial are released.

Bear Stearns acted as the sole lead arranger and bookrunner on the deal that was used to fund a tender offer for MetroPCS Inc.'s $150 million 10¾% senior notes due 2011 and refinance $540 million of existing debt, with remaining proceeds going toward cash on the balance sheet for build-out and corporate uses.

MetroPCS Wireless is a Dallas-based provider of wireless communications services.

Maverick Tube closes

Maverick Tube Corp. closed on its new $325 million five-year revolving credit facility with an initial interest rate of Libor plus 150 basis points, according to a company news release. JPMorgan was the lead bank on the deal.

The revolver has a $125 million accordion feature to provide maximum borrowings of $450 million at the company's option.

Proceeds were used to help fund the $186 million purchase price for Tubos del Caribe SA, Colmena SA and Advance Corp., refinance existing bank borrowings and provide additional liquidity for growth.

Maverick is a St. Louis-based manufacturer of tubular products used in the energy industry for drilling, production, well servicing and line pipe applications, as well as industrial tubing products used in various applications.

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