Day juggles funds from second to first lien; PinnOak sets pricing, adds soft call; Calpine dips on ruling

By Sara Rosenberg

New York, Nov. 22 - In primary happenings, Day International Group Inc. moved funds from its second-lien term loan into its first-lien term loan, and PinnOak Resources LLC firmed pricing on its credit facility toward the higher end of guidance and added soft call protection to the term loan tranche.

In secondary doings, Calpine Corp.'s second lien headed lower as the court ruled in favor of bondholders, declaring the company's use of proceeds from a July asset sale in violation of indentures.

Day International shifted $25 million out of its second-lien term loan and into its first-lien term loan but left pricing on the tranches unchanged, according to sources.

The first-lien term loan (B1/B) is now sized at $275 million, up from $250 million, with pricing still set at Libor plus 250 basis points, sources said.

Meanwhile, the second-lien term loan (B2/CCC+) is now sized at $115 million, down from $140 million, with pricing still set at Libor plus 700 basis points, sources added.

The $415 million credit facility also contains a $25 million revolver (B1/B) with an interest rate of Libor plus 250 basis points.

Goldman Sachs is the lead bank on the deal.

Proceeds will be used to refinance existing debt.

The company is tendering for any and all of its $115 million 9½% senior subordinated notes due 2008. The tender offer is scheduled to expire on Dec. 2, after being extended from the original Nov. 22 deadline.

Day International is a Dayton, Ohio, producer and distributor of consumable products for the offset printing and textile industries.

PinnOak sets spreads

PinnOak Resources firmed up pricing on its $175 million senior credit facility (B3/B) at Libor plus 325 basis points on Tuesday, according to a market source.

The facility - which consists of a $50 million six-year revolver and a $125 million seven-year term loan - was talked in the Libor plus 300 basis points area, placing the final spread within the guidance that lenders were originally provided with when the deal launched, the source explained.

In addition to setting pricing levels, the syndicate added 101 soft call protection for one year to the term loan, the source concluded.

UBS is the lead arranger on the deal that will be used to refinance certain existing debt and pay a dividend to equity holders.

PinnOak is a Pittsburg-based domestic producer of high quality, low volatile metallurgical coal.

AAi.FosterGrant still struggling?

AAi.FosterGrant Inc. still seems to be having a hard time getting done, even with the second round of changes that were announced last week, as something like $100 million in commitments were in the book as of Monday for the $150 million first-lien term loan B (B2), according to a buyside source.

"They said they've pretty much maxed out on what they can do (in terms of pricing changes) but based on how it's going, I wouldn't be surprised if they did something else. They're basically only trying to do a $100 million dividend with this deal so they could always pull it and just keep the existing deal in place. I'm going to keep playing hardball with them and see what I can get," the source said.

The term loan B is currently being talked at Libor plus 400 basis points with 101 soft call protection for one year and a 50 basis point original issue discount. Pricing had been revised last week from Libor plus 350 basis points and before that from original price talk at launch of Libor plus 275 basis points. When the initial flex up was announced, the syndicate added the soft call and original issue discount to the tranche.

In addition, at the time of the second first-lien flex up, the syndicate announced its intention to consider removing the provision in the first-lien term loan credit agreement that would have allowed the company to take out incremental first-lien debt at a later date. The size of this accordion feature was scheduled to be determined at a later date.

And, the amortization schedule on the first-lien term loan is also under consideration, as the syndicate is thinking of increasing it from the original 1% per year amount (balloon payment due at maturity) with which the deal was launched.

The company's $215 million credit facility also contains a $15 million revolver (B2) and a $50 million second-lien term loan (B3).

Pricing on the second-lien term loan is talked at Libor plus 775 basis points, after being revised last week from Libor plus 700 basis points and prior to that from original price talk of Libor plus 625 basis points.

The second-lien term loan is being offered at 99 - a 100 basis point discount from the original par offer price - and contains hard call protection of 102 in year one and 101 in year two.

JPMorgan and General Electric Capital Corp. are the lead banks on the credit facility, with JPMorgan the left lead.

Since the deal first hit the market, it has been under scrutiny as some existing term loan B investors were upset over the company's decision to not pay the 101 soft call protection premium contained in the existing facility based on the claim that this new financing is a recapitalization, not a refinancing.

However, this non-payment of call protection is not considered to be the primary problem with the new deal. Some issues raised by investors include the significant rise in leverage with this transaction, the use of proceeds, and the significant reduction in spreads when compared to the existing loan.

Interestingly, when the company came to market with its existing credit facility in 2004, there were some problems as well. In order to get the $115 million credit facility done, the term loan B had to be reduced in size to $90 million from $100 million, pricing on the term loan B had to be increased to Libor plus 500 basis points from Libor plus 350 basis points, soft call protection of 102 in year one and 101 in year two had to be added to the B loan, amortization on the term loan B had to be changed, and a $10 million term loan A with an interest rate of Libor plus 450 basis points had to be added to the financing package. The existing facility also contains a $15 million revolver. Bear Stearns acted as the lead bank on that transaction.

AAi.FosterGrant is a Smithfield, R.I., eyewear and jewelry company.

Calpine ruling sends loan lower

Calpine Corp.'s second-lien term loan dropped by about a point as the company lost its court battle against certain noteholders over the use of asset sale proceeds.

The San Jose, Calif., power company's second-lien bank debt was quoted at 76 bid, 77 offered by day's end, compared with previous levels around 77 bid, 79 offered, according to a trader.

On Tuesday, the Delaware Court of Chancery ruled that Calpine's use of about $313 million of proceeds from the sale of domestic gas assets to purchase gas storage inventory violated its second-lien notes indenture.

Furthermore, vice chancellor Leo E. Strine Jr. ruled that future use of the proceeds for similar contracts is impermissible.

Calpine has been fighting the use-of-proceeds issue with The Bank of New York, collateral trustee for the company's senior secured noteholders, and Wilmington Trust Co., indenture trustee for the company's first- and second-lien notes since September.

About $400 million from the sale of Calpine's domestic gas assets remains in an account at the Bank of New York.

SPX closes

SPX Corp. closed on its new $1.625 billion senior secured credit facility consisting of a $450 million five-year revolver, a $750 million five-year delayed-draw term loan and a $425 million five-year foreign trade facility, all priced with an initial interest rate of Libor plus 87.5 basis points.

The delayed draw is for six months and will be used to refinance the company's Liquid Yield Option Notes in the event the notes are put or redeemed in February 2006.

The revolver will be available for general corporate purposes, and the foreign trade facility will be used to issue foreign credit instruments such as standby letters of credit and bank guarantees.

J.P. Morgan Securities Inc. acted as the lead arranger on the deal, and Dresdner Kleinwort Wasserstein and Deutsche Bank arranged the foreign trade facility.

"These new credit facilities provide SPX with the increased financial flexibility to continue growing our core business while also addressing the potential February refinancing event. In addition, we have taken the strategic step to globalize our credit capacity to align with our expanding international presence and global growth initiatives," said Patrick J. O'Leary, executive vice president and chief financial officer, in a company news release.

SPX is a Charlotte, N.C., provider of cooling technologies and services, flow technology, industrial products and services, and technical products and systems.

Accellent closes

Kohlberg Kravis Roberts & Co. completed its acquisition of Accellent Inc. from KRG Capital Partners and DLJ Merchant Banking Partners in a transaction valued at $1.27 billion, according to a company news release.

To help fund the transaction, Accellent got a new $475 million credit facility (B2/BB-) consisting of a $75 million six-year revolver and a $400 million seven-year term loan B with an interest rate of Libor plus 200 basis points.

During syndication, the term loan was upsized from $375 million as $25 million was shifted out of the company's high-yield bond offering and pricing was reverse flexed from Libor plus 225 basis points.

JPMorgan and Credit Suisse First Boston acted as the lead banks on the deal, with JPMorgan the left lead.

In addition to helping fund the LBO, proceeds were also used to refinance Accellent's existing senior secured credit facility and 10% senior subordinated notes due 2012, and the revolver will be available for working capital purposes.

Accellent is a Collegeville, Pa., provider of fully integrated contract manufacturing and design services to medical device manufacturers.

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