Avis slides in soft market; BJ's Wholesale, Blackboard, Metropolitan Health release talk

By Sara Rosenberg

New York, Sept. 12 - Avis Budget Group Inc.'s extended term loan was weaker in trading on Monday despite the release of what appeared to be positive third-quarter estimates, as the market in general was down with equities and quiet with a lot of attention focused on the primary.

Nabbing the spotlight was BJ's Wholesale Club Inc. and Blackboard Inc., as both companies held bank meetings for their credit facilities. With the launches, BJ's came out with structure and pricing guidance on its new deal, and Blackboard revealed talk on its term loans.

Also on the primary front, Metropolitan Health Networks Inc. announced pricing on its relaunched facility, and Sealed Air Corp. firmed up timing on the launch of its term loan B, setting a bank meeting for this week.

Avis dips in light trading

Avis' extended term loan slid lower in trading on Monday as the overall market was off by about a quarter to a half a point with stocks, according to a trader, who said there was little activity in the name following the company's release of third-quarter preliminary numbers.

The extended term loan was quoted at 97 bid, 99 offered, down from 97½ bid, 99½ offered, the trader said. A second trader, meanwhile, was also seeing the debt at 97 bid, 99 offered, but was putting it down from 98 bid, par offered on Friday.

For the third quarter ended Sept. 30, Avis, a Parsippany, N.J.-based vehicle rental company, expects that revenues will increase 7% to 8% over the 2010 third quarter to $1.6 billion.

Pretax income for the quarter is expected to increase roughly 29% to 35%, to $200 million to $210 million, excluding certain items.

And, adjusted EBITDA for the quarter is anticipated to increase more than 21% to 26%, to $265 million to $275 million, excluding certain items.

Avis plans update call

Also on Monday, word surfaced that Avis will be holding a call at 1 p.m. ET on Tuesday to discuss revised deal structure, pricing and timing on its financing for the purchase of Avis Europe plc, a Bracknell, England-based vehicle rental company.

Morgan Stanley & Co., Citigroup Global Markets Inc., Credit Agricole Securities (USA) Inc., Scotia Capital (USA) Inc. and RBS Securities Inc. are the lead banks on the deal.

In early August, the company launched $900 million of incremental senior secured debt (BB) comprised of a $300 million revolver add-on, a $200 million term loan A and a $400 million term loan B.

Original price talk on the revolver and A loan was Libor plus 300 basis points, subject to a ratings-based grid, with no Libor floor, and the B loan was launched with talk of Libor plus 350 bps with a 1.25% Libor floor, an original issue discount of 99 and 101 soft call protection for one year.

Chatter was that pricing on the credit facility would move higher as a result of market conditions, that tranche sizing could be changed and bonds could be a part of the capital structure.

Avis incremental commitment

Details on the revised financing that Avis will launch on Tuesday are not yet available, but the company did say in an 8-K filed with the Securities and Exchange Commission on Monday that it entered into an agreement for a $20 million tranche A term loan and a $200 million revolver add-on for the Avis Europe acquisition.

JPMorgan Chase Bank is the administrative agent on the debt, and the lead arrangers are the same as seen on the original bank deal.

Pricing on the tranche A term loan and revolver can range from Libor plus 275 bps to 325 bps based on ratings, the filing said.

Under the purchase agreement, Avis Europe shareholders will receive £3.15 in cash per share. The transaction is valued at £635 million, or about $1 billion.

Closing is expected to take place in October, subject to Avis Europe shareholder approval, court approval and regulatory clearances.

BJ's details emerge

In more loan happenings, BJ's Wholesale Club held a bank meeting on Monday afternoon to kick off syndication on its proposed $2.225 billion senior secured credit facility, and in connection with the event, tranching specifics and price talk were announced, according to market sources.

The deal includes an $850 million ABL revolver, a $50 million last-out ABL term loan, a $1.125 billion seven-year first-lien term loan and a $200 million 71/2-year second-lien term loan, sources said.

Regarding ABL price talk, the revolver was launched at Libor plus 200 bps, subject to a grid, and the term loan was launched at Libor plus 350 bps.

Meanwhile, the first-lien term loan is talked in the Libor plus 525 bps area and the second-lien term loan is talked at Libor plus 850 bps to 875 bps, with both tranches having a 1.25% Libor floor.

In addition, the first-lien loan is offered at an original issue discount of 97½ and has 101 soft call protection for one year, and the second-lien loan is offered at 97 and has call protection of 103 in year one, 102 on year two and 101 in year three, sources added.

BJ's lead banks

Deutsche Bank Securities Inc., Citigroup Global Markets Inc., Barclays Capital Inc., Jefferies & Co., GE Capital Markets and Wells Fargo Securities LLC are the lead banks on BJ's credit facility.

Most recently, the facility structure had been described as a $900 million asset-based facility and about $1.3 billion of first- and second-lien term loans, with specific tranche sizes unavailable.

And prior to that, the company had said in filings with the SEC that it would be getting a $900 million ABL facility, a $1.25 billion first-lien term loan and a $425 million second-lien term loan.

However, the decision was made to reduce the amount of term loan borrowings by $350 million as a result of sale and leaseback proceeds that are expected to come at closing, sources previously explained to Prospect News.

BJ's being acquired

Proceeds from BJ's credit facility will be used to help fund the buyout of the company by Leonard Green & Partners LP and CVC Capital Partners for $51.25 per share in cash. The all-cash transaction is valued at $2.8 billion.

Other funds for the acquisition will come from around $640 million in equity.

Closing is expected on or about Sept. 30, subject to approval of BJ's shareholders, customary conditions and regulatory approvals.

Shareholder approval was obtained on Friday, at which time about 72% of shareholders voted in favor of the buyout and about 0.4% voted against the transaction.

BJ's is a Westborough, Mass.-based operator of warehouse clubs.

Blackboard discloses guidance

Blackboard also held its bank meeting in the afternoon, launching its $780 million seven-year first-lien term loan (B+) with talk of Libor plus 550 bps, with a 1.5% Libor floor, an original issue discount of 96½ to 97 and soft call protection of 102 in year one and 101 in year two, according to a market source.

Furthermore, the company's $350 million eight-year second-lien term loan (CCC+) was presented to guys with talk of Libor plus 975 bps, with a 1.5% Libor floor and an original issue discount of 97½ to 98, the source said. This tranche is non-callable for one year, then at 102 in year two and 101 in year three.

By comparison, the company previously said in filings with the SEC that first-lien term loan pricing was expected at Libor plus 475 bps with a 1.5% Libor floor, and second-lien term loan pricing was expected at Libor plus 800 bps with a 1.5% Libor floor.

Those filings also had the first-lien term loan sized at $700 million, but said that it could be upsized by $80 million if 100% of the outstanding equity interests of a portfolio company of Providence Equity Partners were to be contributed to the company.

Blackboard getting revolver

In addition to the term loans, Blackboard's $1.23 billion senior secured credit facility includes a $100 million five-year revolver (B+).

Bank of America Merrill Lynch, Deutsche Bank Securities Inc. and Morgan Stanley & Co. Inc. are the lead banks on the deal and are asking for commitments by Sept. 21. Closing and funding is expected on Oct. 4.

Proceeds, along with $850 million of equity, will be used to fund the buyout of the company by Providence Equity Partners for $45 per share in cash. The transaction is valued at $1.64 billion, plus the assumption of $130 million of net debt.

Completion of the buyout is subject to stockholder approval, other customary conditions and regulatory approvals.

Blackboard is a Washington, D.C.-based provider of enterprise software applications and related services to the education industry.

Metropolitan talk surfaces

Yet another deal to reveal price talk on Monday was Metropolitan Health Networks, as the company relaunched its $355 million credit facility with a slightly different structure and higher pricing than what was seen at its original bank meeting on Aug. 3, according to a market source.

The revised deal includes a $40 million revolver talked at Libor plus 500 bps with a 1.5% Libor floor and an original issue discount of 99, the source said, compared to original plans for a $25 million revolver talked at Libor plus 475 bps with a 1.5% floor.

As before, there is a $240 million first-lien term loan, but talk on this tranche is now Libor plus 550 bps with a 1.5% Libor floor and an original issue discount of 981/2, compared to Libor plus 475 bps with a 1.5% Libor floor and a discount of 99 originally.

And, lastly, the facility provides for a $75 million second-lien term loan talked at Libor plus 1,175 bps with a 1.75% floor and a discount of 98, the source added, whereas, under the original structure, it was a $90 million second-lien term loan talked at Libor plus 900 bps with a 1.75% floor and a discount of 98.

Metropolitan and Continucare

Proceeds from Metropolitan Health's credit facility will be used, along with cash and investments, to fund the acquisition of Continucare Corp. for $6.25 in cash and 0.0414 of a share of Metropolitan common stock per share. The transaction is valued at about $416 million and is expected to close by the end of this month.

GE Capital Markets Inc. and SunTrust Robinson Humphrey Inc. are the lead banks on the deal.

The revised tranching was announced last week when word of the relaunch hit the market. Price talk, however, had not been available until Monday. When the relaunch plans emerged, it was said that the deal had been lost in the haze of the market volatility in August, which is why the decision was made to start fresh.

Metropolitan Health is a Boca Raton, Fla.-based health care organization. Continucare is a Miami-based provider of primary care physician services on an outpatient basis.

Sealed Air sets launch

In other primary news, Sealed Air nailed down timing on its $1.2 billion seven-year term loan B with the scheduling of a bank meeting for 3 p.m. ET on Tuesday, according to a market source. Previously, the deal was simply labeled as September business.

The company's $3 billion facility (Ba1/BB+) also includes a $700 million five-year revolver and a $1.1 billion five-year term loan A, both of which launched in late July.

The pro rata syndication process was a success as the tranches were oversubscribed and because of that, the company decided to upsize its A loan from $1 billion and downsize its B loan from $1.3 billion.

Also, based on filings with the SEC, it was initially expected that the term loan A would be sized at $750 million and the term loan B would be sized at $1.55 billion, but when the pro rata was launched, a revised structure emerged.

Sealed Air lead banks

Citigroup Global Markets Inc., Bank of America Merrill Lynch, BNP Paribas Securities Corp. and RBS Securities Inc. are the lead banks on Sealed Air's credit facility.

Official talk on the term loan B has not yet emerged, but filings with the SEC said the debt would be priced at Libor plus 275 bps on the U.S. piece and Euribor plus 300 bps on the euro piece, with the entire tranche having a 1% Libor/Euribor floor.

Pricing on the term loan A and revolver is Libor plus 250 bps, with the revolver having a 50 bps unused fee. This pricing is in line with what the company had outlined in its regulatory filings.

Proceeds will be used to fund the purchase of Diversey Holdings Inc. from the Johnson family and Clayton, Dubilier & Rice LLC for $2.1 billion in cash and an aggregate of 31.7 million shares of Sealed Air common stock. The transaction is valued at $4.3 billion.

In connection with the transaction, $1.4 billion of Diversey net debt will be refinanced.

Sealed Air plans notes

In addition to the credit facility, Sealed Air expects to approach the high-yield market with a $1.5 billion senior unsecured notes offering that is backed by a commitment for a $1.5 billion one-year bridge loan, of which $1 billion will be available in dollars and $500 million will be available in euros.

Pricing on the bridge loan is Libor plus 575 bps on the U.S. piece and Euribor plus 600 bps on the euro piece, with the spread on both pieces stepping up by 50 bps after three months and every three months thereafter. There is a 1% Libor floor on the U.S. tranche and a 1.25% Euribor floor on the euro tranche.

Pro forma leverage will be 4.4 times.

Closing is expected in the fourth quarter, subject to customary regulatory approvals.

Sealed Air is an Elmwood Park, N.J.-based manufacturer of packaging and performance-based materials and equipment systems for food, industrial, medical and consumer applications. Diversey is a Sturtevant, Wis.-based provider of cleaning, sanitization and hygiene products.

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