Hertz pulls repricing; Affiliated Computer ups spread; Aveta sets talk; Windstream breaks

By Sara Rosenberg

New York, June 29 - The Hertz Corp. pulled the pricing proposal for its institutional bank debt on Thursday morning due to a number of negative events, such as overall loan market back-up, additional debt and a change in rating outlooks by the rating agencies.

In other primary news, Affiliated Computer Services Inc. flexed pricing higher on its term loan and Aveta Inc. came out with price talk on its new loan as the deal was launched to investors with a Thursday bank meeting.

Switching to the secondary, Windstream Communications' credit facility freed for trading with the term loan B starting out wrapped around par and then ticking slightly higher to close the session on a stronger note.

Hertz opted to remove its institutional bank debt repricing amendment as general market conditions, news of $1 billion in additional debt and negative outlooks from Moody's Investors Service and Standard & Poor's weighed heavily on the proposal, according to a market source.

And, as a result of this action, trading levels on the institutional bank debt saw some positive momentum since investors are no longer facing a loss in spread, with levels moving to par 3/8 bid, par 5/8 offered from par 1/8 bid, par 3/8 offered, a trader remarked.

Under the amendment, the Park Ridge, N.J, vehicle rental organization was looking to take pricing down on its term loan B and its synthetic letter-of-credit facility to Libor plus 200 basis points from the current rate of Libor plus 225 basis points.

In addition, the amendment called for a step down to Libor plus 175 basis points, based on leverage. Under the current loan terms, the institutional bank debt carries a step down to Libor plus 200 basis points from Libor plus 225 basis points that is based on leverage, so basically with the repricing the company would have left the pricing grid in place but changed it to match the new pricing level.

Deutsche Bank was leading the repricing deal, which was presented to investors at the start of last week.

Just a few days after the repricing was launched, Hertz Global Holdings Inc., the indirect parent company of Hertz Corp., announced that it received a commitment for up to $1 billion in debt financing that will be used to pay a dividend to Hertz Holdings' stockholders.

This new debt financing is not expected to be syndicated in the loan market; rather it is more likely to be a holding company PIK financing transaction.

Deutsche Bank, Lehman Brothers, Merrill Lynch, Goldman Sachs, JPMorgan Chase and Morgan Stanley provided the debt commitment, which is not subject to receipt of any consent or approval from any group of Hertz Corp.'s lenders.

Although this new debt is likely to be subordinate to the Hertz Corp. credit facility, it still created some additional push back on this particular repricing amendment and was viewed somewhat in a pessimistic light as was evident by Moody's and S&P changing their outlooks on Hertz Corp. to negative from stable earlier this week.

Moody's said that the negative outlook recognizes a potentially more aggressive financial strategy that is reflected in the willingness of Hertz's owners to seek up to a $1 billion distribution only six months after completing the buyout of Hertz.

Moody's also said that the debt issued by Hertz Holdings to fund any dividend would have to be serviced by the receipt of dividends from Hertz and could be a source of pressure on the operating subsidiary's financial position.

S&P, in agreement with Moody's, said that its decision to place Hertz on CreditWatch negative was based on potential incremental debt at Hertz, the sole operating entity of Hertz Global Holdings Inc., as well as on a more aggressive financial policy.

Affiliated Computer flexes up

Affiliated Computer revised price talk higher on its proposed $1 billion term loan B add-on, and as a result, on its $800 million of existing term loan B debt, according to a market source.

And, now that existing term loan B lenders are expecting an even bigger increase in spread than they originally anticipated, trading levels on the outstanding B loan debt headed higher, moving to par bid, par 3/8 offered from 99¾ bid, par 1/8 offered, a trader remarked.

Under the changes, the term loan B add-on is priced with an interest rate of Libor plus 200 basis points, up from original talk at launch of Libor plus 175 basis points, the source said.

In connection with the add-on, the company's existing term loan B debt is being repriced in line with the new debt, so originally whereas pricing was going to go from the current rate of Libor plus 150 basis points to Libor plus 175 basis points, now it will go up to Libor plus 200 basis points, the source explained.

Proceeds from the term loan B add-on will be used to fund a share repurchase program for up to $1 billion of the company's class A common stock.

Affiliated Computer got its existing $800 million term loan B in March of this year to help fund a Dutch auction for common shares.

Under the March Dutch auction tender, the company had originally offered to purchase up to 55.5 million shares of its class A common stock at a minimum price per share of $56 and a maximum price of $63, for a total value of about $3.5 billion.

But, the company only successfully tendered for about 7.4 million shares of its class A common stock at a purchase price of $63 per share for a total cost of about $465 million - which resulted in a downsizing of the term loan B size to $800 million from $4 billion.

However, under the term loan B credit agreement, provisions were made for a $3 billion accordion feature allowing for future incremental borrowings to fund purchases of equity and debt securities.

Citigroup is the lead bank on the deal.

Affiliated Computer Services is a Dallas-based provider of business process and information technology outsourcing solutions to commercial and government clients.

Aveta price talk

Aveta announced price talk of Libor plus 225 basis points on its proposed $185 million term loan (B1/B) Thursday when the deal was presented to lenders with a morning meeting, according to a market source.

Bear Stearns is the lead bank on the deal.

The term loan is being borrowed under the Aveta credit facility accordion feature, and pricing on the transaction is set in line with existing term loan pricing. However, the actual borrower under this particular term loan is Preferred Health Management Corp.

Proceeds will be used to fund the acquisition of PMC Medicare Choice, a Medicare Advantage company and health care plan providing benefits in 78 municipalities in Puerto Rico, for about $250 million.

Of the total purchase price, about $185 million will be payable at closing and the balance will be earned and payable over up to 24 months after closing based on the achievement of specific performance targets for the combined Puerto Rico healthcare operations of PMC and Aveta.

On a combined basis, total debt is $485 million against year-to-date annualized EBITDA of $163.5 million yielding 3x total debt to EBITDA and 6.7x interest coverage.

This transaction is only having a modest impact on leverage as most recently total debt to EBITDA was 2.8x.

Aveta is a Hackensack, N.J., medical management company.

Windstream frees to trade

Over on the secondary side, Windstream's credit facility broke for trading with the $1.9 billion seven-year term loan B opening at 99 7/8 bid, par 1/8 offered and then moving up to par bid, par ¼ offered where it closed the day, according to a trader.

The term loan B is priced with an interest rate of Libor plus 175 basis points.

Windstream's $3.3 billion credit facility (Ba2/BB+/BBB-) also contains a $500 million five-year revolver with an interest rate of Libor plus 150 basis points, a $500 million five-year term loan A with an interest rate of Libor plus 150 basis points and a $400 million five-year delayed-draw term loan C that will be available for four months.

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

Proceeds will be used to help fund the merger of Alltel Corp.'s wireline business with Valor Communications Group Inc. in a transaction valued at about $9.1 billion, with the merged company renamed Windstream Communications and based in Central Arkansas.

More specifically, the term loan A and term loan B will be used to help finance a $2.4 billion dividend payment to Alltel, to refinance Valor's existing credit and to refinance about $81 million of Alltel's outstanding bonds.

Proceeds from the revolver will be used for working capital and general corporate purposes.

And, proceeds from the delayed-draw term loan C will be used to purchase up to $400 million of Valor's outstanding bonds that may be tendered in connection with this merger transaction. It is anticipated that these bonds will not be put in connection with the transaction, which would then cancel out the need for the term loan C tranche, reducing the overall credit facility size.

ILC closes

ILC Industries Inc. closed on its $300 million senior secured credit facility, according to a company news release. The facility consists of a $30 million six-year revolver and a $270 million 61/2-year first-lien term loan, with both tranches priced at Libor plus 250 basis points.

UBS and General Electric Capital Corp. acted as the lead banks on the deal.

Proceeds from the credit facility, along with $110 million of junior capital led by GSO Capital Partners, were used to help fund the recapitalization of ILC by its majority shareholder, Behrman Capital.

The recapitalization included redeeming the company's existing second-lien term loan and mezzanine notes, paying a dividend to existing shareholders and paying related transaction fees and expenses.

ILC Industries is a Bohemia, N.Y., supplier of defense electronics, advanced microelectronic components and engineered materials to the defense, homeland security, commercial aerospace, space and industrial markets.

Philadelphia Newspapers closes

Philadelphia Newspapers LLC completed its acquisition of The Philadelphia Inquirer, Philadelphia Daily News, Philly.com and related media properties from The McClatchy Co. for $562 million, according to a company news release.

To help fund the purchase, Philadelphia Newspapers got a new $345 million senior credit facility consisting of a $295 million term loan B and a $50 million revolver, with both tranches priced at Libor plus 275 basis points.

During syndication, the term loan B was upsized from $275 million as the amount of mezzanine debt being used to fund the transaction was reduced to $85 million from $105 million, and pricing on both the term loan B and the revolver firmed up at the high end of original guidance of Libor plus 250 to 275 basis points.

RBS Securities acted as the lead bank on the deal.

Philadelphia Newspapers was formed by a group of local investors headed by advertising executive Brian Tierney for the purpose of acquiring these assets.

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