L-1 Identity breaks; GM, Delphi, Ford trade down; York Label raises OID; Wrigley blows out

By Sara Rosenberg

New York, Aug. 1 - L-1 Identity Solutions Inc. allocated and freed its credit facility up for trading on Friday morning, with the term loan quoted well above its original issue discount price.

Also on the trading side, General Motors Corp.'s term loan fell following the release of second-quarter results, which also brought Delphi Corp.'s second-lien debtor-in-possession financing term loan lower, and Ford Motor Co.'s term loan softened with July sales numbers.

In other news, York Label lifted the original issue discount on its term loan and is focusing on the wide end of original price talk, and Wrigley Co.'s term loan B is almost two times oversubscribed ahead of the upcoming commitment deadline.

Furthermore, Strategic Materials Inc.'s credit facility is fully subscribed plus some, and now that syndication has successfully wrapped, allocations are expected to go out shortly, and EnergySolutions Inc. came out with an original issue discount on its new letter-of-credit facility as the deal has been launched to investors.

L-1 Identity Solutions' credit facility allocated and freed up for trading on Friday, with the $300 million five-year term loan quoted more than a point higher than the discount price at which it was sold during syndication, according to a market source.

The term loan opened at 99½ bid, par offered and then the bid ticked higher to 99 5/8, while the offer remained at par, the source said.

Pricing on the term loan is Libor plus 450 basis points with a 3% Libor floor, and the paper was sold at an original issue discount of 981/2.

During syndication, the term loan was upsized from $250 million and the original issue discount was lowered from initial talk of 98.

The source said that allocations on the term loan "were horrible." He explained that there were "over $1 billion in orders for a $300 million deal. Revolver lenders, i.e. banks, were also given $125 million of the $300 million term loan."

L-1 Identity's $435 million senior secured deal (Ba3/BB+) also includes a $135 million five-year revolver that is priced at Libor plus 375 bps with a 50 bps commitment fee.

During syndication, the revolver was upsized from $100 million.

Bank of America and Wachovia are the joint lead arrangers and bookrunners on the facility, with Bank of America the administrative agent and Wachovia the syndication agent.

According to the original commitment letter filed with the Securities and Exchange Commission, pricing on the credit facility was going to be based on corporate family ratings, which emerged as B2/BB-.

On the term loan, the filing said that if corporate family ratings were Ba3/BB-, pricing would be Libor plus 375 bps; if ratings were Ba3/B+ or B1/BB-, pricing would be Libor plus 400 bps; if ratings were B1/B+, pricing would be Libor plus 450 bps; and if ratings were lower or unavailable, pricing would be Libor plus 500 bps.

As for the revolver, the filing said that if corporate family ratings were Ba3/BB-, pricing would be Libor plus 325 bps; if ratings were Ba3/B+ or B1/BB-, pricing would be Libor plus 350 bps; if ratings were B1/B+, pricing would be Libor plus 375 bps; and if ratings were lower or unavailable, pricing would be Libor plus 400 bps.

The commitment letter also said that the original issue discount on the term loan would be based on corporate ratings as well, so if ratings were Ba3/BB-, the discount was expected to be at 99; if ratings were Ba3/B+ or B1/BB-, the discount was expected to be at 981/2; and if ratings were lower or unavailable, the discount was expected to be at 98.

Amortization on the term loan will be 5% in year one, 10% in year two, 20% in years three and four, and 45% in year five.

Financial covenants include a consolidated total opco leverage ratio not to exceed 3.25 to 1.00 and a debt service overage ratio of not less than 2.75 to 1.00.

Proceeds will be used to help fund the tender offer for Digimarc Corp.'s outstanding common stock for $12.25 per share. This price was adjusted from $11.90 per share based on the number of shares of Digimarc common stock expected to be outstanding at the expiration of the tender offer. Total cash consideration to be paid by L-1 remained unchanged at $310 million.

Beaverton, Ore.-based Digimarc is spinning off its digital watermarking business, so L-1 is really just acquiring the ID Systems business, which provides products and services that enable the annual production of more than 60 million personal identification documents, including ID services for more than 25 countries.

Digimarc stockholders will also receive shares in DMRC Corp., which will hold Digimarc's digital watermarking business and Digimarc's cash as of the completion of the transaction.

Consummation of the transaction requires the completion of the tender offer, the spin-off of the digital watermarking business and other customary closing conditions. The Federal Trade Commission has already granted early termination of the Hart-Scott-Rodino antitrust review process.

Following the closing of the transaction, on a pro-forma calendar 2008 basis, L-1 expects to have revenue of about $670 million, adjusted EBITDA of $110 million including operational efficiencies, unlevered free cash flow of $75 million and a backlog of about $1 billion.

L-1 is a Stamford, Conn., provider of products for protecting and securing personal identities and assets.

General Motors, Delphi retreat

General Motors and Delphi both saw bank debt levels come in during the trading session as General Motors announced quarterly results that included a hefty net loss, and reported a slump in July sales numbers, according to a trader.

General Motors' term loan was quoted at 75½ bid, 76½ offered, down from Thursday's levels of 77¾ bid, 78¾ offered, the trader said.

And, Delphi, a Troy, Mich.-based automotive electronics manufacturer, saw its second-lien DIP term loan quoted at 86 bid, 87 offered, down from 88 bid, 89 offered, the trader added.

For the second quarter, General Motors reported a net loss of $15.5 billion, or $27.33 per share, including significant charges and special items, compared with net income from continuing operations of $784 million, or $1.37 per share, in the second quarter of 2007.

On an adjusted basis, the company posted a net loss of $6.3 billion, or $11.21 per share, compared with net income from continuing operations of $1.3 billion, or $2.29 per share, in the same period last year.

Revenue for the quarter was $38.2 billion, down from $46.7 billion in the year-ago quarter.

The second quarter loss was primarily driven by several factors, including significant losses in GM North America due to continuing U.S. industry volume declines and shifts in vehicle mix, the long strike at American Axle and large lease-related charges, a number of special charges associated with ongoing restructuring actions, continued losses at GMAC Financial Services, and updated estimates regarding recoveries and expectations of assumed benefit obligations in the Delphi bankruptcy.

"As our recent product, capacity and liquidity actions clearly demonstrate, we are reacting rapidly to the challenges facing the U.S. economy and auto market, and we continue to take the aggressive steps necessary to transform our U.S. operations," said Rick Wagoner, chairman and chief executive officer, in a news release.

"We have the right plan for GM, driven by great products, building strong brands, fuel-economy technology leadership and taking full advantage of global growth opportunities."

Focusing on liquidity, the Detroit-based automotive company's cash, marketable securities, and readily-available assets of the Voluntary Employees' Beneficiary Association trust totaled $21 billion on June 30, down from $23.9 billion on March 31.

The change in liquidity reflects negative adjusted operating cash flow of $3.6 billion in the second quarter, driven primarily by weaker results in GM North America.

As of June 30, including undrawn, committed U.S. credit facilities of about $5 billion, the company had access to about $26 billion in liquidity.

In July, General Motors provided notice to draw $1 billion under its secured revolving credit facility.

As was previously reported, the company is taking operating and related actions to improve cash flow by about $10 billion through the end of 2009. In addition, the company has outlined plans to raise about $5 billion through capital markets activities and asset sales.

General Motors reiterated on Friday that it is confident that these initiatives, along with its current cash position and $4 billion to $5 billion of committed U.S. credit lines, will provide it with ample liquidity to meet its operational needs through 2009.

Meanwhile, regarding sales results, the company delivered 235,184 vehicles in the United States in July, down 26.7% from last year. Overall, the company's truck sales in July declined 41.5%.

The company blamed weak industry conditions caused by a challenging U.S. economic environment, higher fuel prices and inventory shortages in critical segments such as compact cars for the overall sales decline for the month.

Ford falls

Ford's term loan also receded in trading after the company revealed July sales results that showed a steep decline on a year-over-year basis, according to a trader.

The term loan was quoted at 77 1/8 bid, 78 1/8 offered, down from 78¾ bid, 79¼ offered, the trader said.

For the month of July, Ford's total sales were 161,530, down 14.9% from 189,920 last year. Total truck sales fell to 99,229, down 22.1% from 127,309 last year.

Ford is a Dearborn, Mich.-based automotive company.

York Label ups OID

In primary happenings, York Label increased the original issue discount on its $135 million six-year term loan to 95 from initial talk in the 97 to 98 area, according to a market source.

Also, price talk on the term loan is now Libor plus 500 bps, the high end of initial guidance of Libor plus 475 bps to 500 bps, the source said.

As before, the term loan has a 3% Libor floor.

York Label's roughly $190 million credit facility (B1/B+) also includes a C$30 million six-year term loan, a $23 million five-year revolver and a C$2 million five-year revolver.

Bank of America is the lead bank on the deal that will be used to help fund the buyout of the company by Diamond Castle.

York Label is an Omaha, Neb.-based provider of labeling technologies to major global consumer goods, wine & spirits, pharmaceutical and food & beverage companies.

Wrigley well received

Wrigley's term loan B is already well oversubscribed even though lenders technically have until Wednesday to throw in their orders, with about $7 billion in commitments placed towards the $3.6 billion tranche, according to a buyside source.

The oversubscription is not very surprising given that on the day of the retail bank meeting, which was July 23, the term loan B was already more than half done when looking at firm orders and oversubscribed when looking at indicated interest.

The term loan B is talked at Libor plus 375 basis points with a 3% Libor floor and an original issue discount of 97.

Initially, based on filings with the SEC, it was thought that the B loan would be sized at $4.45 billion, but it was reduced prior to launch to account for a bond issue being left in place.

And, back in May, when the structure on the deal first emerged, sources heard rumors that the term loan B was expected around the Libor plus 400 bps context, but nothing official had been announced at that time.

Wrigley's $4.85 billion credit facility also includes a $250 million revolver and a $1 billion term loan A, with both of these tranches talked at Libor plus 325 bps.

Currently, there is no plan to close the books early on the deal, even with the term loan B blowing out, since the pro rata tranches are still being worked on, the source explained.

"Almost done with the term loan A. Basically waiting on commercial banks," the source added.

Goldman Sachs is the lead arranger on the deal, and Barclays, GE Capital, Rabobank and Sumitomo have signed on as co-arrangers.

Proceeds will be used to help fund the merger of Wm. Wrigley Jr. Co. and Mars Inc., and to provide for ongoing working capital and general corporate purposes.

Mars will pay $80 cash for each share of Wrigley common stock and class B common stock in a transaction valued at about $23 billion.

As part of the merger, Mars received a separate debt commitment from JPMorgan, Bank of America, BNP Paribas, Citigroup, Deutsche Bank, Lloyds TSB Bank and RBS Securities that provides for a $12 billion senior unsecured credit facility.

The Mars facility, which is expected to be investment grade, consists of a $1.5 billion revolver, an $8.5 billion term loan and a $2 billion bridge loan, according to filings with the SEC.

Proceeds from the Mars facility will be used to finance the equity contribution from Mars, the repayment or refinancing of certain Mars debt and for general corporate purposes.

Also, Berkshire Hathaway has agreed to provide $4.4 billion in subordinated debt financing to the surviving corporation in the merger and to invest $2.1 billion in equity securities.

Confections company, Wrigley Co., will be operated as a separate, stand-alone subsidiary of Mars, keeping its headquarters in Chicago. Mars is a McLean Va.-based producer of confectionery, food and petcare products.

Strategic Materials readies allocations

Strategic Materials' completed syndication of its roughly $135 million credit facilities, with the final result being that the deal is oversubscribed, and with syndication done, the deal is now expected to allocate early during the week of Aug. 4, according to a market source.

The facilities consist of a $40 million revolver, a $65 million term loan, a $5 million capex facility, a C$10 million revolver and a C$15 million term loan.

All tranches are priced in line with initial talk at Libor plus 375 basis points with a 3% Libor floor, and all were issued with an original issue discount that ranges from 98½ to 99 based on commitment size.

Comerica is the lead bank on the deal that will be used to refinance existing debt.

Strategic Materials is a Houston-based glass processing company.

EnergySolutions sets OID

EnergySolutions launched its new $200 million letter-of-credit facility to investors with an original issue discount of 983/4, according to a market source.

The facility is priced at Libor plus 250 bps.

Credit Suisse and JPMorgan are leading the deal that was presented to lenders through a bank meeting on Thursday.

The company first announced plans for the letter-of-credit facility when it disclosed in July that it amended its credit facility, providing for the amendment and restatement of the deal in its entirety upon satisfaction of certain conditions.

In addition to providing for the new letter-of-credit facility, the amended and restated facility will return the existing synthetic letter-of-credit facility deposits and make $100 million of term letter-of-credit facility loans for which the company will maintain restricted cash equal to the amount of the facility.

The amendment and restatement is subject to, among other things, the completion of the decommissioning of the Zion Nuclear Power Station site in Zion, Ill., which is expect to occur by the end of the third quarter of soon thereafter.

EnergySolutions is a Salt Lake City-based provider of nuclear services.

Fiserv pricing increase attributed to ratings

Fiserv Insurance Solutions Inc.'s recently announced the change in pricing to its credit facility is being partly explained by a ratings glitch and partly by the company's performance, according to a buyside source.

Lenders wanted ratings on the deal, and they did get a BB- bank loan rating from Standard & Poor's, but Moody's Investors Service has decided that they will not provide a rating until certain audited financial information is available, the source said.

As per the credit agreement, the company will be required to obtain a Moody's rating post closing. This rating probably won't come out till 2009, the source continued.

The source went on to say that another reason for the bump in pricing could be the business itself as "bottom line EBITDA is kind of moving around."

As was already reported, on Thursday, the banks on Fiserv announced that pricing on the $335 million six-year term loan and the $50 million five-year revolver was flexed up to Libor plus 450 bps from initial talk at launch of Libor plus 350 bps.

In addition, the original issue discount on the term loan widened to 98 from initial guidance of 981/2.

The term loan still carries a 3.25% Libor floor.

Credit Suisse is the lead bank on the $385 million deal that will be used to help back Stone Point Capital LLC's acquisition of a 51% interest in the company, the completion of which was announced on July 15.

The acquisition was initially funded through about $205 million in equity and $335 million in bridge financing out of one of Stone Point's private equity funds.

Stone Point purchased the majority interest in Fiserv Inc.'s insurance business through its private equity fund Trident IV.

Fiserv received about $510 million in net after-tax proceeds and retains a 49% equity interest in the business.

Fiserv Insurance Solutions is a Cedar Rapids, Iowa, provider of insurance technology, professional services and outsourcing services.

DynCorp closes

DynCorp International Inc. closed on its new $400 million credit facility (Ba1/BB+), according to a news release.

Wachovia acted as the lead bank on the deal that was completed on July 28.

The facility consists of a $200 million revolver and a $200 million term loan A, with both tranches initially priced at Libor plus 275 bps.

During syndication, the revolver was downsized from $250 million.

Proceeds from the facility, along with a $125 million add-on to the company's 9½% senior subordinated notes, were used to refinance existing bank debt.

DynCorp is a Falls Church, Va., provider of defense, technical and government outsourced services.

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