Venoco breaks; Burlington, Dole, Sports Authority under pressure; Cebridge upsizes, adds second lien

By Sara Rosenberg

New York, April 26 - Venoco Inc. allocated its credit facility on Wednesday, with the second-lien term loan freeing for trading right around the 101-type context. Also in trading, relatively new deals like Burlington Coat Factory Warehouse Corp., Dole Food Co. Inc. and The Sports Authority Inc. all saw their term loans slip lower in trading on market technicals.

In the primary, Cebridge Connections Inc. tweaked its capital structure, upsizing the first-lien term loan B and adding a second-lien term loan tranche to the deal as the company decided not to go ahead with a previously planned bond offering.

Venoco's credit facility hit the secondary on Wednesday, with the $350 million five-year second-lien term loan (Caa1/B-) quoted around par ¾ bid, 101¼ offered and actively trading at the 101 level, according to a market source.

The second-lien term loan is priced with an interest rate of Libor plus 450 basis points, and if the company completes an initial public offering of common stock, pricing will drop to Libor plus 400 basis points.

During syndication, pricing on the second-lien loan was reverse flexed from original talk at launch of Libor plus 500 basis points.

The 50 basis point step down upon completion of an IPO was always part of the credit agreement, but with last week's reverse flex in pricing, the step down goes to Libor plus 400 basis points as opposed to Libor plus 450 basis points as was originally contemplated.

The second-lien loan contains call protection of 102 in year one, 101 in year two and par thereafter.

Venoco's $650 million credit facility also contains a $300 million three-year reserve-based revolver that contains a pricing grid ranging from Libor plus 150 to 225 basis points depending on utilization.

The revolver commitment fee can range from 37.5 to 50 basis points depending on utilization. The initial borrowing base under the revolver is set at $200 million.

Credit Suisse and Lehman Brothers are the joint lead arrangers on the second-lien term loan, with Credit Suisse acting as administrative agent, Lehman acting as syndication agent and Harris Nesbitt acting as co-arranger. Harris Nesbitt is the lead arranger on the revolver, with Credit Suisse and Lehman acting as co-arrangers, co-syndication agents and co-documentation agents.

Proceeds from the credit facility will be used to fund the already completed acquisition of TexCal Energy LLC.

Venoco is a Denver-based independent energy company.

New deals trade down

There was a trend in Wednesday's trading session in which market players noticed that new deals - like Burlington, Dole and Sports Authority - that during syndication cut pricing on their institutional tranches, some of which were covenant-light, or are highly leveraged, came under some pressure, bringing trading levels down fairly considerably for the loan market, according to traders.

For starters, Burlington's term loan B, which began trading on April 17, dropped to 99 5/8 bid, 99 7/8 offered from par 1/8 bid, par 3/8 offered during market hours, traders said. This term loan B is priced with an interest rate of Libor plus 225 basis points, after coming in at the low end of original guidance of Libor plus 225 to 250 basis points, and the company's leverage is somewhere around 6-plus times with little asset coverage.

Dole's strip of term loan B and funded letter-of-credit facility debt, which began trading on April 11, dropped to 99 7/8 bid, par 1/8 offered from previous levels of par 1/8 bid, par ¼ offered, traders continued. This covenant-light paper is priced with an interest rate of Libor plus 175 basis points after reverse flexing during syndication from Libor plus 200 basis points.

Lastly, Sports Authority's term loan B, which just began trading on Tuesday, dropped to 99¾ bid, par 1/8 offered from previous levels of par bid, par ½ offered, traders added. This covenant-light tranche is priced with an interest rate of Libor plus 225 basis points after reverse flexing from Libor plus 250 basis points.

"All these deals that people were fine with like two weeks ago have come under pressure," one trader remarked. "But, as they come under pressure, people should be looking at these. Market technicals are crisscrossing. It's only a matter of time before these things move back up."

Burlington is a Burlington, N.J., retailer of branded apparel. Dole is a Westlake Village, Calif., producer and marketer of fresh fruit, fresh vegetables and fresh-cut flowers. And, Sports Authority is an Englewood, Colo., full-line sporting goods retailer.

Lear rises on earnings

Avoiding the fate of the other new deals was Lear Corp., which saw its term loan B strengthen in trading - despite it fitting the cut pricing during syndication criteria - as investors were pleased with the company's financial results, according to a trader.

The term loan B, which started trading this past Monday, was seen closing the session at par 3/8 bid, par ¾ offered, up from previous levels of par ¼ bid, par ½ offered, the trader said. For comparison, this tranche is priced with an interest rate of Libor plus 250 basis points after reverse flexing during syndication from Libor plus 300 basis points.

"It's up on earnings. That's why Lear didn't get lumped into that group [of new deals]," the trader said.

On Wednesday morning, Lear announced first-quarter results that included net sales of $4.7 billion, compared with net sales of $4.3 billion in the first quarter of 2005, and pretax income of $14.8 million, compared with a pretax loss of $2.9 million in the first quarter of 2005. Net income was $17.9 million, or $0.26 per share, for the first quarter of 2006, compared with net income of $15.6 million, or $0.23 per share, for the first quarter of 2005.

For full-year 2006, Lear expects record worldwide net sales of about $17.7 billion, reflecting primarily the addition of new business globally, partially offset by unfavorable platform mix and the adverse impact of foreign exchange.

And, full-year 2006 income before interest, other expense, income taxes, impairments, restructuring costs and other special items are anticipated to be in the range of $400 million to $440 million, compared with $325 million a year ago.

Lear is a Southfield, Mich., supplier of automotive interior systems and components.

Movie Gallery momentum continues

Movie Gallery Inc.'s term loan B spent another day heading higher despite the lack of credit specific news, bringing total gains this week to about a point-and-a-half, according to a trader.

The term loan B closed the session quoted at 91½ bid, 93 offered, up from Tuesday's closing levels of 91 bid, 92 offered. At the end of last week, the paper was being quoted at of 90 bid, 91½ offered.

Positive momentum in the name has been attributed to recent announcements that the company has reached a management agreement with Hilco Real Estate LLC under which a program will be initiated to restructure leases at more than 1,100 existing Movie Gallery and Hollywood Video stores, and that it expects to be in full compliance with the financial covenants for the reporting period ended April 2.

In addition, Movie Gallery's levels were said to be helped by movie rental company Netflix Inc.'s positive first-quarter results that were released early this week.

Movie Gallery is a Dothan, Ala.-based movie rental company.

Cebridge reworks structure

Switching to the primary, Cebridge Connections made some changes to its credit facility as it increased the size of its first-lien term loan B and added a second-lien term loan tranche to the deal to compensate for a $775 million bond offering that the was previously planned but has now been eliminated, according to a market source.

The 71/2-year first-lien term loan B (B1/B+) is now sized at $2.1 billion, up from an original size of $2 billion, the source said.

In addition, a $675 million eight-year second-lien term loan was added to the capital structure. Of the total amount, $337.5 million will be cash pay at Libor plus 475 basis points and contain call protection of 103 in year one, 102 in year two and 101 in year three. The remaining $337.5 million will be pay-in-kind at Libor plus 600 basis points and will be non-callable for three years, the source said.

Currently, the first-lien term loan B is talked at Libor plus 225 basis points; however, "they're talking about the possibility of taking it down to Libor plus 200 basis points," the source remarked. "Talk is they may just settle for a step down to Libor plus 200 basis points. We'll see," the source added.

Cebridge's now $3.255 billion credit facility (up from $2.48 billion) also contains a $200 million seven-year revolver (B1/B+) with a 50 basis point commitment fee and a $280 million 11/2-year interim term loan.

Goldman Sachs and Credit Suisse are joint lead arrangers on the deal, with Goldman the left lead.

Proceeds from the credit facility will be used to help fund the purchase of Cox Communications Inc.'s cable television systems.

GS Capital Partners and Oaktree Capital Management LLC are the majority investors in Cebridge and the primary equity partners in this transaction.

The acquisition, which was announced in 2005, is expected to close in the second quarter.

Cebridge is a St. Louis-based provider of cable television and internet access.

Activant cuts spread

Activant Solutions Inc. lowered pricing on its $390 million term loan B to Libor plus 200 basis points from original price talk at launch of Libor plus 250 basis points, according to a market source.

Pricing on the company's $40 million revolver was left unchanged at Libor plus 250 basis points, the source added.

Prior to the launch of the deal earlier this month, the term loan B was expected to be sized at $340 million. However, the company opted to present lenders with an upsized term loan B tranche as it shifted its proposed senior notes offering into its proposed senior subordinated notes offering and downsized the total bond transaction by $50 million to $175 million.

The $175 million offering of 10-year senior subordinated notes is being talked at 9½% to 9¾%, with pricing expected to take place on Thursday.

Deutsche Bank, JPMorgan and Lehman are the lead banks on the $430 million senior secured credit facility (B2/B), with Deutsche the left lead.

Proceeds from the credit facility, along with bond proceeds, will be used to help fund the leveraged buyout of Activant by Hellman & Friedman LLC and Thoma Cressey Equity Partners.

The transaction is subject to customary regulatory approvals, as well as satisfaction of other customary closing conditions, and is expected to close by May 8.

Activant, currently owned by HM Capital Partners LLC, is an Austin, Texas-based technology provider of business management solutions.

GenTek closes

GenTek Inc. completed the repricing of its first- and second-lien term loans, under which the spread on the first-lien term loan was lowered to Libor plus 225 basis points from Libor plus 275 basis points and the spread on the second-lien term loan was lowered to Libor plus 425 basis points from Libor plus 575 basis points.

In addition, the first-lien term loan contains a step down to Libor plus 200 basis points if certain credit rating improvements are achieved.

Furthermore, lenders agreed to a $22 million repayment toward the second-lien debt that the company has funded from proceeds of the recently closed sale of its Canadian Wire and Cable business. Second-lien holders were paid a prepayment premium of about $220,000.

"These amendments and the associated debt reduction are a material step forward in achieving our stated objective of long-term cash flow improvement. Further, this will give GenTek even greater flexibility to fund our growth initiatives from operating cash flow," said William E. Redmond Jr., president and chief executive officer, in a company news release.

Bank of America acted as the lead bank on the repricing for GenTek, a Parsippany, N.J., manufacturer of industrial components and performance chemicals.

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