Calpine CCFC II revolver volatile throughout day but pulls higher to 99 levels by evening

By Sara Rosenberg

New York, March 11 - Calpine Construction Finance Co. II LLC revolver's was all over the place on Thursday as levels rose following the announcement of a refinancing transaction, dropped on some market confusion and then rose again once everything was sorted out.

The bank debt was quoted around 99 bid, 99½ offered or maybe slightly higher at 99 1/8 bid, 99 5/8 offered by late day, according to a trader.

"It started at 971/2, 981/2. After the deal was announced it went up to 99, 99 3/8. It went down from there because people weren't sure if the deal was underwritten. Then they realized that it was and it went back up," the trader explained.

On Thursday Calpine revealed that its subsidiary, Calpine Generating Co. LLC (CalGen) will commence an offering for term loans and senior notes in a second attempt to refinance the CCFC II revolver, this time with Morgan Stanley leading the transactions.

The deal is split into four parts. There is an $800 million "super" secured floating-rate loans or notes tranche due 2009 that is non-callable for three years and is talked at Libor plus 350 to 375 basis points. The second piece is $855 million of senior secured floating-rate loans or notes due 2010 that are non-callable for four years and are talked at Libor plus 550 to575 basis points. The third tranche is $550 million of secured floating-rate notes due 2011 that are non-callable for life and are talked at Libor plus 875 to 900 basis points. Lastly, there will be $200 million of secured fixed-rate notes due 2011 that are non-callable for life and are talked at 11¼% to 11½%, according to sources.

On Feb. 24, CalGen pulled its CCFC II refinancing proposal of $1.3 billion non-recourse first priority secured institutional term loan from the bank loan market and its $1.05 billion secured notes offering from the high-yield market due to market conditions. Deutsche Bank was the lead bank on that deal.

Ever since those transactions were tabled, rumors have been flying around the market regarding a potential refinancing, timing of a new deal and lead banks. And, the speculation, which now proved to be right on course, was that once affirmation of a new deal hit the market the CCFC II revolver would trade up to 99ish.

Calpine is a San Jose, Calif.-based power company.

United Industries launch set

United Industries Corp. is tentatively scheduled to hold a bank meeting on March 25 for its previously announced proposed $510 million senior credit facility (B1/B+), according to a market source. Bank of America and Citigroup are the lead banks on the deal.

The facility consists of a $385 million term loan and a $125 million revolver.

Proceeds will be used to finance the acquisition of The Nu-Gro Corp., which was announced on March 2, and to redeem United's outstanding preferred stock and the remainder of its outstanding 9 7/8% series B subordinated notes due 2009.

United Industries is a St. Louis manufacturer and marketer of value-oriented products for the consumer lawn and garden care and insect control markets.

Sealy launch next week

Sealy Corp. is expected to hold a bank meeting next week for its proposed credit facility, according to a market professional, with some buyside sources saying that they heard that Thursday or Friday is being targeted for the launch.

Other details on the deal, such as timing or structure, have still not emerged in the primary marketplace.

JPMorgan and Goldman Sachs are the lead banks on the deal.

Proceeds will be used to help fund Kohlberg Kravis Roberts & Co.'s (KKR) approximately $1.5 billion acquisition of Sealy.

The company also plans to use equity to support the transaction as well, according to a company news release.

Furthermore, substantially all of the Trinity, N.C., bedding manufacturer's existing debt will be refinanced in connection with the transaction.

Under the acquisition agreement, KKR and Sealy management will acquire about 92% of Sealy, with existing shareholders retaining the remaining 8% interest. Sealy is being acquired from a private investment group that includes Bain Capital, Charlesbank Capital Partners, JPMorgan Partners, CIBC Argosy Merchant Fund and BancBoston Capital.

Goldman, Sachs & Co. and J.P. Morgan Securities Inc. served as financial advisers to Sealy. Kirkland & Ellis LLP advised the selling Sealy shareholders, and Simpson Thacher & Bartlett LLP advised KKR.

The Pantry reverse flexes

Pricing on The Pantry Inc.'s $345 million seven-year term loan was reduced to Libor plus 275 basis points from initial pricing of Libor plus 300 basis points, according to various market sources.

The $415 million senior credit facility (B1/B+), which launched via a bank meeting in mid-February, also contains a $70 million six-year revolver with an interest rate of Libor plus 275 basis points

Originally, the company anticipated the deal to be sized at $440 million consisting of a $370 million term loan B and a $70 million revolver. But it was later downsized following the pricing of an upsized $250 million offering, from $225 million, of 10-year senior subordinated notes.

Wachovia and Credit Suisse First Boston are the joint lead arrangers on the deal.

Proceeds from the credit facility will be used to refinance the company's existing senior credit facility. The existing deal has a first lien term loan carrying an interest rate of Libor plus 425 basis points with a 1.75% Libor floor and a second lien term loan carrying an interest rate of Libor plus 650 basis points with a 1.5% Libor floor, so this new transaction will result in significantly lower spreads and the removal of Libor floor protection.

The Pantry is a Sanford, N.C., convenience store chain.

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