AM General breaks for trading; Knoll term loan basically done at new spread

By Sara Rosenberg

New York, Sept. 24 - AM General Corp. allocated and broke for trading late in the day Friday with opening bids set but no offers. On the primary front, Knoll Inc.'s new Libor plus 300 basis points pricing that was assigned to the term loan this past Monday proved to be effective as the tranche is now basically subscribed.

AM General's first-lien term loan was quoted at 99 bid - unchanged from the original issue price - and the second-lien term loan was quoted at 101 bid - a point higher than its original issue price, according to a trader.

As for allocations, "everyone got pretty much what they put in for," a market source added.

The $400 million seven-year first-lien term loan is priced at Libor plus 450 basis points and contains call protection of 105 in year one, 103 in year two and 101 in year three. The $165 million second-lien term loan C is priced at Libor plus 900 basis points and is non-callable for two years with call protection of 102 in year three and 101 in year four.

Originally, the first-lien term loan was priced at Libor plus 300 basis points and was being offered at par and the second-lien term loan was priced at Libor plus 525 basis points, but both tranches were flexed higher and call protection was sweetened from original indications this past Wednesday in order to wrap up syndication.

The $615 million credit facility also contains a $50 million five-year revolver with an interest rate of Libor plus 300 basis points.

Citigroup is the sole lead bank on the deal.

Currently, AM General is owned by Renco Group Inc., but a new holding company is being formed through a contribution partnership with MacAndrews & Forbes and Renco. Under the partnership, MacAndrews would have a majority stake of the company and Renco would have a minority stake. A portion of the proceeds from this credit facility will go toward the new holding company and portion will go toward debt repayment.

AM General is a South Bend, Ind., military and special purpose vehicles company.

Knoll basically done at new pricing

Knoll's $425 million term loan is either close to or already subscribed at the new spread, although the increased pricing did not in any way cause the deal to suddenly blow out, according to a fund manager.

"With the flex to 300 they think they'll be able to get that done. [I've been told] they're basically there right now, which either means there's $425 million in the books or just below that.

"I passed. It's not warranting 300. It's warranting a lot more than that," the fund manager continued, explaining that issues like poor company performance over the past four years and the equity sponsor trying to get a dividend out of the company before they do an initial public offering are just some of the reasons that he's back away from getting involved at this pricing level.

Originally the term loan was priced at Libor plus 250 basis points.

Knoll's $75 million revolver is still talked at the Libor plus 250 basis point mark.

On Sept. 10, just one day after the company held a bank meeting to launch the credit facility into syndication, Knoll filed an S-1 with the Securities and Exchange Commission announcing plans for an initial public offering of its common stock. The in-market credit facility is expected to be obtained before the IPO is done, according to the filing.

UBS Securities LLC and Goldman Sachs are the lead banks on the loan deal, with UBS listed on the left.

Proceeds from the $500 million senior secured credit facility (BB-) will be used to refinance existing debt and to fund a dividend to existing shareholders.

Knoll is an East Greenville, Pa., designer and manufacturer of branded office furniture products and textiles.

Calpine trades up, settles back down

Calpine Corp.'s second-lien loan traded up on Friday, with some trades occurring as high as the near 87½ area before the paper settled back down to 86½ bid, 87½ offered, according to a trader.

The slight rally was still follow-through from Thursday's positive momentum that was sparked by news of convertible notes and first-priority senior secured note offerings.

"They're taking care of a lot of maturities out there," the trader said about the offerings.

On the heels of the announcements Thursday, Calpine's second-lien saw quite a bit of activity and headed all the way to 87 bid, 87½ offered before the session was over, up about a point from previous levels.

San Jose, Calif.-based power company Calpine plans on pricing about $600 million of new unsecured convertible notes due 2014 via sole bookrunner Deutsche Bank Securities Inc. and about $785 million of first-priority senior secured notes due 2014 via Merrill Lynch on Monday.

These offerings will not only help liquidity and take care of some upcoming maturities but have also managed to give investors more confidence in the company's ability to access the capital markets and follow-through on what it previously said it would attempt to do.

Proceeds from the convertibles will be used to redeem High Tides I and High Tides II and to redeem or repurchase other existing debt through open-market purchases.

Net proceeds from the bond offering are also expected to be used to redeem or repurchase existing debt through open-market purchases.

Concurrent with the offerings, Calpine will use cash on hand to repurchase about $266 million principal amount of its existing 4¾% unsecured convertible notes due 2023 from Deutsche Bank.

AAi.FosterGrant allocations

AAi.FosterGrant Inc.'s $115 million credit facility is anticipated to allocate and break for trading on Monday, and the syndicate is targeting a closing date of Sept. 30, according to a market source.

The syndicate recently finalized terms of the credit agreement, with a number of changes made to the deal this past Wednesday, including reducing the term loan B size to $90 million from $100 million, adding a $10 million term loan A tranche, upping pricing, adding soft call protection of 102 in year one and 101 in year two, and changing the amortization schedule.

The six-year term loan B is priced at Libor plus 500 basis points, up from initial price talk of Libor plus 350 basis points, and is being offered at par. The $15 million five-year revolver and the term loan A are both priced at Libor plus 450 basis points.

Since launching in early August, pricing on AAi.FosterGrant's term loan B has been up in the air. Around, mid-August rumor had it that the tranche would be flexed up to somewhere in the Libor plus 400 basis point range in an attempt to capture investor attention. The deal was said to be falling through the cracks since it was August - a time well known for vacations - and people who were present were caught up in other deals. And then, early this month, talk was pretty much right on the mark as investors anticipated that pricing would go up to Libor plus 500 basis points, call protection of 102 in year one and 101 in year two would be added and the amortization schedule would be improved.

Bear Stearns is the sole lead bank on the deal that will be used to help fund the acquisition of Magnivision Inc. from American Greetings Corp. in an all cash transaction.

AAi.FosterGrant is a Smithfield, R.I., eyewear and jewelry company. Magnivision is a reading glasses company.

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