Hertz sets opening spreads; Amscan floats talk; Calpine higher despite shakeup; Kodak up again

By Sara Rosenberg

New York, Nov. 29 - The Hertz Corp. officially came out with opening spreads on its massive credit facility as the deal was launched to retail investors through what can only be described as an extremely well-attended bank meeting.

In other primary happenings, Amscan Holdings Corp. has started to float price talk on its new deal ahead of its scheduled Thursday launch.

As for the secondary, Calpine Corp.'s second-lien bank debt somewhat surprisingly ended the day at stronger levels - after a short stumble - despite news of management departures. Also, Eastman Kodak Co.'s term loan continued to inch higher on the same positive investors sentiment that has been pushing it up since early last week.

Hertz announced price talk on its $3.85 billion credit facility as the deal was presented to retail investors on Thursday morning in a meeting that had "standing room only" and a "ton of people" in attendance, according to a market source.

The $1.6 billion asset-based revolver was launched with opening talk of Libor plus 225 basis points, and both the $2 billion term loan and the $250 million synthetic letter-of-credit facility were launched with opening talk of Libor plus 250 to 275 basis points, the source said.

Previously, there had been rumors floating around that the price talk on the deal would come anywhere in the Libor plus 225 to 300 basis points range but nothing definitive had been announced until now.

Deutsche Bank, Lehman Brothers and Merrill Lynch are the lead banks on the credit facility, with Deutsche the left lead.

Proceeds from the loan, along with proceeds from a proposed $2.8 billion equivalent bond offering, will be used to help fund the acquisition of Hertz by Clayton, Dubilier & Rice Inc., The Carlyle Group and Merrill Lynch Global Private Equity.

The equity sponsors are purchasing the Park Ridge, N.J., vehicle rental organization from Ford Motor Co. in a transaction valued at $15 billion.

Amscan price talk

Amscan spread guidance surfaced as the $505 million credit facility (B2/B) is getting ready to launch with a bank meeting on Thursday, with both the $420 million seven-year term loan and the $85 million six-year revolver currently talked at Libor plus 300 basis points, according to a buyside source.

Goldman Sachs and Bank of America are the lead banks on the deal.

Proceeds from the credit facility will be used to help back the leveraged buyout of Party City Corp. by Berkshire Partners LLC and Weston Presidio - who already own Amscan.

An equity contribution from the two sponsors and management of $132 million will also be used for LBO financing.

The current financing package differs from the one outlined in commitment letters that were filed with the SEC in early October. According to the original plan, the credit facility was going to be sized at $540 million consisting of a $400 million seven-year first-lien term loan, a $75 million six-year revolver and a $65 million eight-year second-lien term loan. And, equity contributions under the original plan were expected to be in an amount of at least $100 million.

Under the terms of the LBO agreement, Party City shareholders will receive $17.50 per share in cash for each share of common stock outstanding for total consideration of about $360 million.

The acquisition, which is expected to close by year-end, is subject to financing, shareholder approval and other customary conditions, including regulatory approvals.

Proceeds from the credit facility and the equity contribution will be used to finance the merger, repay or refinance existing debt, pay merger fees and expenses and for general corporate purposes.

Party City is a Rockaway, N.J., party goods chain. Amscan is an Elmsford, N.Y., designer, manufacturer and distributor of decorative party goods.

Pre-Paid Legal books likely to stay open

Pre-Paid Legal Services Inc. had pushed out its commitment deadline officially to Tuesday when a 100 basis point flex up in spreads was announced last week, but it is expected that this deadline will not hold fast and firm as the commitment/syndication process will likely continue throughout the rest of the week, a market source told Prospect News.

The $160 million senior secured credit facility (B1/B+) consists of a $150 million seven-year term loan and a $10 million five-year revolver, with both tranches currently priced at Libor plus 325 basis points after the spreads were increased from initial price talk of Libor plus 225 basis points. The revolver has a 50 basis point unused fee.

A factor that may have played a role in the deal's need to increase pricing was the company's mid-November announcement that it owed $9.9 million in punitive damages under a lawsuit filed against it and its chief executive officer.

The Bank of Nova Scotia is the lead bank on the deal that will be used to refinance about $30 million in existing bank debt, fund further share repurchases, dividends and general working capital purposes.

Pre-Paid Legal Services is an Ada, Okla., developer and marketer of legal service plans.

Calpine stronger

Calpine Corp.'s second-lien bank debt closed the day stronger, according to traders, even though the company announced some significant executive management changes - news that managed to send some of the company's bonds lower.

The bank debt closed Tuesday's session with levels of 75½ bid, 76½ offered, compared with the previous session's quotes of 74 bid, 76 offered, the trader said.

However, the bank debt did get as low as 74¼ at some point during the day before rebounding to higher levels, a second trader added.

On Tuesday morning, the San Jose, Calif.-based power company said that Peter Cartwright, chairman, president and chief executive officer, and Robert D. Kelly, executive vice president and chief financial officer, were leaving the company.

Calpine's lead director, Kenneth T. Derr, has been named chairman of the board and acting chief executive officer, and Eric N. Pryor, executive vice president and deputy chief financial officer, will serve as interim chief financial officer.

"The board believes that these management changes are essential to better address Calpine's financial challenges and to provide a new direction for the company," the news release added.

Calpine's bank debt had spent most of last week in a downward spiral after the Delaware Court of Chancery ruled that its use of about $313 million of proceeds from the sale of domestic gas assets to purchase gas storage inventory violated its second-lien notes indenture.

But, this week so far has been a different story, with levels consecutively posting gains over the past two sessions.

Prior to last week's court ruling, the bank debt was being quoted around 77 bid, 79 offered.

Kodak rises again

Kodak's term loan spent Tuesday's session in the 99 7/8 bid, par 1/8 offered region, up from Monday's levels of 99 5/8 bid, 99 7/8 offered, as people are "starting to believe in it" more and more, according to a trader.

The positive momentum started early last week after a bullish report from Barron's was released over the Nov. 19 weekend and, including Tuesday's lift, has now resulted in a full point gain when compared to the 98 7/8 bid, 99 1/8 offered context that the paper was quoted at prior to the release of the article.

Kodak is a Rochester, N.Y.-based digital imaging products, services and solutions company.

Consolidated Communications closes

Consolidated Communications Holdings Inc. closed on the repricing of its $425 million term loan, under which the interest rate on the tranche was reduced to Libor plus 175 basis points from Libor plus 225 basis points.

Citigroup acted as the lead bank on the deal.

Consolidated Communications is a Mattoon, Ill., provider of voice and data communication services.

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