DaVita, Sturm Foods and Canon Communications set price talk as deals launch

By Sara Rosenberg

New York, May 5 - DaVita Inc. released opening price talk on its jumbo deal, Sturm Foods Inc. came out with price talk on its first-lien tranches and Canon Communications LLC set opening pricing levels as well as all three credit facilities launched into syndication Thursday.

DaVita came out with price talk on its $3.15 billion credit facility (BB-) at its Thursday bank meeting, with the $250 million six-year revolver and $250 million six-year term loan A tranches both talked at Libor plus 175 basis points, and the $2.65 billion seven-year term loan B talked at Libor plus 200 basis points, according to a market source.

JPMorgan is the sole bookrunner on the deal, and Credit Suisse First Boston is involved in the transaction as well.

Proceeds from the credit facility along with proceeds from an already completed $1.35 billion bond offering will be used to help fund the $3.05 billion cash acquisition of Gambro Healthcare's U.S. assets and to refinance debt.

The two-tranche bond deal priced in March. The offering included $500 million of eight-year senior notes (B2/B) priced at par to yield 6 5/8% and $850 million of 10-year senior subordinated notes (B3/B) priced at par to yield 7¼%.

Net proceeds from the bond offering along with available cash were already used by the company to repay all outstanding amounts under the term loan portions of its existing credit facilities, including accrued interest.

Following the acquisition, the company's leverage ratio will be in the 5x to 5.2x EBITDA range, but DaVita hopes to reduce that ratio to around 3x to 3.5x in the next three to four years using anticipated strong cash flows.

Completion of the acquisition is subject to customary closing conditions including Hart-Scott-Rodino antitrust clearance.

On Feb. 18, DaVita received a request from the Federal Trade Commission for additional information regarding the acquisition. The company continues to be involved in talks with the FTC, and although no agreement has yet been reached, based on discussions, DaVita expects that it will be required to divest about 5% of the combined number of Gambro Healthcare and DaVita centers, which represents the same percentage of the combined revenues.

DaVita is an El Segundo, Calif., provider of dialysis services.

Sturm sets first-lien talk

Sturm Foods announced opening price talk of Libor plus 300 basis points for both its $20 million revolver and $125 million term loan B at Thursday's bank meeting but left investors with a "to be determined" answer when it came to pricing on the $75 million second-lien term loan, according to a market source.

Deutsche Bank is sole bookrunner on the $220 million credit facility that will be used to help fund Hicks Muse Tate & Furst Inc.'s leveraged buyout of the company. Sturm is currently a portfolio company of Mason Wells.

Sturm Foods is a Manawa, Wis., provider of dry food products for targeted private label and co-pack markets.

Canon price talk

Canon Communications released opening price talk of Libor plus 275 basis points on both its $10 million five-year revolver and its $85.5 million six-year term loan B, and opening price talk of Libor plus 600 basis points on its $33.5 million 61/2-year second-lien term loan, according to a syndicate document.

The revolver has a commitment fee of 50 basis points.

Credit Suisse First Boston is the sole lead arranger and sole bookrunner on the $129 million deal.

Proceeds will be used to help fund the leveraged buyout of Canon by Apprise Media LLC, a niche media company backed by Spectrum Equity Investors. Currently, Canon is owned by Veronis Suhler Stevenson.

Canon is a Los Angeles-based producer of print publications, trade shows and digital media for the medical device manufacturing market and allied packaging, plastics and electronics markets.

Auto downgrades unnerve market

All eyes were on General Motors Corp. and Ford Motor Co. as both companies were downgraded to junk status by Standard & Poor's - an idea that made many investors, including loan players, agitated.

"The market came in after [the] GM and Ford downgrade. Didn't see many bids after that. [It] got kind of scary for a while. It's a little bit better now but we're still lower on the day. It makes guys nervous. Going to be paper coming our way eventually but can we absorb it?" a market source said.

On Thursday, S&P lowered GM's long- and short-term corporate credit ratings to BB/B-1 from BBB-/A-3, with the outlook set on negative.

"The downgrade to non-investment-grade reflects our conclusion that management's strategies may be ineffective in addressing GM's competitive disadvantages," S&P said. Of greatest immediate concern to the rating agency is that the company's sport utility vehicles will no longer be as profitable as they have been in recent years.

"Still, GM should not have any difficulty accommodating near-term cash requirements. The effort by Kirk Kerkorian's Tracinda Corp. to increase its ownership stake in GM represents an additional uncertainty; however, this is not a factor at all in the current rating action," S&P added.

The negative outlook reflects the fact that GM's financial performance has proven to be volatile and unpredictable, the rating agency added.

Also on Thursday, S&P lowered Ford's long- and short-term corporate credit ratings to BB+/B-1 from BBB-/A-3, with the outlook set at negative.

"The downgrade to non-investment-grade reflects our skepticism about whether management's strategies will be sufficient to counteract mounting competitive challenges," S&P said. Of greatest immediate concern to the rating agency for Ford is the same as GM - that sport utility vehicles will not be able to generate the profitability it has historically enjoyed.

The negative outlook reflects the assumption that it will be difficult for Ford to improve its automotive profitability from the roughly breakeven level anticipated for full-year 2005, the rating agency added.

GM is a Detroit, Mich.-based automaker. Ford is a Dearborn, Mich.-based manufacturer and distributor of automobiles.

Calpine gives up some gains

Calpine Corp.'s second-lien bank debt took a step back on Thursday, trading in the 79s early in the day and falling off to 77 bid, 78 offered by the close. On Wednesday, the paper closed around 79, 80 bid, 80, 81 offered.

The San Jose, Calif.-based power company officially announced first-quarter results on Thursday, including revenue of $2.2 billion, representing an increase of 9% over the same period in the prior year, and net loss per share of $0.38 or $168.7 million, compared to a net loss per share of $0.17 or $71.2 million, for the same quarter last year.

From Monday through Wednesday's close, Calpine's second-lien bank debt had been skyrocketing, gaining about six or seven points over the course of the week and reversing a negative trend that was seen for most of last week because of bankruptcy rumors.

To disqualify these bankruptcy rumors, Calpine had pre-announced some first-quarter results last Friday, which included cash and cash equivalents on hand of about $800 million, EBITDA, as adjusted for non-cash and other charges, of about $240 million and fully diluted loss per share of about $0.38.

Dura closes

Dura Automotive Systems Inc. closed on its new $325 million senior secured credit facility consisting of a $175 million asset-based revolver due May 2010 with an interest rate of Libor plus 200 basis points and a $150 million second-lien term loan (B2/B+) due May 2011 with an interest rate of Libor plus 350 basis points.

The second-lien term loan was increased from $115 million during syndication on strong demand.

JPMorgan and Bank of America were the lead banks on the deal, with JPMorgan the left lead.

Proceeds were used to replace a $175 million revolver due 2008 and a $111 million term loan C due 2008.

"We believe the improved liquidity position from these new credit facilities will allow Dura to meet the near-term challenges in the automotive industry while maintaining our strategic course toward profitable growth and long-term value to our investors," said Keith Marchiando, vice president and chief financial officer, in a company news release.

Dura is a Rochester Hills, Mich., designer and manufacturer of driver control systems, seating control systems, glass systems, engineered assemblies, structural door modules and exterior trim systems for the automotive and recreation, and specialty vehicle industries.

TNS closes

TNS Inc. closed on its $195 million amended and restated credit facility (Ba3/BB-) consisting of a $165 million seven-year term loan with an initial interest rate of Libor plus 200 basis points and a $30 million five-year revolver with an initial interest rate of Libor plus 200 basis points. Both tranches contain a step down to Libor plus 175 basis points based on leverage.

Originally the revolver and term loan were talked at Libor plus 175 basis points with a step down to Libor pus 150 basis points.

GECC Capital Market Group Inc. acted as sole lead arranger and sole bookrunner on the deal.

Financial covenants in effect as of May 4 include a leverage ratio of less than 2.85 to 1.0, an interest coverage ratio of greater than 4.0 to 1.0 and a fixed charge ratio of greater than 2.5 to 1.0.

Proceeds were used to help fund a modified Dutch auction tender offer to purchase up to 9 million shares of outstanding common stock. The company accepted for purchase a little over 6 million shares at a purchase price of $18.50 per share.

TNS is a Reston, Va., provider of business-critical, cost-effective data communications services for transaction-oriented applications.

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