EPCO cuts term B spread, adds step down; Hanley Wood, F&W break; Calpine lower on numbers

By Sara Rosenberg

New York, Aug. 3 - EPCO Inc. reverse flexed pricing on its $1 billion term loan B and even added a step down provision as the deal was oversubscribed.

As for the secondary, Hanley Wood Inc. and F&W Publications Inc. allocated on Wednesday, with both companies seeing their first-lien institutional term loans free up for trading atop 101. Another big name in trading was Calpine Corp. as the bank debt took a hit after the company released disappointing second-quarter financials.

EPCO reduced pricing on its $1 billion five-year term loan B to Libor plus 225 basis points from Libor plus 250 basis points and added a step down to Libor pus 200 basis points based on leverage, according to a market source.

Pricing on both the $300 million three-year revolver and the $600 million three-year term loan A remained at Libor plus 225 basis points, the source added.

The term loan B is being offered to investors at par.

The revolver and term loan A are being sold as a strip, and commitments of $35 million get an upfront fee of 30 basis points, while commitments of $20 million get an upfront fee of 25 basis points.

Lehman Brothers and Citigroup are the lead banks on the $1.9 billion credit facility (Ba3/B+), with Lehman left lead on the term loan B and Citi left lead on the revolver and term loan A.

Proceeds will be used to refinance an existing bridge loan.

EPCO, a privately owned company controlled by Dan L. Duncan, owns the general partner of Houston-based midstream energy company Enterprise Products Partners LP and Houston-based pipeline company Texas Eastern Products Pipeline Co. LLC.

National Bedding pricing guesstimates

National Bedding Co. has yet to release price talk on its upcoming $570 million credit facility; however, some investors are forming their own opinion as to where opening spreads may emerge at Thursday's 10 a.m. ET bank meeting.

"I would guess that given the expected ratings they'll try to price the first-lien around Libor plus 250 and the second-lien around Libor plus 550 to 600," a buyside source told Prospect News.

Ratings are expected to be B1/B+ on the first-lien debt and B3/B- on the second-lien debt.

The facility is comprised of a $50 million five-year revolver, a $320 million six-year first-lien term loan and a $200 million seven-year second-lien term loan.

Goldman Sachs is the lead bank on the deal, with Merrill Lynch and GE Capital involved as well.

Proceeds from the credit facility will be used to help fund the leveraged buyout of National Bedding by The Ares Corporate Opportunities Fund LP and Teachers' Private Capital.

National Bedding is a Hoffman Estates, Ill., manufacturer of bedding products and is the maker of Serta mattresses.

Hanley Wood breaks

Hanley Wood's $302 million seven-year term loan freed up for trading Wednesday, with the paper quoted at 101 1/8 bid, 101 3/8 offered from open until close, according to one trader. A second trader, however, said that the paper jumped up to 101¼ bid after opening at 101 1/8 bid, 101 3/8 offered and then fell off late in the day to par ¾ bid, 101 1/8 offered.

The term loan, of which $32 million is delayed draw, is priced with an interest rate of Libor plus 225 basis points. Originally the funded portion of the term loan was sized at $260 million but was increased to $270 million during syndication. Furthermore, pricing on the entire term loan came down from Libor plus 300 basis points during syndication as well.

The delayed-draw term loan has a commitment fee of 112.5 basis points.

Hanley Wood's $362 million credit facility (B2/B) also contains a $60 million six-year revolver with an interest rate of Libor plus 300 basis points and a 50 basis point commitment fee.

Credit Suisse First Boston and JPMorgan are joint lead arrangers on the deal, with CSFB the left lead.

Proceeds will be used to help fund the leveraged buyout of the company by JPMorgan Partners, Wasserstein & Co., and current and former Hanley Wood management from Veronis Suhler Stevenson.

Hanley Wood is a Washington, D.C., business-to-business media company serving the residential and commercial construction industries.

F&W starts trading

F&W Publications' $250 million seven-year first-lien term loan opened for trading Wednesday at 101¼ bid, 101½ offered and then traded up to 101 3/8 bid, 101 5/8 offered by the close, according to one trader. A second trader, however, said that the paper opened at 101 3/8 bid, 101 5/8 offered and then moved up to 101½ bid, 101¾ offered where it closed out the session.

As for the $100 million 71/2-year second-lien term loan, that actually came in from opening levels of 102½ bid, 103¼ offered to 102 1/8 bid, 102½ offered by day's end, the second trader remarked.

"I think it's just not that liquid, "the trader said about the second lien. "Once they got some real people in there, the market tightened up."

The first-lien term loan is priced with an interest rate of Libor plus 225 basis points. Pricing was reverse flexed from Libor plus 300 basis points during syndication.

The second-lien term loan is priced with an interest rate of Libor plus 625 basis points. Pricing was reverse flexed from Libor plus 700 basis points during syndication.

F&W's $400 million credit facility also contains a $50 million six-year revolver with an interest rate of Libor plus 300 basis points and a 50 basis point commitment fee.

JPMorgan and Credit Suisse First Boston are joint lead arrangers on the deal, with JPMorgan on the left.

Proceeds will be used to help fund the leveraged buyout of F&W by Abry Partners from Providence Equity Partners.

F&W is a Cincinnati-based publisher of special interest magazines and books.

Calpine dips on earnings

Calpine's bank debt was lower on Wednesday after the company released financial and operating results for the second quarter that disappointed investors, with the Calpine Corp. second-lien bank debt really taking the brunt of the negativity.

The Calpine second-lien paper was quoted down by about 3 points on the day, closing out the session at 83½ bid, 85 offered, according to a trader.

By comparison, the CalGen second-lien bank debt was unchanged to maybe down a half a point with levels closing out the day at 99½ bid, par ½ offered, and the CalGen first-lien bank debt was unchanged at 101 bid, 102½ offered, the trader said.

For the second quarter, the San Jose, Calif., power company reported a net loss per share of $0.66, or a net loss of $298.5 million, compared to a net loss per share of $0.07, or a net loss of $28.7 million, for the same quarter in the prior year. Revenue for the quarter was $2.2 billion, representing an increase of 0.5% over the same period in the prior year.

Included in the quarter's results are various non-routine items that in total netted to a charge of $0.11 per share, consisting of impairment charges on two power plants in operation and three in development, cancellation charges to terminate several long-term service agreements, and a net gain on the repurchase of debt.

"During the second quarter, spark spreads were mixed, and Calpine experienced several unplanned equipment outages in key power markets. Financial results were further impacted by power plant and development project asset impairments and service agreement cancellations, totaling just over $200 million. These were partially mitigated by approximately $129 million of income from repurchase of debt," said Peter Cartwright, president and chief executive officer, in a company news release.

"While results for the quarter were disappointing, Calpine continues to make significant progress in advancing our strategic initiative to de-lever our balance sheet and reduce interest expense and operating costs. In just over two months since our May rollout, Calpine has completed or announced over $2 billion of transactions toward attaining these goals, and since the beginning of the third quarter, we have lowered total debt by approximately $1.3 billion to $17.4 billion."

"Although demand in the second quarter was dampened by mild weather, especially in April and May, since June we have seen strong demand for electricity and improving spark spreads in our major power markets," Cartwright continued in the release. "Our recently restructured long-term service arrangements with our major equipment manufacturers will advance Calpine's program to lower operating costs, improve plant performance and enhance our major maintenance capabilities."

Calpine also released six-month numbers that included revenue of $4.3 billion, representing an increase of 4.2% over the same period in the prior year, and a net loss per share of $1.04, or a net loss of $467.2 million, compared to a net loss per share of $0.24, or a net loss of $99.9 million, for the same period in the prior year.

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