Michaels Stores rises with upgrade; Citgo may upsize loan; IMG, Styron, Canwest tweak deals

By Sara Rosenberg

New York, June 7 - Michaels Stores Inc.'s term loans headed higher during Monday's trading session after news emerged that the company's ratings were lifted by Moody's Investors Service due to better operating performance.

Over in the primary market, talk is that Citgo Petroleum Corp. will likely upsize its term loan and downsize its bond offering given that the loan is oversubscribed, and, as disclosed before, pricing on the term loan is still waiting to be finalized based on where bond pricing falls out.

Also, IMG Worldwide Inc. came out with a third round of changes on its term loan, this time reducing the size and firming pricing at the high end of talk, and Styron and Canwest LP increased spreads and the original issue discounts on their term loans.

Michaels Stores trades up

Michaels Stores' term loans gained some ground in the secondary market following Moody's announcement that it revised the company's ratings for the better, according to traders.

The term loan B-1 was quoted by one trader at 92 bid, 92½ offered, up from 91¼ bid, 92 offered, and by a second trader at 91¾ bid, 92¾ offered, up from 91½ bid, 92 offered.

And, the term loan B-2 was quoted by the first trader at 95 3/8 bid, 95 7/8 offered, up from 94¾ bid, 95½ offered.

On Monday, Moody's said that it upgraded, among other things, Michaels Stores' corporate family rating to B3 from Caa1 and term loan ratings to B2 from B3.

"The upgrade in the company's ratings reflects recent improvement in operating performance resulting from higher comparable store sales and operating margin expansion," the rating release said.

Michaels Stores is an Irving, Texas-based arts and crafts specialty retailer.

Citgo mulls term loan increase

Moving to the primary, Citgo is contemplating boosting the size of its $300 million five-year term loan being that the tranche was well received at initial price talk. Final pricing, however, is still bond dependant, according to a market source.

The term loan is being talked at Libor plus 350 basis points with a 1.75% Libor floor and an original issue discount of 981/2.

Last month, the company began a roadshow for $1.5 billion of seven-year and 10-year senior secured notes. Pricing on those notes, though, has yet to take place and it's being described as a day-to-day event.

"Given oversubscription and relative value, I would think the company would lean to upsizing the term loan [and downsizing the bonds]," the source said.

The source went on to say that the term loan could possibly end up as high as $750 million, and the minimum size of the tranche would probably be in the $500 million context.

Citgo getting revolver

Citgo's $1 billion senior secured credit facility (Ba2/BB+/BB+) also includes a $700 million revolver, which was fully circled ahead of the term loan's launch and is now also oversubscribed, the source remarked.

There is no talk of a revolver upsizing at this point, the source added.

Pricing on the revolver is Libor plus 325 bps with a 62.5 bps commitment fee. The spread is determined by a ratings grid.

And, upfront fees on the revolver range from 100 bps to 150 bps based on order size.

BNP Paribas, RBS and UBS are the lead banks on the deal, with BNP the left lead.

Proceeds from the credit facility and the bonds will be used to refinance existing debt. As a condition of the deal, the company must raise at least $1 billion between the term loan and the new bonds.

Citgo is a Houston-based refiner and marketer of transportation fuels, lubricants, petrochemicals and other industrial products.

IMG downsizes, sets spread

IMG Worldwide lowered the size of its five-year term loan B (Ba2/B+) to $250 million from $300 million and firmed pricing at Libor plus 525 bps, the wide end of the most recent guidance, according to a market source.

At launch, the loan was talked at Libor plus 425 bps, it was then flexed up to Libor plus 500 bps and then talk widened to the Libor plus 500 bps to 525 bps range.

The term loan has a 2% Libor floor and 101 call protection for two years, and is being offered to investors at an original issue discount of 97.

Earlier in syndication, the Libor floor was increased from 1.75%, the call protection was added, and the discount moved from initial talk of 98½ and then from revised talk of 98.

IMG readies allocations

Currently, the expectation is that IMG Worldwide's term loan will allocate early this week, the source remarked.

JPMorgan and Deutsche Bank are the lead banks on the deal, with JPMorgan the left lead.

Proceeds will be used to refinance existing debt and for general corporate purposes.

IMG is a New York-based provider of sports and event marketing and management services.

Styron raises pricing

Styron made a second round of changes to its credit facility, flexing pricing higher on the $800 million first-lien term loan to Libor plus 575 bps from the Libor plus 550 bps area and raising the original issue discount to 98 from most recent talk of 98½ to 99, according to a market source.

The term loan carries a 1.75% Libor floor and 101 soft call protection for one year.

Last Thursday, the loan had been upsized from $675 million as the company eliminated its $125 million second-lien term loan from the capital structure.

At the time of the upsizing, price talk on the first-lien term loan was raised from Libor plus 475 bps, the original issue discount guidance was revised from just 99, and the call protection was added.

The second-lien term loan that was canceled was being talked at Libor plus 775 bps with a 1.75% Libor floor and an original issue discount in the 98 to 99 area. The tranche was going to carry call protection of 103 in year one, 102 in year two and 101 in year three.

Styron lead banks

Deutsche Bank, Barclays and HSBC are the lead banks on Styron's credit facility, and they were asking for commitments from lenders by 5 p.m. ET on Monday.

Proceeds from the $1.04 billion deal (B2/B+), which also includes a $240 million revolver, will be used to help fund its buyout by Bain Capital from Dow Chemical for $1.63 billion.

Under the agreement, Dow Chemical has an option to receive up to 15% of the equity of Styron as part of the sale consideration.

The transaction is expected to close by August, subject to the completion of customary conditions and regulatory approvals.

Styron is a diversified chemicals and plastics company that is expected to have $3.5 billion in revenue based on 2009.

Canwest reworks deal

Another company to come out with changes to its credit facility was Canwest, as it increased pricing and the original issue discount on its $400 million term loan, according to a market source.

The term loan is now priced at Libor plus 700 basis points, up from Libor plus 600 bps, and the original issue discount is now 97, up from 98, the source said.

Left unchanged was the 2% Libor floor and 101 call protection for one year.

JPMorgan and Morgan Stanley are the lead banks on the deal.

Canwest being acquired

Proceeds from Canwest's term loan will be used to help fund the acquisition of the company and some of its subsidiaries by holders of its 9¼% senior subordinated notes.

The noteholder group has agreed to buy substantially all of the LP entities' financial and operating assets from Canwest Global Communications Corp., including all of its daily newspapers, digital and online media operations as well as the shares of National Post Inc., for $1.1 billion. The figure includes $950 million in cash funding.

The sale proceeds will allow a full repayment of the $925 million debt owed by the LP entities to their senior secured lenders.

Canwest Global is a Winnipeg, Man.-based media company that filed for Chapter 15 bankruptcy on Oct. 6, 2009.

Jack Henry closes

In other news, Jack Henry & Associates Inc. completed its acquisition of iPay Technologies Holding Co. LLC for $300 million, according to a news release.

To help fund the transaction, Jack Henry got a new $300 million credit facility, consisting of a $150 million revolver and a $150 million term loan A, with both tranches priced at Libor plus 250 bps.

Wells Fargo and Bank of America acted as the lead banks on the deal, with Wells Fargo the left lead.

Jack Henry is a Monett, Mo.-based provider of computer systems and ATM/debit card/ACH transaction processing services primarily for financial services organizations. iPay is an Elizabethtown, Ky.-based provider of online bill payment services.

U.S. Renal completes deal

U.S. Renal Care Inc. completed its $110.25 million acquisition of Dialysis Corp. of America Inc., according to a news release.

To help fund the transaction, U.S. Renal Care obtained a new $172.5 million credit facility (B1/B+), consisting of a $132.5 million six-year term loan and a $40 million five-year revolver, with both tranches priced at Libor plus 450 bps with a 1.75% Libor floor. It sold at an original issue discount of 99.

During syndication, the term loan was upsized from $125 million as the company's mezzanine financing was downsized to $40 million from $47.5 million, the revolver was upsized from $30 million and pricing on the facility firmed at the tight end of the original Libor plus 450 bps to 475 bps talk.

RBC acted as the lead bank on the deal for the Plano, Texas-based provider of outpatient dialysis services.

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