PaeTec, El Pollo Loco set talk; Opti Canada breaks; Cebridge, Movie Gallery, GM weaker with market

By Sara Rosenberg

New York, May 16 - PaeTec Corp. and El Pollo Loco Holdings Inc. came out with price talk on their credit facilities as the two companies presented their proposed deals to lenders with bank meetings on Tuesday.

In secondary happenings, Opti Canada Inc.'s term loan freed for trading with levels seen quoted atop par. Also in trading, general heaviness in the loan market continued to take its toll, with names like Cebridge Connections Inc., Movie Gallery Inc. and General Motors Corp. succumbing to the pressure.

PaeTec set opening price talk on its $390 million credit facility as syndication on the deal officially began with a Tuesday afternoon launch, according to a market source.

The $25 million revolver (B1/B) and the $240 million first-lien term loan B (B1/B) are both being talked at Libor plus 375 basis points, while the $125 million second-lien term loan (B3/CCC+) is being talked at Libor plus 775 basis points, the source said.

The second-lien term loan contains call protection of 103 in year one, 102 in year two and 101 in year three, the source added.

Merrill Lynch and Deutsche Bank are joint bookrunners on the deal, with Merrill the left lead. CIT and CIBC are involved in the transaction as well.

Proceeds will be used to refinance the company's existing $100 million credit facility and buy back $262 million of preferred shares from private equity investors.

PaeTec is a Fairport, N.Y., competitive local exchange carrier.

El Pollo Loco price talk

Meanwhile, El Pollo Loco price talk also surfaced on Tuesday in conjunction with the deal's official launch into syndication, according to a market source.

Both the $175 million seven-year term loan B and the $25 million six-year revolver were presented with opening price talk set at the Libor plus 225 basis points area, the source said.

Merrill Lynch, Bank of America and Goldman Sachs are the lead banks on the $200 million credit facility, with Merrill Lynch the left lead.

The company is getting the credit facility in connection with its initial public offering of common stock.

Proceeds from the new term loan will be used to fund the redemption of the company's 14½% senior discount notes due 2014 and its 11¾% senior notes due 2013, and fund the repayment of its existing senior secured credit facility.

Revolver borrowings will be available for working capital and general corporate purposes.

Successful consummation of the new credit facility, note repurchases and the IPO are all conditioned upon each other.

El Pollo Loco is an Irvine, Calif., quick-service restaurant chain specializing in Mexican-style chicken dishes.

Crown Castle revolver guidance

Also on the price talk front, Crown Castle Operating Co. came out with guidance on its proposed $250 million 364-day revolver, with the spread expected to fall out 25 basis points inside of wherever pricing on the proposed term loan pricing ends up, according to a market source.

The $1 billion eight-year term loan is talked at Libor plus 200 to 225 basis points.

Morgan Stanley and RBS Securities are joint lead arrangers on the $1.25 billion senior secured credit facility (B1/BB) that was launched to investors with a bank meeting on Tuesday, with Morgan Stanley the left lead.

Proceeds will be used to refinance existing bank debt and fund the acquisition of Mountain Union Telecom LLC.

Under the acquisition agreement, Crown Castle will acquire more than 98% of the outstanding equity interest of Mountain Union for about $304 million at the closing date and, starting in 2007, will have a right to call the remaining equity interest for about $5 million.

The revolver is expected to be undrawn at closing.

The transaction is expected to close by July 1.

Crown Castle is a Houston-based owner, operator and manager of wireless communications sites. Mountain Union is an Alexandria, Va.-based owner, operator and manager of wireless communications sites.

Opti frees to trade

Switching to the secondary, Opti Canada's $450 million seven-year term loan B (BB+) broke for trading during Tuesday's market hours with levels seen quoted at par ¼ bid, par ½ offered, according to a market source.

The term loan is priced with an interest rate of Libor plus 175 basis points. During syndication, the tranche was upsized from $400 million and pricing came in at the low end of talk of Libor plus 175 to 200 basis points.

At close, approximately 66% of the term loan B is being funded, with the remaining amount delayed draw for six months. Originally, the deal was going to be about 50% funded and about 50% delayed draw, but that changed with the increase in the tranche size.

RBC Capital Markets acted as the lead bank on the deal, with The Toronto-Dominion Bank, The Royal Bank of Scotland plc, The Bank of Nova Scotia and BNP Paribas (Canada) involved as well.

Proceeds from the term loan B are being used to repay a C$300 million six-month bridge loan that was used to repay a C$100 million facility bridge loan and to fund previously announced oil sands expenditures for the Long Lake Project and expansion phases.

Opti is a Calgary, Alberta-based company focused on developing the fourth integrated oil sands project in Canada, the Long Lake Project, in a 50/50 joint venture with Nexen Inc.

Cebridge, Movie Gallery, GM trade off

General market heaviness in the secondary continued to be the trend on Tuesday, especially in the morning hours, pushing levels lower on Cebridge, Movie Gallery and GM, according to traders.

Cebridge, a St. Louis-based provider of cable television and internet access, saw its term loan head down to 99½ bid, 99 7/8 offered from previous levels of 99 7/8 bid, par 1/8 offered, according to one trader.

Meanwhile, Movie Gallery, a Dothan, Ala.-based movie rental company, saw levels on its term loan B drop by a quarter of a point on the bid side to 96½ bid, 97½ offered, a second trader said. On Monday, Movie Gallery's loan had come off by about a quarter of a point from last week's closing levels, with market heaviness and profit taking cited as the primary drivers.

And, Detroit-based automaker GM saw it revolver weaken during market hours as levels fell by half a point to 96½ bid. 97½ offered, the second trader added.

J. Crew closes

J. Crew Operating Corp. closed on its new $285 million seven-year senior secured term loan (B2/B) that is priced with an interest rate of Libor plus 225 basis points, according to a company news release.

During syndication, pricing on the loan was reverse flexed from original talk at launch of Libor plus 250 basis points.

Pricing on the loan can step down to either Libor plus 200 basis points if ratings on the loan improve to B1/B+ or Libor plus 175 basis points if ratings on the loan improve to three-B's or better. The company only qualifies for the step down if leverage falls below 31/4x. Also, once the leverage test is met and the deal gets re-rated, pricing can only drop to the appropriate spread that one time. So, for example, if the term loan receives ratings of B1/B+, pricing will drop to Libor plus 200 basis points and at that time, the pricing grid will be removed from the credit agreement, eradicating the ability to further drop to Libor plus 175 basis points if ratings improve a second time.

Originally, the pricing grid was three-tiered, allowing the spread to drop to Libor plus 225 basis points on B1/B+ ratings, Libor plus 200 basis points on three-B's and Libor plus 175 basis points on four-B's - but this too was changed during syndication.

Goldman Sachs and Bear Stearns acted as joint lead arrangers and joint bookrunners on the deal, with Goldman also administrative agent and Bear Stearns syndication agent. Wachovia acted as documentation agent.

Proceeds from the new loan were used to redeem the company's 9¾% senior subordinated notes due 2014.

J. Crew is a New York-based apparel and accessories retailer.

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