Emdeon, Sally, ACS set talk; Buffets, Rent-A-Center cut spreads; Encore upsizes; Beacon, Petco break

By Sara Rosenberg

New York, Oct. 25 - Emdeon Business Services came out with price talk on its credit facility, Sally Beauty Co. detailed tranching and price talk on its new deal, and ACS Media LLC released spread guidance, as all three transactions were launched with bank meetings Wednesday.

In other primary news, Buffets Inc. lowered pricing on its term loan and synthetic letter-of-credit facility while also adding a leverage-based step down, Rent-A-Center Inc. reduced pricing on its term loan B and Encore Medical Corp. upsized its in-market term loan in preparation for a proposed acquisition of a privately held company.

Meanwhile, in trading, Petco Animal Supplies Inc. hit the secondary on Wednesday with the term loan wrapping around the 101-type context and Beacon Roofing Supply Inc. freed up as well, with the term loan quoted in the low-par's.

Emdeon Business Services officially kicked off syndication on its $975 million credit facility with the holding of a bank meeting during Wednesday's market hours, and in conjunction with the launch, price talk on the deal emerged, according to sources.

The company presented its $50 million six-year revolver (B1/B+) with opening talk of Libor plus 250 basis points, its $755 million seven-year first-lien term loan B (B1/B+) with opening talk of Libor plus 250 to 275 bps and its $170 million 71/2-year second-lien term loan C (Caa1/B-) with opening talk in the Libor plus 550 bps area, sources said.

Citigroup, Deutsche Bank and Bear Stearns are the lead banks on the deal that will be used to help fund General Atlantic LLC's acquisition of a 52% interest in Emdeon Corp.'s Business Services business.

The transaction values the unit at $1.5 billion, according to Emdeon Corp., which is retaining a 48% interest.

General Atlantic will contribute $320 million in equity.

Closing is scheduled for the fourth quarter.

The business services segment provides revenue cycle management and clinical communication services for health care.

Emdeon is a health care business, technology and information services company based in Elmwood Park, N.J. General Atlantic is a Greenwich, Conn., private equity firm.

Sally sets structure, spread talk

Sally Beauty released details on the structure of its $1.47 billion senior secured credit facility along with price guidance as the deal was launched to investors on Wednesday as well, according to a market source.

The facility was presented as a $400 million five-year asset-based revolver (Ba2/BB-) talked at Libor plus 150 bps, a $200 million six-year term loan A (B2/B+) talked at Libor plus 250 bps and an $870 million seven-year term loan B (B2/B+) talked at Libor plus 275 bps, the source said.

Prior to the launch, it was known that there would be a $400 million revolver and $1.07 billion in term loan debt, divided into an A tranche and a B tranche, but the specific breakdown of the term loan sizes was unavailable.

Furthermore, although official price talk on the deal wasn't out, various recent filings with the Securities and Exchange Commission had the revolver expected at Libor plus 150 bps and the seven-year term loan B debt expected at Libor plus 275 bps based on it being rated lower than B1/B+.

Merrill Lynch, JPMorgan, Bank of America and Morgan Stanley are joint lead arrangers and joint bookrunners on the deal, with Merrill the administrative agent.

Proceeds from the credit facility, along with $430 million of senior unsecured notes and $280 million of senior subordinated unsecured notes, will be used to help fund the company's spinoff from Alberto-Culver Co.

Under the spinoff plan, Alberto-Culver's shareholders will receive a special $25.00 per share one-time cash dividend for each share and, upon completion of the transaction, Alberto-Culver shareholders will own one share of Alberto-Culver stock and one share of Sally Beauty stock for each share held.

Alberto-Culver shareholders will own 52.5% of the shares of Sally Beauty, which will become a new public company listed on the New York Stock Exchange.

The remaining 47.5% stake in Sally Beauty will be owned by Clayton, Dubilier & Rice, which will invest $575 million to acquire the equity stake.

Sally Beauty is a Melrose Park, Ill., beauty supplies distribution business.

ACS Media spread talk

ACS Media announced opening price talk of Libor plus 250 to 275 bps on its $130 million seven-year term loan B as it too launched with a bank meeting during the session, according to a market source.

The company's $140 million senior secured credit facility (B1/B) also includes a $10 million six-year revolver.

Wachovia and Lehman are the lead banks on the deal, with Wachovia the left lead.

Proceeds will be used to fund Pendo Acquisition ULC's leveraged buyout of ACS Media for C$188 million.

ACS Media an Anchorage, Alaska, directories publisher.

Buffets reverse flexes

Buffets reduced pricing on its $530 million seven-year term loan and $70 million seven-year synthetic letter-of-credit facility to Libor plus 300 bps from original talk at launch of Libor plus 325 bps, and added a step to both tranches under which pricing can drop to Libor plus 275 bps when net leverage falls below four times, according to a market source.

This is the second change made to the term loan since syndication first started. Last week, the term loan was upsized from $500 million when the company decided to downsize its bond deal to $300 million from $330 million.

Buffets' $640 million credit facility (Ba3/B-) also includes a $40 million five-year revolver priced at Libor plus 325 bps, in line with original talk at launch.

Credit Suisse and UBS are joint bookrunners and lead arrangers on the deal, with Credit Suisse the left lead.

Proceeds from the facility and the bonds will be used to help fund the acquisition of Ryan's Restaurant Group, Inc. and refinance existing debt.

Under the acquisition agreement, Buffets, a Caxton-Iseman Capital, Inc. portfolio company, will buy Ryan's in a cash transaction valued at about $876 million, including debt that will be assumed or repaid at or prior to closing.

The combined company will have annual revenues of more than $1.7 billion.

Buffets is an Eagan, Minn., operator of buffet-style restaurants. Ryan's is a Greer, S.C., restaurant company.

Rent-A-Center trims spread

In other pricing news, Rent-A-Center reverse flexed its $725 million six-year term loan B to Libor plus 175 bps from original talk at launch of Libor plus 200 bps, according to a market source.

The company's $1.3225 billion credit facility (Ba2/BB) also contains a $400 million five-year revolver and a $197.5 million five-year term loan A, which are both priced at Libor plus 175 bps as well.

JPMorgan is the lead bank on the deal.

Proceeds will be used to refinance existing bank debt and fund the acquisition of Rent-Way, Inc. for $10.65 in cash per share. The transaction is valued at about $567 million, including the liquidation of all of Rent-Way's debt, such as its bonds and convertibles.

Pro forma for the transaction, Rent-A-Center's total net debt to leverage will be around 3.2 times, but that is expected to drop to around 2½ times within the first 12 to 18 months through the use of free cash flow.

Rent-A-Center is a Plano, Texas, rent-to-own operator. Rent-Way is an Erie, Pa., rental purchase company.

Encore ups term loan size

Encore Medical decided to increase its seven-year term loan tranche to $335 million from an original size of $325 million, according to an 8-K filed with the Securities and Exchange Commission Wednesday.

The term loan is being talked at Libor plus 200 bps.

Proceeds from the incremental term loan debt along with about $4 million of available cash will be used to finance the proposed acquisition of a privately-held, complementary medical device company located outside of the United States.

Encore is in advanced discussions with this privately held company, with the anticipation being that a stock purchase agreement will be entered into during the first two weeks of November and the transaction will be completed by the end of November.

If the proposed acquisition is not completed by Nov. 30, Encore will repay the additional $10 million of term loan borrowings.

Encore's now $385 million senior secured credit facility (Ba3/B), up from $375 million, also includes a $50 million six-year revolver talked at Libor plus 200 bps with a 50 bps commitment fee.

Bank of America and Credit Suisse are the lead arrangers and bookrunners on the deal, with Bank of America also acting as administrative agent and Credit Suisse acting as syndication agent.

Proceeds from the majority of the credit facility financing will be used to help fund the leveraged buyout of Encore by Blackstone Capital Partners V LP for $6.55 in cash per share, with a total transaction value of about $870 million.

Other LBO financing will include a commitment from Blackstone to provide up to $335 million in equity and a proposed offering of $215 million in senior subordinated notes.

Encore is an Austin, Texas, orthopedic device company.

Evergreen sweetens second-lien call premium

Evergreen International Aviation, Inc. changed the call premiums on its $100 million 61/2-year second-lien term loan (Caa1/CCC+) to non-callable for two years, then at 102 in year three and 101 in year four, according to a market source, who added that this was the final tweak needed to get the deal done.

This is the second time that the call protection was modified to please investors - at launch it was 102 in year one and 101 in year two and then earlier on in the syndication process it was changed to 103 in year one, 102 in year two and 101 in year three.

The second-lien tranche is priced at Libor plus 750 bps plus 150 bps pay-in-kind and was offered to investors with an original issue discount of 98.

Earlier in syndication, the second-lien loan was upsized from $50 million, pricing was flexed up from Libor plus 750 bps and the original issue discount was added.

Evergreen's $370 million credit facility also includes a $30 million five-year revolver (B1/B+) at Libor plus 350 bps and a $240 million five-year first-lien term loan B (B1/B+) at Libor plus 350 bps that was sold with an original issue discount of 99.

During the syndication process, the revolver was downsized from $50 million and pricing was flexed up twice, first from Libor plus 275 bps to Libor plus 325 bps and then from Libor plus 325 bps to Libor plus 350 bps.

In addition, during syndication, the first-lien term loan B was downsized twice, first from $300 million to $250 million and then to $240 million, pricing was flexed up twice, first from Libor plus 275 bps to Libor plus 325 bps and then from Libor plus 325 bps to Libor plus 350 bps, and the original issue discount was added with it first proposed at 99½ and then sweetened to 99.

Credit Suisse is the lead bank on the deal that will be used to fund a tender offer for any and all of the company's outstanding 12% senior second secured notes due 2010.

The credit facility will close on Monday, the source concluded.

Evergreen is a McMinnville, Ore.-based portfolio of five diverse aviation companies.

Petco breaks

Switching over to the secondary, Petco's credit facility started trading, with its $700 million covenant-light seven-year term loan B (Ba3/B) quoted at par 5/8 bid, 101 1/8 offered, according to a trader.

The term loan B is priced at Libor plus 275 bps. During syndication, the tranche was upsized from $650 million and pricing was reverse flexed from original talk of Libor plus 300 bps.

The company's $900 million senior secured credit facility also includes a $180 million six-year last-in, first-out asset-based revolver priced at Libor plus 150 bps and a $20 million six-year first-in, last-out asset-based revolver priced at Libor plus 250 bps.

Credit Suisse, Bank of America and Wells Fargo are the lead banks on the deal, with Credit Suisse the left lead.

Proceeds will be used to help fund the leveraged buyout of Petco by Leonard Green & Partners, LP and Texas Pacific Group.

As part of the LBO financing, GS Mezzanine has agreed to purchase newly issued eight-year 10½% senior subordinated notes. The size of this mezzanine financing was reduced to $450 million from $500 million due to the term loan B upsizing.

Leonard Green has provided an equity commitment for $350 million, and Texas Pacific Group has provided an equity commitment for $415 million to help fund the deal as well.

Under the LBO agreement, the sponsors will buy Petco for $29 per share in cash. The total value of the transaction, including assumed debt, is $1.8 billion.

Petco is a San Diego-based specialty retailer of premium pet food, supplies and services.

Beacon frees to trade

Beacon Roofing Supply's credit facility also broke for trading on Wednesday, with its $350 million seven-year term loan quoted at par bid, par ½ offered, according to a market source.

The term loan is priced at Libor plus 200 bps, the high end of original guidance of Libor plus 175 to 200 bps.

Beacon Roofing's $513.5 million credit facility also includes a $163.5 million asset-based revolver priced at Libor plus 100 bps.

The revolver is secured by a first lien on receivables, and the term loan is secured by a first lien on inventory and plant property and equipment.

General Electric Capital Corp. is the lead bank on the deal that will be used to refinance the company's existing credit facility.

Leverage will be around the mid-two times area.

Beacon is a Peabody, Mass., distributor of roofing materials and complementary building products.

Secondary softer

The secondary market as a whole felt a touch weaker on Wednesday as names like Charter Communications Inc., Georgia-Pacific Corp. and Cedar Fair LP all saw term loan B levels dip by about an eighth of a point, according to a trader.

Charter, a St. Louis-based broadband communications company, saw its term loan B close the day at par 7/8 bid, 101 1/8 offered, down from previous levels of 101 bid, 101¼ offered, the trader said.

Georgia-Pacific, an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals, saw its term loan B close the day at par ½ bid, par ¾ offered, down from previous levels of par 5/8 bid, par 7/8 offered, the trader continued.

And, Cedar Fair, a Sandusky, Ohio, owner and operator of amusement parks and water parks, saw its term loan B close the day at 101 bid, 101 3/8 offered, down from previous levels of 101¼ bid, 101 5/8 offered, the trader added.

Advanced Micro closes

Advanced Micro Devices Inc. closed on its new $2.5 billion seven-year term loan B (Ba3/BB-/BB-), according to a company news release.

The term loan B is priced at Libor plus 225 basis points with a step down to Libor plus 200 bps once the term loan has been reduced by $750 million. Original guidance on the loan at launch was Libor plus 200 to 225 bps.

Morgan Stanley acted as the lead arranger, bookrunner and administrative agent on the deal.

Proceeds were used to help fund the acquisition of ATI Technologies Inc. for a combination of $4.3 billion in cash and 58 million shares of common stock.

Advanced Micro is a Sunnyvale, Calif., provider of microprocessor services for computing, communications and consumer electronics markets. ATI is a Markham, Ont., designer and manufacturer of innovative 3D graphics, PC platform technologies and digital media silicon products.

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