Kelson sets price talk; HCP firms spreads with ratings; Krispy Kreme, Performance Transportation break

By Sara Rosenberg

New York, Feb. 14 - Kelson Holdings LLC released price talk on its credit facility as the deal was launched with a bank meeting on Wednesday, and HCP Acquisition Inc. set pricing on its oversubscribed in-market deal as ratings emerged.

In the secondary, Krispy Kreme Doughnuts, Inc.'s credit facility freed for trading, with the term loan quoted atop 101, and Performance Transportation Services, Inc. broke as well, with its strip of first-lien institutional debt quoted atop par and its second-lien debt quoted atop 101.

Kelson presented its $1.51 billion senior secured credit facility to investors through a bank meeting early Wednesday, and at that time, price talk on the transaction was revealed, according to a market source.

The $50 million revolver and $990 million first-lien term loan were launched to lenders with talk set at Libor plus 325 basis points, while the $470 million second-lien term loan was launched with talk of Libor plus 650 bps pay in kind, the source said.

Pricing on the second-lien term loan can be changed to Libor plus 575 bps cash pay if the company's cash flow operations improve enough that EBITDA over interest is greater than 1¼ times, the source continued.

The first-lien term loan carries call protection of 101 in year one, and the second-lien term loan carries call protection of 110 in year one, 103 in year two, 102 in year three and 101 in year four, the source added.

Merrill Lynch is the bookrunner and lead arranger on the deal.

Proceeds from the credit facility, along with $160 million of mezzanine debt, will be used for a recapitalization that will involve the repayment of substantially all of the company's existing debt and the formation of a new holding company, which will own four power plants in the south central United States.

Kelson, a company wholly owned by Harbinger Capital Partners, is a holding company established for the management and ownership of certain power plants.

Charter revolver talk emerges

Charter Communications Inc. was another deal that kicked off syndication on Wednesday, and with the conference call launch, price talk of Libor plus 200 bps surfaced on the $1.5 billion revolver tranche (B1), according to a market source.

As was previously reported, the company's $6 billion first-lien term loan (B1), of which $1 billion is new debt and $5 billion is for refinancing, is being talked at Libor plus 225 bps, and the $550 million second-lien term loan (B3) is being talked at Libor plus 250 bps.

Both the first-lien term loan and the second-lien term loan carry 101 soft call protection for one year.

JPMorgan, Bank of America and Citigroup are the lead banks on the $8.05 billion senior secured credit facility.

Proceeds will be used to refinance the company's $6.85 billion senior secured credit facility, to redeem up to $550 million floating-rate notes due 2010 issued by CCO Holdings, LLC and up to $187 million 8 5/8% senior notes due 2009 issued by Charter Communications Holdings, LLC, and for general corporate purposes.

Charter is a St. Louis-based broadband communications company.

HCP sets pricing

HCP Acquisition firmed up pricing on its approximately $590 million credit facility as B2/B- corporate ratings surfaced on the deal, according to a market source.

The books on the transaction were actually closed on Monday after reaching multiple oversubscriptions, but lenders were asked to recommit to the deal by the close of business Wednesday since pricing could now be determined, the source explained.

The approximately $420 million (C$500 million) seven-year first-lien term loan (B1) is priced at Libor plus 225 bps and the approximately $170 million (C$200 million) eight-year second-lien term loan is priced at Libor plus 425 bps, the source said.

It is expected that the spreads that were announced on Wednesday will be the final pricing on the deal, the source added.

As was previously reported, the first-lien term loan has call protection against voluntary repayments of 101 for one year and the second-lien term loan has call protection against voluntary repayments of 103 in year one, 102 in year two and 101 in year three.

Credit Suisse is the lead bank on the deal.

Proceeds will be used to fund the acquisition of the outstanding units of the Calpine Power Income Fund and to acquire a 30% ownership interest in Calpine Power Fund LP held by Calpine Canada Power Ltd.

HCP Acquisition is a subsidiary of Harbinger Capital Partners.

Krispy Kreme trades atop 101

Moving to the secondary market, Krispy Kreme Doughnuts' credit facility broke for trading, with the $110 million first-lien term loan quoted at 101 bid, 101½ offered, according to a market source.

The term loan is priced at Libor plus 300 bps. During syndication, pricing on the tranche was reverse flexed from original talk of Libor plus 325 bps.

Krispy Kreme's $160 million credit facility also includes a $50 million revolver priced at Libor plus 300 bps, which also saw a reverse flex in pricing from Libor plus 325 bps during syndication.

There is a one-time reset built into the credit facility's pricing that is based on ratings.

Under the grid, if the company receives corporate credit ratings, pricing will adjust at that time (and only once) as follows - Libor plus 225 bps at B1/B+, Libor plus 250 bps at B2/B and Libor plus 275 bps at B3/B-.

Originally, the ratings grid called for Libor plus 250 bps at B1/B+, Libor plus 275 bps at B2/B and Libor plus 300 bps at B3/B-, but it was revised during the syndication process.

Credit Suisse is the lead bank on the deal that will be used to refinance existing debt.

Krispy Kreme is a Winston-Salem, N.C.-based branded specialty retailer of doughnuts.

Performance Transportation frees to trade

Another name to hit the secondary on Wednesday was Performance Transportation Services, with its $130 million strip of institutional first-lien bank debt quoted at par ¼ bid, par ¾ offered and its $35 million second-lien term loan quoted at 101 bid, 101½ offered, according to a trader.

The first-lien institutional bank debt - comprised of a $50 million term loan and an $80 million synthetic letter-of-credit facility - is priced at Libor plus 325 bps, and the second-lien term loan is priced at Libor plus 750 bps with call protection of 102 in year one and 101 in year two. During syndication, pricing on the second-lien loan was flexed up from original talk of Libor plus 700 bps.

The company's $185 million exit financing credit facility also includes a $20 million revolver priced at Libor plus 325 bps.

Goldman Sachs acted as the lead bank on the deal.

Performance Transportation, a Wayne, Mich., transporter of motor vehicles, emerged from Chapter 11 bankruptcy protection on Jan. 29.

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