Venetian increases term loan sizes, tightens pricing; US Oncology ups term pricing on bonds

By Sara Rosenberg

New York, Aug. 4 - Venetian Casino Resort made some changes to its proposed credit facility (B1/B+), including upsizing both the delay draw term loan A and the term loan B, and solidifying pricing at the low end of talk on all four tranches with the addition of a stepdown. Meanwhile, US Oncology Inc. increased pricing on it institutional tranche as the company's bond offering priced wide.

Venetian's 18-month delay draw term loan A due in 2009 was upsized to $115 million from $90 million and the term loan B due in 2011 was upsized to $665 million from $655 million, according to a market source.

The now $1.01 billion senior secured facility also contains a $125 million revolver due in 2009 and a $105 million six-month delay draw term loan B due in 2011.

The delay draw term loan A has a 150 basis points unused fee and the delay draw term loan B has a 75 basis points unused fee.

All four tranches are priced with an interest rate of Libor plus 250 basis points with a step down to Libor plus 225 basis points, the source said, adding that the "step down [is] not for several years subject to leverage."

At the bank meeting, the syndicate went out with price talk of Libor plus 250 to 275 basis points on the term loan B, including the delay draw portion. Prior to launch, market speculation had the term loan B talked in the Libor plus 275 basis points area.

Price talk on the revolver and delay draw term loan A was unavailable until now.

It's no surprise that the deal came in at the low end of talk being that it had received a nice amount of orders right after the bank book was posted a few days before the launch and was oversubscribed pretty much immediately after the July 19 bank meeting.

In fact, the deal was getting so much interest from investors that the syndicate had to shut down the books early, pushing the deadline up by a couple of days to last Friday from some time this week.

Some factors working in favor of the deal are the ratings, the collateral package and it being a known credit that people like.

Goldman Sachs is the sole lead arranger and bookrunner on the deal as well as syndication agent. Bank of Nova Scotia is the administrative agent on the loan.

Proceeds will be used by the Las Vegas hotel and casino to refinance existing debt and to finance construction of the new Palazzo casino resort project.

Closing on the credit facility is expected to take place this month.

US Oncology flexed up

US Oncology increased pricing on its $400 million seven-year term loan B to Libor plus 275 basis points from Libor plus 250 basis points due to a portion of the restructured $575 million bond offering pricing at the wide end of talk, according to a market source.

On Wednesday, the Houston cancer-care services company priced $300 million (increased from $200 million) of senior notes at 9%, right on top of the 9% price talk. The company also priced $275 million (downsized from $375 million) of senior subordinated notes at 10¾%, 50 basis points wide of the 10¼% price talk.

The term loan has more than $600 million in commitments from investors, the source said.

The $550 million senior secured credit facility (Ba3/B+) also contains $150 million five-year revolver with an interest rate that was left unchanged at Libor plus 250 basis points, the source added. This revolver had previously been increased in size from $100 million during syndication.

JPMorgan Chase Bank, Wachovia Bank and Citicorp North America Inc. are the lead banks on the credit facility.

Proceeds from the credit facility, combined with proceeds from the bond offering, will be used to help fund the acquisition of US Oncology by Oiler Acquisition Corp., an affiliate of Welsh, Carson, Anderson & Stowe IX LP.

Under the merger agreement, the holders of US Oncology common stock, other than Welsh Carson who already owns about 14.5% of the common stock, will receive $15.05 per share in cash for their shares, which represents an 18.5% premium above the March 19 closing price of $12.70. The transaction is valued at about $1.7 billion, including consideration for outstanding stock options and the assumption of debt.

Closing of the deal is subject to various conditions including majority approval from US Oncology's shareholders excluding Welsh Carson and members of senior management participating in the transaction, closing of the financing transactions, closing of a tender offer for US Oncology's public debt securities, the expiration of the applicable waiting period under the Hart-Scott-Rodino Act and other customary conditions.

On June 14, US Oncology announced that it had received tenders of notes and related consents from holders of more than a majority of the $175 million outstanding principal amount of its 9 5/8% senior subordinated notes due 2012. Most recently, the tender offer was extended to Aug. 13.

Furthermore, the company received early termination of the waiting period under Hart-Scott-Rodino.

A special stockholders' meeting will be held on Aug. 20 regarding the merger.

Charter down on CFO news

Charter Communications Inc.'s term loan B ended the day lower by about an eighth to a quarter of a point on Wednesday with the paper quoted at 98 bid, 98½ offered following news that the company's executive vice president and chief financial officer resigned, according to a trader.

But, the bank debt was all over the place before the afternoon CFO announcement with trades occurring at stronger levels of 99½ and 99 5/8 on "rumors that Paul Allen was going to put some money into the company," a second trader said.

Michael P. Huseby's resignation becomes effective on Aug. 20, according to a company news release. He is leaving Charter to become executive vice president and chief financial officer of Cablevision Systems Corp.

The St. Louis cable company anticipates naming a replacement soon, the release added.

Reliant moves on earnings

Reliant Energy Inc.'s bank debt was off to a rough start right after earnings were released with the paper dropping by about a quarter to a half a point, but by afternoon it had dusted itself off regaining its loss to end the day unchanged, according to a trader.

"It dropped to 991/2. Now it's back up to 99¾ bid, par ¼ offered. It dropped right after earnings and moved back up. I don't think the call was as bad as people expected," a trader said.

However, according to a second trader, the paper was quoted at 99¾ bid, par ¼ offered throughout the entire trading day.

For the second quarter, the Houston electricity and energy services company reported a loss from continuing operations of $69 million, or $0.23 per share, compared to a loss from continuing operations of $34 million, or $0.12 per share, for the same period of 2003.

The company also reaffirmed its 2004 outlook for adjusted earnings per share from continuing operations at $0.25.

"We are on track to deliver the outlook we provided earlier this year both in terms of earnings and cash flow for 2004. In addition, we have made significant progress toward our cost improvement targets and net debt-to-adjusted EBITDA goal of three times or less by the end of 2006," said Joel Staff, chairman and chief executive officer, in a company news release.

"In May we announced the sale of our upstate New York power generation facilities for approximately $900 million. The proceeds from the sale of these assets will be used to reduce debt, and we expect the transaction to be completed later this year."

Some skittish on OSI business

Although OSI Group's $700 million credit facility is expected to do just fine in the upcoming syndication process, there are some investors out there who aren't anticipating getting involved in the deal simply because of the market sector in which the company operates.

The facility consists of a $250 million revolver and a $450 million term loan that is talked in the Libor plus 250 basis points context.

"I looked at it and wasn't thrilled. I have a personal bias against distributors. They tend to have high revenues and low income. I've seen distributors blow up before. They don't have incredible collateral. Obviously these guys have been around for a long time so I don't think that will happen to them but I didn't want to have to think about it," a market source said.

But, he added, "it should go fine, especially since they're expecting BB ratings and it's priced in the 250 area."

Bank of America is the lead bank on the Aurora, Ill., food processor and distributor's dividend recap loan that will launch via a bank meeting Thursday.

Dean Foods cancels B

As was rumored, Dean Foods Co. went to an all pro rata structure on its $3 billion refinancing deal (Ba1) due to an overwhelming amount of demand from pro rata lenders, according to a market source.

The facility now consists of a $1.5 billion five-year term loan A and a $1.5 billion five-year revolver, company officials said in a conference call Wednesday.

It was unclear prior to press time whether the original Libor plus 125 basis points pricing on the revolver and term loan A was revised in connection with the size shifts.

Originally, the deal was launched as a $750 million term loan B with an interest rate of Libor plus 175 basis points, a $1.25 billion term loan A and a $1 billion revolver.

Supposedly, the syndicate had received something like $3 billion in commitments in pro rata so early in the week talk started circulating that they would increase the revolver and term loan A and cancel the term loan B.

The refinancing will provide the company with lower borrowing spreads, simplify the facility structure and extend maturities, company officials said in the call.

"The reduced borrowing spreads under this facility will help offset today's rising interest rate environment," officials added in the call.

Wachovia and Bank One - or JPMorgan - are the lead banks on the Dallas food and beverage company's deal.

At the end of the second quarter, interest coverage was 5.1x versus 4.7x in the year-ago period and total debt stood at $3.1 billion or 3.4x leverage.

Rockwood closes

Rockwood Specialties Group Inc. closed on its $1.757 billion credit facility (B1/B+) consisting of a $985 million seven-year term loan B with an interest rate of Libor plus 250 basis points and a stepdown to Libor plus 225 basis point if leverage falls below 2.25x, a $272 million eight-year euro term loan C with an interest rate of Libor plus 300 basis points, a $250 million six-year revolver with an interest rate of Libor plus 250 basis points and a commitment fee of 50 basis points, and a $250 million six-year term loan A with an interest rate of Libor plus 250 basis points.

Originally, the term loan B was launched with a size of $1.05 billion and pricing of Libor plus 275 basis points, but the size was reduced during syndication because the company opted not to refinance some of the debt at the businesses it is acquiring and the pricing was reduced on strong oversubscription.

The term loan C was originally sized at $300 million but was downsized during syndication as well, for the same reason as the term loan B downsizing.

Credit Suisse First Boston, UBS and Goldman Sachs were the joint lead arrangers and joint bookrunners on the financing.

Proceeds from the facility, combined with proceeds from a bond offering and equity, were used to fund the acquisition of four chemical businesses of Germany-based Dynamit Nobel.

The equity for the transaction was provided by Rockwood's internal resources, its existing majority shareholder Kohlberg Kravis Roberts & Co. LP and by CSFB Private Equity. The sponsors bid €2.25 billion for the four business units.

"We are all excited about the future of these businesses. Rockwood is now a leading global specialty chemicals and advanced materials company with first-class technologies across all businesses. The combination of these businesses will create a global organization with estimated annual revenue of more than $2.5 billion, employ approximately 10,000 people, and have operations in more than 30 countries," said Seifi Ghasemi, chairman and chief executive officer, in a company news release.

"We will continue to support organic growth across all of our businesses, look for further complementary acquisitions, and maintain the focus on customer-driven innovation."

Rockwood is a Princeton, N.J., specialty chemicals and advanced materials company.

Alion Science closes

Alion Science and Technology Corp. closed on its $130 million credit facility consisting of a $100 million five-year term loan (B+) with an interest rate of Libor plus 275 basis points and a $30 million five-year revolver with an interest rate of Libor plus 275 basis points and a 50 basis points commitment fee.

The credit agreement also allows the company to get an additional $50 million in term loans under certain conditions, according to a company news release.

Of the $100 million term loan B, the company drew $50 million at close on Tuesday and the remaining $50 million may be drawn over the next 60 days.

Proceeds were used by the McLean, Va., global research and development company to retire the previous senior credit facility.

Future draws will be used to pay down other existing debt obligations with funds obtained at lower interest rates and provide additional funds for future acquisitions.

Credit Suisse First Boston was the sole lead arranger and bookrunner on the deal. LaSalle Bank participated in the syndication of the deal as well.

"Alion has enjoyed successful growth since becoming an employee-owned company in 2002. This financing, coupled with the confidence that the market has placed in us as a research and technology firm, will help us pursue new opportunities through both organic growth and acquisitions," said Bahman Atefi, chairman and chief executive officer, in the release.

Stillwater Mining closes

Stillwater Mining Co. closed on its $180 million credit facility (Ba3/BB) on Tuesday consisting of a $140 million six-year term loan B with an interest rate of Libor plus 325 basis points and a $40 million five-year revolver with an initial interest rate of Libor plus 300 basis points and a 75 basis points commitment fee, according to a company news release.

TD Securities was the lead arranger and administrative agent on the deal.

Under the credit agreement, the company must offer 25% of the proceeds received from the sale of palladium inventory received from the Norilsk Nickel transaction as prepayments against the credit facility and 50% of annual excess cash flow must be used toward prepayment as well.

Proceeds of the new credit facility will be used to pay off the previous debt facility and for general corporate purposes.

Stillwater is a Columbus, Mont., developer, extractor, processor and refiner of palladium, platinum and associated metals.

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