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Bank LoanPublished by SourceMedia, Inc. Vol. 25, No. 25 June 21, 2010

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REPORTInvestors Flex Muscles to Win Sweeter Deals

For the past several weeks, banks have been making new deals sweeter than an ice cream sundae, trying to lure in inves-tors. And for those who like things even sweeter—well, there’s more to come, sources say, since bankers are going out of their way for investors.

“Buyers have the advantage now,” said a New York-based in-vestor. “We are getting either larger OIDs or a call protection.”

Another New York-based investor added that OIDs, along with coupons, “may creep even up even further for bigger deals needing broad market participation or those that are not of ro-bust credit quality. The dealer can only stay on the sideline for so long. Plus they are sitting on a bunch of unsold commitments.”

Over the past few weeks, banks have flexed up roughly $10 bil-lion in loans, according to Thomson Reuters. That is the highest volume of upward price flexes the loan market has seen since the third quarter of 2007 when the credit crisis first hit and it comes as a stark contrast to the first quarter of 2010 when banks flexed down most deals.

Since early May, banks have flexed up deals by an average of 150 bps and widened OIDs by a cent or two, sources said. More-over, one-year, 101 soft call protections and 1.75% Libor floors have become almost mandatory for new deals.

(See SWEETER DEALS on page 4)

Bridge to Somewhere? Banks See HY ReturnBanks are confident that the junk

bond market will snap back to the more vibrant self it was earlier this year. Evidence of this is found in the reappearance of the bridge loan in the debt packages of leveraged finance deals. Some market players see the re-emergence of bridge loans as a positive sign, but others say it could be a slip-pery slope that could lead to disaster.

“Banks figure they know better

than the market and are stepping in and doing bridges again. The first couple of deals will work, that will em-bolden others to do the same, and will end up with a portfolio of bridges to nowhere. Where have I seen this pic-ture before?” said Anders Maxwell, a managing director with P.J. Solomon Co. “It’s a classic indication that the

(See BRIDGE LOANS on page 8)

Banks Shop $790M TLB for Michael FoodsA bank consortium last week began

shopping a $790 million term loan B backing GS Capital Partners’ buyout of Michael Foods.

Price talk on the term loan was be-tween Libor plus 450 bps and Libor plus 475 bps, with an OID of 98 and a 1.75% Libor floor.

“[Michael Foods] is a decent com-pany,” said a New York-based investor. “The real issue is whether they are com-ing with enough of a new issue discount. I’m not sure that is the case.”

The banks—Bank of America Mer-

rill Lynch, Goldman Sachs and Bar-clays—have also added a one-year, 101 soft call protection on the loan and they have arranged $430 million in senior un-secured notes and a $75 million revolver. Price talk on the loans has not been de-termined. The banks, though, plan on marketing the notes early this week.

GS Capital’s acquisition, which totals $1.7 billion, was announced last month and is expected to close in the next two months. The private equity firm is pur-

(See MICHAEL FOODS on page 5)

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Bank LoanREPORT

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BANK LOAN REPORT

Remember the Gentiva Health Ser-vices and CITGO deals that got post-poned last month? Well, they’re back.

A bank group has begun market-ing a retooled debt package to help CITGO refinance its debt, while an-other bank consortium gears up to market a revamped debt package to back Gentiva’s acquisition of Odyssey Health Care.

BNP Paribas, RBS Securities and UBS upped the size of the CITGO fa-cility after investors reportedly over-subscribed the original $300 million term loan. CITGO’s new credit facil-ity now consists of two $650 million term loans.

Price talk on one of the term loans is at Libor plus 700 bps, while the other is being talked at Libor plus 600 bps. Both loans will include an OID of 98 and a 2% Libor f loor.

Price talk on the original $300 mil-lion term loan was at Libor plus 350 bps, with an OID of 98.5 and a 1.75% Libor f loor. The banks have kept the revolver, but have upsized it to $750 million from $700 million.

Meanwhile, Gentiva’s new debt package now consists of a $600 mil-lion term loan B, a $200 million term loan A and a $125 million revolver, according to Bloomberg. Its original debt package included an $800 mil-lion term loan B, $305 million in senior unsecured notes and a $125 million revolver. The banks—Bank of America Merrill Lynch, Barclays,GE and Sun Trust—also committed to providing a $305 million bridge loan in the original package if the notes were not issued prior to the merger closing.

Price talk on the new term loan B

is at Libor plus 700 bps. Price talk on original the term loan B was at Libor plus 325 bps, with a 1.5% Libor f loor. Price talk was not announced on the notes. The banks were supposed to be-gin marketing the new term loan last week, but as of Bank Loan Report’s Thursday press time the banks had not begun shopping it.

Atlanta-based Gentiva is rated B+ by Standard & Poor’s and Ba3 by Moody’s Investors Service.

Gentiva’s acquisition of Odys-sey will create the largest provider of home hospice and health-care services in the U.S.

CITGO’s debt is rated Ba2 by Moody’s. S&P rated its proposed se-nior secured debt BB+.

CITGO is a subsidiary of Petróleos de Venezuela, based in Caracas, Venezuela. —RK

Banks Roll Out Reworked Gentiva, CITGO Deals


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L O A N M A R K E T B U Z Z

Banks Set Price Talk on DynCorp’s TL

A Bank of America Merrill Lynch-led bank group last week established price talk on a $565 million term loan backing Cerberus Capital Management’s roughly $1.5 billion buyout of DynCorp International, according to sources. Price talk has been set at Libor plus 475 bps, with an OID between 97 and 98 and a 1.75% Libor floor. The bank group, which consists of BofA, Citigroup, Barclaysand Deutsche Bank, has also arranged a $150 million revolver and roughly $455 million in senior unsecured notes. It hasn’t been determined when the banks plan on marketing the notes.

Bank of America, Barclays and Credit Suisse last week began shopping a $625 million financing package for Ver-tafore, according to sources. The loan will be used to help finance the company’s $1.4 billion buyout by TPG Capi-tal. The debt package includes a $550 million term loan due 2016 and a $75 million revolver that matures in 2015. The banks expect to launch the deal after July 4, accord-ing to Standard & Poor’s Leveraged Commentary and Data. Last September, Vertafore extended the maturities of its much of its bank debt and increased the pricing. TPG agreed to purchase Vertafore from its current own-ers Hellman & Friedman and JMI Equity, the company announced June 10.

Radio One plans to issue new loans and bonds to help it finance its $82 million purchase of TV One, the Lanham, Md.-based broadcasting company announced last week. Deutsche Bank is the lead underwriter. The company’s proposed new senior credit facility consists of a $350 mil-lion term loan B and a $50 million revolver. The proceeds of the term loan will be used to refinance all of Radio One’s outstanding debt under its current senior credit fa-cility. Radio One is also launching an exchange offer for its 8.875% senior notes due 2011 and 6.375% senior sub-ordinated notes due 2013. Bondholders will receive $900 in newly issued exchange notes for every $1,000 in bonds tendered. Existing bondholders will also be able to pur-chase an aggregate of $100 million in new second-lien se-nior secured notes due 2016. A minimum of 95% of note holders must agree to the exchange offer for it to succeed. The offer expires June 30. Moody’s Investors Service is-sued a Ba3 rating to the revolver, a B1 rating to the term loan B, a B3 rating to the new second-lien notes due 2016 and a Caa2 to the new senior unsecured exchange notes. S&P issued a BB- rating on the revolver and term loan B and a CCC+ rating on the new notes and exchange notes. Radio One currently owns 19% of TV One and is purchas-ing another 37% of its outstanding equity.

Jefferies has arranged a $240 million term loan for Vision Solutions’ acquisition of Double-Take Software,according to S&P. Price talk has not been determined. Vi-sion Solutions, an Irvine , Calif.-based software company owned by Thoma Bravo, agreed to acquire Double-Take last month for $242 million. Vision Solution’s senior lever-age will be approximately 3.75x. The two companies are expected to generate around $180 million in revenue after the transaction is completed. The term loan is expected to receive a B or B+ rating.

GE last week increased the coupon on a $90 million term loan for Pabst Brewing Co. to Libor plus 500 bps from 475 bps and widened the OID to 98 from 99, accord-ing to sources. The 1.5% Libor floor was left unchanged. Pabst, the Woodridge , Ill.-based brewer, plans on using the proceeds from the loan, along with a $10 million revolver, to finance its acquisition by C. Dean Metropoulos & Co.

Kenan Advantage Group, a North Canton, Ohio-based logistics company, and Insight Global, an Atlanta-based staffing company, have secured credit facilities totaling more than $500 million. KeyBanc Capital Markets has arranged a $250 million term loan B, a $125 million de-layed-draw term loan and a $75 million revolver backing Kenan Advantage Group’s acquisition by Goldman Sachs,according to S&P. KeyBanc, along with CIBC and Credit Suisse have also arranged a pro rata credit facility to back the deal. That facility consists of a $160 million term loan A and a $75 million revolver. Price talk on the term loan B has not been established. Price talk on the pro rata portion is at Libor plus 300 bps. Meanwhile, BNP Paribas has arranged a $121 million term loan and a $20 million revolver for In-sight Global’s acquisition by Harvest Partners, according to Bloomberg. Price talk on the loan is at Libor plus 525 bps, with an OID of 98 and a 1.75% Libor floor. Harvest Part-ners is purchasing Insight from HIG Capital Partners.

Bank of America Merrill Lynch has decided to move its secondary loan sales and trading team to New York from Charlotte, N.C, while Nomura Securities has begun to set up its own loan trading platform, according to Bloomberg.Bank of America, which expanded its secondary loan sales and trading team after acquiring Merrill Lynch in January 2009, is moving the team to Manhattan, joining it with the distressed loan trading and par loan trading teams. Meanwhile, Nomura has decided to set up its own trad-ing platform in New York for the Japanese bank. The firm could begin trading par and distressed loans as early as the end of June.

BANK LOAN REPORT



Deals such as a $940 million term loan backing Madison Dearborn Partners’acquisition of TransUnion are a good ex-ample of this. Before the loan syndicated two weeks ago, the bank consortium shopping it increased the coupon between Libor plus 475 bps and Libor plus 500 bps from between Libor plus 375 bps and Li-bor plus 400 bps and widened the OID to 98.5 from 99. The banks—JPMorgan,Bank of America Merrill Lynch, Credit Suisse and Deutsche Bank—also added a one-year, 101 soft call protection to the loan and left the 1.75% Libor floor in place. Other companies, such as Calpine,have seen the coupon on their term loan increase by as much as 200 basis points (see chart below).

The recent price flexes have also im-pacted companies with existing debt. Dean Foods, a Dallas-based dairy pro-ducer company, last week learned that the hard way when investors pushed back an extension to the company’s existing term loan B. The company was looking to extend $500 million of its $1.7 billion term loan B by two years and increase the coupon to Libor plus 300 bps from Libor plus 137.5 bps for allowing it to do so. The company was also willing to add a one-year, 101 soft call protection to the loan. The offer was rejected by lenders because the new coupon was too low, given where the market is today, sources said.

It couldn’t be determined if the com-pany continued to pursue its extension

or not. On June 14, the company issued a statement saying that it was “actively evaluating alternatives to provide longer-term flexibility in its capital structure” and that it was “seeking an amendment and extension” to the term loan B. A com-pany spokeswoman declined to comment beyond what was in the release. JPMor-gan, Bank of America and Wells Fargoarranged the extension. Calls to JPMor-gan, Wells Fargo were not returned. A Bank of America spokeswoman declined to comment.

“It seems like the market is in price discovery mode where you basically name your price and spread, and, to a lesser extent, LIBOR floor,” said a New York-based banker.

No one is quite sure just how sweet new deals will get, but most agree that higher coupons, wider OID and other incentives, such as call protections, will be com-monplace throughout the summer. One investor argued that Libor floors should be wider because, from the borrower’s perspective, “[Libor floors] become free in a year or so.” He added that there should be more than just a one-year, 101 soft call protection included in new deals. Those features “are particularly meaningless in this market because very few loans get repriced that quickly anyways, so it’s an easy give for the borrower.”

Market participants say these new deals will be buyout financings rather than refinancing related, because those companies that need to refinance are waiting for spreads to come down, and their sweetness won’t deter private equity

firms and strategic buyers from the bank loan market.

“We don’t believe the recent upsurge in spreads will discourage determined issu-ers,” Randy Schwimmer, head of capital markets at Churchill Financial, wrote in a recent email to clients. “The pressure for PE firms to show realizations or deploy capital is just too great given competi-tive fundraising dynamics.” Moreover, Schwimmer noted, with Libor still below 1%, the overall cost of senior debt is still lest than 8%, and that includes a 1.75% Li-bor floor. “Remember what six-month Li-bor was at the peak of the bull market thee years ago? Try 5.38%. That makes today’s cost of borrowing, even with a flex or two, a genuine bargain.”

Just how sweet new deals get, sources say, will depend on how well the high yield market performs and the severity of the debt crisis in Europe —the two pri-mary causes for the price flexes. “A lot depends on how the high yield market performs,” said a New York-based banker specializing in midmarket deals. If sec-ond quarter corporate earnings are posi-tive, he said, than that could spur more activity in the high yield market because it shows that the economy is on the right track. This boost in confidence, though, could cause bank loan spreads to fall, and the same would happen if the situation in Europe improves, thereby easing the fears of contagion, sources said.

“Things will get better if we get a little stability and the bond market gets back on its feet,” said a New-York-based banker at a large international bank. —RK

SWEETER DEALScontinued from page 1

BANK LOAN REPORT

Recent Price FlexesName Date Post-flex

spread

Post-flex

floor

Post-flex

OID

Pre-flex

spread

Pre-flex

floor

Pre-flex

OID

Pre-flex

YTM

Added

call

Calpine Jun 3 L+550 150 98.0 L+375 150 98.0 5.73% 101

Hearthside Food Solutions

Jun 3 L+550 175 98.0 L+500 175 98.0 7.46%

Spectrum Brands Jun 3 L+650 150 98.0 L+450 150 99.0 6.35% 101

Cincinnati Bell Jun 4 L+500 150 97.0 L+375 150 98.0 5.74% 101

CanWest Global Communications

Jun 7 L+700 200 97.0 L+600 200 98.0 8.80%

Styron Jun 7 L+575 175 98.0 L+475 175 98.5 6.88% 101

AutoTrader.com Jun 8 L+450 150 98.0 L+350 150 99.0 5.30% 101

TransUnion Jun 8 475 - 500 175 98.5 375-400 175 99.0 5.93% 101Source: S&P LCD



chasing Michael Foods from Thomas H. Lee Partners, which acquired the Minnetonka, Minn.-based producer of egg products in 2003. Thomas H. Lee, though, will retain a roughly 20% stake in the company. The acquisition is also being financed with $492 mil-lion in equity.

The company has an existing credit facility consisting of a $250 million term loan B, a $200 million term loan A and a $75 million revolver, according to Stan-dard & Poor’s.

S&P last week assigned a BB- rating to the new term loan.

Moody’s Investors Service last week lowered Michael’s corporate rating and the company’s probability of default rat-ing to B2 from B1 and assigned a B1 rat-ing to the term loan B and a Caa1 rating to the company’s $430 million in senior

unsecured notes. The ratings agency also said its ratings on the company’s existing credit facility will remain on re-view for downgrade until the leveraged buyout closes.

Moody’s ratings reflect the compa-ny’s new capital structure, which it says will increase Michael Foods’ pro-forma leverage by “2.4 turns” to approxi-mately 5.9x. The company’s leverage reduction should be steady but “some-what slow, given the difficult economic environment and more limited free cash flow following the releveraging,” Christina Padgett and Linda Montag,two Moody’s analyst, wrote in a report last week. The ratings also reflect the company’s “sensitivity to grain and egg commodity prices, its customer and supply concentrations, the impact of the difficult economic environment on volumes, which have been declin-ing, and the company’s exposure to the challenges facing the food service

industry.” These factors are offset by Michael Foods’ leading market posi-tion, the benefits of its new production facility, product diversity, a growing emphasis on “value-added products” with more stable margins and the com-pany’s consistent cash flow generation track record.

Last month, right after the acquisi-tion was announced, S&P placed Mi-chael Foods’ B+ corporate credit rating on CreditWatch with negative implica-tions. The ratings agency said then that even though the company’s credit pro-tection measures have improved over the past five years due to improved op-erating performance and reduced debt, the leveraged buyout could weaken Mi-chael Foods’ credit profile because of the likelihood of the transaction to be funded with additional debt.

The company’s consolidated Ebitda for the 12 months ended April 3 was ap-proximately $216.2 million. —RK

MICHAEL FOODScontinued from page 1

BANK LOAN REPORT

NEWLY ANNOUNCED LEVERAGED LOANS

Source: KDP Investment Advisors

Announce Issue CommitDate Issuer Type Amt ($M) Date Price Talk Lead Fac Rating Co Rating Industry

6/16/16 Vertafore Inc. Loan 550 BAML -/-/- -/-/- Technology

6/16/10 DynCorp Intl Inc. TLB 565 L+475 @ 97-98 BAML -/-/- -/BB-/- Aerospace/Defense

6/10/10 CITGO Petroleum Loan 600 6/24/10 L+600 @ 98 BNP -/-/- Ba2/BB/- Energy Services

6/10/10 CITGO Petroleum Loan 650 6/24/10 L+700 98 BNP -/-/- Ba2/BB/- Energy Services

6/10/10 Michael Foods TLB 790 L+450-457 @ 98 BAML -/-/- B1/B+/NR Food/Food Services

6/9/10 LNR Property Loan 445 L+750 GS -/-/- B2/B+/- Financial Services

6/9/10 Allscripts Loan 570 L+350 JPM -/-/- -/-/- Healthcare/Hospitals

5/21/10 CanWest LP Loan 400 L+700 @ 97 JPM -/-/- -/-/- Publishing & Information

5/20/10 Cedar Fair, L.P. TLB1 1050 L+350 JPM -/-/- Ba3/B+/NR Lodging/Leisure

5/20/10 Sophos TLB 300 RBC -/-/- -/-/- Technology

5/18/10 Universal Health TLB 2850 L+350 JPM -/-/- -/-/- Healthcare/Hospitals

5/11/10 Sedgwick Loan 400 L+400 @ 99 BAML -/-/- B2/B+/- Insurance

5/11/10 Sedgwick 2nd Lien 200 L+750 @ 98.5 BAML -/-/- B2/B+/- Insurance

5/10/10 InVentiv Health TL 525 C -/-/- Ba3/BB-/NR Healthcare/Hospitals

4/30/10 Vertis Inc Loan 300 CS -/-/- Caa1/B/- Publishing & Information

4/20/10 IESI Corp. Loan 345 L+325 BAS -/-/- B1/B+/- Environmental



Atlantic Tele-Network IncLOCATION: St. Thomas, VIPACKAGE AMOUNT: $298.9 mil.ADMINISTRATIVE AGENT: CoBank ACBSYNDICATION AGENT: BankAmeri-ca; Toronto-Dominion BankDOCUMENTATION AGENT: Deutsche Bank AG; Union Bank NABOOKRUNNER: CoBank ACBOTHER LENDERS: CoBank ACB; BankAmerica; Toronto-Dominion Bank; Deutsche Bank AG; Union Bank NA; Brown Brothers Harriman & Co; Banco Popular de Puerto Rico; Fifth Third Bank; Raymond James Bank FSB; AgFirst Farm Credit Bank; Agstar Financial Services PCA; Farm Credit Bank of TexasACTIVE: 1/20/2010BUSINESS: Atlantic Tele Network pro-vides telecommunications services in the US Virgin Islands and Guyana.RATINGS: NR/NR

Part AAMOUNT: $73.9 mil.TYPE: RevCred/Term LnPURPOSE: Refin/Ret Bank DebtMATURITY: 9/30/2014

Part BAMOUNT: $150.0 mil.TYPE: RevCred/Term LnPURPOSE: Refin/Ret Bank DebtMATURITY: 9/30/2014

Part CAMOUNT: $75.0 mil.TYPE: RevCred/Term LnPURPOSE: Refin/Ret Bank DebtMATURITY: 9/10/2014

Crosstex Energy LOCATION: Dallas, TXPACKAGE AMOUNT: $420.0 mil.AMOUNT: $420.0 mil.ADMINISTRATIVE AGENT: BankAmericaSYNDICATION AGENT: BNP Paribas; Wells Fargo; Royal Bank of CanadaBOOKRUNNER: BankAmerica OTHER LENDERS: BankAmerica; BNP Paribas; Wells Fargo; Royal Bank

of Canada; Comerica Bank; Compass Bank; Sumitomo Mitsui Banking Corp; US Bancorp; Wachovia; Morgan Stanley Securities; Goldman Sachs; Capital One Financial; UBS Securities TYPE: Rev Cred FacPURPOSE: General Corp. Purp.; Work-ing Capital; Refin/Ret Bank Debt; OtherPRICING: LIBOR + 425.000 bpsFEES: LOC 425.000 bps; LOC 400.000 bps; LOC 375.000 bps; LOC 350.000 bps; LOC 325.000 bps; Commitment 50.000 bps; Assignment US $3,500ACTIVE: 2/5/2010MATURITY: 2/10/2014BUSINESS: Crosstex Energy LP, based in Dallas, Texas, provides gas gather-ing, treating, processing, transmission, distribution, supply and marketing, as well as crude oil marketing.RATINGS: NR/NR

Diebold IncLOCATION: North Canton, OHPACKAGE AMOUNT: $512.2 mil.ADMINISTRATIVE AGENT: JP MorganSYNDICATION AGENT: PNC Bank Corp; US Bank NADOCUMENTATION AGENT: BankA-merica; Bank of Tokyo-Mitsubishi UFJ; Wells Fargo Bank NACO-AGENTS: IRELAND/HSBCBOOKRUNNER: JP Morgan & Co Inc; PNC Bank Corp; US Bank NAOTHER LENDERS: JP Morgan; PNC Bank Corp; US Bank NA; BankA-merica; Bank of Tokyo-Mitsubishi UFJ; Wells Fargo Bank NA; Bank of Ireland; HSBC Holdings PLC; Bank of New York; RBSACTIVE: 10/19/2009BUSINESS: Diebold Inc, located in North Canton, Ohio, manufactures and wholesales automated teller machines, electronic and physical security sys-tems for various products used to equip bank facilities software and integrated systems for global financial markets. The company operates under three segments. Financial self-service prod-uct segment offers an integrated line of self-service banking products and Automated Teller Machines. Physical

Security and Facility Products division designs and manufactures financial ser-vice solutions offerings, including the RemoteTeller SystemTM, safe deposit boxes and safes and drive up banking equipment. Election systems/lottery segment provides electronic voting systems and lottery machines.RATINGS: NR/NR

Part AAMOUNT: $400.0 mil.TYPE: Rev Cred FacPURPOSE: General Corp. Purp.PRICING: LIBOR + 240.000 bpsMATURITY: 10/19/2012

Part BAMOUNT: $112.2 mil.TYPE: Rev Cred FacPURPOSE: General Corp. Purp.PRICING: LIBOR + 240.000 bpsMATURITY: 10/19/2012

Encore Capital Group LOCATION: San Diego, CAPACKAGE AMOUNT: $327.5 mil.AMOUNT: $327.5 mil.ADMINISTRATIVE AGENT: JP MorganSYNDICATION AGENT: BankAmericaDOCUMENTATION AGENT: Fifth Third Bank; SunTrust Banks; Morgan Stanley BOOKRUNNER: JP Morgan; BankA-merica OTHER LENDERS: JP Morgan; BankA-merica; Fifth Third Bank; SunTrust Banks; Morgan Stanley; Compass Bank; Citi; Leumi International; California Bank & Trust; Israel Discount Bank of NY; Manufacturers BankTYPE: Rev Cred FacPURPOSE: General Corp. Purp.; Working Capital; Refin/Ret Bank Debt; Future AcquisitionsPRICING: LIBOR + 375.000 bpsFEES: Commitment 40.000 bps; Com-mitment 50.000 bps; Commitment 62.500 bps; Assignment US $3,500ACTIVE: 2/8/2010MATURITY: 2/13/2013BUSINESS: Encore Capital Group Inc, located in San Diego, California, is

T E R M S H E E T S



a provider of charged-off consumer receivables purchase and management services.RATINGS: NR/NR

Expedia IncLOCATION: Bellevue, WAPACKAGE AMOUNT: $750.0 mil.AMOUNT: $750.0 mil.ADMINISTRATIVE AGENT: JP MorganSYNDICATION AGENT: BankAmerica; RBSDOCUMENTATION AGENT: BNP Paribas SA; Barclays PLCBOOKRUNNER: JP Morgan & Co Inc; BankAmerica Corp; RBS; BNP Paribas SA; Barclays PLCOTHER LENDERS: JP Morgan; BankA-merica; RBS; BNP Paribas SA; Barclays PLC; US Bank NA; Sumitomo Mitsui Banking Corp; Bank of Tokyo-Mitsubi-shi Trust; Mizuho Corporate Bank LtdTYPE: Rev Cred FacPURPOSE: Refin/Ret Bank Debt; General Corp. Purp.; Working Capital; Capital Expenditures; Future Acquisi-tionsPRICING: LIBOR + 300.000 bpsFEES: Commitment 25.000 bps; Com-mitment 37.500 bps; Commitment 50.000 bps; Commitment 62.500 bps; Commitment 75.000 bps; Arrange US $3,500.0ACTIVE: 2/8/2010MATURITY: 2/8/2013BUSINESS: Provides online travel book-ing services including flight schedules, hotel reservations, transportation, vaca-tion packages, cruise, deal destinations and business travel. RATINGS: NR/NR

Kite Realty Group LOCATION: Indianapolis, INPACKAGE AMOUNT: $30.0 mil.AMOUNT: $30.0 mil.ADMINISTRATIVE AGENT: KeyBank BOOKRUNNER: KeyBank CorpOTHER LENDERS: KeyBank; Royal Bank of Canada; Raymond James Bank TYPE: Term LoanPURPOSE: General Corp. Purp.PRICING: LIBOR + 265.000 bps

ACTIVE: 7/15/2008MATURITY: 7/15/2011BUSINESS: Kite Realty Group LP, lo-cated in Indianapolis IN, is a real estate investment trust (REIT).RATINGS: NR/NR

Michaels Stores IncLOCATION: Irving, TXPACKAGE AMOUNT: $900.0 mil.ADMINISTRATIVE AGENT: BankAmericaBOOKRUNNER: BankAmerica Corp; Wells Fargo Bank NA; Deutsche Bank AG; Credit Suisse; JP Morgan & Co IncOTHER LENDERS: BankAmerica; Wells Fargo Bank NA; Deutsche Bank AG; Credit Suisse; JP Morgan; GECC Capital Markets Group; RBS; UBS AG; US Bank NA; Regions Bank; SunTrust Banks; PNC Bank Corp; General Mo-tors Global Group Tr; Webster Bank; Barclays PLCACTIVE: 2/19/2010BUSINESS: Michaels Stores Inc, located in Irving, Texas, owns and operates specialty retail stores featuring arts, crafts, framing, f loral, decorative wall decor as well as seasonal merchandise for the hobbyist and do-it-yourself home decorator operating under the name Michaels as well as Aaron Brothers, Recollections and Star Wholesale.RATINGS: NR/NR

Part AAMOUNT: $850.0 mil.SYNDICATION AGENT: Wells Fargo Bank NADOCUMENTATION AGENT: Deutsche Bank AG; Credit Suisse; JP MorganCO-AGENTS: GECC; RBS; UBS-AGTYPE: Rev Cred FacPURPOSE: Refin/Ret Bank Debt; General Corp. Purp.PRICING: LIBOR + 350.000bpsFEES: Commitment 62.500 bpsMATURITY: 2/19/2014

Part BAMOUNT: $50.0 mil.SYNDICATION AGENT: Wells Fargo Bank NA; Deutsche Bank AG

DOCUMENTATION AGENT: Credit Suisse; JP MorganTYPE: Rev Cred FacPURPOSE: Refin/Ret Bank Debt; Gen-eral Corp. Purp.PRICING: LIBOR + 550.000bpsFEES: Commitment 62.500 bpsMATURITY: 2/19/2014

Online Resources Corp.LOCATION: Chantilly, VAPACKAGE AMOUNT: $100.0 mil.ADMINISTRATIVE AGENT: BankAmericaSYNDICATION AGENT: Silicon Valley BankBOOKRUNNER: BankAmerica OTHER LENDERS: BankAmerica; Silicon Valley Bank; Brown Brothers Harriman; Manufacturers & Traders Trust; SunTrust Banks; GECC Capital Markets GroupACTIVE: 2/21/2007BUSINESS: Online Resources Corp, headquartered in Chantilly, Virginia, provides web and phone-based finan-cial services, electronic payments and marketing services to drive consumer adoption. It was founded in 1989.RATINGS: NR/NR

Part AAMOUNT: $15.0 mil.TYPE: RevCred/TLAPURPOSE: Refin/Ret Bank Debt; Working Capital; Capital Expenditures; General Corp. Purp.PRICING: LIBOR + 275.000 bpsFEES: Commitment 25.000 bps, LOC 225.000 bps; Commitment 37.500 bps, LOC 250.000 bps; Commitment 50.000 bps, LOC 275.000 bps; Assignment US $3,500MATURITY: 2/21/2012

Part BAMOUNT: $85.0 mil.TYPE: RevCred/TLAPURPOSE: Refin/Ret Bank Debt; Working Capital; Capital Expenditures; General Corp. Purp.PRICING: LIBOR + 275.000 bpsFEES: Assignment US $3,500MATURITY: 2/21/2012

T E R M S H E E T S



markets are not functioning and the banks have a memory that stands a nanosecond.” Maxwell notes that while the first few bridge loans may likely work, which is precisely what makes them problematic. He likens the result-ing debt market to a game of musical chairs, with bridge loans succeeding until the music stops in the form of a stalled out credit market.

Nevertheless, the bridges are hap-pening. For instance, the junk bonds have been bridged in the $1.1 billion financing for the buyout of inVentive Health. Private equity firm Thomas H. Lee Partners agreed to acquire in-Ventive in an all-cash deal that will be funded with $384 million in equity, $600 million in senior secured loans—including a $525 million term loan and a $75 million revolver—and $275 mil-lion in junk bonds.

Interactive Data plans to issue $700 million in junk bonds to help finance its $3.4 billion buyout by private equity firms Silver Lake and Warburg Pin-cus, and it’s using a bridge loan for the junk bonds.

Lend Me Your Fears

“These bridge loans could come due without the bond market respond-ing, so what if the market doesn’t clear when the company goes to refinance?” said Stephen Kunkel, a managing di-rector with AEG Partners. “Bridge loans in those scenarios are basically a speculative prediction about when the bond market is going to come back. … It’s open for debate and speculation and will be for the remainder of the year about when bond market is going to come back. It’s going to be a longer clawback than any of us thought. These kinds of facilities, these bridge loans, there are some inherent risk because it’s based on someone believing what time the recovery is going to be.”

An earlier deal that used a bridge loan for bonds took a few months to get going, even though the primary market was pricing things at a steadier clip at

the time. BioScrip priced $225 mil-lion in 10.25% senior notes due 2015 on March 17, almost two months after the deal appeared on the high yield calen-dar. The company is using the funds, along with those from a $150 million credit facility, to finance its $343.2 mil-lion acquisition of Critical Homecare Solutions, a home health care service provider it bought from Kohlberg & Company. The credit facility consists of a $100 million term loan and a $50 million revolver.

Here’s Your (Good) Sign

While this may indicate a lon-ger time frame for the bonds to take out the bridges, the use of the bridge loans is a good sign for many market players. “Any willingness on banks to take risk again is a good sign for the capital markets,” said Paul Matlack,a vice president and U.S. fixed income investment strategist with Delaware Investments. He also points out that the challenges presented to banks us-ing bridges can be tempered by the way banks are working to syndicate these loans. “Banks aren’t just hanging on to these bridges; they’re being sold to hedge funds and floating-rate mutual funds,” he said. “They’re fairly well dis-turbed these days and they can hedge themselves with CDS, so banks’ ability to hedge against that is a heck of a lot better.” Matlack said that a better indi-cator of when LBO deals are approach-ing dangerous territory is the level of leverage. As long as LBO deals keep le-verage below 5x, they can largely avoid the punishment dished out to bubble-era deals.

Arthur Wong, a primary credit an-alyst with Standard & Poor’s, has con-cerns about the excessive use of bridge loans, but doesn’t think that they have become prevalent enough to pose a danger to the market. “It’s more a re-flection of companies wanting to get the transaction done, but given recent shakiness in the market, you see the return of the bridge loans,” said Wong. “Bankers do have short memories, but I don’t think it’s much of a concern just yet.” Wong points out that unlike the

bubble period, the market is not seeing the flood of LBO transactions today that left a number of hung bridges in its wake.

But in what could be a more omi-nous sign of the outlook on the high yield bond market, some banks are not bridging the junk bonds but cutting them out entirely. “I’ve seen a number of deals come lately where the bond deal was downsized and the loan deal upsized,” said Matlack. “This may well have been driven by something unique to the deal, but my sense is that there is simply good demand at the moment for more senior structures and floating-rate paper. The most topical example today is Citgo.”

BNP Paribas, RBS Securities and UBS upped the size of Citgo’s loan package and pulled its $1.5 billion bond offer after investors oversub-scribed the original $300 million term loan. CITGO’s new credit facility now consists of two new term loans—one between $500 million and $550 mil-lion and the other $500 million. The original debt package consisted of a $300 million term loan, a $700 million revolver and the high yield bonds (see story, page 2).

At the same time, Bank of America Merrill Lynch, Barclays, GE and Sun Trust reworked Gentiva’s new debt package to take out the junk bond por-tion in favor of a larger loan segment. The original debt package included $305 million in senior unsecured notes and a bridge loan if the notes were not issued prior to the merger closing, as well as an $800 million term loan B and a $125 million revolver. The new debt package consists of a $600 million term loan B, a $200 million term loan A and a $125 million revolver.

But investors are confident that good or bad, bridge loans will be back. “Initially, when you come out of down-turns, things pick up and get better. But once banks are competing for business, you set yourself up for the next down cycle in credits,” said Matlack. “If we are at the beginning of an up-tick in the credit cycle, a year or 18 months from now someone is going to be doing stupid bridge loans.” — MS

BRIDGE LOANScontinued from page 1

BANK LOAN REPORT


randerson

Highlight


Most Recent Closed U.S. Leveraged Loans

Close Date Borrower Facility Amount Tranche Loan Type Maturity All Agents ($ mil) Amount ($ mil)

06/15/10 Meredith Corp 150.0 150.0 Rev Cred Fac 06/15/13 BOA/JPM/WF/BBVA/ US-BANK-NA

06/11/10 Spectrum Brands Inc 1,050.0 750.0 RevCred/Term Ln 06/11/16 CS/BOA/DEUTSCHE-BANK

06/09/10 Archipelago Learning Inc 96.6 20.0 RevCred/Term Ln 11/09/13 GECC

06/09/10 Archipelago Learning Inc 96.6 76.6 RevCred/Term Ln 11/09/13 GECC

06/09/10 Lifetime Brands Inc 125.0 125.0 Rev Cred Fac 06/09/15 JPM/HSBC

06/07/10 Wolverine World Wide Inc 150.0 150.0 Rev Cred Fac 06/07/14 JPM/BOA/HARRIS-BK/ WELLS-FARGO

06/04/10 Protection One Inc 415.0 390.0 RevCred/Term Ln 06/04/16 JPM/BARCLAYS

06/04/10 Protection One Inc 415.0 25.0 RevCred/Term Ln 06/04/15 JPM/BARCLAYS

06/04/10 Jack Henry & Associates Inc 400.0 150.0 RevCred/TLA 06/04/15 WELLS-FARGO/BOA/ REGIONS-BK/JPM/ US-BANK-NA



06/04/10 CBIZ Inc 250.0 250.0 Rev Cred Fac 06/04/14 BOA/HUNTINGTON-BK/ KEYBK/JPM/US-BANK-NA

06/04/10 Dycom Industries Inc 225.0 225.0 Rev Cred Fac 06/04/13 BOA/WF/BRANBT/RBS/ PNC-BANK-CORP

06/04/10 EnPro Industries Inc 75.0 75.0 Rev Cred Fac 03/06/11 BOA

06/04/10 HP Hood LLC 257.5 175.0 RevCred/TLA 08/19/14 BOA

06/04/10 HP Hood LLC 257.5 82.5 RevCred/TLA 08/19/14 BOA

06/04/10 Ravago America Recycling 530.0 500.0 RevCred/Term Ln 06/04/14 WELLS-FARGO/TD-BANK NORTH/BOA/US-BANK-NA

06/04/10 Ravago America Recycling 530.0 30.0 RevCred/Term Ln 06/04/12 WELLS-FARGO/ TD-BANKNORTH/BOA/ US-BANK-NA

06/04/10 Schumacher Group 120.0 50.0 Rev Cred Fac 06/04/15 GECC/JPM/FIFTH-THIRD- BK/COMPASS-BANK

06/04/10 Schumacher Group 120.0 70.0 Rev Cred Fac 06/04/15 GECC/JPM/FIFTH-THIRD- BK/COMPASS-BANK

06/03/10 Tenneco Inc 719.4 150.0 RevCred/Term Ln 06/04/16 JPM/BOA

06/03/10 Tenneco Inc 719.4 569.4 RevCred/Term Ln 05/31/14 JPM/BOA

06/03/10 Citadel Broadcasting Corp 762.5 762.5 Term Loan 06/03/15 JPM

06/03/10 Mets Limited Partnership 375.0 50.0 RevCred/Term Ln 06/03/14 JPM/BOA/CITI/ WELLS-FARGO/RBS



06/02/10 Hoffmaster Co 220.0 30.0 RevCred/Term Ln 06/02/16 CS/GECC/CHURCHILL-FIN

06/02/10 Hoffmaster Co 220.0 190.0 RevCred/Term Ln 06/02/16 CS/GECC/CHURCHILL-FIN

06/01/10 Owens & Minor Inc 350.0 350.0 Rev Cred Fac 06/01/13 BOA/WF/SUNTRUST-BK/ JPM/US-BANK-NA

06/01/10 Dave & Buster’s Inc 200.0 50.0 RevCred/Term Ln 06/01/15 JPM/JEFFERIES/GECC

06/01/10 Dave & Buster’s Inc 200.0 150.0 RevCred/Term Ln 06/01/16 JPM/JEFFERIES/GECC

06/01/10 Vanguard Natural Resources LLC 400.0 400.0 Rev Cred Fac 06/01/13 CITI/BNP-PARIBAS

Source: Thomson Reuters

BANK LOAN REPORT



BANK LOAN REPORT

MOST RECENT RATINGS ACTIONSUPGRADES

DATE ISSUER LOAN DETAILS RATINGS ACTION AGENCY RATIONALE

17-Jun Unifrax $180M TLB B1 from B2 Moody’s Improved operations, stronger profitability 11-Jun Noranda Aluminum $550M TLB, $250M R B+ from B S&P Debt reduction 11-Jun Packaging Dynamics $130M TL B from B- S&P Improving market conditions 8-Jun Dollar General $600M TLB BB from B S&P Improved credit metrics 8-Jun Dollar General $1.7B TLB BBB- from BB S&P Improved credit metrics 28-May Sally Holdings $920M TLB, $150M TLA, $400M ABL BB+ from BB S&P Improving credit protection 27-May Verint Systems $650M 1st TL BB- from B+ S&P Positive financial statement 25-May Dana Holding $1.43 TL BB- from B+ S&P Improved financial performance 25-May Education Management $1.185B TL, $442.5M R BB from BB- S&P Company to delever 21-May Educate Inc. $75M 2nd TL B- from CCC S&P Positive discretionary cash flow 20-May Willbros Group $50M TL BB+ from BB- S&P Reduction in proposed first-lien TL 19-May IAP Worldwide Services $415M 1st TLB B- from CCC+ S&P Improved operating results 13-May Acument Global $325M TL B- from CCC+ S&P Business unit sales agreement 10-May Fairchild Semiconductor $525M TL, $100M R BB+ from BB- S&P Improved operating trends 6-May Ikaria Acquisition $235M 2nd TL, $40M R, $235M TL, $40M TL BB from BB- S&P Change in terms of deal

DOWNGRADES DATE ISSUER LOAN DETAILS RATINGS ACTION AGENCY RATIONALE

10-Jun Barneys New York $280M TL CCC- from CCC S&P Weak liquidity 10-Jun Spirit Finance $850M TL D from CC S&P Debt repurchase equivalent to a default 8-Jun Helix Energy $835M TLB BB- from BB S&P Deteriorating credit metrics 8-Jun Hercules Offshore $900M TLB, $175M R B- from B S&P Unfavorable market conditions 8-Jun Holdings Gaming Borrower $305M 1st TL Caa1 Moody’s Unsustainable capital structure 3-Jun Network Communications $69M 1st TL, $15M R Caa1 from Ba3 Moody’s Events of default 28-May GateHouse Operating $275M TLC, $670M TL, $250M DDTL CCC- from CCC S&P N/A 26-May Symbion $125M TLB, $125M TLA B- from B S&P Difficult position with weak economy 24-May CRC Health $420M TL, $100M R B1 from Ba3 Moody’s High leverage, moderate interest coverage 20-May Keystone Automotive $200M TL CCC from B- S&P Weak performance 19-May Longview Power $350M DDTL, $100M LOC BB- from BB S&P Weaker merchant conditions 17-May Neff Corp. $290M 1st TL C from Ca Moody’s Filed for Chapter 11 13-May Kgen $200M TLB, $120M LOC, $80M R BB- from BB S&P Expected lower cash flow 11-May Targa Resources $500M TL, $100M R B+ from BB- S&P Dependent on upstream distributions 10-May Altergrity $835M TL, $90M R B from B+ S&P N/A

ASSIGNMENTS DATE ISSUER LOAN DETAILS RATINGS ACTION AGENCY RATIONALE

17-Jun CITGO $650M TLC BB+ S&P N/A 17-Jun Radio One $350M TL, $50M R BB- S&P Alleviates near-term maturity risk 17-Jun Vision Solutions $240M TL B1 Moody’s Moderately high leverage 15-Jun M-Foods Holdings $790M TLB BB- S&P Stable operating performance 9-Jun Silgan $550M R, $300M TLA Ba1 Moody’s Concentrated industry structure 8-Jun Holdings Gaming Borrower $305M 1st TL Caa1 Moody’s Unsustainable capital structure 4-Jun Styron $800M 1st TL B2 Moody’s Narrow portfolio 2-Jun NextMedia $135M TLB B+ S&P Exposure to negative secular trends 1-Jun CoreLogic $350M TL, $500M R Ba2 Moody’s Leading market position 28-May Michaels Stores $1B TL B S&P N/A 28-May TransFirst $135M 2nd TL CCC+ S&P Highly leveraged financial profile 28-May TransFirst $310M TLB B S&P Highly leveraged financial profile 27-May Xerium Technologies $410M 2nd TL B+ S&P Weak business risk profile 27-May Xerium Technologies $60M 1st TL, $ BB- S&P Weak business risk profile 26-May Electrical Components $145M TLB B+ S&P Weak business risk profile 25-May Tenneco $550M 1st TL, $150M 2nd TL Ba2 Moody’s Strong credit metrics



BANK LOAN REPORT

SECONDARY LOAN MARKET ADVANCERS AND DECLINERS(For the week ended June 16, 2010)

Source: Markit

CLOSED END LOAN PARTICIPATION FUND PERFORMANCE

Source: Lipper

— Average % Change: 3.98 — — Number of Funds: 44 —

Loanbase Statistics — Syndicated U.S. Loans

Data distribution as of June 17, 2010 (in millions)

2007 2008 2009 2010

M All Leverage All Leverage All Leverage All Leverage

Q1 448,630 296,746 278,888 127,832 116,359 29,849 169,122 100,364.1

No. packages 837 547 758 446 302 169 433 305

Q2 638,948 301,909 331,027 129,901 160,054 73,010 179,886 86,699

No. packages 1,045 622 794 465 455 297 305 218

Q3 519,003 250,078 267,756 146,147 102,603 56,890 NA NA

No. packages 853 450 663 423 403 258 NA NA

Q4 426,849 207,368 163,881 79,818 189,946 95,990 NA NA

No. packages 823 404 439 285 482 324 NA NA

Total Dollars 2,033,429 1,056,100 1,041,553 483,698 568,962 255,738 349,007 187,063

Total Packages 3,558 2,023 2,654 1,619 1,642 1,048 738 523

Top 10 Dec l ine rsFacility Previous Current Percent

Bid Bid Change

F&W Media 6/10 Equity 0.1 0 -100

Regency Entertainment (Mezz 12/06) 21.5 16.5 -23.256

SemGroup 12/09 Equity 28.25 24 -15.044

R.J. O’Brien (2nd Lien 7/07) Hybrid TL 7.5 6.5 -13.333

Cosmetic Essence (3/07) TLb 24.5 22.5 -8.163

BAWAG 5/07 (EUR) TL 34 32 -5.882

Trident Exploration 11/06 Unsecured TLB 34 32 -5.882

CPI (RC 11/09) Revolving Credit 90 85 -5.556

Summit Business (7/07) Delayed TL 47 44.5 -5.319

Summit Business (7/07) TLb 47 44.5 -5.319

Top 10 AdvancersFacility Previous Current Percent

Bid Bid Change

Entegra Equity 1 1.5 50

Tribune 12/07 Bridge 2.167 3 38.44

Buffets 4/10 Letter of Credit 62.5 75 20

Green Valley 2/07 2nd Lien TL 4.75 5.1 7.368

Hema (Mezz 8/07) Mezzanine 85 90.5 6.471

Euramax International Equity 210 220 4.762

Neff Rental (2nd Lien 6/07) Hybrid TL 19.75 20.667 4.643

Infor Global Solutions 3/07 45.188 47.125 4.287

F&W Publications (Add-on 4/07) TLb-1 48 50 4.167

F&W Publications 8/05 TLB 48 50 4.167

Total Net 12/31/09 Assets To 6/15/10

Name Of Fund 5/31/10 ($ Mil’s) % Change Rank

Pioneer Floating Rate Tr 477.4 5.94 1

Nuveen Senior Income 203.6 5.93 2

Eaton Vance Sen Flt-Rt 487.7 5.89 3

BlackRock Dvsd Inc Strat 129.3 5.56 4

Eaton Vance Flt-Rt Inc 556.7 5.55 5

Invesco VK Senior Income 840.2 5.43 6

Western Asset Var Rt Str 108.2 5.31 7

Eaton Vance Senior Inc 249.1 5.27 8

Oppenheimer Sen Flt;C 793.9 4.78 9

Nuveen Float Rt Inc Opp 320.3 4.73 10

Total Net 12/31/09 Assets To 6/15/10

Name Of Fund 5/31/10 ($ Mil’s) % Change Rank

BlackRock Fltg Rate Inc 327.4 4.42 11

Highland Flt Advtg;C 336.6 4.31 12

Invesco VK Sr Loan;IB 536.1 4.25 13

Nuveen Float Rate Inc 537.7 4.18 14

BlackRock Flt Rt Inc II 138.6 4.06 15

LMP Corporate Loan 116.6 3.98 16

BlackRock Flt Rt Inc 262.2 3.95 17

Invesco Prime Income Tr 670.4 3.88 18

Invesco VK Dyn Cred Opps 922.2 3.56 19

BlackRock Def Opp Credit 120.7 3.50 20


11097 ASRS d H Ad 8 5 11 BW i dd 1 5/21/09 3 59 28 PM


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