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Indianapolis Downs and key creditors agree on sale, plan process

Indianapolis Downs has reached an agreement with its two key stakeholders on a path forward that would feature a sale process for the company and, if that does not produce a transaction, a consensual reorganization plan, according to court documents.

The company did not provide further details, but said it would file documentation for the deal by April 18. According to a March 28 motion, that is also the date to which Indianapolis Downs is seeking to now extend its exclusive period to file reorganization plan. Exclusivity expired on March 28, but under Delaware court rules the filing of the motion automatically extended it.

The company said that it has agreed with the stakeholders, Fortress Credit Opportunities Advisors and an ad hoc committee of second-lien noteholders, on a term sheet and was in the process of completing a plan-support agreement.

In the meantime, the company said the marketing and sale process called for in the deal got underway on March 26.

In addition to plan-filing exclusivity, the company also asked the court to extend the corresponding exclusive period to solicit acceptance to the proposed plan to June 5. The company added that it anticipates holding a confirmation hearing “around” Aug. 10. – Alan Zimmerman

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Neiman Marcus to borrow $150M against asset-based loan, backing dividend

Neiman Marcus has disclosed that it plans to initially borrow $150 million under its $700 million asset-based revolver due 2016 to fund a dividend of approximately $442.6 million. The company also plans to use cash on hand.

Pricing on the asset-based revolver is L+225. On Jan. 28, Neiman Marcus had $628 million available under the asset-based revolver.

Neiman Marcus’ $2.06 billion term loan was quoted at 99.625/100 this morning, which is within recent trading range, but a touch off the highs. The loan was placed in May at L+350, with a 1.25% LIBOR floor, and included a 101, one-year soft call premium. The loan was arranged by Credit Suisse, J.P. Morgan, Bank of America Merrill Lynch, Wells Fargo, and Barclays Capital.

Department store operator Neiman Marcus is rated B+/B2. – Richard Kellerhals

Follow Richard on Twitter @KellerhalsLCD for Investment-Grade and Pro Rata news

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Hawker Beechcraft downgraded to CC as largest loan default since 2010 looms

Standard & Poor’s yesterday lowered its corporate credit rating on Hawker Beechcraft to CC from CCC, fearing a default soon. The move was based on Hawker’s plan to issue more debt, and on the details of the agreement with lenders for forbearance and covenant relief.

If Hawker defaults on its more than one billion dollars in term loan debt, it would be the largest loan default in the S&P/LSTA Leveraged Loan Index since Boston Generating in August 2010, according to LCD. On a pro forma level, it would single-handedly shove the default rate in April up to 0.51% by amount outstanding, from 0.21% in March, and to 0.77% by the number of loans, from 0.61% in March, according to LCD.

Hawker announced a forbearance agreement with 70% of the lenders in its secured credit facility on Tuesday that defers any interest or other payments due on its secured credit facility through June 29, 2012. The agreement waives certain violations of the minimum EBITDA or minimum liquidity covenants that occurred or may occur, according to S&P. Part of the plan called for a $120 million term loan that will have a pledge on certain specified assets, and is senior on a cash-repayment-waterfall basis to the existing term loan, as LCD reported yesterday.

Given Hawker’s need for the additional debt and covenant relief, S&P noted the increased likelihood of a selective default for the company if it does not make its next payment, due tomorrow.

While Hawker’s announcement on Tuesday said the agreement was aimed at providing additional liquidity while “working with its lenders toward a comprehensive recapitalization,” Reuters reported on Wednesday that it was to give the company time to prepare a prearranged bankruptcy.

The default rate has hovered near historical lows. It could tick higher thanks to Hawker Beechcraft

While the cash position is uncertain, as Hawker has yet to release year-end numbers, S&P judges that the apparent need for the additional term loan indicates that cash generation has been worse than expected in the last six months. And note coupons are due on April 1, which will push to Monday, April 2, on all three outstanding bond issues. The combined payment is approximately $28 million, according to S&P.

The company may also pursue a distressed debt exchange, as the 2014 maturity of the $1.2 billion term loan approaches, according to the ratings note, something that the ratings agencies consider a default. Hawker also has a $200 million add-on. – Staff reports

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Iceland Foods oversubscribes LBO loan, prompting talk of price-flex

There is increasing chatter around a potential reverse-flex for Iceland Foods’ £885 million LBO, following what players are describing as a successful syndication. The formal deadline for responses passed on Wednesday, and while some stragglers were yet to respond, the deal has gone down well with investors – both on the bank and fund side – and there is talk that the TLB is heavily oversubscribed.

In light of the recent reverse/structural flexes for CPA Global and Ahlsell on the back of their oversubscriptions, players are making the assumption that a flex of some description is all but certain for Iceland Foods.

(Indeed, after this story was written the loan arrangers announced that pricing on the deal was being reduced due to market demand. Subscriber link)

How “market flex” pricing works, and how it evolved in the leveraged finance world, is detailed here, in LCD’s Loan Primer. It’s free.

Among the options potentially available to the borrower could be a reduction on the margin currently offered on the TLB, or a reduction in the OID offered. The £200 million seven-year TLB-1 pays L+550, while the £360 million seven-year euro-denominated TLB-2 pays L+525. The OID has been talked in the 98 area. Also, given Iceland is a U.K. borrower, another option could include optimising the ultimate currency mix.

Demand for the transaction has been bolstered by a positive perception of management, as well as the company’s overall performance. It has also been noted that despite being a retail credit, Iceland is a discount food retail business, and therefore relatively defensive versus the broader sector.

The strong B+/Ba3 rating profile provided further support, as has a limited new-issue pipeline, according to sources.

Keen to maximise their allocations on the euro TLB portion, some funds have put in commitments for the sterling TLB, while traders have also reported some selling of sterling secondary assets this week as funds make room for the deal.

Credit Suisse, Deutsche Bank, HSBC, Nomura, and RBS are MLAs and bookrunners.

Iceland reported sales of £2.4 billion in the financial year to March 2011, up 5.9% on the previous year, and EBITDA up 2% to £188 million. It opened 20 net new stores that year, and was effectively debt free at year end. – Sarah Husband / David Cox

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Elior launches €200M high yield bond offering to back acquisitions

French catering services firm Elior has launched syndication of a €200 million bullet facility to cover two pending acquisitions, according to sources. Nomura is sole bookrunner for the drive-by facility, which is being shown to the existing syndicate. Commitments are due on Monday.

The facility, which matures in December 2017, is fully funded on day one and has a bullet structure. It is subsequently being targeted at institutional lenders. A portion has been soft circled on the back of reverse-enquiry, and a book-building process is underway. The margin is talked in the E+500-525 context, while talk around the OID is in line with other recent new issues at 98 area, sources said.

Among its pending acquisitions is Groupe Ansamble SAS, a Vannes-based owner and operator of catering facilities. This acquisition is due to wrap by the end of April, while another is due to close next week, sources said. Ansamble employs 2,400 people and generated a turnover of €160 million in 2011, according to sources.

As reported earlier this week, Elior secured more than 90% in terms of consent rate, and more than 80% on the extension for its A-to-E request at last Friday’s early bird, with the final deadline due this Friday.

Once this process and syndication of the acquisition facility wraps, the borrower will have essentially pushed the majority of its maturities out to between 2016 and 2017. The extended RCF matures in June 2016, the extended portion of the B/C matures in June 2017, and the new acquisition facility matures in December 2017.

Aside from the extension request, the amendment also includes a provision for the company to issue high-yield bonds, sources said. The documentation has been tightened around certain points, including dividend payments, and some improvements have been made to the company’s monthly reporting requirements, sources added.

Credit Agricole CIB and Nomura are handling the A-to-E on behalf of the company.

Charterhouse led the take-private of Elior in 2006 in a deal backed by a €1.97 billion senior, second-lien and mezzanine financing. This was moved onto an all-senior footing in 2007 via the addition of €740 million of new senior debt, leaving leverage at 6.1x based on end-2007 projected EBITDA. – Sarah Husband

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Magnolia Bluffs Casino closes on $45M debt, equity financing

The Natchez, Miss.-based Magnolia Bluffs Casino project closed on a $45 million financing to proceed with construction, according to an announcement from the developer obtained by LCD.

The financing includes a combination of equity and debt. The debt was raised from a single institutional investor, with equity investors who have prior experience in gaming, according to a source familiar with the deal.

Premier Gaming, a Kentucky-based casino-development company headed by CEO Kevin Preston, is leading the project via a Mississippi-registered investment entity called Casino Holding Investment Partners, records show. Premier will manage the casino and amenities, according to the announcement.

Construction on the project, designed by architect Edward A. Vance, has begun and is expected to be completed in December 2012, according to the company. The casino will include 600 slot machines and 12 table games. The facility, situated on Roth Hill, will be the second casino in Natchez, along with the Isle of Capri Casino.

The city has already spent $23 million to reclaim the riverbank, develop Roth Hill Road and stabilize the bluff to allow for development of the site, according to city records.

Equity funding is coming from Natchez Riverside Entertainment LP, with investments made through the EB-5 investors program, according to the announcement. The program provides a method of obtaining a green card for foreign nationals who invest money in the U.S., according to the Department of Homeland Security. To obtain the visa, individuals must invest at least $1 million – or $500,000 in a high-unemployment or rural area – creating or preserving at least 10 jobs.

Houlihan Lokey acted as placement agent and adviser in the transaction. The Jones Walker law firm served as the legal adviser to the company. – Max Frumes

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Dynegy shareholders file class action suit blaming CEO, CFO, Icahn

In the wake of a damning report filed by the examiner in the bankruptcy proceedings of Dynegy Holdings, law firm Faruqi & Faruqi filed a class action lawsuit against the energy company in the Southern District of New York on behalf of anyone who purchased Dynegy stock between Sept. 2, 2011 and March 9, 2012.

Faruqi claims Dynegy CEO Robert Flexon, CFO Clint Freeland, and activist investor Carl Icahn “knew or recklessly failed to inform investors that Dynegy’s wholly owned subsidiary fraudulently transferred direct ownership in one of Dynegy’s indirectly owned subsidiaries directly to Dynegy,” the firm said in a statement released late Wednesday.

As LCD has reported, the examiner, Susheel Kirpalani, filed a 173-page report on March 9 that found the company’s restructuring transaction undertaken last year constituted both an actual and constructive fraudulent conveyance – a determination with the potential to derail the company’s Chapter 11 (see “Dynegy examiner finds fraudulent conveyances, fiduciary breaches,” LCD News, March 9, 2012.) The bankruptcy court ordered the parties in the case to participate in mediation to be led by Kirpalani. The parties are scheduled to provide an update to the court on that mediation on April 4, in Manhattan. – John Bringardner

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Expert Global adds stronger call protection to proposed leveraged loan

Barclays Capital, J.P. Morgan, Deutsche Bank, and RBS Citizens yesterday set changes to their merger financing for Expert Global Solutions, adding mandatory amortization and strengthening the call protection on the $675 million first-lien term loan. Recommitments were due by close of business yesterday.

As before, the six-year term loan is talked at L+675 with a 1.25% LIBOR floor at 98 to yield 8.71% to maturity. It’s now non-call one, with a 102 hard call in year two. The term loan previously included a 101, one-year soft call premium

Amortization, previously 1% per annum, now steps to 3% each in years two and three, and 5% per annum thereafter. Revisions were also made to the timing on the excess-cash-flow-sweep’s step-down and the capex language was tightened.

As noted earlier, Sponsor One Equity Partners wants to merge two of its portfolio companies, NCO Group and APAC Customer Services, into a single entity. A loan and bond financing for the merger was withdrawn from the market in late 2011.

The revised merger transaction includes a $120 million revolving credit, a $675 million, first-lien term loan, a $200 million second-lien term loan that’s already been placed with an all-in yield of 11.5%, $300 million of equity from One Equity and $159 million of a PIK option holdco loan, sources said.

The private equity firm has owned NCO since 2006. NCO is currently leveraged at 5.9x, and the merged entity eases opco leverage to 3.9x on a pro forma basis, adjusted for synergies, sources said. First-lien leverage will be roughly 3x. – Chris Donnelly

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After breach (?), Findus lenders clear loan waiver, await restructuring

Investors have approved a waiver request from food business Findus, according to sources, which came ahead of an anticipated restructuring of the debt. The company is believed to have breached its December covenant, sources added.

Lenders were offered a 1% margin uplift, payable in PIK, and a 50 bps fee. In addition, the company will inject €20 million in equity, sources said.

As part of this request, lenders were asked to allow the company to draw down a small amount, thought to be €20 million, under its revolver. Drawdowns on the revolver – which carries a loss-sharing agreement – have been halted due to the breach, sources said.

Investors say that work on the restructuring should get underway soon, with the co-coms to be formed shortly and more information to follow at the end of next month. Sources suggest that value breaks in the mezzanine.

Sponsor Lion was thought to have been considering a sale of the Nordic business, but said earlier in March that it had no immediate plans to go ahead with this. Findus is facing rising raw material prices in a very competitive industry. Senior leverage is around 4.5x, according to sources.

The buyout of Findus in 2008 was backed by £550 million of senior debt and a £180 million mezzanine facility. – Staff reports

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Spain’s ONO considers options for €1.4B leveraged loan refinancing

ONO is out with a request for proposals as it looks at refinancing the rump of its €3.5 billion senior facility put in place in 2010, according to market sources.

The RFP is intended to address the Spanish cable group’s €1.4 billion of bank debt that needs to be refinanced prior to June 2013. Since 2010, ONO has made considerable strides in managing its capital structure, most recently placing an oversubscribed $1 billion high-yield bond in January.

Bankers say ONO could look at either a full refinancing of that €1.4 billion debt or an amend-to-extend, although the former is thought more likely. This reflects the firm’s strong relationship-following among bank lenders, as well as its recent good performance. In its fourth-quarter and full-year 2011 results, ONO reported a 3.2% increase in EBITDA to a company record of €748 million, thereby leaving leverage at 4.59x. Banking sources added that the firm’s recent use of the bond market means it will stick with loans for the refinancing.

The original loan was signed in April 2010, and structured as a forward start that left out-of-the-box margins at E+300. The margins are on a grid, with the lowest level at E+240.

In the secondary, ONO’s notes due 2019 were quoted at either side of 89.75 by mid-morning, with its 8.875% notes due 2018 in a 93.5 context.

ONO is Spain’s second-largest provider of broadband internet, pay television and fixed telephony services, with more than 1.9 million residential customers. The firm carries corporate ratings of B2/B/B, and a B1/B/BB- profile for senior unsecured bonds.

CCMP Capital Advisors, Thomas H. Lee Partners, Providence Equity Partners, Quadrangle Capital Partners, Global Telecom Investments (GE Group), Caisse de Dépôt et Placement du Québec, Multitel Group, Val Telecomunicaciones, Ontario Teachers’ Pension Plan, Capital Riesgo Global (Banco Santander), Sodinteleco, Northwestern Mutual Life Insurance Company, and Bregal Co-Invest are ONO’s main shareholders. – David Cox/Sohko Fujimoto