American Airlines Adds to DIP Loan; Magic Newco Refinancing Debt

American Airlines Inc. added $500 million to an existing debtor-in-possession loan, while software maker Magic Newco LLC is seeking to cut interest expense by refinancing its borrowings.

American is offering to pay 3.75 percentage points more than the London interbank offered rate on the additional amount, the same rate the carrier proposed on the original $1.05 billion financing it obtained last month, according to a person with knowledge of the offering who asked not to be identified because they weren’t authorized to speak publicly.

American’s parent, AMR Corp., filed for bankruptcy protection in November 2011. Its reorganization plan is premised on a merger between American and US Airways Group Inc.

Magic Newco is seeking a $938 million, five-year term loan B that will pay 4 percentage points to 4.25 percentage points more than Libor, according to another person with knowledge of that offering who asked not to be identified because the deal isn’t public yet.

The new loan compares with the 6 percentage points more than the lending benchmark it currently pays. The company is also seeking a $100 million, four-year, revolving credit line and a 124 million-euro ($164 million), five-year, term loan B, according to the person.

Prices on the largest first-lien junk loans dropped for a fifth straight day, shedding 0.02 cent to 98.26, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan 100 index. There are about $44 billion of deals in general syndication, with about $669 billion signed in the last 12 months, according to data compiled by Bloomberg.

Saks Acquisition

Hudson’s Bay Co., Canada’s biggest department-store operator, obtained about $2.8 billion of debt-financing commitments to back its purchase of luxury retailer Saks Inc.

Bank of America Corp. and Royal Bank of Canada are providing $1.9 billion of term loans and a $900 million unsecured bridge portion, according to a regulatory filing yesterday. The arrangement also includes two revolving credit lines of $950 million and C$750 million ($728 million).

Hudson’s Bay agreed to buy New York-based Saks for $2.4 billion.

Community Health Systems Inc., the second-largest U.S. hospital chain, agreed to buy Health Management Associates for $3.9 billion in cash and stock. Community Health has $9 billion in outstanding debt, including $4.3 billion in loans, Bloomberg data show.

In a revolving credit, money can be borrowed again once it’s repaid; in a term loan, it can’t. Term loan B facilities are typically marketed to institutional investors.

Before it's here, it's on the Bloomberg Terminal.