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Published on 7/1/2002 in the Prospect News Bank Loan Daily.

Market dips slightly on investor skepticism; Casella Waste launching Tuesday

By Sara Rosenberg

New York, July 1 - The secondary bank loan market is feeling the effects of investor nervousness and a back-up in the high-yield bond market, causing prices to drop slightly, according to market professionals. People are shocked with the continued bad news surrounding companies and accounting errors, with WorldCom, Inc. and Xerox Corp. being the two most recent, one trader explained. In primary news, Casella Waste Systems Inc. is scheduled to hold a bank meeting Tuesday for a new $300 million credit facility.

In the latest round of troubles for WorldCom, the Clinton, Miss. telecommunications company disclosed that it lost its $1.5 billion accounts receivable securitization program and received notice from lenders that defaults occurred on the existing credit facilities. Furthermore, the company received a delisting notice from Nasdaq, effective July 5, but the delisting can be stayed if the company requests a hearing.

"Everyone is waiting to see if WorldCom files for Chapter 11 now," a market professional said.

The company was already suffering after an audit discovered expenses treated as capital expenditure and will restate its earnings, reducing EBITDA by $3.055 billion in 2001 to $6.339 billion and $797 million in the first quarter of 2002 to $1.368 billion The Securities and Exchange Commission is investigating the matter and the Justice Department is also getting involved.

Meanwhile Xerox, under a settlement agreement with the Securities and Exchange Commission, restated results from 1997 to 2000 and adjusted 2001 results. For 1997 through 2001, the Stamford Conn. document company reversed $6.4 billion or previously recorded equipment sale revenue, according to a company press release. And, revenues for the time period were reduced by 2% to $91 billion.

"Overall, the total adjustments in the restatement reduce full-year revenues and pre-tax income for 1997, 1998 and 1999 while increasing revenues and pre-tax income for 2000 and 2001," the release said. "Total revenue on a restated basis for 2001 was $17 billion and the net loss was $71 million or 12 cents per share."

In addition, the company announced that "restatement has no impact on the new credit facility announced last week with the exception of an update to the financial covenants reflecting the final restated numbers," the release said.

Otherwise "it's been pretty quiet [in the secondary] and I expect it to stay that way all week," the trader added.

Casella Waste Systems Inc.'s bank meeting Tuesday regarding its new $300 million senior secured credit facility (B1/BB-) is expected to go well, according to market sources.

"It's a repeat issuer," a market professional said. "I don't think they expect any surprises given the strong performance of the credit. It should go off without a hitch."

The loan consists of a $175 million five-year revolver with an interest rate of Libor plus 275 basis points and a $125 million seven-year term loan B with an interest rate of Libor plus 325 basis points, according to market sources.

The company's previous term loan B had an interest rate of Libor plus 400 basis points, according to the market professional.

"They're shaving off 50 basis points," he added.

Fleet Securities and Bank of Americas are the lead banks on the deal.

Proceeds combined with proceeds from a note sale will be used to repay outstanding borrowings under the company's existing credit facility, the release said.

Casella Waste Systems is a Rutland, Vt. provider of collection, transfer, disposal and recycling services.

In other news, Hilb, Rogal and Hamilton Co. closed on its new $259.975 million credit facility (Ba3/BB-). Wachovia is the lead bank on the deal.

The Glen Allen, Va. insurance intermediary's new loan consists of a $100 million two-year revolver with an interest rate of Libor plus 200 basis points, $29.975 million two-year term A with an interest rate of Libor plus 200 basis points and a $130 million five-year term B with an interest rate of Libor plus 300 basis points, according to market sources.

Proceeds were used to help fund the acquisition of Hobbs group LLC, an Atlanta, Ga. insurance broker.

Advance Auto Parts Inc. closed on a new $250 million term C, which will be used to replace the company's existing term loan B. The Roanoke, Va. auto parts chain obtained the new tranche due to a better interest rate, according to a company press release JP Morgan Securities Inc. was the sole lead arranger and sole bookrunner.


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