Dobson loan draws interest on simplified capital structure, leverage cut, absence of telecom deals

By Sara Rosenberg

New York, Sept. 8 - Dobson Communications Corp.'s proposed $700 million senior credit facility, which isn't slated to hit the market until next Tuesday, has already received some positive feedback from potential investors, leaving those close to the deal with good expectations.

One particular idea that seems to have attracted "positive sentiment" is the integration of two credit facilities - the Dobson Operating Co. credit facility and the Dobson/Sygnet credit facility - into one, according to a market source. By combining the two facilities, the company is not only simplifying its capital structure but its taking bank debt leverage below two times, the source explained.

At June 30, approximately $484 million was outstanding under the Dobson Operating Co. credit facility and approximately $267 million was outstanding under the Dobson/Sygnet credit facility, according to a news release.

In addition to repaying bank debt, proceeds from the bank facility and a $600 million bond offering will be used to refinance and replace outstanding borrowings under the existing credit facilities, to fund the repurchase of Dobson/Sygnet Communications Co.'s 12¼% senior notes and to fund the repurchase of $250 million of its outstanding 12¼% senior preferred stock.

The upcoming deal has also generated some talk since "there hasn't been a largely syndicated telecom issue in a while," the source continued. "Now there are two - Crown Castle and Dobson.

"You had Qwest but that was a different structure," he added.

Crown Castle International Corp. is holding a lender meeting on Tuesday to discuss amending its restricted group operating company's $1.2 billion credit facility, to increase the size of the term loan B by $601 million to $1 billion, to extend the tenor of the term loan B to September 2010 from March 2008 and to reduce the revolver commitment to $350 million from $500 million.

Furthermore, the amendment may involve a change in the interest rate on the existing term loan B as well.

Crown Castle is a Houston-based company that owns, operates and manages wireless communications sites and broadcast transmission networks, and provides network design, radio frequency engineering, site development and other services.

Dobson's credit facility consists of a $550 million 61/2-year term loan B and a $150 million six-year revolver. A maturing bond deal is the reason behind the slightly unusual tenor of the institutional tranche, according to the market source. The company has some bonds maturing in seven years so the syndicate opted to leave some room in between the bank and bond maturities to avoid any investor hesitation.

"I think it's going to go great," the market source said in regards to Dobson's upcoming deal. "A lot of investors know the name. It's a good structure. And, they have some high-yield bonds so it gives investors a good reference point by looking at where the bonds trade. [Plus] they have a $600 million bond sale before the bank meeting so that solidifies this reference point."

The company is starting a roadshow for the $600 million senior notes due 2013 on Tuesday and pricing is expected to take place later this week.

"It's not typically the way it's done," the source said, referring to the bonds pricing before the credit facility even hits the bank loan market. "But I think the company pushed to get into the bond market as fast as possible given the favorable conditions there."

Lehman Brothers and Bear Stearns are joint lead arrangers and book managers on the deal and Morgan Stanley is an underwriter as well.

Meanwhile, in the secondary, Dobson's bank debt was quoted around par following the refinancing announcement.

"It's basically unchanged. It traded last week at par 1/2. I don't see why anyone would pay above par or below par for this paper now that it's being taken out," a trader said.

Dobson is an Oklahoma City provider of rural and suburban wireless communications services.

Goodyear Tire & Rubber Co.'s revolver remained unchanged on Monday despite news reports that nine out 14 factories organized by the United Steelworkers of America have approved the tentative labor agreement that was announced on Aug. 20.

The revolver was quoted at 94 bid, 95½ offered, according to a trader who remarked that he just hadn't "seen any better bids" during Monday's market hours.

Following the initial announcement of the tentative labor pact, Goodyear's revolver jumped up by two points to 93½ bid, 94½ offered.

The Akron, Ohio tire company and the United Steelworkers of America have been negotiating since the second week of March.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.