NRG sees over $3 billion in commitments; SP Newsprint gains momentum with $65 million committed

By Sara Rosenberg

New York, Dec. 10 - NRG Energy Inc.'s $1.2 billion exit financing credit facility (BB), which launched via a conference call on Monday, already has in excess of $3 billion in the book. While SP Newsprint Co.'s proposed $300 million credit facility, which launched via a bank meeting on Monday, is moving along in the right direction although subscription has not yet been reached as investors are taking their time to do credit work.

"It's going very, very well," a syndicate source said regarding NRG. There is "lots of demand, lots of interest. We're going to keep the commitment period open till Friday because some people wanted to meet with the company at the bond roadshow."

The Minneapolis energy company began the roadshow for the $1 billion senior secured second lien notes due 2013 (B2/B+) on Tuesday and pricing is expected to occur either on Dec. 17 or Dec. 18.

When asked whether there have been any changes to the structure of the facility due to the high demand, the source responded, "[the company] reserves the right, based on demand, to upsize either the bank deal or the bond deal by a total of $500 million to refinance the plan of reorganization notes that I think are 10% PIK. The decision will be made by the company next week."

Allocations are expected to take place next week and the syndicate is aiming to close and fund the facility by Dec. 23.

Credit Suisse First Boston and Lehman Brothers are acting as joint lead arrangers on the deal, which consists of a $250 million four-year revolver with an interest rate of Libor plus 425 basis points and a commitment fee of 100 basis points and a $950 million 61/2-year term loan B with an interest rate of Libor plus 450 basis points.

NRG filed for Chapter 11 protection in May. On Dec. 5, the company announced that it successfully completed its Chapter 11 reorganization and emerged from bankruptcy. Through the reorganization process, the company eliminated corporate level debt and other claims totaling more than $6 billion and emerged from Chapter 11 with $510 million of corporate debt and about $4.4 billion in project level debt.

SP Newsprint's facility consists of a $225 million term loan B with price talk of Libor plus 325 to 350 basis points and a $75 million revolver talked at Libor plus 325 basis points.

"There's very strong interest in it," a source close to the deal told Prospect News. "It's a cyclical sector so people are still doing their work on it. The newsprint sector has been in a trough so there's a little bit of work involved in getting through the industry.

"Final ratings have not been received. They will be B1/B+, but some people are waiting to see the papers," the source continued.

"[Also], it's the first time they're tapping the institutional market," the source explained.

"As of Tuesday, $65 million was committed. I think by Friday or by early next week things [are expected] to be clearing through on this. It's expected to be fully subscribed. It's a strong company. [There are] strong partners. People are just doing their work and getting comfortable," the source said.

As for the revolver, the existing bank group as well as some additional new lenders are expected to participate in the tranche.

The term loan is being offered at par, while upfront fees for the revolver are 75 basis points for a $15 million commitment and 50 basis points for a $10 million commitment.

Proceeds will be used to refinance an existing credit facility that consists of a revolver and a term loan A, and expires in 2005.

Commitments are due on Dec. 19, and the syndicate is targeting the first week of January to close on the credit facility. However, being that the existing facility does not mature until 2005, there is no rush to close on the currently in-market deal.

TD Securities is the lead bank on the Atlanta newsprint manufacturer's deal.

Meanwhile, it is now expected that a bank meeting for Ionics Inc.'s proposed $250 million credit facility will probably take place in mid-January, as opposed to the previously announced December/January timeframe, according to a market source. UBS Securities, Bank of America and Fleet are arranging the deal.

The facility will consist of a $75 million revolver and a $175 million term loan.

Proceeds will be used to help support the acquisition of Ecolochem Inc. for $200 million in cash and about 4.91 million shares of Ionics common stock. Based on the 30 trading days' average closing stock price ended Nov. 17, the stock portion of the consideration would be valued at $138 million, according to a company news release.

Closing on the deal is expected to take place in early 2004.

Ionics is a Watertown, Mass.-based company that develops and manufactures systems and provides related services for water treatment. Ecolochem is a Norfolk, Va.-based company that provides emergency, short-term and long-term mobile water treatment services.

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