Allied Waste's term loan B dips down to par 3/8 on market technicals

By Sara Rosenberg

New York, April 29 - Allied Waste Industries Inc.'s term loan B traded at par 3/8 on Tuesday, slightly softer from Monday's level and ¼ a point lower from Friday's quotes probably due to no other reason than there being more sellers than buyers at the present moment, according to traders.

On Monday, the loan traded at par 3/8 plus and was quoted with a par ¼ bid, par ½ offer. On Friday, the loan traded at par 5/8.

"It's probably market technicals," one trader said in explanation of why the paper has softened slightly over the last few days. "This happens a lot on these bigger deals. They ebb and flow until they find the right level."

"There was a very sharp flurry of buying," the trader said. "I think we may settle down to a par ¼ ceiling by the end of the week.

"The synthetic LC is looking very heavy. I have a couple of offers and they're just sitting there at par 1/8," the trader continued.

"The Allied RC was heavily bid at the 94 range and traded between 94, 941/2. The offer is creeping up to 95. Funds are buying it but we're almost getting at the point where it's the same economics as buying the B," he added.

The company announced on Tuesday that it closed on the new $2.7 billion credit facility. JPMorgan, Citibank, Credit Suisse First Boston, Deutsche and UBS Warburg were the lead banks on the deal.

The facility consists of a $1.5 billion five-year revolver with an interest rate of Libor plus 300 basis points and a $1.2 billion seven-year term loan with an interest rate of Libor plus 325 basis points. Pricing on both tranches contain grid-based pricing improvements based on decreases in the company's leverage ratio. There is also a $200 million institutional letter of credit facility.

"We are pleased with the successful completion of the refinancing of the credit facility, which was the final piece of a multifaceted financing plan," said Tom Ryan, executive vice president and chief financial officer, in a news release. "With the improvements in debt maturities, liquidity, and covenants, and given the strong, supportable cash flow of this business, we have addressed substantial aspects of the perceived leverage risk at Allied Waste."

Allied Waste is a Scottsdale, Ariz. solid waste management company.

Dynegy Inc.'s bank debt "has been churning upwards over the last couple of days" and was quoted with a 97¼ bid, 98 offer on Tuesday, according to a trader.

The Houston energy company reported net income of $147 million, or $0.17 per diluted share, for the first quarter 2003, compared to a net loss of $247 million, or $0.91 per share, for the first quarter 2002. Operating cash flow, including working capital changes, was approximately $400 million for the first quarter 2003.

"With the continuing support of our employees, we made significant progress during the quarter on our self-restructuring initiatives, highlighted by the completion of our bank refinancing and the re-audit of our 1999, 2000 and 2001 financial statements. We also reached an agreement to sell our U.S. communications business and continued the wind-down of our remaining third-party marketing and trading activities," said Bruce A. Williamson, president and chief executive officer, in a news release. "Since our self-restructuring efforts began, we have been working diligently to address past issues, while also creating a company with a new business model centered on energy assets and a focus on fiscal discipline."

As of April 21, the company's liquidity was $1.8 billion. This consisted of $1.15 billion in cash and $1.1 billion in revolving bank credit, less $450 million in letters of credit. Also as of April 21, Dynegy reduced debt by $491 million, compared to year-end 2002. Revolver exposure, including letters of credit and borrowings, was reduced by $350 million and the balance of debt was reduced by $141 million.

Management also raised the 2003 guidance estimate to $0.10 to $0.18 per share from the previous guidance estimate given on Jan. 7 of $0.08 to $0.15 per share.

Calls to accounts regarding Rent-A-Center Inc.'s proposed $650 million credit facility (Ba2/BB) began on Monday, according to a syndicate source, and the initial reaction so far has been a positive one.

"The early read is that it's a name people know. [The company] has performed well. It has significantly deleveraged in the past," the syndicate source said.

Furthermore, "pricing will be marked to market" so the expectation is that it will be more beneficial to investors, he added.

And, also working in favor of the upcoming deal is the change in rating outlooks by both Moody's Investors Service and Standard & Poor's. Moody's changed its outlook to stable from negative and S&P changed its outlook to positive from stable, according to the source.

Lehman Brothers and JPMorgan are the joint lead arrangers on the deal, with JPMorgan also serving as syndication agent. Bear Stearns is also acting as syndication agent. Morgan Stanley signed on as documentation agent, and UBS Warburg and Wachovia are managing agents.

The loan consists of a $450 million term loan B, a $120 million revolver and an $80 million tranche that will either be a letter of credit facility or a synthetic term loan, the source said. The syndicate has not yet officially gone out with price talk on the deal.

A bank meeting is set for May 6.

Proceeds will be used to refinance the company's existing senior debt.

Rent-A-Center is a Plano, Tex. rent-to-own store operator.

Plains Exploration & Production Co. closed on a $500 million three-year revolving credit facility, which will become effective upon the closing of the acquisition of 3TEC Energy. JP Morgan Chase, BankOne and Bank of Montreal were the lead banks on the deal, which has 14 bank lenders.

Under the agreement's borrowing base, borrowings are initially set at $425 million and will be determined semiannually. The Houston oil and gas company anticipates initially borrowing somewhere between $300 to $325 million under the loan.

The revolver will be used in connection with the pending acquisition of 3TEC to refinance existing debt at Plains Exploration and 3TEC, finance the cash portion of the purchase price of 3TEC common and preferred stock, and provide general working capital liquidity.

"We are pleased to have the strong support of the financial community as we move forward to grow PXP into a more prominent and dynamic independent oil and gas company. This facility allows us to refinance debt at historically very attractive rates as well as provide substantial liquidity and flexibility going forward. Combined with the earlier affirmation of our credit ratings by S&P and Moody's, we are well positioned financially to execute our strategy to deliver value to our shareholders," said Steve Thorington, executive vice president and chief financial officer, in a news release.

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