CACI should get good reception on business sector, balance sheet; Home Interiors breaks

By Sara Rosenberg

New York, March 31 - CACI International Inc.'s proposed $550 million credit facility (BB) is expected to go pretty well as some potential investors were impressed with the company and its balance sheet. Meanwhile, Home Interiors & Gifts Inc.'s credit facility hit the secondary with the term loan B staying relatively close to its original issue price.

CACI's facility consists of a $200 million five-year revolver with an interest rate of Libor plus 225 basis points and a 50 basis points undrawn fee, and a $350 million seven-year term loan B with an interest rate of Libor plus 225 basis points.

"It's a nice little business. Good comparison to this is Titan, which is being acquired by Lockheed. Valuation there (which was valued at a purchase price of approximately $2.4 billion) makes this company look like it's worth a lot of cash," a fund manager said regarding CACI.

"There are decent ratings. Leverage is low at 2.9 times total and senior, and, interest coverage is pretty high at over eight times," the fund manager added. "I would imagine I would commit to this."

Banc of America Securities LLC is the lead bank on the deal.

Proceeds will be used to finance the $415 million cash acquisition of American Management System Inc.'s Defense and Intelligence Group.

Closing on the acquisition is expected to take place by May and is conditioned on CGI Group Inc.'s successful completion of a tender offer for all of the outstanding shares of AMS for $19.40 per share or $858 million. The transactions are also subject to regulatory and government approvals.

Assuming the transaction is consummated in May, CACI estimates the acquisition of the Defense and Intelligence Group will add about $275 to $285 million to its fiscal year 2005 revenues and incremental earnings per share of about $0.14 to $0.17. The EBITDA margin for DIG in fiscal year 2005 is expected to be 15% to 17%, according to a company news release.

During a conference call discussing the acquisition that took place earlier in the month, the company projected pro forma debt at June 30 of $415 million, pro forma debt/last-12-months EBITDA of 2.6 times at June 30, pro forma cash of $20 million and available borrowing capacity of $135 million under the new credit facility at June 30.

CACI is an Arlington, Va., provider of IT and network solutions. The Defense and Intelligence Group is a Fairfax, Va., provider of business management solutions to the U.S. government.

Home Interiors breaks

Home Interiors & Gifts Inc.'s $370 million credit facility (B2/B) broke for trading on Wednesday with the term loan B seen "hovering right around where it was issued at," according to a market source.

Specifically, the source quoted the paper at 98 7/8 bid, 99½ offered. However, according to a trader, the term loan B "might be slightly higher on the bid side (then 98 7/8) but it's in the right vicinity."

The $320 million term loan B is priced with an interest rate of Libor plus 425 basis points and was offered to investors at 99.

Over the course of syndication the institutional tranche was flexed up twice, first to Libor plus 375 basis points from Libor plus 325 basis points and then to Libor plus 425 basis points from Libor plus 375 basis points.

The facility contains a $50 million revolver with an interest rate of Libor plus 275 basis points. Investors get 1% for revolver commitments as well.

JPMorgan and Bear Stearns are the lead banks on the deal, with JPMorgan listed on the left.

Proceeds will be used to refinance about $169.8 million of existing senior debt, to repurchase all approximately $139 million or a portion of the company's outstanding convertible preferred stock, for general working capital purposes and to pay transaction fees and expenses.

On a pro forma basis after giving effect to the refinancing and the anticipated use of the proceeds from the refinancing, as of Dec. 31, 2003 the company would have had about $474.6 million in total debt, compared to about $323.2 million in total debt as of Dec. 31, 2003 on an actual basis.

Home Interiors & Gifts is a Dallas integrated manufacturer and distributor of home decorative accessories.

Charter active and higher

Charter Communications Inc.'s bank debt was up about half a point on the day as more definitive details emerged on the company's proposed refinancing transaction.

The term loan B was quoted at 99½ bid, 99 7/8 offered and the term loan A was quoted at 99¼ bid, 99¾ offered, according to one trader. However, a second trader quoted both the term loan A and the term loan B at 99½ bid, 99¾ offered. On Tuesday, the term loan B was quoted at 99 bid, 99½ offered and the term loan A was quoted at 98 5/8 bid, 99 offered, according to a different trader.

"It's been trading actively. People haven't quite figured out what to do with it. They have to wait till Friday to see what the deal looks like - if there are fees, rollovers. And, there's no guarantee that the deal will get done either," the trader said in explanation of why people aren't just sitting on the paper and waiting to get paid down.

Charter Communications Operating LLC will launch a $6.5 billion credit facility on Friday consisting of a $1.5 billion revolver, a $2 billion term loan A and a $3 billion term loan B with price talk of Libor plus 325 basis points.

JPMorgan and Bank of America are the lead banks on the deal, with JPMorgan listed on the left.

Proceeds from the new deal combined with proceeds from a $1.5 billion senior second lien notes offering, will be used by the St. Louis cable company to refinance the bank debt of its subsidiaries, CC VI Operating Co. LLC, Falcon Cable Communications LLC, and CC VIII Operating LLC, all as one concurrent transaction.

aaiPharma bid lower, no offers

aaiPharma Inc.'s bank debt was quoted around mid-90's bid, looking for offerings by late in the day Wednesday, basically in a the same area as previous levels of 95 bid, 97 offered despite news of a default and a ratings downgrade, according to a trader.

"The bonds checked off and then rebounded. The [bank debt] was kind of in a similar context. I'm hearing low bids out there [for the bank debt] but no offers down there," the trader said.

Late Tuesday the company announced that it will not be able to file its 10-K report with the Securities and Exchange Commission within the 15-day extension because of the continued work of its internal investigating committee, putting it in default on its senior secured credit facility.

As a result, lenders have informed the company that it will now be barred from making any borrowings under its $100 million revolver.

Furthermore, lenders have the right to block the Wilmington, Del., pharmaceutical company from making a scheduled $9.6 million interest payment on the 11% notes that is due on April 1. aaiPharma said that it is working with its lenders to develop a plan that would allow the interest payment to be made by April 30.

The investigation, which was announced on March 1, holding up the filing is in regards to the "unusual sales" in two product lines - the pain-killer Darvocet and Brethine, an asthma drug - during the second half of 2003.

In reaction to this news, Standard & Poor's downgraded the company's ratings including its senior secured debt rating to CCC+ from BB- and its subordinated debt rating to CC from B-. The ratings remain on CreditWatch, with negative implications, where they were originally placed on March 19, 2003.

S&P said it has significant concerns regarding the company's short-term liquidity, especially given the $9.6 million interest payment. As of Dec. 31, 2003, the company had only roughly $9 million of cash on hand, and cash flows from operations have likely been minimal in 2004, given the lowered sales prospects of aaiPharma's product portfolio, the rating agency said.

"In the wake of the loss of access to its $100 million revolver under its senior secured credit facility, aaiPharma is currently negotiating for a new short-term credit facility. AaiPharma also plans to close the sale of its M.V.I./Aquasol product to Mayne Group Ltd. for roughly $100 million by June 2004. A timely sale is essential, as aaiPharma faces a $31 million product rights payment in August 2004," the rating agency added.

VWR reworked

VWR International's credit facility (B1) underwent some changes recently that included upsizing both the revolver and the euro term loan and reverse flexing both the U.S. and the euro term loan, according to a market source.

The facility now consists of a $150 million five-year multi-currency revolver, upsized from $125 million, with an interest rate of Libor plus 250 basis points, a $415 million seven-year term loan with an interest rate of Libor plus 250 basis points, reverse flexed from Libor plus 275 basis points, and a €175 million seven-year term loan, upsized from €150 million, with an interest rate of Libor plus 275 basis points, reverse flexed from Libor plus 300 basis points, according to the source.

Furthermore, the U.S. term loan B now contains a stepdown in pricing to Libor plus 225 basis points if leverage falls below 5x, the source added.

The institutional term loan was already expected by some to reverse flex due to the incredibly warm investor reception that the deal received resulting in the tranche's oversubscription.

Deutsche Bank and Citigroup are the lead banks on the deal.

Proceeds will be used to support the acquisition of VWR by Clayton, Dubilier & Rice Inc. from Merck KGaA for $1.65 billion. The transaction is subject to normal regulatory approvals and is expected to close by April.

The credit facility was upsized to compensate for a reduction in the equity contribution that will be used to support the buyout as well, the source explained.

VWR is a West Chester, Pa., distributor of laboratory supplies to the industrial, pharmaceutical, educational and government markets.

ATP closes

ATP Oil & Gas Corp. closed on its new $185 million senior secured term loans consisting of a $150 million five-year term loan B with an initial interest rate of 10.5% and a $35 million five-year second lien term loan with an initial interest rate of 12%. After six months, the interest rate on the $150 million loan increases 1%, according to a company news release.

Originally, the deal was launched as a $175 million five-year term loan B with an interest rate of Libor plus 850 basis points.

Credit Suisse First Boston was the sole lead arranger on the deal.

Security for the deal is substantially all of the company's oil and gas assets.

This new facility replaced a $125 million senior revolver that was set to mature in 2007 with substantially the same collateral base.

The $185 million term facility, net of fees and expenses, has improved the company's liquidity and working capital position by about $56 million, allowing it to execute its 2004 capital program, the release said. This program includes the development of proved undeveloped reserves on nine properties, three of which have already been brought to production in the first quarter of 2004. In addition, the long-term nature of the facility combined with the new liquidity will allow ATP to focus on its next major project, Mississippi Canyon 711 with gross proved reserves over 100 Bcfe.

"The new term facility provides the financial resources to perform all of the development operations that ATP has planned for 2004 as well as launch our pre-development activities for our 2005 - 2007 development program. This term facility also represents an important change in the company's debt structure, as borrowings and scheduled amortization were set at closing and will not be subject to the periodic redeterminations associated with traditional revolving credit facilities," said T. Paul Bulmahn, chairman and president, in the company release.

ATP is a Houston natural gas and oil company.

Hillman closes

Code Hennessy & Simmons LLC completed its acquisition of The Hillman Cos. Inc. on Wednesday for a total transaction value of $510 million, including the repayment of outstanding debt and adding the value of the company's outstanding trust preferred shares, according to a company news release.

In connection with the buyout Hillman got a new $257.5 million credit facility (B2/B) consisting of a $40 million revolver with an interest rate of Libor plus 300 basis points and a $217.5 million term loan B with an interest rate Libor plus 325 basis points.

Merrill Lynch and JPMorgan were the lead banks on the deal.

Hillman is a Cincinnati manufacturer of key-making equipment and distributor of key blanks, fasteners, signage, and other small hardware components.

Kansas City Southern closes

Kansas City Southern closed on a new $250 million credit facility (Ba3/BB+) consisting of a new $100 million revolver due March 30, 2007 with an interest rate of Libor plus 225 basis points and a $150 million term loan B due March 30, 2008 with an interest rate of Libor plus 200 basis points, according to a company news release.

Morgan Stanley and Scotia were the lead banks on the deal.

Proceeds from the term loan B will be used to refinance the company's existing credit facility, pay transaction costs and for general corporate purposes. The revolver is undrawn.

Kansas City Southern is a Kansas City, Mo., holding company with principal operations in rail transportation.

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