Kodak weakens on downgrade; Abengoa overhauls loan; BCBG, J Crew pricing picture clears

By Sara Rosenberg

New York, Oct. 20 - Eastman Kodak Co.'s new term loan traded down on Thursday after Standard & Poor's downgraded the debt for a second time within the past couple of weeks.

In primary doings, Abengoa Bioenergy of Ravenna (Nordic Biofuels of Ravenna LLC) reworked its credit facility, adding a second-lien tranche and reducing the size of the first-lien tranche while increasing pricing.

Also, BCBG Max Azria Group's term loan pricing has been narrowed as some are now anticipating the deal to come in the mid-range of talk based on the recent better-than expected ratings announcements.

And, J. Crew Group Inc. has basically dropped the high end of its price talk range as the deal is massively oversubscribed.

Kodak's $1.5 billion in seven-year term loan debt felt softer as S&P cut the company's credit facility rating to B+ from BB-, while leaving the outlook at negative.

The term loan was quoted at 99½ bid, 99 7/8 offered late in Thursday's session, down from Wednesday's levels of par bid, par 3/8 offered, according to one trader, while a second trader had the paper quoted at 99 7/8 bid, par 1/8 offered by evening.

The term loan was seen all over the place with bids quoted as low as 99 3/8 and then moving up to 99¾ following the downgrade news, a fund manager chimed in.

"Right now it's hovering around par," the fund manager said late in the day. "Everyone is all over the place just trying to create buying opportunities."

Meanwhile, the $1.2 billion five-year revolver was quoted at 94 bid, 96 offered, unchanged on the day, according to one of the traders.

The revolver traded below 94½ during market hours, disappointing given that the bank debt only broke for trading around a week ago at 991/2, another trader added.

S&P said that this latest downgrade is a result of reduced confidence with Kodak's profitability and cash flow prospects because of ongoing and rapid deterioration of its traditional consumer imaging business, the unproven profit potential of its emerging digital imaging businesses, high cash restructuring costs and economic uncertainty.

S&P went on to say that these factors create concern about the company's ability to maintain an adequate margin of compliance with the bank leverage covenant that tightens rapidly throughout 2006.

This is the second rating downgrade that the facility has undergone. At the end of September, S&P had cut the loan rating by one notch to BB- from BB, citing essentially the same profitability and cash flow concerns.

Following the initial rating downgrade, pricing on Kodak's term loan debt - which is comprised of $1 billion that was funded at close and $500 million that is delayed draw - had stepped up to Libor plus 225 basis points as opposed to original price talk of Libor plus 175 basis points based on the original pricing grid that had been part of the deal since launch.

Also, pricing on the revolver stepped up to Libor plus 200 basis points from original price talk of Libor plus 150 basis points based on the pricing grid as well.

Kodak is a Rochester, N.Y.-based digital imaging products, services and solutions company.

Calpine down on bankruptcy fears

Calpine Corp.'s second-lien term loan was off by about a point on the day as bankruptcy fears continue to weigh on the market and sector weakness as a whole was present, according to a trader.

The bank debt was quoted at 76 bid, 78 offered, compared to levels of 77 bid, 79 offered at the close of business Wednesday, the trader said.

The word bankruptcy has been thrown around lately as news surfaced that the San Jose, Calif., energy company is working with the Kirkland & Ellis law firm.

However, the company has been trying to dispel some of the fears, saying earlier this week that Kirkland & Ellis is being used in the legal battle with noteholder trustees Bank of New York Co. Inc. and Wilmington Trust, rather than for preparations to head off to bankruptcy court.

Abengoa reworks deal

Abengoa Bioenergy of Ravenna (Nordic Biofuels of Ravenna LLC) completely revamped its in-market credit facility Thursday afternoon as the first-lien term loan was reduced in size but increased in pricing, and a second-lien tranche made its way into the credit structure.

The first-lien term loan B (B2/B) was cut back to $80 million from an original size of $120 million, tenor was decreased to 7½ years from eight years and pricing was flexed up to Libor plus 425 basis points from original price talk of Libor plus 325 to 350 basis points, according to a syndicate document.

Meanwhile, an eight-year second-lien term loan in the size of $42 million was added to the deal - increasing the overall credit facility size to $122 million from $120 million, the document said.

Pricing on the second-lien term loan is set at Libor plus 750 basis points.

Credit Suisse First Boston is the lead bank on the deal that will be used to build a greenfield ethanol plant in Ravenna, Neb.

BCBG pricing helped by ratings

BCBG's $200 million six-year term loan B is expected by some investors to firm up at Libor plus 325 basis points, right in the mid-point of the original Libor plus 300 to 350 basis points talk, as ratings came in a little better than expected at B1/B+.

"Basically I was told not to expect it at 350 [basis points]," a buyside source said. "It's going to be 325. I don't think it will happen at 300."

The $300 million credit facility also contains a $100 million five-year asset-based revolver (Ba3/BB).

Goldman Sachs and Citigroup are the lead banks on the deal, with Goldman the left lead on the term loan and Citi the left lead on the revolver

Security for revolver borrowings is a first lien on accounts receivables and inventory.

Security for term loan borrowings is a first lien on capital stock and property, plant and equipment and a second lien on accounts receivables and inventory.

Proceeds will be used by the Vernon, Calif., clothing company to refinance existing debt and for acquisition consideration.

J. Crew price talk shifts to low end

Price talk on J. Crew Group's $295 million oversubscribed seven-year term loan (Ba3/B+) has shifted to the lower end of original guidance as investors are now being told to expect the deal in the Libor plus 225 basis points area as opposed to anywhere from Libor plus 225 to 250 basis points, according to a market source.

The term loan has been really well received from day one as it was already fully circled plus some by the time the early October bank meeting took place. As of now, the tranche is said to have well over $1 billion in orders.

Goldman Sachs and Bear Stearns are the lead banks on the deal, with Goldman the left lead.

New York-based apparel and accessories retailer, J. Crew, is getting the new term loan in connection with its initial public offering of common stock. Its existing $170 million asset-based revolver will remain in place as is.

Proceeds from the term loan, along with proceeds from the IPO, will be used to redeem all $92.8 million 14½% cumulative preferred stock, all $32.5 million 14½% cumulative redeemable preferred stock, all $21.7 million 13 1/8% senior discount debentures due 2008 and all or a portion of the 9¾% senior subordinated notes due 2014.

Doane allocates downsized deal

Doane Pet Care Co. allocated its downsized $210 million credit facility (B1/BB-) on Thursday as pricing and loan structure firmed up over the past couple of sessions, according to a market source.

Recently, the syndicate had reverse flexed pricing on the term loans, increased the size of the U.S. term loan minimally and decreased the size of the revolver.

The $105 million U.S. term loan, up from $100 million, and the $55 million equivalent euro term loan were both reverse flexed to Libor plus 225 basis points from Libor plus 250 basis points, the source said.

Meanwhile, the revolver was downsized to $50 million from $65 million due to a lower need given that some existing debt is staying in place, the source added. Pricing on the revolver, however, remained unchanged at Libor plus 250 basis points.

Lehman is the lead bank on the deal that will be used to help fund Teachers' Private Capital's leveraged buyout of the company. The deal is expected to close on Monday.

Under the acquisition agreement, Teacher's Private Capital will purchase Doane for total cash consideration of $840 million from JPMorgan Partners, Bruckman, Rosser, Sherrill & Co., CapStreet Group LLC and DLJ Merchant Banking Partners LP.

As part of the transaction, Teachers' Private Capital and Doane plan to complete a recapitalization, under which the company will undergo a significant deleveraging. As a result of the substantial equity investment being made by Teachers' Private Capital, proceeds from the transaction will allow Doane to retire all of its outstanding preferred stock and reduce the amount of funded debt on its balance sheet.

Doane is a Brentwood, Tenn.-based manufacturer of private label pet food.

Alpha readies allocations

Alpha Natural Resources Inc. plans on allocating its $500 million credit facility (B2/BB-) next week now that term loan pricing has firmed up at lower-than-originally expected levels and a step down was added to the deal, according to a market source.

The $250 million seven-year term loan was recently reverse flexed to Libor plus 175 basis points from Libor plus 200 basis points and a step down to Libor plus 150 basis points at total net leverage of 1x was added to the tranche, the source explained.

Pricing on the $250 million five-year revolver was left unchanged at Libor plus 200 basis points, the source added.

Citigroup and UBS are joint bookrunners on the deal, with Citi the left lead.

Proceeds will be used to help fund the acquisition of coal reserves and operations affiliated with the privately held Nicewonder coal group in southern West Virginia and southwestern Virginia for a total purchase price of $316.2 million and to refinance the company's existing $175 million revolver.

Under the purchase agreement, Alpha subsidiaries will issue Nicewonder affiliates $60 million of Alpha common stock and pay $256.2 million in cash and seller notes.

Closing is anticipated by late October, subject to the satisfaction of conditions outlined in the purchase agreements including the securing of financing and necessary regulatory approvals.

Alpha Natural Resources is an Abingdon, Va., Appalachian coal producer.

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