Citgo loan's collateral draws investors; El Paso rallies again; International Transmission breaks

By Sara Rosenberg

New York, Feb. 25 - Citgo Petroleum Corp.'s $200 million three-year term loan, which launched on Tuesday morning, found favor in the eyes of some investors due to the collateral package. Meanwhile, in the secondary, El Paso Corp. continued to head north, this time on news of a new credit facility and International Transmission Co. broke for trading.

Citgo's term loan has an interest rate of Libor plus 500 basis points and a Libor floor of 3%, market sources said. Credit Suisse First Boston is the lead bank on the deal.

"It's a reasonable loan," the fund manager told Prospect News. "The collateral package is what makes this appealing - Citgo's interest in two pipelines."

Credit Suisse First Boston is hoping to close syndication of the loan on Wednesday, according to the fund manager. Calls to the syndicate were not immediately returned and the Tulsa, Okla. petroleum company declined to comment on the deal.

In the secondary market, El Paso Corp.'s bank paper continued its rally on Tuesday, this time spurred on by news of a new $1 billion term loan that will be used to retire Trinity River debt, according to a trader. The paper was quoted with a 92 bid and a 94 offer, compared to previous quotes of a 91 bid and a 93 offer, the trader said.

On Monday, bank debt levels for the Houston provider of natural gas services moved up a few points on news that the company was selling some of its gas reserve assets to Chesapeake Energy Corp. for $500 million.

International Transmission Co. allocated and broke for trading in the secondary with the operating company loan quoted at par 3/8 and the holding company loan quoted at 99 7/8, "well above their stated fees", according to a syndicate source.

The operating company's loan consists of a $185 million six-year term loan B with an interest rate of Libor plus 250 basis points and an upfront fee of 1/8, and a $15 million three-year revolver with an interest rate of Libor plus 250 basis points.

The holding company's loan consists of a $240 million six-year term loan B (upsized from $120 million) with an interest rate of Libor plus 375 basis points and an upfront fee of 50 basis points.

The loan is expected to close and be funded on Friday, the syndicate source added.

CIBC is the lead bank on the deal. Union Bank of California and SocGen are co-syndication agents.

Proceeds will be used to help fund the acquisition of International Transmission by affiliates of Kohlberg Kravis Roberts & Co. and Trimaran Capital Partners LLC.

International Transmission is the Detroit-based transmission business subsidiary of DTE Energy.

Fleming Companies Inc.'s bank debt was said to "hang in there" at the 97/99 range despite news that the previously reported Securities and Exchange Commission investigation into business practices has now become a more informal investigation, according to a fund manager.

"It's the same stuff that has been going on," the fund manager added.

Fleming is a Lewisville, Tex. wholesale distributor of consumable goods, and also operates price impact supermarkets.

Following up on some deals, Isle of Capri Black Hawk LLC's $135 million add-on, which launched on Feb. 5, is moving along smoothly now that the Penn National Gaming Inc. credit facility has cleared the market. The $105 million term loan C due 2006 with an interest rate of Libor plus 400 basis points is done, according to a syndicate source. The $30 million add-on to the revolver due 2005 with an interest rate of Libor plus 325 to 400 basis points, depending on leverage, is half subscribed.

"There are 15 investors in hand," the syndicate source said. "And, we don't have any of the relationship banks in yet, but they absolutely will come in."

CIBC is the administrative agent on the deal.

Proceeds from the Black Hawk term loan C will be used to help fund the purchase of Colorado Central Station Casino and Colorado Grande Casino from International Game Technology, Inc. The transaction is expected to be completed some time in April.

Isle of Capri Black Hawk is a Colorado hotel casino that is jointly owned by Isle of Capri Casinos and Nevada Gold & Casinos.

Dole Food Co. Inc. hosted a call on Tuesday to discuss the structure of the $1.15 billion credit facility that launched last week to managing agents.

"I think they were just getting questions about the way the loan was set up," a fund manager explained. "U.S. and foreign borrowers. Foreign assets. It's a unique situation. People aren't used to investing in a structure like that. The call was to get people more familiar with the information [and] to clarify all the issues."

A Bermuda-based subsidiary of Dole will be the borrower of the $600 million 51/2-year term loan B with an interest rate of Libor plus 375 basis points. A U.S. subsidiary will be the borrower of the $250 million five-year term loan A with an interest rate of Libor plus 325 basis points, according to the fund manager.

The loan also contains a $300 million five-year revolver (in dollars and euros) with an interest rate of Libor plus 325 basis points.

"It's still going smoothly," the fund manager said regarding the syndication of the large loan. "People aren't that familiar with all the laws and how they impact the loan. I'm pretty confident it's a pretty decent structure. It sounds like they have all the bases covered."

Deutsche Bank, Scotia Capital and Bank of America are the lead banks on the deal.

Proceeds from the facility will be used to help fund the buyout of Dole by DHM Acquisition Co., which is wholly owned by David H. Murdock.

Dole is a Westlake Village, Calif. producer and marketer of fresh fruit, vegetables and flowers.

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