Dollar General launches loan; Pride International, Trinity Industries refinancings in market

By Sara Rosenberg

New York, May 2 - In primary activity, Dollar General Corp.'s bank meeting was set to be a success. More than half the deal was done before the bank meeting even started, according to a syndicate source. With the supply/demand ratio working favorably for companies, "second-tier" deals like Pride International Inc. and Trinity Industries Inc. are currently in the market as well, according to a market researcher.

Dollar General launched a $450 million credit facility via SunTrust Thursday. The Goodlettsville, Tenn. discount retailer of general merchandise's loan consists of a $350 million three-year revolver with a current facility fee of 37.5 basis points and a $150 million 364-day tranche with a current facility fee of 32.5 basis points. There is an all-in draw rate of Libor plus 237.5 basis points and interest rates are established through a pricing grid based on credit ratings. Proceeds will be used to refinance existing debt.

"I think about $300 million was done before the meeting," the syndicate source said. "It's a non-issue in this market."

Information about how the bank meeting went could not be obtained.

Pride International Inc. has received commitments for new bank facilities totaling $450 million. The new loan, which is expected to be completed by the end of May, will consist of a $200 million five-year term and a $250 million three-year revolver with options of two one-year extensions, said Earl McNiel, vice president and chief financial officer.

Credit Lyonnais is the lead bank on the deal, according to market sources. A fee of 50 basis points is being charged for commitments of $20 million and a fee of 35 basis points is being charged for commitments of $10 million, the source said.

Proceeds from the new loan will be used to refinance existing senior indebtedness. The new revolver will replace the Houston, Tex. drilling contractor's existing $150 million domestic revolver and enhance the company's liquidity, according to McNiel.

Pride is considered to be a second-tier deal due its operations in Argentina, according to the researcher.

The company reported net earnings of $109,000 on revenues of $282.876 million for the first quarter 2002. These results included a net extraordinary loss of $454,000. Excluding the extraordinary loss, net earnings were $563,000, compared to net earnings of $35.921 million on revenues of $355.228 million for the same quarter last year.

"The Company has experienced particularly weak conditions in the Gulf of Mexico jackup market as high natural gas inventory storage levels have resulted in reduced demand for rig services," a company press release said. "Average utilization of the Company's Gulf of Mexico jackup fleet during the first quarter of 2002 decreased to 34% from 99% during the first quarter of 2001, and from 43% during the fourth quarter of 2001. Average day rates during the first quarter of 2001 decreased to $26,100 from $39,500 during the prior year first quarter and $28,600 during the fourth quarter of 2001. Additionally, results for the Company's international land operations declined from the fourth quarter 2001 to the first quarter 2002, driven by reduced activity, particularly in Argentina and Venezuela."

Trinity Industries Inc. is said to be in the market with a $400 million refinancing credit facility via JPMorgan Chase, according to market sources. The Dallas, Tex. diversified industrial company's deal is said to consist of a $250 million five-year revolver with an interest rate of Libor plus 175 basis points and a $150 million seven-year term loan B with an interest rate of Libor plus 275 basis points. Both the syndicate and the company were not immediately available to confirm this information.

The company is involved in a "negative trend", the researcher said. Possible problems for the company include continued worsening of the railcar market, declines in other businesses and the potential need to invest in additions to the railcar lease fleet.

Bids on Xerox Corp. were slightly lower Thursday in the secondary bank loan market, with the lowest reported bid being 92, according to a trader. However, the paper didn't experience much trading activity because holders believe the bid should be around 94 to 95.

"Guys are just trying to talk it down based on the rating news," the trader said.

Moody's Investors Service downgraded Xerox late Wednesday, affecting $9 billion of debt. Ratings lowered include Xerox's senior unsecured debt, cut to B1 from Ba1, subordinated debt, cut to B3 from Ba2, and preferred stock, cut to Caa1 from Ba3. The outlook is negative.

Moody's said the downgrade reflects its concern about the level of free cash flow that Xerox's core non-finance business generates relative to the company's debt level, the large debt maturities over the next few years, its dependence on capital market access to refinance debt obligations and the need for continued cost reductions in the face of modest revenue growth prospects.

"Xerox is just a mess," a market researcher said. "I was surprised it took so long to hit the equity market. Given what happened to Nortel (with the draw down of its $1.75 billion revolver and then a last-minute agreement on amending and restating), how could they think it will be any different with their 57 lenders? I'm very skeptical that they'll meet their June 30 deadline."

Xerox is currently in negotiations with its lenders on the refinancing of its $7 billion revolver, which is due October 2002.

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