Secondary feels weaker on equity drop and lack of investor activity

By Sara Rosenberg

New York, July 19 - The secondary bank loan market was a bit heavy on Friday, according to market sources. Some contribute the slight weakening to the plunge in the stock market combined with the lack of investor activity due to it being a summer Friday.

Following the news that Johnson & Johnson, a New Brunswick, N.J. healthcare products company, is under investigation by the FDA, investor fears were once again sparked in a market already skittish. Equities tumbled with the Dow Jones Industrial Average closing at 8019.20, down 390.20, and the S&P 500 closing at 847.75, down 33.81. The secondary bank loan market was not immune to investors' negative feelings either.

"There was very little activity so it's hard to tell if everything is down," a trader said. "But the market does feel weaker on investor concern."

For example, Nextel Communications Inc., a Reston, Va. mobile communications provider, dipped to a bid of 81 and an offer of 82, compared to Thursday's bid of 82 and offer of 83, the trader said. And, Tyco International Ltd., a Pembroke, Bermuda diversified manufacturing and service company, fell about a point or two on Friday with the 2006 bank loan paper trading around 80 and the 2003 loan trading around 90, the trader added.

Overall the market felt slightly lower, "but investors haven't been around on Fridays so that could have caused it," a market professional said. "A lot of activity wasn't anticipated."

In primary activity Friday, Pinnacle Entertainment Inc. launched a new $300 million credit facility. The Glendale, Calif. gaming company's loan consists of a $125 million four-year revolver with an interest rate of Libor plus 350 basis points, a $25 million four-year delayed draw term loan A with an interest rate of Libor plus 350 basis points, a $100 million four-year delayed draw term loan B with an interest rate of Libor plus 350 basis points and a $50 million four-year funded term loan B with an interest rate of Libor plus 350 basis points, according to market sources.

The revolver has an undrawn fee of 100 basis points, the delayed draw term loan A has an undrawn fee of 200 basis points and the delayed draw term loan B has an undrawn fee of 250 basis points, according to market sources.

Upfront fees are 12.5 basis points for the term loan B, 150 basis points for a commitment of $15 million of the revolver and 100 basis points for a commitment of $10 million of the revolver, according to market sources.

Bank of America and Bear Stearns are the lead banks on the deal.

As for Thursday's hectic primary in which seven deals launched, according to a market professional, "there was decent attendance given the number of meetings held. I think deal teams split themselves up to cover as many transactions as they could."

"There were a couple of meetings pushed up from last week and they just happened to land on the same day," the professional said in explanation of why so many deals launched on Thursday.

Greif Brothers Corp.'s new $500 million credit facility (Ba3/BB), which was launched Thursday, consists of a $250 million revolver with an interest rate of Libor plus 250 basis points and a $250 million term loan with an interest rate of Libor plus 250 basis points. There is a 25 basis point upfront fee for those who were already invested in the company's revolver, according to a syndicate source. New investors receive an upfront fee of 50 basis points.

"The deal went very well," the syndicate source said. "It was well received."

Proceeds are being used to repay existing debt. Salomon Smith Barney and Deutsche Bank are the lead banks on the deal.

Greif is a Delaware, Ohio manufacturer of industrial shipping containers, containerboard and corrugated products.

Horizon Natural Resources Co.'s new $250 million revolving exit financing facility with an interest rate of Libor plus 350 basis points "also went very well", according to a syndicate source. There is a 50 basis point upfront fee for a commitment of $15 million, an 87.5 basis point upfront fee for a commitment of $25 million and a 112.5 basis point upfront fee for a commitment of $35 million, the syndicate source said. Deutsche Bank is the sole lead arranger on the deal.

Horizon Natural Resources is an Ashland, Ky. producer of steam coal.

Constar International Inc.'s new $250 million credit facility consists of a $150 million seven-year term loan B with an interest rate of Libor plus 325 basis points and a $100 million five-year revolver with an interest rate of Libor plus 300 basis points, according to market sources Citibank is the lead bank on the deal.

Proceeds from the term loan will be used to repay outstanding debt. Constar's initial public offering, headed by Salomon Smith Barney, is dependant upon the successful completion of this credit facility and a $200 million senior subordinated note sale.

Constar is a Philadelphia-based producer of PET plastic containers for food and beverages.

NCI Building Systems Inc.'s, new $225 million senior secured credit facility via Bank of America and Wachovia consists of a $125 million six-year term loan B with an interest rate of Libor plus 275 basis points and a $100 million five-year revolver with an interest rate of Libor plus 250 basis points, a syndicate source said.

Proceeds, combined with proceeds from a $50 million note sale, will be used to refinance existing bank debt. The refinancing is expected to be completed in August, according to a company press release.

NCI is a Houston, Texas manufacturer of metal building products.

IASIS Healthcare Corp.'s refinancing $463 million credit facility consists of a $125 million five-year revolver with an interest rate of Libor plus 350 basis points and a $338 million six-year term B with an interest rate of Libor plus 350 basis points, market sources said. Bank of America and BNP Paribas are leading the deal.

IASIS is a Franklin, Tenn. acute care hospital company that is a portfolio company of Joseph Littlejohn & Levy.

Agrilink Foods Inc.'s new $470 million credit facility to support the leveraged buyout by Vestar Capital Partners, loan consists of a $200 million five-year revolver with an interest rate ranging between Libor plus 250 basis points and Libor plus 275 basis points and a $270 million seven-year term loan B with an interest rate of Libor plus 300 basis points, according to market sources. JPMorgan Chase, Bank of America and Bank of Montreal are the lead banks on the deal.

Agrilink is a Rochester, N.Y. manufacturer and marketer of frozen vegetables. The company is levered 3.5 times on a senior debt basis and 5.25 times on a total basis, according to the investment banker.

New World Pasta Co.'s new $230 million credit facility consists of a $200 million seven-year term loan B with an interest rate of Libor plus 325 basis points and a $30 million five-year revolver with an interest rate of Libor plus 325 basis points, according to a syndicate source. Morgan Stanley is the lead bank on the deal.

The Harrisburg, Pa. dry pasta maker is using proceeds to refinance existing debt including the repayment of a term C bridge loan that was provided by Joseph Littlejohn & Levy.

In other news, SPX Corp. pulled a refinancing deal earlier this week, according to market sources. "They were looking to bring pricing in by about 50 to 75 basis points," a market professional said. "But the high yield market hasn't been that friendly so things are a little more painful for the loan market. Basically, they didn't cut pricing but they extended the maturities and relaxed some covenants."

The company's $450 million term loan B was pushed out to 2009 and the $740 million term loan C was pushed out to 2010, the professional said.

SPX is a Muskegon, Mich. diversified manufacturing and service company.

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