Wyndham up on asset sales; Xerox dips on investigation; Centennial strengthens

By Sara Rosenberg

New York, Sept. 24 - Wyndham International Inc.'s bank debt moved around quite a bit after the company announced its latest asset sales and finally settled approximately two points higher than previous quotes towards the end of the day. Xerox Corp., on the other hand, dropped by about two points as news of a U.S. attorney investigation surfaced. Lastly, Centennial Communications Corp. was up about a point, leaving traders optimistic that Sprint PCS Group's reduction in third quarter estimates would not affect the wireless sector as a whole.

On Tuesday, Wyndham announced a definitive agreement with Westbrook Hotel Partners IV, LLC to sell 13 hotel properties for approximately $447 million. Bear, Stearns & Co. Inc. and J.P. Morgan Securities Inc. are serving as financial advisors to Wyndham on the transaction.

"Today's agreement provides hard evidence of Wyndham's ability to execute one of the key components of its strategic plan, which is to sell all non-strategic assets and use the proceeds to reduce our debt. As we accomplish this, we continue to grow the Wyndham brand through management and franchise agreements, and are pleased to add Westbrook/Sunstone to our growing list of franchisees," said Fred J. Kleisner, chairman and chief executive officer, in a news release.

The transaction is expected to close within the next three to four months at which time all net proceeds will be used to pay down debt.

"Proceeds work out to about a 10% pay-down across the board on the revolver, IRL and term loan B," a fund manager said. "This morning, I saw an 89 offering on the term loan B. The bid was 81. The bid side stayed grounded, while the offer got a little over enthused."

In the late afternoon, the IRL was quoted with a bid of 83½ and an offer of 851/2, up from a bid around 82 and an offer around 84. The term loan B was quoted with a bid of 82 and an offer of 84, compared to a previous bid around 80½ and offer around 821/2. Previous levels of Wyndham's bank debt "are just quotes", the fund manager warned. "There wasn't a lot of trading activity before the announcement so levels were not really solidified."

When asked if the revolver saw a jump as well, the fund manager replied: "The revolver rarely trades so I rarely hear it quoted."

All in all, the Dallas, Tex. hotel operator saw about a two-point improvement in the secondary, "which is where it should be," the fund manager stated. "If you bought bank debt yesterday for 81½ for 100 cents on the dollar and you get 10 cents back today, 79.4 becomes your new cost basis. So for the same credit today, your cost basis went down two points.

"Any further upside will be on hold until the market gets more information on the sale," the fund manager concluded.

The agreed upon asset sale is not going to affect Standard & Poor's ratings or outlook for Wyndham since the transaction gels with previous expectations and proceeds are minimal compared to billions of debt outstanding, the rating agency commented.

"The asset sale is in line with Standard & Poor's expectation that management at Wyndham would follow through with its strategy of divesting its non-proprietary assets and using proceeds to reduce debt," S&P said. "The size of the transaction is relatively small compared to the company's roughly $3.3 billion of debt outstanding at the end of June 2002 and is not expected to reduce leverage as measured by total debt to EBITDA."

Xerox Corp.'s bank debt, like Wyndham's, also basically saw a two-point change - but down rather than up. The revolver was quoted with a bid of 75 and an offer of 76, the term loan A was quoted with a bid of 83¼ and an offer of 84¼ and the term loan B was quoted with a bid around 95 and an offer around 96, a trader of distressed names said.

"We were fairly active in it," the trader said. "It was down about two points on the investigation and the market just sucks today, with stocks being down."

The Stamford, Conn. document company announced on Monday night that the U.S. attorney's office is conducting an investigation into past accounting issues, which had been previously reviewed by the Securities and Exchange Commission. Xerox had settled with the SEC by paying a $10 million fine, restating its financial results for the years 1997 through 2000 and adjusted its previously announced 2001 results.

Centennial Communications Corp. traded up about a point on Tuesday to a bid of 67 and an offer of 68, the trader said, adding the most important thing that can be taken from the Wall, N.J. telecommunications company's performance and the performance of cellular names in general is that Sprint PCS Group's latest news seems to have had little effect on the sector.

On Monday, Sprint Corp. announced that a modest net loss of wireless customers is expected in the third quarter due to the deactivation of Clear Pay customers who failed to pay for services. In reaction to this announcement, analysts cut third quarter expectations for the Kansas City, Mo. wireless network.

"You would have thought that after the Sprint news wireless would have been off," the trader said. "But, it wasn't. It seems like it was contained to Sprint."

In primary activity, Centerpulse Ltd. launched its new $635 million credit facility, which is split between euros and dollars, according to a syndicate source. The loan consists of a $300 million two-year term loan A with an interest rate of Libor plus 275 basis points and a $335 million five-year term loan B with an interest rate of Libor plus 350 basis points.

"The bank meeting was well attended," the syndicate source told Prospect News. "There seems to be a lot of interest. It's a little early to tell though."

UBS Warburg is the lead bank on the deal.

Proceeds are being used to fund a trust for legal settlements.

Centerpulse is a Switzerland-based developer, producer and distributor of medical implants and biological materials for cardiovascular and orthopedic markets.

Also launched on Tuesday was FMC Corp.'s $550 million credit facility (BBB-), which consists of a $250 million three-year revolver with an interest rate of Libor plus 262.5 basis points and a $300 million five-year term loan B with an interest rate of Libor plus 325 basis points, market sources said.

When asked about the deal, one sell-side source admitted that he hadn't heard much feedback. "Theoretically though, they should be able to raise some incremental debt," he added.

Citigroup and Bank of America are the lead banks on the Philadelphia, Pa. diversified chemical company's credit facility.

Proceeds will be used to refinance existing debt.

Meanwhile, the lead bank is "looking to wrap up syndication" on Nellson Neutraceutical Inc.'s recently launched $145 million credit facility, a syndicate source said. The loan consists of a $15 million five-year revolver with an interest rate of Libor plus 425 basis points and a $130 million seven-year tern loan B with an interest rate of Libor plus 425 basis points.

"It's a nice little deal," the syndicate source concluded.

UBS Warburg is the lead arranger and the bookrunner on the loan.

Proceeds will be used to help fund the Irwindale, Calif. functional bar and powder company's leveraged buyout by Fremont Partners.

In other news, Veridian Corp. closed on its new credit facility (Ba3/BB-) on Tuesday, according to a syndicate source. After a few adjustments to the size of both the term loan and the revolver, the facility has been finalized at a size of $360 million. The loan consists of a $90 million 4.75-year revolver with an interest rate of Libor plus 300 basis points and a $270 million term loan B ($140 million was an add-on done through this syndication process) with an interest rate of Libor plus 350 basis points.

"Veridian went really well," a fund manager previously told Prospect News. "They basically added $140 million to the existing facility. It was supposed to be $160 million but they lowered it because there was extra cash on hand for the acquisition. I heard that they had $250 million in orders."

Wachovia is the lead bank on the deal.

The new facility will be used to refinance the company's existing $200 million senior secured loan as part of the acquisition of Signal Corp.

Veridian is an Arlington, Va. information technology and information security products provider.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.