Aurora Foods bank debt trades higher as investors expect paydown and new notes

By Sara Rosenberg

New York, July 2 - Aurora Foods Inc.'s bank debt moved a couple of points in an otherwise quiet market on Wednesday after the company released details on its restructuring plan. The paper was quoted at 97 bid, 98 offered by the end of the day and traded as high as 98 ½ during market hours, according to a trader.

On Tuesday the bank debt was quoted in the low 90s.

The company announced that it plans on filing a pre-negotiated bankruptcy reorganization case in order to facilitate a restructuring plan and that discussions with bank lenders and bondholders have begun regarding the terms of the comprehensive financial restructuring designed to reduce outstanding indebtedness, strengthen the balance sheet and improve liquidity.

"This is being viewed as positive news. People are expecting to get paid down at par and to get new notes," the trader said.

Under the restructuring plan, existing bank lenders will be paid in full, receiving about $458 million in cash and approximately $197 million in new senior unsecured ten-year notes. Approximately $441 million of new bank financing is expected to be obtained in connection with the restructuring, including a $50 million revolver.

J.W. Childs Associates, L.P., a Boston-based private equity investment firm, will purchase a 65.6% equity stake in the restructured company for $200 million and the company's existing $400 million in subordinated debt will be converted into a combination of equity and cash. The investment will be used to reduce the Aurora's outstanding bank debt and subordinated debt as well as for working capital purposes.

Holders of the 12% senior unsecured notes due 2006 will receive new ten-year senior unsecured notes in the principal amount of approximately $29 million.

Holders of the outstanding 8.75% and 9.875% senior subordinated notes due 2008 and 2007, respectively, will receive a 50% recovery on their notes consisting of cash in the aggregate amount of approximately $110 million and approximately 29.5% of the post-restructuring common stock.

In connection with the restructuring, the company has opted to defer the $8.8 million interest payment due July 1, 2003 on its outstanding 8.75% senior subordinated notes. Under the indenture for the notes, there is a 30-day grace period for interest payments. The company's bank lenders have agreed not to exercise any remedies available to them during the grace period.

Aurora Foods is a St. Louis producer and marketer of leading food brands.

In primary news, Merisant Co.'s credit facility has undergone a number of changes throughout the syndication process including modifications in the size and pricing of various tranches.

The credit facility is now sized at $310 million (Ba3/BB-), consisting of a $35 million 51/2-year revolver with an interest rate of Libor plus 275 basis points and a commitment fee of 50 basis points, a €50 million 51/2-year term loan A with an interest rate of Libor plus 275 basis points and a $225 million 61/2-year term loan B with an interest rate of Libor plus 275 basis points.

Originally, the facility was sized at $320 million and consisted of a $40 million 51/2-year revolver with an interest rate of Libor plus 300 basis points, a €40 million 51/2-year term loan A with an interest rate of Libor plus 300 basis points and a $240 million 61/2-year term loan B with an interest rate of Libor plus 325 basis points.

At the end of last week, the company opted to upsize its senior subordinated notes offering to $225 million from $200 million.

Proceeds from the credit facility will be used to help fund the Chicago tabletop sweetener company's recapitalization plan.

Credit Suisse First Boston is the lead arranger and administrative agent, Wachovia is the syndication agent, and Bank One and Fortis are co-documentation agents.

Educate Inc. closed on a new $130 million credit facility (B1/B+) in conjunction with the completion of the acquisition of Sylan Learning Systems Inc.'s K-12 businesses with funding from Apollo Management, L.P.

The facility consists of a $20 million five-year revolver with an interest rate of Libor plus 375 basis points and a $110 million 5 1/2-year term loan with an interest rate of Libor plus 425 basis points.

JPMorgan was the lead bank on the deal.

"The investment in Educate, Inc. exemplifies our philosophy of investing in companies with skilled management teams, highly respected products and services, strong brands and leading market share. Sylvan has an extraordinary track record of serving families. We are excited about working with the talented Educate management team as the company continues its legacy of industry innovation and leadership," said Larry Berg, a senior partner of Apollo Management, L.P., in a news release.

Educate, formed by Apollo Management LP, is based in Baltimore.

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