DaVita breaks at par plus levels; Dynegy and Loral up on proposed debt repayments

By Sara Rosenberg

New York, July 15 - DaVita Inc.'s new $1.1 billion credit facility broke for trading in the secondary bank loan market on Tuesday, according to market sources, with the institutional term loan quoted at par plus by the end of the day.

In other secondary news, Dynegy Inc. and Loral Space & Communications Ltd.'s bank debt were higher as investors anticipated pay downs, and Charter Communications Inc. was slightly off, probably in response to the bonds dipping slightly, according to sources.

DaVita's institutional tranche was said to be trading around par ¼ throughout the day, according to one trader, who added that the loan did not trade very actively, which is not really a surprise given that it was basically existing lenders that committed to the new deal.

However, according to a second trader, the B loan traded a little higher than par 1/4, but he declined to reveal exact levels.

DaVita's new credit facility consists of a $115 million four-year revolver with an interest rate of Libor plus 225 basis points and a 50 bps commitment fee, a $144 million four-year term loan A with an interest rate of Libor plus 225 basis points and an $842 million six-year term loan C with an interest rate of Libor plus 250 basis points.

Credit Suisse First Boston is the lead bank on the Torrance, Calif. dialysis services company's loan, which is being used to refinance existing debt.

In March 2002, DaVita closed on a new $1.115 billion senior secured credit facility consisting of a $150 million term loan A, a $115 million revolver and an $850 million term loan B. The term loan A and the revolver bear interest at Libor plus 150 to 275 basis points, depending on the company's leverage ratio. At March 31, 2003, $143.662 million of the term loan A remained outstanding and the margin was Libor plus 225 basis points, according to a filing with the Securities and Exchange Commission. The term loan B bears interest at Libor plus 300 basis points

Dynegy's bank debt was higher on news of a possible debt repayment with the pro rata quoted at 97¾ bid, 99½ offered, according to a trader. Last week, the pro rata was quoted at 97½ bid, 98½ offered.

On Tuesday, the Houston energy company announced plans to repay bank debt, purchase all outstanding notes due 2005 and 2006 and repay amounts outstanding under the secured financing tied to its Midwest generation assets with proceeds from a proposed notes offering, convertible offering and a stock exchange with ChevronTexaco for new securities and cash.

In conjunction with the refinancing and restructuring transactions, Dynegy is seeking an amendment to its credit facility to, among other things, permit the proposed capital markets transactions, the tender offer and consent solicitation and the Series B preferred stock restructuring, according to a news release.

It is anticipated that the amendment will carry a provision requiring that a minimum amount of proceeds are raised through the proposed capital markets transactions before any proceeds may be used to make the $225 million cash payment contemplated by the Series B preferred stock restructuring transaction.

Loral Space & Communications Ltd.'s bank debt traded in the mid-to-high 90's following the company's announcement that the company and some of its subsidiaries filed for Chapter 11, and that a definitive agreement has been reached to sell its six North American telecommunications satellites to Intelsat, Ltd. for up to $1.1 billion in cash.

Most of the proceeds from the sale of the North American satellites will be used to repay all $959 million of Loral's outstanding secured bank debt. The transaction is expected to close within four to six months, pending Bankruptcy Court and regulatory approval, according to a news release.

"[The bank debt] last traded months ago and that was in the 80's," a trader said, adding that the upward momentum is due to the expectation of a complete pay down.

"Loral's principal challenge has been to overcome the effects of the prolonged economic downturn that led to the lack of satellite manufacturing orders across the industry and a slowdown in growth of fixed satellite services (FSS). We have concluded that a sale of the North American satellites, coupled with a Chapter 11 reorganization, represents the best way to resolve the financial difficulties that have resulted from the downturn. We will be able to use the substantial cash proceeds generated by this transaction to reduce our secured debt, while allowing Loral to reorganize around its remaining satellite fleet and satellite manufacturing business," said Bernard L. Schwartz, chairman and chief executive officer, in the release.

The New York satellite communications company has opted not to obtain third-party debtor-in-possession financing at this time due to the belief is that cash on hand and cash flow from operations will be adequate to fund normal operations and customer support.

Charter Communications' bank debt experienced "a little bit of a sell off" on Tuesday, according to a trader, with the term loan B trading around 951/2. "It's marginally down. It was 951/2, 96¼ yesterday. The downgrades took a little steam out of the bonds, which probably took a little steam out of the bank debt today," the trader added.

On Thursday, Standard & Poor's downgraded Charter Communications Inc.'s corporate credit rating to CC from CCC+ and convertibles bonds to C from CCC-. The ratings remain on CreditWatch negative.

S&P left unchanged Charter Communications Holdings LLC's senior unsecured debt at CCC-, CC VI Operating Co. LLC's senior secured debt at CCC+, CC VIII Operating LLC's senior secured debt at B-, Charter Communications Operating LLC's senior secured debt at B, Renaissance Media Capital Corp.'s senior unsecured debt at CCC- and Avalon Cable Holdings LLC's senior unsecured debt at CCC- and continued the CreditWatch negative.

The St. Louis cable company's bank paper moved to the 95½ bid, 96¼ offered level last Friday as it jumped up by about a point in response to the company's announcement that it will attempt to access the capital markets to sell approximately $1.7 billion principal amount of new senior notes.

Proceeds will be used to repay up to approximately $500 million of indebtedness under one or more of the company's subsidiaries' credit facilities and to fund the cash tender offers for a portion of the company's convertible senior notes and a portion of Charter Communications Holdings, LLC's senior notes and senior discount notes. The tender offers are intended to reduce Charter's consolidated debt and extend the maturities of its outstanding indebtedness.

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