With market technicals shifting slightly Associated Materials' launch contains no pre-commitment talk

By Sara Rosenberg

New York, Aug. 5 - The market atmosphere has changed recently as investors seem to have given up some "irrational ways" and are now, once again, starting to study a credit before committing to a deal, according to a fund manager. Fitting in to this new tone, there was really no discussion of pre-launch commitments at Associated Materials Inc.'s bank meeting on Tuesday afternoon, a big change from a few weeks ago when a deal was oversubscribed before it even hit the primary.

That's not to say that the deal is not a good one or will not syndicate successfully but with this new-found market skepticism, it may take a little longer to get done.

"It sounds like an okay deal," the fund manager said. "The company is buying Gentek, which basically does the same thing but has a bigger presence in Canada. So it should be a good fit.

"I think people are pickier though. They're not just lobbing in orders. People are actually doing work on it. Thinking about things before putting in an order," the fund manager added.

As to whether the deal will be a hit, "You couldn't gauge it from the call," the fund manager said. "They did their presentation. People asked some questions. But you couldn't really tell what people were thinking.

"I think we're pretty fully invested now. Not sure yet [if we're committing]," the fund manager concluded. "I'd like to see what the ratings are going to be."

The $260 million senior secured credit facility (Ba3) consists of a $70 million revolver due April 2007 and a $190 million seven-year term loan B. Pricing on the revolver will remain in line with existing pricing at Libor plus 300 basis points, while the term loan was launched at Libor plus 300 basis points, 50 basis points lower than the current pricing.

UBS Securities and Credit Suisse First Boston are the joint lead arrangers and CIBC is documentation agent on the deal.

Proceeds will be used to help fund the acquisition of Gentek Holdings Inc. and to repay all indebtedness of Gentek Holdings and its subsidiaries for an aggregate purchase price of approximately $118 million in cash, which includes an estimated working capital adjustment. Pro forma senior leverage for the acquisition will be 2.3 times and pro forma total leverage will be 4.2 times.

The proposed acquisition is expected to close by the end of this month and is subject to customary conditions including receipt of regulatory approvals and receipt of financing.

Associated Materials is a Cuyahoga Falls, Ohio manufacturer and nationwide distributor of exterior residential building products.

Meanwhile though, some are trying to take advantage of what is still considered to be a strong, albeit not as strong, primary market. For example, Dean Foods Co. held a conference call on Tuesday regarding amending and restating its credit facility, essentially to lower pricing by 25 to 50 basis points, depending on the tranche (see story on page one of this issue).

In order to make the $2.45 billion credit facility (Ba1/BB+) slightly more investor friendly, call protection at par ½ for the nine months was added.

Wachovia Securities and Bank One are the lead banks on the deal.

Dean Foods is a Houston processor and distributor of milk and other dairy products.

In the secondary, Wyndham International Inc.'s bank debt remained in essentially the same context as previous levels on Tuesday following the release of second quarter results that included a net loss of a little more than $90 million. The term loan B was quoted in the 84 area and the IRL was quoted in the 86 area, according to a trader.

For the quarter, EBITDA, as adjusted, was $76.1 million, consistent with the original guidance, before adjusting for assets sold, of $75 million to $80 million. On a pro forma basis, EBITDA, as adjusted, was $70 million compared to $84.8 million for the same quarter last year. The company reported a net loss of $91.5 million and a pro forma net loss of $27.8 million for the second quarter, versus a $41.4 million net loss and a $43.2 million pro forma net loss for the same period in 2002. After the effect of the Dallas hotel enterprise's preferred dividend, this resulted in a net loss of $0.77 per share on a fully diluted basis. The net loss on a pro forma basis was $0.39 per share. RevPar was $75.79, a decline of 5.4% versus the second quarter 2002.

"The operating strategy we put in place two years ago has continued to generate positive and consistent results for our company," stated Fred J. Kleisner, chairman and chief executive officer, in a news release. "Each quarter Wyndham has experienced progressive improvement in our market share, and for the third and fourth quarters 2003, we have implemented market-by-market plans focused on increasing our ADR as we continue to monitor change in the economy."

Liquidity was approximately $200 million at the end of the quarter. Before giving effect to the permanent revolver reduction associated with the amendment treatment of asset sales and refinancings, liquidity would be $256 million as compared to $273 million reported for the previous quarter. The reduction is due primarily to the payment of fees related to completing the credit facility amendment and the Lehman and Bear Stearns mortgage pool refinancings, which allowed Wyndham to push out all significant 2003 and 2004 loan maturities to 2006 and beyond.

Total debt at the end of the quarter was about $2.76 billion, comprised of revolver $168.7 million, IRL's $389.5 million, term loans $1.09 billion, and mortgage and other indebtedness $1.11 billion.

In follow-up news, Pegasus Satellite Communications Inc. closed on a new senior secured $100 million term loan. This facility amends and restates a loan facility established, but not closed, on April 2, with the same lenders. DBS Investors Agent Inc. is the administrative agent on the deal.

The term loan has a tenor of six years and an interest rate of 12.5% per annum with 6% payable in cash quarterly and 6.5% to be accrued and added to principal to be paid at loan maturity, according to a filing with the Securities and Exchange Commission.

Security is a second-priority security interest in the stock of Pegasus Media & Communications held by Pegasus Satellite Communications.

Proceeds are being used to redeem the 12.5% senior subordinated notes of Pegasus Media & Communications Inc. and to partially fund a $59 million letter of credit facility for a subsidiary of Pegasus Media & Communications.

In return for the loan commitment, the lenders received warrants to purchase shares of non-voting common stock of Pegasus Communications Corp. for an exercise price of $16.00 per share.

Pegasus is a Bala Cynwyd, Pa. provider of satellite television.

© 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.