Collins & Aikman's B loan bid strengthens on news of Ford contract

By Sara Rosenberg

New York, Oct. 10 - Collins & Aikman was reported as stronger on Friday on the heels of the company's announcement that it signed a new contract with Ford Motor Co. One trader placed the B tranche as high as par bid, while a second trader said that although bids were probably stronger than the previous 99 area it was hard to pinpoint real levels on the bank debt due to overall inactivity in the quiet pre-holiday trading day.

"It's been kind of quiet today with the early close and the bond market being closed on Monday," the second trader explained. "It could be better bid than 99 but with it being so quiet we haven't really seen anything so it's hard to tell."

Early Friday morning, Collins & Aikman revealed that Ford selected it as a full service supplier for a significant portion of the interior systems on the new Ford Futura.

"We are extremely pleased with being selected by Ford for this program," said David A. Stockman, chairman and chief executive officer, in a news release. "An award of this magnitude is a reflection of our ability to deliver on cost, quality, craftsmanship and innovation across our entire breadth of interior products. Earning this significant Ford interior business is also further confirmation that our business model is working and our leadership position in the global automotive interiors market is secure."

The Troy, Mich. designer engineer and manufacturer of automotive interior components has been a huge focus in the secondary market since the end of the Sept. 29 week as investors reacted to a news report that DaimlerChrysler AG's Chrysler Group is looking to rebid nearly all of the current and future business it does with the Collins & Aikman.

After that initial report regarding Chrysler the bank debt dropped a few points only to start heading up and stabilizing since the early half of the past week following a private lender call.

Meanwhile, by 12.30 p.m. ET, The Scotts Co.'s credit facility still hadn't hit the secondary, according to various sources, making some skeptical that it would actually allocate on Friday due to the shortened pre-holiday session. Previously, a trader told Prospect News that he heard the deal would either break at the end of the week or early in the coming week.

The $1.2 billion credit facility (Ba1/BB) was restructured earlier in the week to increase the revolver to $700 million and decrease the term loan B (for the second time since launching) to $500 million, according to a fund manager.

"The company basically had the leverage to do that," the fund manager said in regards to the upsizing of the revolver and the downsizing of the B loan. "The revolver was two times oversubscribed so they figured they'd increase the revolver."

When the deal first hit the market is was structured as a $550 million five-year revolver and a $650 million term loan B.

Interest in the revolver is grid based with the initial rate set at Libor plus 225 basis points. Interest on the term loan B is Libor plus 200 basis points, lowered from initial price talk of Libor plus 225 basis points, and there is the potential for pricing to step down to Libor plus 175 basis points after September 2004 if the company's leverage is less than two times, the fund manager added.

JPMorgan is the lead arranger on the deal for the Marysville, Ohio supplier of lawn and garden care products.

Proceeds from the credit facility and a high-yield bond offering will be used to finance a tender offer for the company's $400 million outstanding 8.625% senior subordinated notes due 2009.

In follow-up news, DRS Technologies Inc.'s term loan B was not so unexpectedly flexed down to Libor plus 250 basis points from Libor plus 275 basis points, according to a market source. This move was anticipated by some since it was revealed at the late September bank meeting that there were already over $1 billion in orders for the $362.5 million term loan.

The term loan B also has the ability to step down to Libor plus 225 basis points if leverage falls below three times.

"So many people are interested in that deal. They'll always have enough interest to get this done," the source said regarding the change in pricing.

The deal received such positive attention for a number of reasons, including scarcity of defense bank debt in the market, strength of the sector and strength of the company, sources previously told Prospect News.

The $512.5 million credit facility (Ba3/BB-) also contains a $150 million five-year revolver talked at Libor plus 225 basis points.

Bear Stearns and Wachovia are the lead banks on the deal.

Proceeds, combined with proceeds from a bond offering, will be used to help fund the acquisition of Integrated Defense Technologies Inc.

The cash portion of the acquisition, together with the debt of IDT to be refinanced, will aggregate approximately $437 million at closing. Total consideration for the acquisition, including an estimated $175 million of IDT's net debt to be refinanced, is approximately $550 million, representing a multiple of 1.5x the revenues and 8.5x the EBITDA expected to be contributed by IDT during DRS's next full fiscal year ending March 31, 2005.

DRS is a Parsippany, N.J. supplier of defense electronic products and systems.

Crown Castle International Corp. closed on its $702 million term loan B add-on (B-) with an interest rate of Libor plus 325 basis points. J.P. Morgan Securities Inc. and Morgan Stanley Senior Funding Inc. acted as co-lead arrangers and joint bookrunners on the deal.

Initially the add-on was sized at $601 million but was upsized during syndication.

The company obtained the add-on by amending its credit facility, which is now sized at $1.6 billion and consists of a $192.5 million term loan A, a $1.1 billion term loan B (including the add-on) and a $350 million unfunded revolver.

Besides allowing for the additional term loan B debt, the amendment extended the maturity of the B loan to September 2010 from March 2008, reduced the term loan A by $100 million and reduced the revolver commitment by $150 million.

Furthermore, the company's U.K. subsidiary was designated as a restricted subsidiary.

Proceeds are being used to repay all of the $99.2 million credit facility debt at the U.K. subsidiary and repay all of the $206.6 million 9% notes at the U.K. subsidiary. Crown Castle plans to use the excess proceeds of approximately $300 million from the new term B to purchase certain of its higher coupon senior securities.

"We continue to accomplish financial initiatives that reduce total interest expense and lower our overall cost of capital," said W. Benjamin Moreland, chief financial officer, in a news release. "This leverage-neutral transaction simplifies our capital structure and provides our restricted borrowing group access to the operating cash flows of our U.K. subsidiary.

"This transaction is an important milestone as it increases our financial flexibility, extends bank maturities, increases free cash flow, reduces near-term amortization, and positions us favorably to take advantage of anticipated refinancings of our callable securities next year. In addition, the positive response we received from our lenders enabled us to borrow $100 million more than expected of term B loan, which we are using to pre-pay $100 million of the term A loan."

Crown Castle is a Houston-based communications tower operator.

© 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.