Wyndham falls as amendment fails to find lender support; RCN drops following private call

By Sara Rosenberg

New York, Feb. 21 -Wyndham International Inc. and RCN Corp. both saw their bank debt move lower in trading Friday. Wyndham's decline was mainly attributed to its failure to pass its proposed amendment to extend maturities on the IRL and the revolver. RCN, on the other hand, was said to be lower following a private call on Thursday, however details of the call were unavailable.

Wyndham's bank debt "dropped off a little bit", according to one trader. Quotes on the loan varied depending on the trader, with one citing a 72 bid and a 74 offer on the term loan B and another citing a 67 bid and a 72 offer on the term loan B. The IRL was said to be quoted slightly higher than the B loan, and according to LoanX data the IRL is being bid around 75 and offered around 77.

As a reference point, during early February, the term B was quoted with a 77 bid and a 79 offer and the IRL was quoted with an 81 bid and an 83 offer.

The downturn appears to be the result of an amendment request by the company that was not greeted favorably by bank debt holders.

Towards the beginning of the month, Wyndham held a lender call during which the company proposed amending its credit agreement to extend the maturities of the installment repayment loan and revolver to June 30, 2006 from June 30, 2004. Term loan B holders were not being asked to execute any modifications to their agreement.

Under the amendment, the cash portion of the revolver's pro rata distribution from proceeds of asset sales would be used towards paying down the IRLs. Meanwhile, the revolver commitments would be reduced by whatever the pro rata portion of the paydown would have been. For example, if the company has $474 million in commitments for the revolver equaling 22.5% of the committed facilities, the pro rata portion of proceeds from asset sales is 22.5%. If Wyndham were to have $1 million for pay downs from asset sales, then revolver commitments would be reduced by $225,000 and the actual cash would be used to pay down the IRLs, a fund manager previously explained to Prospect News.

There is no event prompting this amendment, meaning the Dallas hotel operator is currently in full compliance with its covenants.

IRL holders were not enthused by this proposal since there didn't seem to be an economic incentive to sign the agreement. According to the fund manager, getting paid down on June 30, 2004 is more attractive than getting a larger portion of a paydown from asset sales that haven't even been announced.

"It didn't pass and they're considering what to do next," one market professional said on Friday. "The lenders are fairly comfortable with their position with collateral. They feel like they have a good chance to get paid at par no matter what happens.

"I see it as kind of a strong arm tactic [by Wyndham]," the professional continued. "As of last week it was going very poorly."

Asked whether this would be the end of the amendment, the professional responded that Wyndham would "keep changing and tweaking and cajoling until they get the last guy through the door."

Another name that was reported lower on Friday was RCN. One trader had the debt quoted with a 67 bid and a 69 offer while another trader quoted it in the low to mid 70's, down from around 80. Although indications were considerably lower, the paper was not actively traded during market hours.

The bank debt dropped following a private call that was held by the company on Thursday. Although the contents of the call couldn't be discovered some speculated that the downward momentum might have been caused by the company's plan to use proceeds from the recently completed sale of its New Jersey cable systems to reinvest in the company rather than to pay down bank debt (a decision that a company spokesperson revealed to Prospect News about two weeks ago).

An RCN spokesman said he could neither confirm nor deny whether there was a private call but said there was some confusion over the timing of the company's earnings conference call. The call had originally been scheduled for Thursday but has been moved to the second week of March to get clear of the asset sale, he said.

RCN is a Princeton, N.J. provider of bundled communications services to residential customers over its broadband network.

In follow-up news, International Transmission Co.'s credit facility has undergone some changes on the holding company level, which in the end will result in a larger amount of senior debt, according to a market source.

The holding company has a $117 million subordinated bridge loan that is being "rolled into" the recently launched $120 million term loan B, the source explained, giving the holding company a new total amount of senior debt of $237 million.

Interestingly, the rating agencies have indicated that ratings will be reaffirmed despite the significant increase in senior leverage, the source continued. The reasoning behind this stems from the fact that the holding company would be reducing interest payments. The subordinated loan has an interest rate of 10%. If it's rolled into senior debt than interest would be less than 5% so the interest expense is basically cut in half and that would "assist cash flows to the point where it works", the source said.

Upon launching, International Transmission's loan was a massive blowout, with the holding company loan four times oversubscribed and the operating company loan three times oversubscribed, according to a syndicate source.

The operating company's loan consists of a $185 million six-year term loan B with an interest rate of Libor plus 250 basis points and a $15 million three-year revolver with an interest rate of Libor plus 250 basis points. The facility was rated Baa1/A-, according to the syndicate source

The six-year holding company term loan B has an interest rate of Libor plus 375 basis points. The facility was rated Baa3/BBB-.

CIBC is the lead bank on the deal and Union Bank of California and SocGen are co-syndication agents.

Proceeds from the facilities will be used to help fund the acquisition of International Transmission by affiliates of Kohlberg Kravis Roberts & Co. and Trimaran Capital Partners LLC for approximately $610 million in cash.

International Transmission is the Detroit-based transmission business subsidiary of DTE Energy.

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