Calpine bid drops on financial restatements; Nextel trades up on market technicals

By Sara Rosenberg

New York, March 3 - The bid on Calpine Corp.'s bank debt dropped off by about a point or two on Monday following the company's morning announcement about a restatement of financial results. Meanwhile, Nextel Communications Inc.'s bank debt was reported to be trading slightly higher due to market technicals.

Calpine announced that two sale-leaseback transactions, previously accounted for as operating leases, would now be recorded as financing transactions. The reclassifications will affect the company's financial results for the years ended Dec. 31, 2000, 2001 and 2002.

For 2000, diluted earnings per share were restated at $1.18 compared to the previously reported $1.19, total debt was restated at $5.1 billion compared to the previously reported $4.8 billion and total debt to capitalization was restated as 0.59 compared to 0.57.

For 2001, diluted earnings per share was restated at $1.80 compared to the previously reported $1.87, total debt was restated at $13.4 billion compared to $12.7 billion and total debt to capitalization was restated as 0.76 compared to 0.75.

For 2002, diluted earnings per share was adjusted to $0.33 compared to the previously reported $0.39, total debt was adjusted to $14.1 billion compared to $13.4 billion and total debt to capitalization was adjusted to 0.73 compared to 0.72.

This change in results will not impact cash flow, liquidity or the outlook for 2003, the company said in a news release. Furthermore, it will not cause a default under any covenants contained in the company's credit agreements.

Taking into account the impact of these changes, the San Jose, Calif. power company confirmed its guidance for 2003 diluted earnings per share for the year ending Dec. 31, 2003 of approximately $0.40 to $0.50 per share.

Calpine's bank paper was quoted with a bid of around 90, a trader said.

Nextel's term loan B and C were said to be trading at 96 5/8 on Monday, according to traders.

"It's a little bit higher," a trader said. "Nextel seems to move up a little bit every day."

"It's a good credit," a second trader said. "So, why shouldn't it [move higher]?"

The Reston, Va. wireless company has managed to impress investors over time with favorable earnings news. For example, the company's most recent results that were announced during February included achieving positive free cash flow and positive full year earnings in 2002 as well as debt reductions.

Guidance given for 2003 included free cash flow of $500 million or more, earnings per share of at least 75 cents, EBITDA of $3.8 billion or more, capital expenditures of $1.8 billion or less and net subscriber additions of 1.7 million or more.

In follow-up news, Northrop Grumman Corp. completed its sale of TRW Automotive to affiliates of The Blackstone Group for $4.7 billion. In connection with the transaction, TRW obtained a $1.96 billion credit facility via Credit Suisse First Boston, JPMorgan, Deutsche Bank, Lehman Brothers and Bank of America.

The facility consists of a $500 million six-year revolver with an interest rate of Libor plus 350 basis points, a $410 million six-year term loan A with an interest rate of Libor plus 350 basis points and a $1.05 billion eight-year term loan B with an interest rate of Libor plus 400 basis points.

Initially, the facility was launched with a $900 million term loan B but the tranche was upsized during the syndication process since it was "a complete blowout", a syndicate source said.

Northrop Grumman will use cash proceeds from the sale to primarily to pay down debt and to meet corporate obligations, according to a news release.

TRW is a Livonia, Mich. diversified supplier of automotive systems, modules and components.

Penn National Gaming Inc. closed on its $800 million senior secured credit facility that is being used to fund the acquisition of Hollywood Casino Corp. and to provide additional working capital.

The facility consists of a $100 million revolver due March 2008 with an interest rate of Libor plus 325 basis points, a $100 million term loan A due March 2008 with an interest rate of Libor plus 325 basis points and a $600 million term loan B due March 2009 with an interest rate of Libor plus 400 basis points.

Bear, Stearns & Co. Inc. and Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Inc. served as joint lead arrangers and joint bookrunners. Merrill Lynch & Co. and Merrill Lynch, Pierce, Fenner & Smith Inc. acted as syndication agent. Bear Stearns Corporate Lending Inc. is the administrative agent. Societe Generale and Credit Lyonnais were the documentation agents.

This new credit facility allows the Wyomissing, Pa. gaming company to raise an additional $100 million in senior secured credit to expand its Pennsylvania racetrack operations if legislation is passed permitting slot machines or video lottery terminals at these facilities, according to a news release.

Concurrent with the closing on the new facility, the previous credit facility was cancelled. The $36 million swap expiring June 2004 with CIBC World Markets Corp. is terminated and the $100 million swap expiring December 2003 with Wells Fargo continues and is now linked to the new facility.

"This financing package provides us with immediate access to capital at attractive rates allowing us to complete our acquisition of Hollywood Casino Corporation and to fund additional expansion, acquisitions and capital expenditures including, if legislation is passed, the addition of slot machines or video lottery terminals at our Pennsylvania racetracks. The confidence in Penn National expressed by the respected financial institutions who arranged and participated in this financing is extremely gratifying and these entities are very supportive of our strategic plans for continued growth," said Peter M. Carlino, chief executive officer, in the release.

In addition to closing on the new line of credit, the company also announced that it would not proceed with commitments for an additional $200 million in financings. These commitments were made available only to finance a change of control offer at 101% of the principal amount of the non-recourse debt issued by Hollywood Casino Shreveport and Shreveport Capital Corporation, which will remain outstanding.

Silgan Holdings Inc. closed on its $150 million add-on term loan with an interest rate of Libor plus 200 basis points, according to a syndicate source.

Initially, the add-on was sized at $100 million but the company opted to use the built-in option to upsize due to a pretty substantial oversubscription during the syndication process.

Deutsche Bank was the lead bank on the loan that is being used to help fund the acquisition of the remaining 65% percent interest in the White Cap joint venture from Amcor White Cap Inc.

Silgan is a Stamford, Conn. manufacturer of consumer goods packaging products.

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