Ply Gem downsizes B loan; AMF close to subscription; Solo see $1.5 billion in commitments

By Sara Rosenberg

New York, Feb. 6 - Ply Gem Industries' term loan B was downsized by $45 million following the company's decision to price an upsized bond offering on Thursday. Meanwhile, AMF Bowling Worldwide Inc.'s term loan B was already about three quarters spoken for by Friday afternoon, and Solo Cup Co.'s term loan was largely oversubscribed by Friday morning.

Ply Gem's term loan B is now sized at $190 million compared to its initial size of $235 million, according to a market participant. The tranche is priced with an interest rate of Libor plus 275 basis points and is being offered at par.

On Thursday, the company priced $225 million of eight-year senior subordinated notes, upsized from an initial size of $180 million, at par to yield 9%.

"The extra $45 [million] was taken away from the term loan, which is going to make allocations even worse," the market participant said. "[But] it makes the deal even more appealing - less senior debt and more debt behind it."

The now $255 million senior secured credit facility (B1/B+) also contains a $65 million five-year revolver with an interest rate of Libor plus 250 basis points.

The deal launched at the end of January to a small group of investors made up of around 25 accounts in order to avoid massive oversubscription and a complicated allocation process.

UBS and Deutsche Bank are joint bookrunners, and CIBC and Merrill Lynch are co-arrangers and documentation agents on the facility.

Proceeds from the credit facility and the bonds will be used to help support the company's acquisition by Caxton-Iseman Capital Inc. from Nortek Inc. in a transaction valued at about $570 million.

Ply Gem is a Kearney, Mo., manufacturer and distributor of products for use in the residential new construction, do-it-yourself and professional renovation markets.

AMF nears subscription

The book on AMF Bowling's term loan B was about three quarters filled by Friday afternoon as once again a new primary deal saw strong market interest. However, besides favorable market technicals, the company also has its strong cash flow generation working in its favor, according to a market source.

The $175 million credit facility (B1/B), which launched via a bank meeting on Thursday, consists of the $135 million 51/2-year term loan B priced with an interest rate of Libor plus 300 basis points and a $40 million five-year revolver priced with an interest rate of Libor plus 300 basis points.

The term loan B is being offered to investors at par, while a $10 million revolver commitment gets investors 100 basis points on allocation.

"It's going fine. It's got good momentum," the source said. "To give an idea of how receptive the market has been, it's roughly ¾ through already on the B.

"[The company's] strong string of cash flow will definitely lend itself to near-term deleveraging," the source added.

Commitments for the deal are due around Feb. 19, and the syndicate is looking to close on the facility toward the end of the month.

Merrill Lynch and Credit Suisse First Boston are the lead banks on the deal with Merrill listed on the left.

Proceeds, combined with proceeds from a proposed $150 million high-yield bond offering also via Merrill and Credit Suisse First Boston, will be used to help support the previously announced leveraged buyout by an affiliate of Code Hennessy & Simmons LLC.

Under the terms of the merger agreement, AMF shareholders will receive $25 in cash for each common share. The cash consideration paid to AMF shareholders may be increased by $0.01 per share per day under certain circumstances if the merger has not closed by a date to be determined. In addition, following the consummation of the merger, the holders of any unexercised AMF Series A warrants will be entitled to receive the difference between the merger consideration and the exercise price.

Standard & Poor's assigned its B rating to credit facility with a recovery rating of 3.

The ratings reflect the secular decline in bowling and considerable contraction in the demand for bowling products, which could hamper the company's cash flow growth and improvement in key credit ratios over the near term. These factors are only partly offset by AMF Bowling's strong position in the bowling center and equipment industries, a minimal degree of business diversity, and the company's significantly reduced debt burden and amortization requirements, S&P explained in its release this past Thursday.

Moody's Investors Service rated the deal B1 late last week, saying that the ratings reflect the high degree of seasonality in the company's U.S. bowling centers, mature nature of its business, and the competitive nature of the business particularly in comparison with other participation sports and activities.

Also reflected in the ratings is the company's high leverage, low coverage statistics, and challenges relating to improving attendance, margins, and cash flow. In addition, the ratings benefit from a core customer base, relatively stable annual revenues, and operational improvement since emerging from bankruptcy in March 2002, Moody's added.

AMF is a Richmond, Va., owner and operator of bowling centers, and manufacturer and marketer of bowling and billiards products.

Solo gets $1.5 billion in orders

Solo Cup's $650 million term loan, which launched this past Monday and is priced at Libor plus 275 basis points, had received $1.5 billion in commitments by Friday morning, according to a market source.

"On Wednesday there was about $700 million. By late Wednesday and the entire day Thursday commitments must have flooded in," the source said.

"There's no talk by the agents about reverse flexing," the source continued. "But, I'm sure they'll get it done at 250."

The $800 million credit facility also contains a $150 million revolver.

Bank of America is the lead bank on the deal.

Proceeds, combined with proceeds from a $325 million high-yield bond offering, will be used to help fund the previously announced acquisition of SF Holdings Group Inc. (Sweetheart Cup, Hoffmaster Tissue and The Fonda Brands).

Also as part of the transaction, Vestar Capital Partners is making a substantial minority equity investment in Solo.

Solo Cup is based in Highland Park, Ill., and SF Holdings is based in Owings Mills, Md. Both companies are manufacturers and distributors of disposable foodservice and beverage-related products.

Allegheny refi via Citi, BofA

Market talk has placed Citigroup and Bank of America as the lead banks on Allegheny Energy Inc.'s issuance of up to $1.6 billion of debt that was recently approved by the Securities and Exchange Commission for the repayment and refinancing of all of the bank debt that was restructured in February 2003, according to a market source.

However, a company spokesperson refused to confirm this latest information, saying, "that's a market rumor and we don't comment on market rumors."

The company has also received SEC approval to issue certain guarantees that will allow the release of about $76 million currently held in escrow. These funds are expected to be used to reduce debt.

Mores specifically, Allegheny is looking to issue up to $450 million in short- and/or long-term unsecured debt including up to $200 million of letter-of-credit capacity and securities convertible into Allegheny common stock, according to a U-1/A filed with the Securities and Exchange Commission on Wednesday. A new revolver is anticipated to be part of this transaction.

Proceeds from the debt transactions would be used to repay debt under its existing credit facility and for general corporate purposes. As of Dec. 31, there was $262 million outstanding under the facility.

In addition, Allegheny Energy Supply Co. LLC, a subsidiary of Allegheny, is looking to issue up to $1.3 billion of long-and/or short-term debt, secured or unsecured including up to $300 million of letter-of-credit capacity. Allegheny Energy Supply's credit facility could also contain a revolver to preserve liquidity capacity, the filing said.

Proceeds from the transactions would be used in combination with cash from other Allegheny sources to repay three existing credit facilities that had a combined capacity totaling $1.428 billion at the end of 2003.

Since restructuring $2.4 billion of debt, including about $2 billion of bank debt, in February 2003, Allegheny has fulfilled various obligations including discontinuing construction projects, redirecting the energy trading business, paying amounts owed to trading counterparties and repaying the restructured bank debt according to a schedule over slightly more than two years.

Based on this progress, along with higher trading levels on the company's debt instruments and generally lower interest rates, the company believes that the refinancing transactions will result in significantly lower overall interest costs - improving credit worthiness - and less restrictive covenants, according to the filing.

Although the individual requests of Allegheny and Allegheny Energy Supply are greater than $1.6 billion, there will be no more than $1.6 billion in debt securities issued, the filing added.

Allegheny is a Hagerstown, Md., energy company.

KZH auctions portfolio

Secondary attention was drawn to KZH's portfolio auction in which all assets of the CLO were sold, according to a trader.

"Over $300 million was auctioned. Lots of BB type names. All institutional paper, with about 90% performing. About 80% to 90% were names you knew," the trader said, declining to comment on specific bank debt that was auctioned off.

"I'm not really sure what happened," the trader responded when asked why the fund opted to sell of all its assets. "It was all pretty good stuff. There must have been some sort of trigger that they hit."

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