Celanese second lien increased, reverse flexed; Appleton Papers term B pricing lowered

By Sara Rosenberg and Paul A. Harris

New York, June 3 - Celanese AG increased the size of its second-lien term loan (B1/B-) to $350 million from $250 million and lowered pricing on the tranche following the decision to decrease the bond offering to $1.244 billion equivalent from $1.315 billion equivalent.

Meanwhile, Appleton Papers Inc. went out to the market on Thursday with a reverse flex by 25 basis points on its term loan B now that the bond deal priced and the term loan B is close to three times oversubscribed, according to a market source.

Final pricing on Celanese's oversubscribed $350 million second-lien term loan came in at Libor plus 425 basis points, down from price talk of Libor plus 450 basis points, according to a market source.

The bond deal now consists of $1 billion of notes priced at par to yield 9 5/8%, in the middle of the 9½% to 9¾% price talk, and €200 million of notes priced at par to yield 10 3/8%, at the wide end of the price talk of 50 to 75 basis points behind the dollar tranche.

This is the second time that the bond deal has been downsized. A little more than a week ago, Celanese first added this $250 million second-lien term loan to the bank deal as the company opted to decrease its proposed bond offering by $250 million to $1.315 billion.

And, market demand wasn't only strong for the second-lien piece, but rather the term loan B was also oversubscribed allowing the syndicate to reverse flex that tranche during the syndication process as well.

The term loan B (Ba2/B+) consists of a $455 million piece and a €125 million euro piece both priced with an interest rate of Libor plus 250 basis points, flexed down from Libor plus 275 basis points, according to the source.

Celanese's facility also contains a dollar-denominated revolver (Ba2/B+) equivalent to €312 million with an interest rate of Libor plus 250 basis points and a dollar-denominated prefunded letter-of-credit facility (Ba2/B+) equivalent to €187.5 million with an interest rate of Libor plus 250 basis points.

Proceeds from the bank and bond transactions will be used to help fund the acquisition of Celanese by The Blackstone Group in a public-to-private transaction for a price of €32.50 per share, or about €3.1 billion.

Since the purchase price is in euros, Celanese is using euro equivalents so as to make sure it raises the full amount needed to complete the acquisition with the intention being that there will be a currency swap back when the facility closes.

Deutsche Bank, Morgan Stanley and Bank of America are the lead banks on the credit facility.

Appleton reverse flexes

Appleton Papers' (Ba3/BB) $250 million six-year term loan B was reverse flexed to Libor plus 225 basis points from talk of Libor plus 250 basis points, according to the source.

The $125 million five-year revolver was left unchanged at Libor plus 250 basis points, the source added.

On Thursday, Appleton downsized and priced its bond offering, decreasing the total size to $335 million from $350 million. However, the bank deal was not increased to compensate for the bond change.

Bear Stearns and UBS are the lead banks on the deal, with Bear listed on the left.

The term loan amortizes at a rate of 1% each year with the balance due at maturity.

Total leverage is 3.6x, and senior leverage is 2.5x.

Proceeds from the credit facility, combined with proceeds from the notes offering, will be used to fund a cash tender offer for $199.958 million of outstanding 12½% senior subordinated notes due 2008. The tender offer expires on June 9.

Appleton is an Appleton, Wis., manufacturer and distributor of paper and paperboard products.

Pegasus around par

Pegasus Media & Communications Inc.'s term loan D moved up about a quarter of a point, heading closer to par, as investors are fairly confident that they will get paid down at par now that the company has filed for Chapter 11.

The D loan traded around a little bit during market hours and closed the day quoted at 99½ bid, par offered, according to a trader.

The Pegasus Satellite Communications Inc. bank debt, which is less liquid than the term loan D, was unchanged at 99½ bid, par ½ offered, with no trading activity seen in the name.

Late Wednesday, Pegasus Communications Corp. said three of its subsidiaries, Pegasus Satellite Television Inc., Pegasus Satellite Communications Inc., and Pegasus Media & Communications Inc., filed for protection under Chapter 11 of the U.S. Bankruptcy Code.

Pegasus said the filing was made to prevent the National Rural Telecommunications Cooperative and DirectTV from seeking to implement the termination of Pegasus Satellite Television's agreements for exclusive distribution of DirectTV services.

Pegasus said it will ask the bankruptcy court to confirm Pegasus Satellite Television's "valuable rights." It will also seek damages resulting from NRTC's and DirecTV's actions to impair those rights, including what Pegasus said was NRTC's breach of its duties to Pegasus Satellite Television, NRTC's majority owner.

The filing is the latest stage in an ongoing dispute with DirecTV over the length of its exclusive right to distribute DirecTV services.

Pegasus said the dispute was brought to a head Wednesday morning when NRTC and DirecTV said they were terminating Pegasus Satellite Television's exclusive distribution arrangements with the NRTC.

As part of the termination, DirecTV made a cash offer to Pegasus - payable in either a lump sum or monthly payments - if Pegasus agrees to an orderly transfer of its subscribers to DirecTV that is completed before Aug. 31.

With this latest move by Pegasus, investors finally received some closure on the whole - will they or won't they file for bankruptcy question - that had been floating around for almost two weeks now.

Bankruptcy worries started due to a court case involving DirecTV, in which DirecTV won a judgment of $51.5 million against Pegasus, plus interest - money Pegasus says it does not have. Furthermore, DirecTV later said that judge Lourdes Baird of the U.S. District Court for the Central District of California had entered a judgment in favor of DirecTV Inc. against Pegasus Satellite Television Inc. and Golden Sky Systems Inc. (Pegasus) of $62.6 million, which includes prejudgment interest. DirecTV is also entitled to recover its legal costs.

Pegasus is a Bala Cynwyd, Pa., diversified media and communications company.

Rockwood launch Monday

A bank meeting date of Monday in New York City has been nailed down for the launch of Rockwood Specialties Group Inc.'s proposed $1.85 billion credit facility (B1/B+). The deal will also have a launch in London via a bank meeting on Wednesday, according to a syndicate document.

Previously, it was only known that the deal would hit the market sometime in mid-June.

As was already reported, the facility consists of a $1.05 billion seven-year term loan B with an interest rate of Libor plus 275 basis points, a $250 million six-year revolver with an interest rate of Libor plus 250 basis points with a 50 basis points commitment fee, a $250 million six-year term loan A with an interest rate of Libor plus 250 basis points and a $300 million eight-year term loan C with an interest rate of Libor plus 300 basis points.

Credit Suisse First Boston, UBS and Goldman Sachs are the joint lead arrangers and joint bookrunners on the financing.

Proceeds, combined with proceeds from a bond offering and equity, will be used to help fund the acquisition of four chemical businesses of Germany based Dynamit Nobel.

The equity for the transaction will be provided by Rockwood's internal resources, its existing majority shareholder Kohlberg Kravis Roberts & Co. LP and by CSFB Private Equity. The sponsors bid €2.25 billion for the four business units.

Closing of the transaction is planned for the third quarter of 2004 and is subject to approval by the supervisory board and annual general meeting of MG Technologies, parent company of Dynamit Nobel, as well as by the relevant antitrust authorities.

Rockwood is a Princeton, N.J., specialty chemicals and advanced materials company.

FairPoint pricing

Pricing on FairPoint Communications Inc.'s newly launched $450 million credit facility (B2) surfaced with the $100 million revolver priced with an interest rate of Libor plus 325 basis points and the $350 million term loan B priced with an interest rate of Libor plus 350 basis points, according to a market source.

Deutsche, CIBC and Citigroup are the lead banks on the deal, with Deutsche listed on the left.

The facility is being obtained in connection with the initial public offering of the company's Income Deposit Securities (IDS).

Proceeds from the term loan, combined with proceeds from the $750 million IDS offering, will be used to repay all outstanding loans under the existing credit facility and to fund the repurchase of all outstanding senior notes and senior subordinated notes.

More specifically, $817.3 million will be used to repay existing debt, $113.2 million will be used to repurchase series A preferred stock, $10.5 million will be used as a cash reserve for discontinued operations and $159 million will be used for other purposes.

In addition, in connection with the IDS offering, the company expects to issue about $361.4 million principal amount of senior subordinated notes to the public and its existing equityholders.

FairPoint is a Charlotte, N.C., provider of telecommunications services.

Insteel closes

Insteel Industries Inc. closed on its new $82 million four-year senior secured credit facility, consisting of a $60 million revolver with an initial interest rate of Libor plus 300 basis points, a $17 million term loan A with an interest rate of Libor plus 375 basis points and a $5 million term loan B with an interest rate of Prime plus 700 basis points. GE Commercial Finance was the lead bank on the deal.

As of June 3, about $42.2 million was drawn on the revolver providing $10.9 million and $22 million was outstanding on the term loans.

Proceeds were used to pay off the existing credit facility and will support future working capital, capital expenditure and general corporate requirements.

"The reductions in the size of the credit facility and the number of lenders from the previous announcements dated March 25, 2004 and May 17, 2004 are due to the improved financial performance of the company which reduced its borrowing requirements," a company news release said.

Originally the deal was anticipated to be a $100 million credit facility consisting of a $60 million revolver and up to $40 million in term loans, and then it was changed to a $97 million credit facility consisting of a $60 million revolver, a $17 million term loan and a $10 to $20 million junior secured term loan.

Insteel is a Mount Airy, N.C., manufacturer of wire products.

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