J.L. French, Scotts break for trading; Crown Cork adds term loan B to credit structure

By Sara Rosenberg

New York, Aug. 11 - J.L. French Automotive Castings Inc. and The Scotts Co. broke for trading in Wednesday's somewhat sleepy secondary market, with the various institutional term loans appearing to be pretty well tucked away as trading activity was light. In primary doings, Crown Cork & Seal Co. Inc. decided to add an institutional tranche to its previously all pro rata in-market deal in reaction to a euro bond downsizing.

J.L. French's first-lien term loan B was quoted at par 7/8 bid, 101¼ offered and the second-lien term loan was quoted at 101 bid, 101½ offered, according to a trader. However, the second-lien tranche did trade as high as 101 7/8 during market hours, a second trader added.

The $225 million seven-year term loan B (B3/B) is priced with an interest rate of Libor plus 450 basis points and contains call protection of 102 in year one and 101 in year two. Originally, the tranche was launched with a size of $250 million and was talked in the Libor plus 350 basis points area. Pricing on the term loan was increased due to the B3 rating received, a market source explained.

The $170 million eight-year second-lien term loan (Caa1/CCC+) is priced with an interest rate of Libor plus 700 basis points and contains call protection of 105 in year one, 103 in year two and 101 in year three. Originally, the tranche was launched with a size of $120 million and price talk of Libor plus 700 to 750 basis points. This piece of bank debt had been three times oversubscribed within a few hours of the bank meeting.

J.L. French's $465 million credit facility also contains a $70 million five-year revolver (B3/B) with an interest rate of Libor plus 450 basis points. The revolver was originally launched with a size of $100 million and price talk of Libor plus 350 basis points. As was the case with the term loan B, pricing was increased due to the rating.

Goldman Sachs is the sole lead bank on the Sheboygan, Wis., automotive parts supplier's deal.

Proceeds from the new credit facility, along with a $165 million preferred equity securities offering that is also being led by Goldman, will be used to refinance the existing credit facility and to fund the purchase of the company's 11½% senior subordinated notes due 2009 in a tender offer.

The tender offer is now set to expire Friday, after being extended from the original Aug. 10 deadline so as to "accommodate the closing of the financing" being arranged to help fund the tender, a company news release said. As of Aug. 10, about 83.4% of the notes had been tendered.

Scotts par 3/8 bid

Scotts term loan B was quoted at par 3/8 bid, par ½ offered on the break. But, as the day progressed, the offer side moved up to par 5/8 but the bid remained unchanged, according to a fund manager.

"I saw early in the day that about $12 million had traded but that's the last I saw," the fund manager said.

"Allocations to the term loan B guys were pretty bad," the fund manager continued. "Just for example, I got 15% of my order. But, my order was placed before they changed the size."

Last week, Scotts restructured its $400 million refinancing/repricing (Ba1/BB) deal, shifting some funds from the term loan B to the term loan A and removing a step up in pricing provision from the term loan A.

The term loan A was increased to $250 million from $200 million, and although pricing remained at Libor plus 125 basis points, the syndicate did remove the step up to Libor plus 150 basis points from the leverage-based pricing grid. Step downs to Libor plus 100 basis points and to Libor plus 75 basis points remained in the pricing grid.

Meanwhile, the term loan B was decreased to $150 million from $200 million and pricing was left untouched at Libor plus 150 basis points.

This is not the only deal to recently lean toward more pro rata bank debt. Dean Foods Co. moved to an all pro rata structure on its $3 billion refinancing deal (Ba1), increasing the five-year term loan A to $1.5 billion from $1.25 billion, increasing the five-year revolver to $1.5 billion from $1 billion and removing the $750 million term loan B tranche. And, Rite Aid Corp. made its move to essentially exit the institutional market and head toward the pro rata market with an amended and restated $1.3 billion credit facility that increased the company's revolver to $850 million from $700 million and decreased the company's term loan to $450 million from $1.15 billion.

This shift to pro rata is seen as a direct result of banks having capital to put to use, according to one market source, who explained that usually it's hard to raise revolvers so when the ability is there people will take advantage of it. Not to mention, pro rata bank debt usually results in a lower cost of capital for the company, the source added.

JPMorgan and Citigroup are the lead banks on the Scotts credit facility, with JPMorgan listed on the left.

Proceeds from the term loans combined with cash on hand will be used refinance and retire the company's existing $500 million term loan B, providing for lower interest rate spreads and modifying many of the borrowing covenants for additional operating flexibility.

Scotts is a Marysville, Ohio, marketer of branded consumer products for lawn and garden care.

Crown Cork adds term B

Crown Cork & Seal added a $125 million term loan B due 2011 to its in-market credit facility (Ba3/BB) following pricing of a euro 6.25% first-priority senior secured notes offering that was downsized to €350 million from €460 million, according to a market source.

The institutional term loan is priced with an interest rate of Libor plus 225 basis points.

Crown Cork's credit facility still contains a $500 million revolver priced at Libor plus 275 basis points and split into a $200 million U.S. revolver, a $200 million euro revolver and a $100 million revolving letter-of-credit facility.

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

Proceeds from the term loan and the bonds will be used to repay the company's existing term loans that mature in 2008. The new revolver would replace the company's existing revolver that comes due in 2006.

Closing is expected to take place on Sept. 1.

Crown Cork is a Philadelphia supplier of packaging products.

Ceradyne bid dips

The bid on Ceradyne Inc.'s term loan B dropped off slightly since the deal first hit the secondary on Tuesday, with the paper quoted at par 7/8 bid, 101¼ offered, compared to 101 bid during the previous session, according to a market source.

"It hasn't really been trading a lot. I didn't even see much of it trade yesterday," the source added.

Ceradyne's $110 million seven-year term loan B is priced with an interest rate of Libor plus 200 basis points, after reverse flexing from Libor plus 225 basis points during syndication on strong oversubscription.

The facility (Ba3/BB-) also contains a $50 million five-year revolver with an interest rate of Libor plus 200 basis points.

Wachovia Capital Markets LLC is the lead bank on the deal.

Proceeds from the credit facility along with cash will be used to help fund the acquisition of ESK Ceramics, which is expected to close in the third quarter.

Under the acquisition agreement, Ceradyne will purchase the Germany-based industrial technical ceramic manufacturer for about €111.4 million, or about $136 million, in cash payable at closing.

Ceradyne is a Costa Mesa, Calif., developer, manufacturer and marketer of advanced technical ceramic products and components for defense, industrial, automotive/diesel and commercial applications.

TCW auction Thursday

Another auction is expected to take place this week, as TCW is scheduled to auction a $300 million portfolio on Thursday with five dealers invited to participate in the transaction, according to market sources.

Just the other day, Bain Capital held an auction for a $250 million portfolio that Wachovia won, beating out seven other dealers that were invited.

"A lot of the CLOs are aged and the equity investors want to exit," one source said in explanation of why more and more portfolio auctions seem to be popping up.

Qwest continues descent

Qwest Communications International Inc.'s fixed-rate bank debt once again fell by three quarters of a point during market hours, this time dropping to 95¼ bid, 96¼ offered, according to traders. On Tuesday, the paper was quoted at 96 bid, 97 offered, and on Monday it was quoted at 97¾ bid, 981/4.

Meanwhile, the floating-rate bank debt was a little stronger, with quotes of 102 bid, 103¼ offered, according to traders, compared to Tuesday's quotes of 101¾ bid, 102¾ offered.

At the start of the week, people were attributing the weakening in the fixed-rate bank debt to a weekend Barron's article that called Qwest the least of a bargain when compared to AT&T and MCI.

But now it seems as if the drop has gone too far to just be a result of an article leaving some perplexed as to the true cause. And, the Denver telecommunications company's recent announcement that it would sell $500 million of notes to fund a tender offer for its $750 million 7.2% notes due Nov. 1 did not seem like the type of news to affect bank debt levels.

"I have no idea why it keeps going down," a trader added.

PNC rumored to lead IMCO/Commonwealth deal

PNC is rumored to be the left lead bank on IMCO Recycling Inc.'s upcoming bank loan deal, with Citigroup and Deutsche also rumored to be involved in the financing as well, although nothing definitive has been determined as of yet, according to a market source.

Proceeds will be used to help fund the merger with Commonwealth Industries Inc.

The merger transaction is expected to close in the fourth quarter of 2004, subject to the approval of the stockholders of both companies, approval under the Hart Scott Rodino Act, refinancing of debt and other customary closing conditions.

Commonwealth's bonds are expected to be refinanced in connection with this transaction, but IMCO's bonds are not required to be put under the merger agreement.

Under the terms of the merger agreement, which was unanimously approved by the boards of directors of both companies, Commonwealth stockholders will receive 0.815 IMCO shares in exchange for each of their Commonwealth shares. Upon completion, IMCO stockholders will own about 54% and Commonwealth stockholders about 46% of the merged entity, based on the number of shares outstanding as of June 16.

The combined company is expected to be named and its headquarters selected prior to the closing of the transaction.

IMCO is an Irving, Texas, recycler of aluminum and zinc. Commonwealth is a Louisville, Ky., manufacturer of aluminum sheet.

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