Doane Pet Care, Cooper Cos. break in the mid-101 area; Northwest faced with sector worries

By Sara Rosenberg

New York, Nov. 3 - Doane Pet Care and The Cooper Cos. Inc. broke for trading on Wednesday with both deals' institutional paper heading into the 101 plus arena. Meanwhile, on the primary front, Northwest Airlines Inc. launched its new deal, and although in this technically strong market there's a good chance the facility will be embraced with open arms, some did raise concerns over sector issues.

Doane Pet Care's term loan was quoted at 101½ bid, 101¾ offered by the end of the day, according to a trader, who said that the paper opened around 101¼ bid, 101¾ offered but then the bid side inched up by a quarter of a point.

The $195 million five-year term loan is priced at Libor plus 400 basis points. The tranche was reverse flexed from Libor plus 450 basis points on Monday.

Credit Suisse First Boston is the lead bank on the deal that will be used to refinance the company's existing credit facility due December 2005.

The $230 million senior secured credit facility (B2/B+) also contains a $35 million five-year revolver.

Doane is a Brentwood, Tenn.-based manufacturer of private label pet food.

Cooper at 101 plus

Cooper Cos.' $250 million seven-year term loan B was quoted at 101¼ bid, 101¾ offered, according to a trader. The tranche is priced with an interest rate of Libor plus 175 basis points.

Originally, the term loan B was sized at $150 million with price talk of Libor plus 200 basis points but was upsized and reverse flexed during syndication.

The $750 million credit facility (Ba3/BB) also contains a $225 million five-year term loan A, downsized from $325 million, and a $275 million revolver. Pricing on these pro rata tranches is also Libor plus 175 basis points after a reverse flex from Libor plus 200 basis points.

Key Banc Capital Markets and JPMorgan Chase Bank are the lead banks on the deal, with Key Banc listed on the left.

Security will be substantially all assets of the combined Cooper-Ocular entity.

Proceeds will be used to help fund the acquisition of Ocular Sciences Inc. in a merger for stock and cash at a cost of approximately $1.2 billion, to refinance existing bank debt, and to provide for working capital and general corporate needs.

Under the acquisition agreement, Cooper will pay about $600 million in cash and issue about 10.3 million shares of its common stock to Ocular Sciences stockholders and option holders. The transaction is expected to close in the first quarter of Cooper's 2005 fiscal year, which began on Nov. 1, 2004.

Cooper Cos. is a Pleasanton, Calif., healthcare products company. Ocular Sciences is a Concord, Calif., manufacturer and marketer of soft contact lenses.

Northwest sector issues a concern

Some investors are still on the fence about Northwest Airlines Inc.'s newly launched $975 million credit facility primarily because of worrisome issues facing the industry as a whole such as high fuel prices and the inability to raise rates because of competition from cheaper carriers.

"Airline credits are probably not the best thing to be investing in right now," a fund manager said. "Fuel prices. Troubles these guys are having. It's a pretty ugly situation for these airlines. [But], I'm not going to put anything past the market given what has been getting done."

Northwest's $675 million five-year term loan A is talked at Libor plus 550 basis points, and its $300 million six-year term loan B is talked at Libor plus 750 basis points - pretty decent given the B1/B+ ratings assigned to the deal.

Furthermore, the syndicate added another enticement, call protection on both term loans of 103 in year one, 102 in year two and 101 in year three.

"Given those ratings, the spread is great so some people may look at this and think what a great deal," the fund manager continued. "But I'm thinking more about whether these guys will be able to weather the storm."

Proceeds from the term loans will be used to refinance existing revolver debt. The company currently has a $725 million five-year revolver due October 2005 and a $250 million 364-day revolver due October 2004 and renewable annually at the option of lenders. The revolvers carry an interest rate of Libor plus 325 basis points.

When asked why the Eagan, Minn.-based airline company may have opted to head into the arena of all-term-loan debt instead of getting a new revolver, the fund manager explained, "they were drawn on almost all of it so it was essentially like having a term loan."

JPMorgan and Citigroup are the lead banks on the deal, with JPMorgan on the left, and Deutsche Bank is involved as well.

Delta launching next week

Interestingly, another airline deal is expected to hit the market soon as Delta Air Lines Inc. gears up to launch its $500 million three-year senior secured credit facility on Tuesday.

But unlike Northwest, Delta's facility contains both a term loan and a revolver, with more aggressive price talk. Delta's $200 million term loan is talked at Libor plus 600 basis points and its $300 million revolver talked at Libor plus 400 basis points.

Furthermore, American Express Travel Related Services Co. has agreed to provide $100 million of the credit facility financing, and the deal itself is said to have attracted a significant amount of early interest already, according to a market source. American Express has also agreed to provide Delta with an additional $500 million in financing in the form of a prepayment of SkyMiles.

General Electric Capital Corp. is the sole lead arranger on the Atlanta air transportation company's credit facility.

The credit facility is part of an out-of-court restructuring attempt which includes: contractual changes with the pilots union that're designed to deliver $1 billion in long-term annual savings through a combination of changes to wages, pension and other benefits and work rules; restructuring debt; securing concessions from vendors and lessors; retooling its operations and reducing non-pilot employee and operational costs; and, of course, finalizing new financing arrangements.

Pilots have until Nov. 11 to vote on the contract changes through an expedited electronic ratification process.

Delta has already reached an agreement with some of its bondholders to defer about $135 million in debt due in 2005.

The company is also offering to exchange up to $680 million principal amount of three series of newly issued senior secured notes to the holders of $2.6 billion principal amount of outstanding unsecured debt securities and enhanced passthrough certificates.

As of Tuesday, about $252 million principal amount of passthrough certificates series 2000-1C and series 2001-1C were tendered in the pending exchange offer.

Advance Stores closes

Advance Stores Co. Inc. closed on its $670 million senior secured credit facility (Ba2/BB+) consisting of a $160 million revolver with an interest rate of Libor plus 150 basis points, a $150 million term loan A with an interest rate of Libor plus 150 basis points, a $185 million term loan B with an interest rate of Libor plus 175 basis points, and a $175 million six-year delayed-draw term loan with an interest rate of Libor plus 175 basis points.

JPMorgan was the lead bank on the deal that was used to refinance outstanding term loans and the revolver under the company's existing $495 million facility and to fund potential stock repurchases under its previously authorized stock repurchase program.

Advance Stores is a Roanoke, Va., retailer of automotive parts.

International Mill closes

Wellspring Capital Management LLC completed its acquisition of International Mill Service Inc. from a shareholder group led by GSC Partners, according to a company news release.

To help fund the leveraged buyout, International Mill got a new $180 million credit facility consisting of a $125 million six-year term loan B (B1/B+) with an interest rate of Libor plus 275 basis points, a $25 million five-year revolver (B1/B+) with an interest rate of Libor plus 275 basis points, and a $30 million seven-year second-lien term loan (B3/B-) with an interest rate of Libor plus 600 basis points.

Bear Stearns was the lead bank on the deal.

International Mill is a Horsham, Pa., provider of outsourced industrial services primarily to the steel industry.

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