Danielson shifts second-lien funds into first lien, frees up for trading; CLO auction goes off

By Sara Rosenberg

New York, June 10 - Danielson Holding Corp. (Covanta Energy) made some quick changes to its credit facility, including shifting some funds from the second-lien tranche into the first-lien tranche.

Then, by Friday afternoon, the Danielson deal allocated and freed up for trading, with the first-lien institutional paper quoted in the upper par context and the second-lien term loan quoted just south of par.

Also, in secondary doings on Friday, a portfolio of par names was auctioned off, drawing the attention of some market players.

Danielson increased the size of its seven-year first-lien term loan B (B1/B+) to $275 million from $250 million and decreased the size of its eight-year second-lien term loan (B2/B-) to $400 million from $425 million, according to a market source.

Furthermore, pricing on the second-lien term loan was finalized at Libor plus 550 basis points, instead of the Libor plus 500 basis point pricing that was previously anticipated on the tranche, the source added.

Pricing on the first-lien term loan B recently firmed up at the Libor plus 300 basis point mark.

The second-lien term loan contains call protection of 103 in year one, 102 in year two and 101 in year three. These call protection provisions were a part of the second-lien credit terms since launch.

Danielson's $1.115 billion credit facility also contains a $100 million six-year revolver (B1/B+) and a $340 million seven-year pre-funded letter-of-credit facility (B1/B+), with both of these tranches seeing pricing firm up recently at Libor plus 300 basis points as well.

The revolver contains a 50 basis point commitment fee.

Goldman Sachs and Credit Suisse First Boston are joint lead arrangers on the deal, with Goldman the left lead.

Proceeds will be used to help finance the acquisition of American Ref-Fuel Holdings Corp. and refinance corporate debt.

Danielson is a Fairfield, N.J., renewable energy and waste disposal company. American Ref-Fuel is a Montvale, N.J., owner and operator of waste-to-energy facilities.

Danielson breaks

Danielson's credit facility hit the secondary in the afternoon, with the $275 million first-lien term loan B and the $340 million pre-funded letter-of-credit facility, which are being traded as a strip, opening around par ½ bid, 101 offered and maintaining those levels throughout the remainder of the session, according to a trader.

"It opened up pretty strong and kind of stayed that way through the close," the trader added.

As for the $400 million second-lien term loan, that tranche opened for trading around 99¾ bid, par offered with the paper consistently quoted at those levels throughout the day as well, the trader said, adding that the second-lien paper didn't trade all that much in Friday's quiet market.

TCW auctions portfolio

TCW auctioned a $240 million portfolio comprised of all par names on Friday, with Deutsche Bank walking away the winner, according to market sources.

Although it is unknown what Deutsche bid for the portfolio, traders did find out that the cover bid, which came from Bank of America, was 100.95.

Triad closes

Triad Hospitals Inc. closed on its new $1.1 billion credit facility (Ba2/BB) due June 2011 consisting of a $500 million term loan A and a $600 million revolver, with both tranches priced at an initial interest rate of Libor plus 125 basis points, according to a company news release.

Pricing on the A loan and the revolver is based on a leverage-based grid and can range from Libor plus 87.5 to 175 basis points.

The revolver was undrawn at closing.

The new facility replaces the company's previous $843 million credit facility that consisted of a $38.4 million term loan A due March 2007 with an interest rate of Libor plus 200 basis points, a $400 million revolver due April 2007 and a $404.2 million term loan B due September 2008 with an interest rate of Libor plus 225 basis points.

In addition to the improved pricing, the new facility gives Triad more financial flexibility by increasing the size of the revolver and by delaying 75% of the principal repayment of the new term loan A until the last year of the credit facility, the release said.

Bank of America is administrative agent, The Bank of Nova Scotia is syndication agent, and JP Morgan Chase Bank, SunTrust Bank and Wachovia Bank are co-documentation agents on the deal.

Triad is a Plano, Texas, owner and manager of hospitals and ambulatory surgery centers.

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