Georgia-Pacific B loan slides some more; Precision Drilling carve-out size still being worked out

By Sara Rosenberg

New York, Dec. 5 - Georgia-Pacific Corp.'s term loan continued to head lower in trading on Friday as chatter about the company's recently launched amendment proposal and lack of a pricing bump still seemed to be putting some pressure on the deal.

In other news, Precision Drilling Trust is still working on figuring out the final size of the carve-out under its term loan B that is talked at a lower original issue discount with a higher spread to attract a certain type of CLO investors.

Georgia-Pacific trades lower

Georgia-Pacific's term loan B was weaker for the second day in a row on continued speculation that the company's amendment may not get approved, being that lenders are not being offered an increase in pricing, according to a trader.

The term loan B was quoted at 77¼ bid, 78¼ offered in the late afternoon, compared to 78 bid, 79½ offered at the end of the day on Thursday.

"I think there was a lender call today between some of the bigger lenders. Not with the company. Pricing may have been what they discussed. Have no proof of it. Just something one account mentioned to me," the trader remarked.

Georgia-Pacific offering paydown and fee

Although Georgia-Pacific is not offering improved pricing on its credit facility, the company did say that if its amendment passes, it will repay $400 million of its term loan B and $100 million of its term loan A, plus lenders would get a 100 bps amendment fee.

In return for the paydown and fee, the company would get to loosen its total leverage covenant. Specifically, the amendment would keep the covenant at 5.25 times, the current requirement, through 2010, whereas without the amendment, the covenant would move to 4.5 times in 2009 and 4.25 times in 2010.

At first, these options appeared to be favorable to lenders as the term loan B had traded up to 79½ bid, 81½ offered from 77½ bid, 79½ offered following the amendment request on Wednesday.

Citigroup is leading the amendment process.

Georgia-Pacific is an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals.

Precision Drilling plugging away

Moving to the primary, Precision Drilling is still figuring out the final size of the proposed carve-out under its term loan B as the lead banks are trying to determine what percentage of the certain CLO investors that couldn't get in to the deal before would be interested in this piece, according to a market source.

As was previously reported, the banks are looking to carve out anywhere from $75 million to $100 million of the $400 million 53/4-year term loan B, and price it at an original issue discount of 85 with a wider spread than the rest of the term loan B.

The remaining term loan B is talked at an original issue discount of 80 with a spread of Libor plus 600 basis points and a 3.25% Libor floor - after flexing up during syndication from original talk of Libor plus 500 bps with discount guidance in the 86 area.

Term B tranches should have same yield

The source explained that the spread on Precision Drilling's carve-out would be whatever is needed to get the two pieces of term loan B debt to have the same ending yield so that the tranches are essentially the same and should trade on top of each other.

The only reason behind the carve-out is that some CLOs couldn't get involved in the deal at a discount of 80 and so offering the piece of debt with the tighter discount allows them to participate in this transaction.

"It appears that there is interest in the market. Obviously not an ideal time, but even with that, people are putting down. Headed in the right direction," the source added regarding syndication of the B loan.

Last week, talk was that the term loan B was over 75% filled.

Precision Drilling pro rata filled out

Precision Drilling's $800 million of pro rata bank debt is already fully subscribed, as it was helped along by a very successful early round of syndication to senior managing agents, a source previously told Prospect News.

Both the $400 million five-year revolver and the $400 million five-year term loan A are currently being talked at Libor plus 400 bps.

According to a filing with the Securities and Exchange Commission, amortization on the term loan A is 5% in year one, 10% in years two and three, and 15% in year four, with the balance payable at maturity, and amortization on the term loan B is 1% per year, with the balance payable at maturity.

Financial covenants include a minimum interest coverage ratio of 3.0 to 1.0, a minimum fixed-charge coverage ratio of 1.05 to 1.0 in 2009 and 1.10 to 1.0 thereafter, and a maximum total leverage ratio of 3.0 to 1.0.

RBC Capital Markets and Deutsche Bank are the joint lead arrangers and bookrunners on the $1.2 billion senior secured credit facility (Ba1/BBB-), with RBC the administrative agent and left lead, Deutsche the syndication agent, and HSBC and TD Securities the co-documentation agents.

Precision Drilling leverage in the 1s

Upon closing on this deal, Precision Drilling's senior leverage will be 1.2 times and total leverage will be 1.7 times.

Proceeds from the credit facility will be used to help fund the acquisition of Grey Wolf Inc. for $9.02 in cash or 0.4225 Precision trust units, subject to proration. The maximum amount of cash to be paid will be about $1.12 billion, and the maximum number of trust units to be issued will be about 42 million.

Other financing for the transaction will come from $400 of senior unsecured notes, which are backed by a commitment for a $400 million 12-month unsecured bridge loan. The bridge loan will be reduced by the amount of Grey Wolf's convertible securities that are not converted or redeemed at close.

Equity will represent about 65% of the pro forma capital structure. On a pro forma basis for the 12 months ended June 30, combined revenue was $1.8 billion.

Completion is still subject to Grey Wolf shareholder approval. The Grey Wolf special meeting of shareholders is scheduled for Dec. 23 after being pushed out from an original date of Dec. 9 because of a clarifying amendment that was made to the acquisition agreement.

Precision is a Calgary, Alberta-based provider of high performance energy services to the oil and gas industry. Grey Wolf is a Houston-based provider of turnkey and contract oil and gas land drilling services.

Goober Drilling deal dies

Also on the new deal front, Goober Drilling's proposed $230 million asset-based credit facility is not happening as the price talk was getting too expensive for the company to accept, according to a market source.

The facility consisted of a $140 million revolver and a $90 million term loan.

At launch, pricing on both tranches was going to be able to range from Libor plus 275 bps to 350 bps based on leverage; however, by the time the deal was pulled, price talk on the tranches had moved up to Libor plus 400 bps, the source said.

Investors were being offered tiered upfront fees based on commitments.

Jefferies was acting as the lead bank on the deal that was going to be used to refinance existing debt.

Goober Drilling, owned by Leucadia National Corp. Chartwell Investments and management, is a Stillwater, Okla., provider of contract drilling services for oil and gas exploration and production companies.

NCI Building cancels deal plans

NCI Building Systems Inc. also decided not to go ahead with its proposed $380 million senior secured credit facility (Ba1/BBB-) as the market was pretty much "closed," a company spokesman told Prospect News on Friday.

The facility consisted of a $100 million five-year revolver, a $100 million six-year term loan and a $180 million delayed-draw, with six-year final maturity, term loan, with all tranches originally talked in the area of Libor plus 250 bps to 275 bps.

Wachovia and Bank of America were acting as the lead banks on the deal that was being marketed primarily to commercial banks.

NCI says it has cash for puts

NCI Building Systems was going to use the delayed-draw term loan to fund a convertibles put in November 2009.

However, the spokesman explained that the company has enough cash on hand to cover the put.

Proceeds from the revolver and funded term loan were going to be used to refinance the company's existing credit facility and for general corporate purposes.

When the market opens back up, the company plans to come back with a new refinancing plan, the spokesman added.

NCI Building is a Houston-based manufacturer and marketer of metal products for the nonresidential construction industry.

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