Dayton floats talk; Goodman overfills; Solutia controversy continues; Cash, LCDX heaviness persists

By Sara Rosenberg

New York, Feb. 6 - Dayton Superior Corp. began circulating pricing guidance on its credit facility as the deal is gearing up for its Thursday bank meeting and Goodman Global Inc.'s term loan B was oversubscribed by Wednesday's commitment deadline.

Also, Solutia Inc. announced that it is suing the lead banks on its exit financing facility, arguing that the debt commitment must be funded even if syndication is unsuccessful.

Over in the secondary, cash and LCDX both had a weaker tone to them, although in the cash market, the softening was somewhat dependent on the name.

Dayton Superior price talk starting making its way around the market as the transaction is getting ready to launch with a bank meeting on Thursday, according to a market source.

The $100 million six-year term loan (B1/BB-) is being guided at Libor plus 425 basis points to 450 bps, with an original issue discount of 98, the source said.

Meanwhile, the $150 million asset-based revolver is being guided at Libor plus 225 bps, with a 37.5 bps commitment fee, the source added.

The company had previously outlined expected pricing in filings with the Securities and Exchange Commission. In those filings, revolver pricing was the same; however, term loan pricing was said to be expected at Libor plus 375 bps.

Financial covenants will include a maximum leverage ratio and a minimum interest coverage ratio.

GE Capital is the lead bank on the $250 million deal that will be used to refinance the company's existing $130 million revolver and retire its 10¾% senior second secured notes due in September 2008.

Upon completion of the refinancing, drawdowns against the new revolver are expected to be about $65 million.

Dayton Superior is a Dayton, Ohio-based provider of specialized products for the non-residential concrete construction market.

Goodman gets done

Goodman Global's $800 million term loan B (Ba3/BB) was oversubscribed - "not by a huge margin, but comfortably over" - by Wednesday's 12 p.m. ET commitment deadline, according to a market source.

And, although books technically closed, there is still the possibility that a couple of stragglers might come in on the deal before allocations go out, the source said.

Allocations are expected on Tuesday of next week, the source added.

The term loan B is priced at Libor plus 425 bps, with an original issue discount of 96 and a 3.25% Libor floor to maturity.

Earlier this week, pricing on the B loan was flexed up from initial talk at launch of Libor plus 375 bps, the original issue discount widened from original guidance of 98½ and the Libor floor was added.

Goodman's $1.1 billion senior secured credit facility also includes a $300 million ABL revolver priced at Libor plus 200 bps.

No changes were made to the revolver during syndication.

Barclays Capital, GE Capital and Calyon are the lead banks on the deal, with Barclays the left lead on the term loan B and GE the left lead on the revolver.

Proceeds will be used to help fund the buyout of the company by Hellman & Friedman LLC for $25.60 in cash per share. The transaction is valued at $2.65 billion.

Other financing will come from $500 million of senior subordinated financing from vehicles managed by GSO Capital Partners and Farallon Capital Management, LLC, according to filings with the Securities and Exchange Commission.

On a gross basis, senior leverage is 3.4 times and total leverage is 5.2 times.

Goodman Global is a Houston-based manufacturer of residential and light commercial heating, ventilation and air-conditioning equipment.

Solutia takes banks to court

Solutia filed a complaint in the U.S. Bankruptcy Court for the Southern District of New York on Wednesday against the three banks that provided the commitment for its exit financing debt, according to a news release.

The company is seeking a court order requiring the banks - Citigroup, Goldman Sachs and Deutsche Bank - to fund the commitment.

The complaint also asserts that the banks should be stopped from invoking the clause they claim relieves them of their obligation due to their improper conduct and misrepresentations to the company, and further claims that the banks fraudulently induced Solutia to enter into the initial engagement by promising that the financing was firmly committed.

In October, the banks committed to provide Solutia with $2 billion in exit financing comprised of a $400 million asset-based revolver, a $1.2 billion term loan B and $400 million of bonds or bridge loan.

On Jan. 23, it came out that the banks were arguing that an adverse change has occurred in the loan syndication, financial or capital markets since Oct. 25 that, in their reasonable judgment, materially impairs syndication of the proposed facility.

Under the credit facility commitment, if an adverse change has occurred since that Oct. 25 date, the banks are no longer obligated to provide the financing.

However, the company took the stance that the ongoing conditions in the credit markets began long before Oct. 25 and, therefore, the banks are required to fund their commitments on or before the Feb. 29 deadline.

And then last week, Solutia said that the banks refused a company demand to close and fund their commitments by Feb. 6, restating their claim that market conditions have hurt their attempt to complete the financing package.

At the start of this week, the banks actually came out with changes to Solutia's debt financing, in a continuing effort to syndicate the transaction.

Under the changes, the $1.2 billion seven-year term loan B (B1/B+) is now being offered to lenders at a discount of 91, compared to initial guidance that was in the 96 area, and a three-year Libor floor of 3.25% was added to the deal. Actual spread on the term loan B was left in line with original talk at Libor plus 350 bps.

The five-year asset-based revolver (Ba1) was increased to $450 million from $400 million, while pricing was left unchanged at Libor plus 175 bps.

And, the accordion features under both the term loan B and the ABL revolver were eliminated.

Meanwhile, price talk on the notes came out at 12.5% at 93 for a yield of 13.97%. They have a face amount of about $430 million but net proceeds will be about $400 million.

"This is not a 'best efforts' agreement," said Jeffry N. Quinn, chairman, president and chief executive officer of Solutia, in the news release. "Solutia agreed to pay the banks an enhanced fee in exchange for their firm commitment to fund the full $2 billion exit financing facility - regardless of the results of the syndication process. We are extremely disappointed by their refusal to meet this commitment and have no choice but to pursue all of our legal remedies."

"It is a well-documented fact that the ongoing conditions in the credit markets began in the summer of 2007," Quinn said in the release. "Well before the banks committed to Solutia's exit financing, they stated in public filings and through professional advice to Solutia that the credit markets were in disarray, and that the credit crisis would continue for months to come. Despite their concerns and negative outlook, the banks entered into a firm commitment to provide Solutia with this exit financing. The willingness of these banks to offer committed financing that was not subject to a successful syndication was a major factor in deciding to award them this business.

"Solutia is ready to emerge from Chapter 11. We have successfully repositioned our company, we have confirmed a plan of reorganization that brings significant value to our constituents, and our businesses are performing well. We now look to the banks to meet their commitment," Quinn added in the release.

Solutia is a St. Louis-based manufacturer and provider of performance films, specialty chemicals and an integrated family of nylon products.

As a result of the financing troubles, Solutia's effective date of its confirmed plan of reorganization and its emergence from Chapter 11 has been delayed from the previously anticipated Jan. 25 date.

Cash, LCDX lower again

The cash market in general felt heavy with some names down by a point, while others were unchanged, and LCDX 9 dropped with equities, according to a trader.

For example, Texas Competitive Electric Holdings Co. LLC (TXU), a Dallas-based energy company, saw its term loan B-2 and B-3 quoted at 89 3/8 bid, 90 3/8 offered, down from 90 bid, 91 offered, the trader said.

Ford Motor Co., a Dearborn, Mich.-based automaker, saw its term loan quoted at 84 bid, 85 offered, down from 85 bid, 86 offered.

And, Freescale Semiconductor Inc., an Austin, Texas, designer and manufacturer of embedded semiconductors, saw its term loan quoted at 80½ bid, 82½ offered, down from 82 bid, 84 offered, the trader continued.

Meanwhile, Georgia-Pacific Corp., an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals, saw its term loan B end the day unchanged at 89 bid, 90 offered, the trader said.

Also, Alltel Communications Inc., a Little Rock, Ark., provider of wireless voice and data communications services, saw its term loan B-3 end unchanged at 89½ bid, 90¼ offered, the trader added.

As for LCDX 9, levels went out around 92.10 bid, 92.30 offered, down from around 92.30 bid, 92.50 offered.

"It traded as high as 92.60 in the Street, but then it came back down," the trader added regarding the index.

In equities, Nasdaq was down 30.82 points, or 1.33%, Dow Jones Industrial Average was down 65.03 points, or 0.53%, S&P 500 was down 10.19 points, or 0.76%, and NYSE was down 56.39 points, or 0.64%.

Tribune slides

Tribune Co.'s term loan B headed down in trading on Wednesday after McClatchy Co., another newspaper company, reported lower fourth quarter revenues, according to a trader.

The Tribune term loan B went out at 72½ bid, 73½ offered, down from previous levels of 73 bid, 74 offered, the trader said.

On Wednesday morning, McClatchy announced that revenues for the quarter were $573.4 million, down 14.9% from revenues from continuing operations of $673.6 million in 2006.

Preliminary income from continuing operations in the fourth quarter was $33.2 million, or 40 cents per share compared to fourth-quarter 2006 income from continuing operations of $76.9 million, or 94 cents per share.

"While we saw a slight improvement in advertising in the fourth quarter compared to the second and third quarters, the advertising environment in 2008 does not appear to be improving. In fact, in January we've seen headwinds from a worsening national economy," said Gary Pruitt, chairman and chief executive officer of McClatchy, in a company news release.

"We now expect advertising will likely be down in the low double-digit range in the first quarter of 2008. As the year progresses we expect advertising revenue trends to improve somewhat from the first quarter, but we don't have sufficient visibility to be more specific."

For the full year, revenues were $2.3 billion, compared to $1.7 billion in 2006, reflecting the addition of the retained Knight Ridder newspapers acquired in the third quarter of 2006.

Preliminary losses from continuing operations in 2007 were $1.26 billion or $15.40 per share, compared to income from continuing operations for the full year of 2006 of $183.5 million, or $2.84 per share.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.