UAL soars on amendment; US Airways rises on merger talk; ResCap trades up; PITG tweaks deal

By Sara Rosenberg

New York, May 5 - UAL Corp.'s term loan B strengthened quite a bit on Monday as the company announced an amendment that includes some hefty consent fees, and increased merger buzz with US Airways Group Inc. probably helped as well, seeing that US Airways' term loan was up too.

Also in trading, Residential Capital LLC (ResCap) saw its term loan rally continue as the company revealed that, if all goes to plan, it will definitely be repaying the loan, and the bid on Idearc Inc. came in a little as investors are getting ready for numbers to come out.

In other news, PITG Gaming reworked its credit facility and talk is that following the changes, the first-lien term loan is oversubscribed and the second-lien term loan is moving along in the right direction.

UAL's term loan B traded higher by a couple of points during Monday's session primarily due to the offer of large amendment fees; however, speculation on a merger with US Airways was likely also a factor since US Airways' term loan was better as well, according to traders.

UAL's term loan B was quoted at 91 bid, 93 offered, up from 87½ bid, 89 offered on Friday, traders said.

US Airways' term loan B was quoted at 78 bid, 79 offered, up from Friday's levels of 76½ bid, 78½ offered, traders added.

On Monday morning, UAL held a lender call to launch an amendment that would waive the fixed-charge coverage ratio for one year and require the company to hold unrestricted cash of $1 billion, up from $750 million.

In connection with this amendment, lenders were being offered a 700 bps fee if they gave consents on Monday and a 500 bps fee is they consent on Tuesday.

"Traded up on the amendment fees that people are getting," one trader remarked about UAL's term loan B. "Northwest kind of did the same thing. It was initially 500 bps if in the first 50.1%. Anybody who came in after that wasn't going to get paid. But, they ended up paying everyone just because it happened within a day, which they weren't expecting."

Late last month, Northwest Airlines Corp., an Eagan, Minn.-based airline company, amended its credit facility to eliminate the fixed-charge coverage ratio for a year.

Meanwhile, pushing US Airways higher, and helping UAL too, was talk that a merger agreement between the two companies could be announced within the next 10 days, a second trader pointed out.

"People are expecting a pay down," the trader added.

UAL is a Chicago-based provider of air transportation services. US Airways is a Tempe, Ariz.-based airline company.

ResCap continues to grind higher

ResCap's term loan was once again trading up as the company confirmed peoples' suspicions that the loan would be repaid in connection with the recently announced financing plans, according to traders.

The term loan was quoted at 95½ bid, 97½ offered, up from 94 bid, 96 offered on Friday and from 90 bid, 92 offered on Thursday, traders said.

On Monday morning, ResCap said in an 8-K filed with the Securities and Exchange Commission that it will be repaying its term loan maturing in July, and replacing its $875 million 364-day revolver and its $875 million three-year revolver.

The funds for the refinancing will come from a $3.5 billion first-lien revolving senior secured credit facility that is currently being negotiated with GMAC LLC as the lender.

The revolver will also be used to fund the cash required for the note exchange and tender offers that were announced on Friday.

Pricing on the revolver is expected to be Libor plus 275 basis points and the company is expected to pay an upfront fee of 50 bps, the filing said.

Covenants include a minimum cash balance and a minimum consolidated tangible net worth.

The company's recently announced proposed cash tender and exchange offers for any and all of its U.S. dollar equivalent $12.8 billion outstanding notes is a condition for obtaining the revolver.

In the offers, ResCap will offer to issue new 8½% senior secured guaranteed notes due 2010 in exchange for existing 2008 and 2009 notes, and new 9 5/8% junior secured guaranteed notes due 2015 in exchange for existing 2010 through 2015 notes.

In addition, holders participating in the exchange offers will be able to elect to receive cash in place of the new notes that they would otherwise receive under a modified Dutch auction process.

The company also plans on commencing a cash tender offer for any and all of its outstanding $1.199 floating rate notes due June 9.

The revolver will mature on the earlier of May 1, 2010 if the offers are completed in a manner satisfactory to the lender, otherwise March 31, 2009, and the date on which the maturity of the new notes issued in connection with the previously announced tender offers is accelerated due to an event of default.

ResCap, an indirect wholly owned subsidiary of GMAC Financial Services, is a Minneapolis-based real estate finance company focused primarily on the residential market.

Idearc bid lower

Idearc's term loan was a touch softer on the bid side as the market is preparing for first-quarter financials to be announced on Tuesday, according to a trader.

The term loan was quoted at 81¾ bid, 82¾ offered, compared to Friday's levels of 81 7/8 bid, 82 5/8 offered, the trader said.

Idearc is a Dallas-based provider of yellow and white page directories and related advertising products.

PITG Gaming revises structure

Moving to the primary, PITG Gaming made a number of modifications to its credit facility, including increasing first- and second-lien term loan sizes, changing the original issue discounts and call protection on the term loans, and increasing pricing on the second-lien, according to a market source.

Under the changes, the first-lien term loan was upsized to $380 million from $370 million, and the second-lien term loan was upsized to $260 million from $250 million, with the additional proceeds being used to fund the increased original issue discounts on the two tranches, the source said.

The original issue discount on the first-lien term loan was increased to 94 from 96 and the discount on the second-lien term loan was increased to 92 from 96, the source remarked.

Pricing on the first-lien term loan was left unchanged at Libor plus 600 bps, with a 3.25% Libor floor, for an all-in yield of 13%.

Pricing on the second-lien term loan was lifted to Libor plus 1500 bps - comprised of Libor plus 1,000 bps cash plus 500 bps PIK - from Libor plus 1300 bps - comprised of Libor plus 1000 bps cash plus 300 bps PIK, the source continued. The Libor floor remained at 3.25%, for an all-in-yield of about 27%.

Also under the revisions, call protection on the first-lien term loan was changed to non-callable for 2½ years, then at 102, 101, as opposed to being non-callable for 1½ years, then at 102, 101, and call protection on the second-lien term loan was changed to non-callable for 2½ years, then at 109, 107, 105, as opposed to non-callable for two years, then at 106, 104, 102.

Second-lien lenders are being offered warrants for 5% of the company's equity.

PITG Gaming's $650 million credit facility, up from $630 million, also includes a $10 million revolver priced at Libor plus 600 bps, with a 3.25% Libor floor.

Credit Suisse is the lead bank on the deal that will be used to help fund the Majestic Star Casino LLC's Pittsburgh casino. Construction started in December and the grand opening is projected for May 2009.

Following these changes, Standard & Poor's raised PITG Gaming's corporate credit rating to B from B-, revolver and first-lien term loan rating to B+ from B, and second-lien term loan rating to CCC+ from CCC.

On the flip side, Moody's Investors Service affirmed its ratings on PITG, including a B3 corporate family rating, Ba3 revolver and first-lien term loan rating, and Caa1 second-lien term loan rating.

S&P said that it upgraded the ratings to reflect meaningful changes to the originally proposed structure, including an amendment to the completion guarantee provided by Barden Nevada Gaming LLC, which offers additional liquidity in the event of a slow ramp-up of the facility.

The amendment calls for a $35 million completion guarantee and requires that any unused portion be deposited into a liquidity reserve account upon completion of construction. The previous structure limited Barden Nevada's commitment to a $25 million completion guarantee, which included a $10 million contribution to the liquidity reserve account that would have been offset dollar for dollar by any amount remaining in the interest reserve account upon completion of construction.

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