Michael Foods details emerge; Spirit Aero term lenders likely to pass amendment; GM dips

By Sara Rosenberg

New York, April 17 - Over in the primary market, some more information on the Michael Foods Inc. proposed credit facility surfaced, including specific timing and expected tranche sizes.

In other news, sentiment towards the Spirit AeroSystems Inc. amendment seems to be positive, at least among some term loan lenders, with the expectation being that the proposal will pass by the deadline early next week.

Meanwhile, on the trading front, General Motors Corp.'s term loan was quoted lower on Friday after a big run up during the previous session and the LCDX 12 index was pretty much unchanged on the day, while cash in general was up once again.

Michael Foods sets timing

Michael Foods nailed down timing for the launch of its $525 million credit facility (Ba3/BB) with the scheduling of a bank meeting for Tuesday, according to a market source.

Previously it was known that the bank meeting would take place during the week of April 20, but a specific date had been unavailable.

In addition, some details on the possible structure of the deal came out, including that there is expected to be a $75 million 31/2-year revolver and $450 million in term loans that will be divided into a term loan A and a term loan B.

Sizes on the term loans are still being figured out. However, it is known that of the total amount up to $275 million can be 31/2-year term loan A debt or up to $275 million can be five-year term loan B debt, the source said.

Michael Foods expected pricing

As was already reported, anticipated price talk on Michael Foods facility has already been making its way around the market, with the revolver and the term loan A guided around Libor plus 400 basis points, and the term loan B guided around Libor plus 450 bps.

The entire facility is expected to carry a 2% Libor floor.

Original issue discounts and upfront fees on the deal are still to be determined, the source added.

Bank of America is leading the transaction that will be used to refinance the company's existing credit facility.

Only existing lenders are being approached to participate in the new credit facility.

Michael Foods is a Minnetonka, Minn.-based food processor and distributor.

Spirit Aero term lender approvals expected

Spirit AeroSystems is anticipated by some market sources to be able to get enough approvals from term loan lenders needed for an amendment to pass that would allow the company to split its revolver into a tranche A that would have the same terms as the current revolver and a tranche B that would have an extended maturity and higher pricing.

"Don't see why it shouldn't get done. From a term loan lenders' perspective, obviously want them to extend their revolver," one source told Prospect News.

"They have a $650 million revolver that is undrawn so obviously they don't need the whole thing. Ideally I think they want like $400 million or so [in tranche B commitments], but I haven't checked on [what's come in so far]. Very low leveraged company. Barely 1.0 times levered," the source added.

Commitments from revolver lenders towards the tranche B are due on Tuesday and so are consents from term loan lenders.

Spirit Aero revolver B pricing

Under the proposal that is being considered by investors, pricing on the revolver tranche B would be Libor plus 300 basis points with a 75 bps commitment fee, based on a leverage grid, and the maturity date of this tranche would be in 2012.

Meanwhile, the revolver tranche A would have the same terms as the current revolver, meaning that maturity would be in June 2010 and pricing would be Libor plus 225 bps with a 50 bps commitment fee.

In order for the amendment to get done, the company needs term loan lender approval and commitments from at least some of its revolver lenders towards the tranche B.

Term loan lenders will get a 25 basis point upfront fee for their consents.

Bank of America is the lead bank on the amendment.

Spirit AeroSystems is a Wichita, Kan.-based designer and manufacturer of aero-structures.

General Motors softens

Switching over to the secondary market, General Motors' term loan was quoted weaker on Friday after rallying by about seven points in the previous day's trading hours, according to a trader.

The term loan was quoted at 56½ bid, 57½ offered, down from around 59 bid, 60 offered on Thursday, the trader said.

The big run up on Thursday had been attributed to news reports that the company is thinking of offering to swap $27.5 billion of bond debt for equity by the end of the month.

On Friday, the focus turned back to Chapter 11, as there was various chatter that bankruptcy is a probably outcome for the troubled Detroit-based automotive company.

LCDX steady, cash better

Also in trading, the LCDX 12 index was relatively flat during the trading session, but the cash market was once again higher, this time by about half a point across the board, according to traders.

The index was quoted on Friday around 80.25 bid, 80.75 offered, traders said. By comparison, on Thursday, one trader had it going out at 80.50 bid, 80.80 offered and Markit had it closing out the day at 80.55.

Stocks, meanwhile, were just slightly better on the day with Nasdaq closing up 2.63 points, or 0.16%, Dow Jones Industrial Average closing up 5.9 points, or 0.07%, S&P 500 closing up 4.3 points, or 0.5%, and NYSE closing up 26.33 points, or 0.48%.

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