Midwest Generation breaks for trading with the term loan reaching 101 levels

By Sara Rosenberg

New York, April 20 - Midwest Generation LLC's credit facility broke for trading on Tuesday with the term loan moving higher from its initial offer price to 101 bid, 101¼ offered and actively traded by agent bank Citigroup during market hours, according to a trader.

The $700 million seven-year first priority secured institutional term loan (Ba3/B+) is priced with an interest rate of Libor plus 325 basis points.

Besides left lead Citigroup, Credit Suisse First Boston, JPMorgan and Lehman Brothers were all lead banks on the deal as well.

The company's credit facility also contains a $200 million revolver. The revolver will be used for working capital and will replace the existing working capital facility under which nothing is drawn.

Security for the term loan and the revolver is a first lien on substantially all of the coal fired generating plants owned by Midwest Generation.

Proceeds from the term loan combined with proceeds from $1 billion of putable second priority senior secured notes will be used to refinance $693 million of debt due in December owed by its direct parent, Edison Mission Midwest Holdings Co., and to make termination payments under the Collins Station lease in the amount of about $970 million.

Midwest Generation is a Chicago electric company.

Juno oversubscribed

Juno Lighting Inc.'s first and second lien term loans were pretty well oversubscribed by Tuesday, with $350 million in commitments received by the syndicate on the $150 million first lien term loan and $90 million in commitments received on the $60 million second lien term loan, according to a fund manager.

The first lien term loan is priced with an interest rate of Libor plus 300 basis points, and the $60 million second lien term loan is priced with an interest rate of Libor plus 575 basis points. The second lien tranche has call protection of 102 in year one and 101 in year two.

But, a reverse flex in pricing "is usually the next step," the fund manager added.

When the deal launched last Wednesday it got good reviews as some were impressed by the business' solid appearance as well as by a new product that is expected to be released soon that could earn the company quite a bit of money and by the potential of leverage reduction.

Leverage is 3.2 times through the first lien and 4.5 times through the second lien. Interest coverage is just over four times. Furthermore, the company generates $25 to $30 million of free cash flow per year that could be used for debt reduction.

Proceeds would be used to retire $160 million of long-term debt and pay a $50 to $60 million dividend to its preferred and common stockholders.

The $240 million credit facility also contains a $30 million revolver.

Wachovia is the lead bank on the deal.

Juno is a Des Plaines, Ill., lighting fixtures manufacturer.

Amscan oversubscribed

Amscan Holdings Inc.'s $250 million credit facility (B1/B+), which just launched last Thursday, is also oversubscribed despite the fact that the syndicate has still not come out with price talk on the deal, according to a market source.

"People may be putting in orders contingent on getting certain spreads. They commit after giving a threshold," a buyside source hypothesized.

Oversubscription is not a major surprise being that the deal had already received a lot of commitments on its launch date as well as the signing on by General Electric Capital Corp. as administrative agent.

Goldman Sachs is the lead bank on the deal, which consists of a $50 million revolver and a $200 million term loan B.

Proceeds will be used to help fund Amscan's recapitalization, which will also be funded through the issuance of $175 million of subordinated bond debt.

Total leverage following the transactions will be 5.7 times total and three times bank.

As part of Amscan's recapitalization via Berkshire Partners and Weston Presidio, the company will merge with AAH Acquisition Corp., a newly-formed corporation affiliated with AAH Holdings Corp., an entity jointly controlled by affiliates of Berkshire Partners and Weston Presidio, according to a company news release. GS Capital Partners II LP, and certain other funds managed by or affiliated with Goldman Sachs & Co., which currently own approximately 71% of Amscan, will transfer all of their equity interests in the company.

The total value of the transaction, including equity and debt, is about $540 million, with the equity portion estimated to be around $240 million.

In connection with the transaction, Amscan will begin a cash tender offer to purchase any and all of its outstanding 9.875% senior subordinated notes due 2007.

The merger, which is expected to close in mid-2004, is subject to customary conditions including the approval of Amscan stockholders, the availability of financing, the expiration of antitrust waiting periods and certain other conditions. Shareholders of Amscan representing about 99% of the outstanding Amscan stock have agreed to vote in favor of the transaction.

Amscan is an Elmsford, N.Y., decorative party goods company.

Metris sees interest

Metris Cos. Inc.'s bank meeting for its newly launched $175 million term loan was well attended on Tuesday and the syndicate did get some commitments from investors by day's end, according to a market source, although specifics on how much of the book is spoken for were unattainable.

The term loan, which is being led by Goldman Sachs, is priced at 11% and is being issued with an original issue discount at 99, the source said.

Proceeds will be used to refinance the company's $125 million one-year term loan that was obtained last June and is priced with an annual interest rate of 12% plus performance payments based on the excess spread in the Metris Master Trust.

In addition, the company is considering a private placement of approximately $250 million of senior secured notes. Proceeds from the notes would be used to refinance existing debt, including term loan debt, the 10% senior notes due in 2004 and a portion of the 10 1/8% senior notes due in 2006, according to a company news release.

Metris is a Minnetonka, Minn., provider of financial products and services.

Meow Mix inching lower

The Meow Mix Co.'s bank debt has been slowly working its way lower in the secondary market with both the first and second lien term loans quoted below par, an occurrence that is not so usual for paper that is less than a year old.

The first lien term loan is quoted at 98¾ bid, 99½ offered, according to one trader. While the second lien term loan is quoted at 97¼ bid, 97¾ offered, according to a second trader.

"I think people don't like it," the first trader said. "It's highly levered. And, I don't think results have been that good."

"There are covenant issues and performance issues," the second trader added.

The term loans were obtained by the Secaucus, N.J., cat food company in October 2003 to support its acquisition by The Cypress Group LLC from J.W. Childs Associates LP. UBS acted as bookrunner and lead arranger, and CIBC acted as syndication agent and co-arranger on the deal.

PanAmSat close to par

PanAmSat Corp.'s bank debt was "quietly quoted" in the high 99s on Tuesday after definitive news emerged about a leveraged buyout, which would result in a refinancing of the company's debt, according to a trader.

"Everyone who was holding that is loving life right now," the trader added.

"It's just yield-to-call paper right now. It's been rumored that it would happen for a while now so it was pretty much around there," a second trader said regarding the LBO and the secondary levels.

The Wilton, Conn., satellite operator is being acquired by Kohlberg Kravis Roberts & Co. from The DirecTV Group Inc. for approximately $4.3 billion, including the assumption of about $750 million of net debt.

To support the LBO, PanAmSat will get a new credit facility and issue high-yield bonds via Credit Suisse First Boston and Citigroup (see story elsewhere in this issue).

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