Terex term loan C prices at higher rate than term B, worrying some existing holders

By Sara Rosenberg

New York, Sept. 17 - Terex Corp. launched its new $210 million term loan C (Ba3/BB-) on Tuesday, which will be used to help fund the acquisition of Genie Holdings Inc. and to refinance Genie debt, a company spokesman said. However, some people who are current holders of the company's existing term loan B paper were not thrilled with the emergence of the Terex term loan C.

The term C has an interest rate of Libor plus 250 basis points, matures on Dec. 31, 2009 and is expected to close by the end of the month, according to the spokesman. Credit Suisse First Boston and Salomon Smith Barney are the lead banks on the deal.

Early in the summer, the Westport, Conn. maker of capital equipment closed on a $675 million credit facility, which was used to help finance the acquisition of Demag Mobile Cranes GmbH & Co. KG and to refinance Terex debt.

At that time, the company priced its term loan B with an interest rate of Libor plus 200 basis points. The 50 basis point difference between the term B and the term C may be attributed to market conditions being less favorable at the present moment, the spokesman explained.

"We're not going to be looking at Terex," a fund manager told Prospect News. "We're very upset about it. The existing deal is Libor plus 200 and this is Libor plus 250. It will have a negative effect on the existing loan."

The fund manager explained that if an investor has the opportunity to purchase the same credit at par with differing spreads they would automatically opt for the bank debt with the larger interest rate since it is providing a better return on the investment.

"Why would you want to buy paper at par for 200 if you can get it at 250?" the fund manager concluded.

Asked whether movement has been detected on Terex's existing term B paper, a secondary bank loan trader said: "I haven't really noticed anything on it today. I think everyone is sitting on it waiting to see what happens on the term C, if it's oversubscribed and flexed down."

Meanwhile, syndication of Rayovac Corp.'s recently launched $675 million credit facility (Ba3) is "struggling" and may undergo some changes, according to a buy-side source. "There are two reasons for this," the buy-side source explained. "One is the aspect of European assets and the issue of collateral. Two is that it's light on pricing.

"I think they're going to be flexing from 325 to 375 [on the term loan B]. From what I hear they're talking about flexing to 350 or 375 but I think it will come on the higher end. The other stuff (meaning the pro rata portion) may flex to 325."

Currently, the credit facility consists of a $150 million six-year revolver with an interest rate of Libor plus 275 basis points, a $50 million six-year euro revolver with an interest rate of Libor plus 275 basis points, a $50 million six-year term A with an interest rate of Libor plus 275 basis points, a $50 million seven-year euro term B with an interest rate of Libor plus 325 basis points and a $375 million seven-year term B with an interest rate of Libor plus 325 basis points.

"European demand has been fairly healthy so they may move $25 million [from the term B] to the European tranche [B]," the buy-side source added.

Bank of America and Citigroup are the lead banks on the Madison, Wis. battery and lighting device company's credit facility. Calls to the syndicate were not immediately returned.

Proceeds from the loan will be used to help fund the acquisition of Varta AG's consumer battery business, retire existing bank debt and provide for expanded working capital needs.

However, Rayovac is not the only loan having trouble with syndication, according to the buy-side source. "I hear the deals recently launched are struggling a little so underwriters are pulling back," the source said, without going into specifics on which new deals fall into this category. "It seems like there's not the urgency [that was felt before Labor Day] because some of the more recent syndication struggled.

"The secondary market was just sort of dead partly because of August and partly because people were waiting for the primary deals to launch," the buy-side source continued. "Activity has picked up some. Now that people know that [some primary deals aren't launching yet], they are going back to the secondary." For example, in August bank loan participants were talking about Del Monte Foods Co., QwestDex and Burger King Corp., expecting some of these loans to be September business. Now it appears that these highly anticipated facilities will launch either by the end of the month or in October.

In follow-up news, U.S. Shipping Acquisition completed its acquisition of the U.S. flag tanker operations of Amerada Hess Corp. and closed on a new $140 million senior secured credit facility (Ba2/BB) consisting of a $130 million six-year amortizing term loan at Libor plus 325 basis points and a $10 million five-year revolver at Libor plus 325 basis points. CIBC World Markets was the lead bank on the New York, N.Y. petroleum tanker company's deal.

"We are very excited about this opportunity," said Paul Gridley, chairman and chief executive officer, in a news release. "The vessels have been maintained to the highest standards by Hess and were built with superior design features that have resulted in a tremendous operating and safety performance record. We particularly value the strong support from existing customers, especially BP, which currently charters three of the six vessels. US Shipping will maintain its strategic relationship with Hess which will give Hess continued access to high quality transportation and logistics services."

NCI Building Systems Inc. closed on a new $250 million senior secured credit facility (Ba3/BB-), which was used to repay in full the existing credit facility, according to a filing with the Securities and Exchange Commission. The loan consists of a $125 million five-year revolver and a $125 million six-year term loan B. Bank of America and Wachovia were the lead banks on the deal.

Interest can vary from Libor plus 200 to 275 basis points on the revolver and Libor plus 300 to 325 basis points on the term loan depending on the company's leverage ratio, the filing said. Initially, the revolver has an interest rate of Libor plus 250 basis points and the term B has an interest rate of Libor plus 325 basis points.

The loan is secured by receivables, inventory and equipment and by 100% of the capital stock and other equity interests in each direct and indirect operating domestic subsidiary.

At closing, the Houston, Tex. metal building products manufacturer borrowed approximately $46 million under the new revolver and $125 million under the term loan, resulting in unused borrowing capacity of $79 million.

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