Reliant trades up on asset sale speculation; CCFC II higher on more refinancing rumors

By Sara Rosenberg

New York, March 4 - Reliant Resources Inc. and Calpine Construction Finance Co. II LLC both traded higher on the day on positive market rumors. Reliant's boost was attributed to a possible pay down, and Calpine's boost was attributed to more refinancing talk.

Reliant's bank debt was seen "moving around a bit" with trades taking place as high as 981/4, according to a trader. By evening, the paper was quoted at 97¾ bid, 98¼ offered compared to Wednesday's levels of 97¼ bid, 98 offered.

The momentum was said to be caused by news reports that the company is planning to sell its New York power plants with proceeds going toward paying down debt, according to the trader.

Calls to the Houston power company to confirm the asset sales news were not immediately returned.

Meanwhile, Calpine Corp.'s CCFC II revolver was also "floating around" the secondary market on Thursday as more rumors continued to be heard on a possible refinancing of the debt, according to a trader.

The paper ended the day quoted at 98 bid, 98½ offered, up slightly from Wednesday's market in which the revolver was seen trading "all the way up to 98," the trader said.

Since the beginning of this week, talk has been floating around that Calpine is going to be bringing its recently cancelled financing package back to the market but with a different underwriter this time around.

On Feb. 24, the San Jose, Calif., power company announced that it pulled its $1.3 billion non-recourse first priority secured institutional term loan from the bank loan market and its $1.05 billion secured notes offering from the high-yield market. The deals were said to be cancelled due to current market conditions.

Deutsche Bank was the lead bank on the pulled bond and bank deals that were going to be used to refinance the CCFC II revolver.

When asked whether there were any rumors pointing to who might be leading the next transaction, the trader responded, "I don't think anyone has been mandated on that yet."

Home Interiors well attended

Home Interiors & Gifts Inc.'s bank meeting saw pretty good physical attendance as well as decent attendance on the phone, according to a market source.

"The company did a good job. I think people listened to it. They've been in the market before. It's not your straight forward manufacturing company. There were a lot of questions from existing and non-existing lenders and that's good. Technically they're increasing leverage at a lower price. Now [investors] just have to evaluate this [and] get comfortable with the business based on leverage," the source said.

The proposed $370 million credit facility (B2/B) consists of a $320 million term loan with an interest rate of Libor plus 325 basis points and a $50 million revolver with an interest rate of Libor plus 275 basis points. The term loan is being issued at par while investors get 1% for revolver commitments.

Home Interiors' existing term loan is priced with an interest rate of Libor plus 450 basis points so this deal would result in a nice reduction in interest expense for the company. As for the potential lenders, some believe that Libor plus 325 basis points is an appropriate spread for the rating.

JPMorgan and Bear Stearns are the lead banks on the deal that is launching on Thursday via a bank meeting, with JPMorgan listed on the left.

Proceeds will be used to refinance about $169.8 million of existing senior debt, to repurchase all approximately $139 million or a portion of the company's outstanding convertible preferred stock, for general working capital purposes and to pay transaction fees and expenses.

On a pro forma basis after giving effect to the refinancing and the anticipated use of the proceeds from the refinancing, as of Dec. 31, 2003, the company would have had about $474.6 million in total debt, compared to approximately $323.2 million in total debt as of Dec. 31, 2003 on an actual basis.

Home Interiors & Gifts is a Dallas integrated manufacturer and distributor of home decorative accessories.

Transportation Tech flexes up

Transportation Technologies Industries' $100 million five-year second lien term loan B (B3/CCC+) saw an increase in spread for a second time since launching into the primary bank loan market on Feb. 12.

The tranche is now priced with an interest rate of Libor plus 700 basis points, according to a syndicate document. Originally this second lien loan was brought to market with Libor plus 500 basis points pricing, however, it was later flexed up to Libor plus 600 basis points. With this newest increase in pricing, the spread on this tranche has been increased by a total of 200 basis points from initial price talk.

Transportation Technologies' $115 million five-year term loan (B2/B) remained at Libor plus 375 basis points, where it was flexed up to the other week from initial pricing of Libor plus 325 basis points.

The facility also contains a $50 million five-year revolver (B2/B) with an interest rate of Libor plus 300 basis points, unchanged since first entering the marketplace.

Credit Suisse First Boston, Lehman Brothers and Wachovia Securities are joint lead arrangers on the deal, with CSFB acting as administrative agent and Wachovia acting as syndication agent.

Proceeds will be used to refinance existing debt.

Transportation Technologies is a Chicago maker of parts, subassemblies and component systems for manufacturers and aftermarket suppliers of medium/heavy-duty trucks, transport buses, off-highway vehicles, construction and agricultural equipment.

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