ResCap rallies on tender consents; Vought up with contract news; Manitowoc may be back

By Sara Rosenberg

New York, May 19 - Residential Capital LLC (ResCap) saw its term loan gain ground in trading Monday as consents were received for its note exchange and tender offers, and Vought Aircraft Industries Inc.'s bank debt rose after the company announced a new wings and slats contract.

Also in trading, Alltel Communications Inc.'s bank debt continued to rise, still spurred on by positive earnings that came out last week.

In other news, Manitowoc Co. Inc. has raised its bid for Enodis plc in an effort to beat out Illinois Tool Works Inc., meaning that its multi-billion credit facility could still come to market, and rumors were swirling over BCE Inc.'s buyout and whether it will take place.

ResCap's term loan was stronger during the trading session after news emerged regarding the progress of the company's refinancing proposal, according to traders.

One trader said that the loan was quoted a 97 bid, 99 offered, up from 94¾ bid, 95¾ offered on Friday, while a second trader said that the loan was quoted at 97 bid, 98 offered, up from morning levels of 95½ bid, 97½ offered and from Friday's levels of 94½ bid, 951/4.

On Sunday night, ResCap revealed that requisite consents were received for its exchange and cash tender offers for $14 billion in notes.

In the offers, ResCap is offering 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.

Holders participating in the exchange offers are 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 is also tendering for any and all of its outstanding $1.199 billion of floating-rate notes due June 9.

ResCap already entered into supplemental indentures adopting the proposed amendments to the indentures under which the old notes were issued.

The amendments to the old notes release the subsidiary guarantees of ResCap's obligations under the old notes and eliminate certain of the restrictive covenants and events of default in the indentures.

As a result, claims with respect to all new notes issued in the exchange offers will be effectively senior to claims with respect to unexchanged old notes.

The offers are conditioned on ResCap entering into a new first-lien senior secured credit facility, providing for at least $3.5 billion of commitments on terms acceptable to the company.

To this end, ResCap has been negotiating a new $3.5 billion first-lien revolver with GMAC LLC as the lender.

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, according to previous filings with the Securities and Exchange Commission.

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

The company must prepay revolver borrowings in an amount equal to net cash proceeds in excess of retained proceeds that are not reinvested in eligible assets within an agreed period of time. Amounts prepaid will permanently reduce the commitment under the senior secured credit facility to the extent such amounts are not reborrowed to acquire new eligible assets within an agreed period of time.

Furthermore, the company will be required to repay the amount of any deficit in borrowing base availability in the minimum amount of $250,000.

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.

Proceeds from the revolver will be used to fund the cash required for the note offers, to repay the company's term loan maturing in July, to replace its $875 million 364-day revolver and to replace its $875 million three-year revolver.

ResCap's new senior secured guaranteed notes will be secured on a second-lien basis by the collateral for the credit facility and the new junior secured guaranteed notes will be secured on a third-lien basis by the collateral.

The note offers will expire on June 3.

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

Vought trades higher

Vought Aircraft's term loan debt soared on Monday after the company said that it has been selected for a wings and slats contract that has a potential value of $1 billion, according to a trader.

The company's existing term loan was quoted at 97 bid, 98 offered, up from 95¼ bid, 96¼ offered on Friday, and the company's new term loan was quoted at 98½ bid, 99½ offered, up from 97 bid, 98 offered on Friday, the trader said.

Under the new contract, Vought will provide wings and slats for the Model 850 Cessna Citation Columbus business jet. The contract covers engineering design, tooling and production work.

Production test articles are scheduled for delivery beginning in 2010, with production article deliveries scheduled to start in 2011.

"[The contract] will probably help with the IPO, which will be used to take out bank debt," the trader added in explanation of why the term loans traded up.

On Friday, Vought said in an S-1 filing that it plans on repaying borrowings under its senior credit facility using proceeds from an initial public offering of common stock.

Remaining proceeds from the IPO will be used for working capital and other general corporate purposes.

Vought is a Dallas-based independent supplier of aerostructures.

Alltel strengthens

Alltel's bank debt was active in an otherwise quiet secondary and levels continued to climb still on the back of earnings, according to traders.

The term loan B-2 was quoted at 92 1/8 bid, 92½ offered, up from 91½ bid, 92 offered and the term loan B-3 was quoted at 92¼ bid, 92¾ offered, up from 91 5/8 bid, 92 3/8 offered, traders said.

Late last week, the company announced first-quarter numbers that included record customer growth, with more than 1 million gross customers added for the second consecutive quarter, and net customer additions hit a new high with a 63% increase year over year.

Revenues were $2.3 billion, an 11% increase from the same period a year ago, net loss for the quarter was $125 million, due primarily to significant increases in interest costs and depreciation and amortization expense following the completion of its leveraged buyout, and consolidated EBITDA was $847 million, an 18% increase from the same period a year ago.

"Guys are just slowly coming in and realizing how cheap this thing is," one trader added.

Alltel is a Little Rock, Ark., provider of wireless voice and data communications services.

Cash, LCDX grind higher

The cash market in general and LCDX 10 were better on Monday, although volume was light, according to a trader.

Cash was up about an eighth of a point across the board, the trader said.

And, the index was quoted at 99.70 bid,99.80 offered, up from around 99.45 bid, 99.60 offered, the trader added.

Manitowoc resurfaces

On the new deal front, Manitowoc announced on Monday that it's back in the race for Enodis as it raised its purchase price offer to trump a recent bid by Illinois Tool Works Inc., and if Manitowoc wins, its proposed credit facility would hit the primary market.

Manitowoc is now offering to buy Enodis for a cash payment of 294 pence per share, and in advance of the closing of the transaction, Enodis intends to pay a dividend of 2 pence per share in lieu of an interim dividend in respect of the financial year ending Sept. 30.

In April, Manitowoc agreed to buy Enodis for 258 pence per share, but then in early May, Illinois Tool Works offered to buy the company for 280 pence in cash per share, plus the 2 pence per share dividend.

Following receipt of the Illinois Tool Works bid, Enodis directors withdrew their recommendation of the Manitowoc offer and said they would unanimously recommend that shareholders vote for the Illinois Tool transaction at a special meeting on June 18.

"Following the current recommended bid for Enodis announced on May 8, 2008, we reconsidered our options carefully and reaffirmed that there is significant strategic merit in bringing these two strong organizations together. Our announcement today highlights that we are determined to bring to bear the many benefits we believe a combination will deliver," said Glen E. Tellock, Manitowoc president and chief executive officer, in a news release.

"Our increased offer is at a 5% premium to ITW's offer and a 63.7% premium to Enodis' average closing price for the 12 months ending April 8, 2008. As such, we believe strongly that our revised offer represents superior value for Enodis' shareholders. At the same time our revised offer still meets our financial objectives of being EPS accretive in two years and EVA positive in three years," Tellock added in the release.

The acquisition is subject to certain closing conditions, including the approval of Enodis shareholders, regulatory approvals in various jurisdictions and other customary closing conditions for a U.K. scheme of arrangement.

When Manitowoc announced its original acquisition agreement with Enodis, the company revealed plans for a $2.4 billion credit facility, consisting of a $400 million five-year revolver, a $900 million five-year term loan A, a $300 million 18-month term loan X and an $800 million six-year term loan Y, with initial pricing on the deal expected at Libor plus 300 bps.

JPMorgan, Deutsche Bank, Morgan Stanley and BNP Paribas are the joint lead arrangers and joint bookrunners on the deal, with JPMorgan the administrative agent, Deutsche and Morgan Stanley as syndication agents, and BNP the documentation agent.

On Monday, the company said in an 8-K filing that it has obtained committed funds to finance the increased offer by means of an amendment to the credit facility agreement.

Manitowoc is a Manitowoc, Wis.-based provider of lifting equipment for the construction industry, manufacturer of cold-side equipment for the foodservice industry, and provider of shipbuilding, ship repair and conversion services. Enodis is a Tampa, Fla.-based food and beverage equipment manufacturer. And, Illinois Tool is a Glenview, Ill.-based manufacturer of a diversified range of value-added industrial products and equipment.

BCE buyout questioned

Now that things have been resolved with the Clear Channel Communications Inc. buyout, people have moved on to speculating about the BCE buyout and whether it will go through or not, according to sources.

Rumor has it that the banks that committed the leveraged buyout financing package are trying to renegotiate terms of the deal, sources said.

Under the original commitment letter obtained last year, Citigroup, Deutsche Bank, RBS Securities and TD Securities agreed to provide a C$23.05 billion credit facility and a C$11.3 billion bridge loan to back high-yield offerings.

The credit facility was outlined as a C$2 billion six-year revolver, a C$4.2 billion six-year term loan A, a C$16.5 billion seven-year term loan B and a C$350 million one-year delayed-draw term loan.

The bond offering was outlined as a C$7.5 billion senior notes tranche and a C$3.8 billion senior subordinated notes tranche.

BCE is being acquired by Teachers Private Capital, Providence Equity Partners Inc. and Madison Dearborn Partners, LLC.

Under the terms of the transaction, the investor group will acquire all of the common shares of BCE not already owned by Teachers Private Capital for an offer price of C$42.75 per common share and all preferred shares at various prices ranging from C$25.25 to C$25.87.

The all-cash deal is valued at C$51.7 billion, including C$16.9 billion of debt, preferred equity and minority interests.

BCE is a Montreal-based communications company.

Fairchild closes

Fairchild Semiconductor closed on its $150 million incremental term loan B-1 (Ba2/BB), according to a news release.

The loan is priced at Libor plus 250 bps and was sold to investors at an original issue discount of 99.

During syndication, the loan was upsized from $100 million being that it was oversubscribed.

Bank of America and JPMorgan acted as the joint lead arrangers on the deal, with Deutsche Bank acting as administrative agent.

Excluding pricing, all terms and conditions on the incremental term loan including maturity date, amortization and financial covenants follow the existing senior credit facility.

The company's existing term loan debt is priced at Libor plus 150 bps.

In conjunction with the close of the incremental loan, the company has initiated the call of its $200 million of 5% convertible senior notes due Nov. 1, 2008. The redemption amount will be paid from the B-1 loan proceeds and cash on hand.

The expected completion date of the call on the convertibles is June 10.

"We received a very favorable response from the credit markets with commitments from lenders far in excess of our target proceeds," said Mark Frey, executive vice president and chief financial officer, in the release.

"We have also had our credit rating upgraded by S&P, to BB from BB-. We are pleased that the credit markets recognized the significant progress we have made improving our management of the semiconductor business cycle while maintaining consistent profitability and positive cash flow."

Fairchild is a South Portland, Maine, supplier of power analog, power discrete and nonpower semiconductor services.

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