Amerigroup downsizes ahead of launch; US Airways breaks; Freeport-McMoRan bounces around

By Sara Rosenberg

New York, March 23 - Amerigroup Corp. reduced the size of its synthetic letter-of-credit facility ahead of its scheduled Tuesday launch because the company's convertible offering was successful enough to result in an upsizing.

Over in the secondary market, US Airways Group Inc.'s term loan freed up for trading, with levels quoted around the mid-par context, and Freeport-McMoRan Copper & Gold Inc.'s term loan B seesawed around in trading after the company basically doubled its equity offerings, of which a good portion will be used to pay down the term loan B debt.

Amerigroup downsized its synthetic letter-of-credit facility tranche by $40 million as result of the company's sale of $240 million in 2% convertible senior notes as opposed to $200 million in convertibles as was originally planned, according to a market source.

The synthetic letter-of-credit facility is now sized at $150 million, down from $190 million, the source said.

The company's $200 million (down from $240 million) five-year senior secured credit facility will still include a $50 million revolver.

The transaction is scheduled to launch with a bank meeting on Tuesday at the W Hotel in New York.

Price talk on the deal is expected to emerge after the meeting.

Goldman Sachs and Wachovia are the lead banks on the deal.

Proceeds from the facility, along with the convertibles, will go toward the settlement of the company's Illinois qui tam litigation.

Amerigroup is a Virginia Beach, Va., managed health care company.

Reynolds and Reynolds tweaks repricing

The Reynolds and Reynolds Co. revised its first-lien term loan repricing proposal, adding 101 soft call protection for one year and adding a leverage-based pricing grid, according to a market source.

Under the repricing, the company is taking down the spread on the first-lien term loan to Libor plus 200 basis points from Libor plus 250 bps.

With the new grid, pricing can step up to Libor plus 225 bps if leverage increases to 6.5 times and pricing can step down to Libor plus 175 bps if leverage decreases to 4.75 times, the source said.

Deutsche Bank is the left lead on the deal.

Reynolds and Reynolds is a Dayton, Ohio-based dealer services company.

US Airways frees to trade

Moving to secondary happenings, US Airways' $1.6 billion term loan (B2/B/BB-) broke for trading, with levels seen at par 3/8 bid, par ¾ offered on the open and at the end of the session; however, the bid side did get as high as par ½ during market hours, according to a fund manager.

The term loan is priced at Libor plus 250 bps. During syndication, pricing on the paper was flexed up twice - first to Libor plus 225 bps from Libor plus 200 bps as a result of weaker-than-anticipated ratings, and then to Libor plus 250 bps from Libor plus 225 bps.

Citigroup and Morgan Stanley are the joint lead arrangers on the deal, with Citigroup the administrative agent, Morgan Stanley the syndication agent and GE Commercial Finance the documentation agent.

Proceeds will be used to refinance $1.25 billion of the company's existing senior secured credit facility, to refinance $325 million of unsecured debt and to raise incremental liquidity.

US Airways is a Tempe, Ariz.-based airline.

Freeport-McMoRan moves around

In other trading news, Freeport-McMoRan's term loan B saw levels bounce around between the low and mid-pars on Friday after the company essentially doubled its equity offerings, according to a trader.

The term loan B ended the session at par ¼ bid, par ½ offered, unchanged on a day-over-day basis, but levels were quoted as low as par 1/8 bid, par 3/8 offered at some point during trading and as high as par 3/8 bid, par 5/8 offered, the trader said.

On Friday morning, the company announced that it priced 41 million shares of common stock at $61.25 per share and 25 million shares of 6¾% mandatory convertible preferred stock. The underwriters have over-allotment options for up 6.15 million additional common shares and up to 3.75 million additional mandatory convertible preferred shares.

By comparison, under the company's originally announced equity offering plans, only 35 million shares of common stock and 10 million shares of mandatory convertible preferred shares were going to be sold, and the underwriters were only going to have the option to purchase up to 5.25 million additional common shares and up to 1.5 million additional mandatory convertible preferred shares to cover over-allotments.

With the new sizes, these equity offerings will generate gross proceeds of approximately $5 billion before underwriting discounts, expenses and the exercise of over-allotment options, if any.

As was previously reported, proceeds from these offerings will be used to repay some of the company's term loan B and term loan A bank debt.

"They doubled the equity offering so more debt will get paid down now. That's going to affect how people trade it. So [the term loan B] moved around a little bit in the morning," the trader added.

Freeport-McMoRan is a Phoenix-based copper, gold and molybdenum mining, exploration and production company.

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