Reynolds breaks; RSC up on paydown; Ford rises with numbers; Dean Foods dips; Revlon slides

By Sara Rosenberg

New York, Nov. 2 - Reynolds credit facility freed up for trading during Monday's market hours, with the term loan B coming in from its opening levels by the end of the day, but still ending up better than the original issue discount at which it was sold.

In more secondary happenings, RSC Holdings Inc.'s second-lien term loan gained a couple of points in reaction to an expected repayment of some of the debt, and Ford Motor Co.'s term loan was stronger on earnings and a ratings upgrade.

Also coming out with numbers was Dean Foods Co., but its term loan B was weaker following the news. Meanwhile, Revlon Consumer Products Corp.'s term loan softened as well. This movement, however, came on the heels of an amendment request.

Reynolds frees up

Reynolds credit facility hit the secondary market on Monday, with the $1.035 billion U.S. term loan quoted at par ¼ bid, par ¾ offered on the break and then coming in to par bid, par ½ offered by the end of the day, according to a market source.

"A lot of people got small positions so they probably flipped out," the source said in explanation on why levels moved lower as the day progressed.

The term loan is priced at Libor plus 425 basis points with a 2% Libor floor and was sold to investor at an original issue discount of 99.

During syndication, the oversubscribed term loan was upsized from $835 million, pricing was cut from Libor plus 500 bps and the original issue discount was reduced from initial talk of 97 to 98.

The company's roughly $1.65 billion credit facility also includes a $120 million revolver, an €80 million revolver and a €250 million term loan.

Reynolds led by Credit Suisse

Credit Suisse is the lead bank on the Reynolds credit facility that will be used to help fund the acquisition of Closure Systems International and Reynolds Consumer Products by Beverage Packaging Holdings, the holding company of SIG Group, which is owned by Rank Group.

The total purchase price for the companies is $3.023 billion, or 7.7 times LTM adjusted pro forma EBITDA.

Other funds for the acquisition will come from $1.1 billion of senior secured notes, €450 million of senior secured notes, €116 million of existing cash and €500 million of equity.

These financings will also be used to repay existing bank borrowings at Beverage Packaging of around €485 million and repay existing Reynolds debt.

Funds from the term loan upsizing are expected to be used to pay for a larger distribution to the Rank Group.

Closing on the acquisition is expected to take place in the fourth quarter and the combined entity will assume the Reynolds name.

Reynolds is a manufacturer of aluminum foil, wraps and bags. Closure Systems is a manufacturer of plastic caps and closures, primarily serving the beverage market. And, Beverage Packaging is a manufacturer of aseptic carton packaging systems.

RSC second-lien strengthens

RSC Holdings' second-lien term loan was up by a couple of points in trading after the company revealed plans to repay a portion of the loan, according to sources.

The second-lien term loan was quoted by one source at 92½ bid, 94½ offered, up 2¼ points on the day, and by a second source at 93½ bid, 95½ offered, up from 91 bid on Friday.

Funds for the second-lien paydown will come from the sale of $200 million of senior notes.

RSC is a Scottsdale, Ariz.-based equipment rental provider.

Ford revs higher

Ford's term loan saw positive momentum on Monday as investors were pleased with the company's third-quarter earnings results, and those results sparked a ratings upgrade, according to traders.

The term loan was quoted by one trader at 90 bid, 91 offered, up from 89 bid, 90 offered, and by a second trader at 90 bid, 90½ offered, up from 88½ bid, 89 offered.

For the third quarter, Ford reported net income of $997 million, or $0.29 per share, compared to a net loss of $161 million, or $0.07 per share, last year.

Pre-tax operating profit totaled $1.1 billion, an improvement of $3.9 billion from a year ago, and it was the company's first pre-tax operating profit since the first quarter of 2008.

On an after-tax basis, excluding special items, Ford posted an operating profit of $873 million in the third quarter, or $0.26 per share, compared with a loss of $3 billion, or $1.32 per share, in the prior year.

Revenue for the quarter was $30.9 billion, down $800 million from the third quarter of 2008.

Ford cash increases

Also on Monday, Ford said that its cash and cash equivalents for the third quarter was $10.1 billion, up from $6.4 billion in the same period last year.

Gross cash for the quarter was $23.8 billion, up from $13.4 billion in the third quarter of 2008.

Cash flow from operating activities of continuing operations for the quarter was $3 billion.

"The Ford team delivered another solid quarter of results with strong contributions from all our business regions," said Lewis Booth, executive vice president and chief financial officer, in a news release.

"Positive cash flow, a stronger balance sheet and a third quarter operating profit are evidence that Ford is meeting the global economic challenges," Booth added.

Ford foresees profitability

Ford continued to say in its earnings release that it now expects to be solidly profitable in 2011, excluding special items, with positive operating-related cash flow.

Previously, the company was expecting 2011 to be breakeven or better.

The company remarked that while it has confidence that the global economy will be improving by 2011, the near-term growth outlook remains rather uncertain.

Looking at 2010, there is a high likelihood of a substantial decrease in European industry volume as scrappage programs expire. This decrease could more than offset U.S. sales volumes, which may improve somewhat from this past quarter's levels, the release added.

Ford upgraded

Following the earnings news, Ford's corporate family rating was upgraded by Moody's Investors Service to B3 from Caa1 and its secured credit facility rating was raised to Ba3 from B1.

Moody's said that the upgrade reflects the substantial progress Ford continues to make in strengthening its product portfolio and cost structure while maintaining a very substantial cash position on its balance sheet.

"We're trying to take a balanced and prospective view of Ford with the B3 rating. Despite the company's strong third quarter, its full-year operating performance and credit metrics for 2009 and 2010 will remain weak for the B3 rating level," said Bruce Clark, senior vice president with Moody's, in the ratings release.

"However, the evidence we see indicates that Ford is on track in its plans to re-establish a sustainable and competitive business model. Continued progress should enable the company to generate much stronger financial performance during 2011 as global vehicle demand continues to recover."

Ford seeks amend and extend

In more Ford news, the company announced late day that it is looking to amend its credit facility to extend the revolver maturity to Nov. 30, 2013 from Dec. 15, 2011.

Lenders who agree to the extension will get an increase pricing by 100 basis points, an increase in fees and an upfront fee.

Under the proposal, each revolver lender that agrees to extend the maturity of its commitments may reduce its commitment by up to 25% percent.

Furthermore, the amendment would expand existing limitations on debt prepayments and repurchases to allow for further balance sheet improvements.

Responses are due on Nov. 18.

So far, certain revolver lenders have indicated that they intend to accept the proposal and extend about $6 billion of commitments.

Ford is a Dearborn, Mich.-based automotive company.

Dean Foods softens

Dean Foods was another company to come out with earnings on Monday. However, its term loan B was lower following the news, with some guessing that it's the outlook for earnings that may have caused the fall being that they were shy of expectations.

The term loan B was quoted at 92¼ bid, 93¼ offered, down a half a point on the day, one trader said.

For the third quarter, the company had net income of $49.7 million, or $0.27 per diluted share, compared with $37.8 million, or $0.24 per diluted share, in the prior year's third quarter,

Net sales for the quarter totaled $2.8 billion, a decrease of 13% from net sales of $3.2 billion in the third quarter of 2008.

Consolidated operating income in the quarter totaled $137.1 million, compared to $131.8 million last year.

As for its outlook, the company is forecasting fourth quarter adjusted diluted earnings to be at least $0.36 per share, and full year adjusted diluted earnings per share of at least $1.63.

Dean Foods generates cash

Dean Foods' net cash provided by continuing operations for the first nine months of 2009 totaled $502.7 million, compared to $458.7 million for the first nine months of 2008.

"I am extremely pleased with our continued strong cash flow performance," said Jack Callahan, chief financial officer, in a news release.

"Reducing our leverage continues to be a key area of focus for the company and we remain committed to achieving our goal of funded debt to EBITDA, as defined by our credit agreement, of 3.5 times or below by the first part of 2011,"Callahan added.

Total debt at Sept. 30, net of $38.6 million of cash on hand, was $4.2 billion. The company's funded debt to EBITDA ratio was 3.97 times as of the end of the third quarter.

Dean Foods is a Dallas-based food and beverage company.

Revlon trades down

Revlon's term loan weakened during market hours as the company announced that it is looking to amend its credit facility, according to a trader.

The term loan was quoted at 96½ bid, 97¼ offered, down from 96¾ bid, 97½ offered, the trader said.

Under the amendment, the company is looking to gain permission to do certain refinancing transactions, including refinancing its 9.5% senior notes due April 2011 on a secured basis.

The amendment does not propose any changes to pricing, a market source said.

Consents are due on Wednesday at 5 p.m. ET. There was no lender call held to launch the amendment

Citigroup is the leading the amendment.

Revlon is a New York-based cosmetics, hair color, beauty tools, fragrances, skincare, anti-perspirants/deodorants and beauty care products company.

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