Levi Strauss improves on expected bond sale; R.H. Donnelley restructures loan, reducing size

By Sara Rosenberg

New York, Nov. 25 -Levi Strauss Co.'s revolver saw a slight improvement in the secondary bank loan market on Monday following news of a bond sale that will be used to reduce bank debt. In the primary, R.H. Donnelley's credit facility underwent some changes that reduced the total size by $25 million.

Levi Strauss & Co. announced that it has commenced a private placement of $300 million senior notes due 2012. Pricing is expected on Tuesday. Approximately $115 million of the net proceeds is expected to be used to repay outstanding debt under the company's senior secured credit facility.

Remaining net proceeds will be used to refinance a portion of the $350 million 6.8% notes due Nov. 1, 2003 if a waiver is obtained from lenders under the credit facility or for working capital and general corporate purposes.

The company's term loan has been trading around par, a trader told Prospect News. And, "the term loan is getting refinanced around par, which is what proceeds are going towards." The proposed bond sale is good news, the trader continued, but there wasn't much movement in the term loan quotes.

However, the revolver, which has a short maturity and is not being refinanced currently, was quoted up following the announcement, with a bid in the mid-99's, up from a previous bid in the upper 98's, the trader added.

Levi Strauss is a San Francisco clothing company.

Overall, the secondary market continued to feel positive on Monday, according to market sources, with one trader describing it as an "active, firm market".

Meanwhile, the total size of R.H. Donnelley's credit facility was reduced by $25 million to $1.525 million, according to a syndicate source. Mores specifically, the term loan A was reduced by $75 million to $500 million and the term loan B was increased by $50 million to $900 million, the syndicate source added. Pricing remained the same.

Under the revised terms, the credit facility currently consists of a $125 million six-year revolver with an interest rate of Libor plus 350 basis points, a $500 million six-year term loan A with an interest rate of Libor plus 350 basis points and a $900 million 71/2-year term loan B with an interest rate of Libor plus 400 basis points.

Bear Stearns, Deutsche and Salomon Smith Barney are the lead banks on the deal, which will be used to help fund the acquisition of Sprint Corp.'s directory publishing business and refinance debt.

The credit facility was not the only financing for the acquisition that underwent changes on Monday. The senior note offering was increased by $25 million to $325 million and price guidance was tightened to 8 7/8%-9% from 9%-9¼%. The $25 million was taken from the bank side and added to the bond side simply because the "high-yield market is on fire right now," the syndicate source explained.

Furthermore, the senior subordinated notes offering was increased by $150 million to $600 million and price guidance was tightened to 10 7/8%-11% from 11%-11¼%, the syndicate source said.

The $150 million added on to the senior subordinated notes offering will be used fund a tender offer for the company's existing 9 1/8% senior subordinated notes due 2008 in order to fix a recently discovered technical default. The default resulted from a failure to add some subsidiaries as guarantors to the indenture in 2000.

Lastly, Goldman Sachs Capital Partners 2000, LP and affiliated entities invested $70 million in R.H. Donnelley through the purchase of convertible preferred stock as a first installment of the $200 million commitment that is part of the acquisition agreement. This investment was made earlier than expected in order to assist in curing the technical default involving the 9 1/8% notes.

"The receipt of $70 million of new equity by the Company and the simultaneous contribution to R.H. Donnelley Inc. offset certain restricted payments that had been made by R. H. Donnelley Inc. to R. H. Donnelley Corporation in 2000 and 2001 while the technical default existed," a company news release explained. "As a result of the Goldman Sachs investment and the execution of supplemental indentures to add these subsidiaries as guarantors, this technical default has been cured."

R.H. Donnelley is a Purchase, N.Y. marketer of yellow pages advertising.

In other news, Hercules Inc. held a bank meeting regarding a new $350 million credit facility. Credit Suisse First Boston and Wachovia are the lead banks on the deal.

The loan consists of a $150 million four-year revolver with an interest rate of Libor plus 275 basis points and a $200 million 4½ year term loan B with an interest rate of Libor plus 325 basis points.

Proceeds will be used by the Wilmington, Del. chemical company to retire the existing credit facility and short-term debt, and for general corporate purposes.

The Carlyle Group completed its purchase of Rexnord Corp. from Invensys plc on Monday for approximately $900 million, according to a company news release.

In connection with this leveraged buyout, Rexnord obtained a $435 million credit facility (B1/B+), which consists of a $75 million six-year revolver with an interest rate of Libor plus 350 basis points and a $360 million seven-year term loan B with an interest rate of Libor plus 400 basis points.

Deutsche Bank and Credit Suisse First Boston were the lead banks on the deal.

Rexnord is a Milwaukee supplier of power transmission components, drives and conveying equipment.

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