Rock-Tenn to upsize; 84 Lumber nets orders; Fresenius up on numbers; TXU slides

By Sara Rosenberg

New York, Feb. 20 - Rock-Tenn Co. is looking to increase the size of its credit facility, assuming that there is enough demand, and decrease the size of its bond offering since - so far - the loan has seen good success.

In other news, 84 Lumber Co.'s asset-based revolving credit facility is off to a good start in terms of syndication, as a number of commitments had already come in by Wednesday morning's launch.

Meanwhile, in trading, Fresenius Medical Care AG & Co. KGaA's term loan B moved higher after the release of earnings and Texas Competitive Electric Holdings Co. LLC's (TXU) term loan B's inched lower.

Rock-Tenn is working on upsizing its credit facility and downsizing its unsecured senior notes deal, being that the credit facility has received a good amount of lender interest, according to a market source.

Currently, the thought is that the credit facility will be increased by $200 million, which would bring it to a total size of $1.2 billion, and the bond offering will be decreased by $200, which would bring it to a total size of $200 million, the source explained.

"[They] are testing the market re: term loan appetite, are thinking of essentially moving $200 million of bonds to bank if appetite is there," the source added.

The plan is that the $200 million of additional funds will be added to the term loan A, bringing the tranche to a new size of $550 million. Pricing on the term loan A is Libor plus 250 basis points.

Rock-Tenn's credit facility (Ba2/BBB-) also includes a $450 million five-year revolver priced at Libor plus 250 bps, with an unused fee of 40 bps (subject to a pricing grid), and a $200 million six-year term loan B talked at Libor plus 275 bps, with an original issue discount of 99.

The revolver and term loan A are being offered with an upfront fee of 1 bps per $1 million commitment.

The term loan B, which is open to banks and institutional investors, was carved out of the term loan A tranche, which was originally expected to be sized at $550 million, prior to the deal's bank meeting in late January as a result of reverse inquiry from institutional accounts.

At launch, price talk on the term loan B was labeled as Libor plus 275 bps to 300 bps, including spread and original issue discount. Some clarity on the B loan pricing emerged recently based on where traction occurred.

Wachovia Bank, Bank of America and SunTrust Bank are the lead banks on the deal.

Proceeds from the credit facility and the notes will be used to fund the acquisition of Southern Container Corp., to refinance the company's existing credit facilities and to provide in excess of $200 million of undrawn capacity.

Total net debt will be around $1.8 billion, debt to capitalization will be around 75.7% and pro forma net debt to EBITDA for the trailing 52 weeks will be around 4.1 times.

The company has a debt reduction target of 3.0 times by Sept. 30, 2010.

Rock-Tenn is buying Southern Container, a Hauppauge, N.Y., privately held containerboard manufacturing and corrugated packaging business, for $851 million in cash. The purchase price, including debt of Southern Container, represents a multiple of about 6.9 times Southern Container's pro forma EBITDA for the 52-week period ended Sept. 8.

The transaction is expected to close in March.

Rock-Tenn is a Norcross, Ga., manufacturer of packaging products, merchandising displays and bleached and recycled paperboard.

84 Lumber catches interest

84 Lumber launched its $450 million five-year asset-based revolving credit facility to investors during the Wednesday session, and the deal is being categorized as having good momentum as it is already more than half done, according to a market source.

In fact, prior to the actual morning launch, there were $275 million in commitments placed towards the revolver, the source said.

The revolver will carry opening pricing of Libor plus 250 basis points, with a 25 bps commitment fee. Spread will be determined by a grid that is based on availability.

Upfront fees are 1 bps per $1 million commitment, the source added.

SunTrust Robinson Humphrey and Wachovia are the lead banks on the deal that will be used to replace an existing revolver and $275 million in private notes.

84 Lumber is an Eighty Four, Pa., supplier of building materials to contractors. Estimated 2007 revenues for the company are $3.045 billion.

Fresenius rises with earnings

Switching to the secondary market, Fresenius Medical Care's term loan B was stronger on Wednesday after the company announced positive financial results and provided a strong outlook for 2008, according to a trader.

The term loan B was quoted at 93 bid, 94 offered, up a half a point from previous levels, the trader said.

For the fourth quarter of 2007, the company reported net revenue of $2.569 billion, up 9% from fourth quarter 2006; operating income was $428 million, up 21% from $354 million last year; net income was $197 million, up 30% from 2006; and earnings per share were $0.67, up 29% from $0.52 last year.

Also in the fourth quarter, the company generated $309 million in cash from operations, representing about 12% of revenue.

For full-year 2007, Fresenius reported net revenue of $9.72 billion, up 14% from 2006; operating income was $1.58 billion, up 20% from $1.318 billion; net income was $717 million, up 34%; and earnings per share were $2.43, up 33%.

Cash from operations during full-year 2007 was $1.200 billion compared to $908 million for 2006 on a reported basis.

The company's debt to EBITDA ratio decreased to 2.84 at the end of 2007 from 3.23 at the end of 2006.

For full-year 2008, the company expects to achieve revenue of more than $10.4 billion, an increase of more than 7%, and net income is expected to be between $805 million and $825 million, an increase of 12% to 15%.

The company expects to spend $650 million to $750 million on capital expenditures and $150 million to $250 million on acquisitions in 2008.

And, the debt to EBITDA ratio is expected to decrease below 2.8 by the end of 2008.

Fresenius is a Bad Homburg, Germany-based provider of products and services for individuals undergoing dialysis because of chronic kidney failure.

TXU weakens

Texas Competitive's term loan B-2 and term loan B-3 fell off in trading during market hours with relatively light volume seen, according to traders.

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

Rumor has it that the lock-up on Texas Competitive's $3.45 billion term loan B-3 will end on Feb. 28, making it possible that the underwriters will then try to sell down some of that paper in the secondary market.

When asked whether this potential emergence of new Texas Competitive paper in the secondary next week had anything to do with Wednesday's softening, one trader said he didn't think so since the rumor has been around for a while.

"[It's] nothing in particular, not a ton of volume," the trader added.

Texas Competitive is a Dallas-based energy company.

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