Light trading in the secondary as investors worry about refinancing risk

By Sara Rosenberg

New York, April 16 - Secondary bank loan market trading was relatively light on Tuesday, according to market sources. With most paper trading at a premium, investors are wary of purchasing paper for fear that they will lose money on the deal if the company refinances the loan. And with the two new issues of the week being refinancings, investors feel that their tentative behavior is justified.

"It's like a minefield out there," a market professional said. "We're trying to buy loans from companies that aren't going to refinance, which is very difficult."

Meanwhile, in primary activity, Titan Corp.'s bank meeting on Wednesday is anticipated to go smoothly. The San Diego, Calif. technology company is launching its $450 million senior secured credit facility (Ba3/BB-) via Wachovia as sole bookrunner and lead arranger. The loan is principally a refinancing of the previous loan.

"It's looking very good," a syndicate source said. "We received a good number of commitments already from existing holders and from new investors. We're walking into the bank meeting confidently."

The loan consists of a $350 million seven-year term B tranche with an interest rate of Libor plus 325 basis points and a $100 million six-year revolver with an interest rate of Libor plus 225 basis points, according to a syndicate source. The unused fee ranges from 50 to 100 basis points depending on amounts drawn. If less than 30% of the revolver is used, the company has to pay a commitment fee of 100 basis points, the syndicate source said. Substantially all of the company's assets are being used to secure the loan, excluding SureBeam.

One fund manager told Prospect News that the fund is committed to both Titan Corp. and RailAmerica Inc. already, even though the deals have technically not been launched yet.

RailAmerica Inc.'s bank meeting is taking place Wednesday for its $475 million credit facility (Ba3/BB-), via UBS PaineWebber and Morgan Stanley Dean Witter as joint lead-arrangers.

The refinancing loan consists of a $100 million six-year revolver with an interest rate of Libor plus 200 basis points and a $375 million seven-year term B tranche with an interest rate of Libor plus 275 basis points, the syndicate source said. There is a commitment fee of 50 basis points on the revolver. All company assets will be used to secure the loan.

"Both deals are going to be fully circled today before the meeting," the fund manager said.

In other news, market talk is that Roundy's Supermarket, a Pewaukee, Wis. food wholesaler and retailer, is expected to hold a bank meeting next week for a $340 million credit facility. Bear Stearns & Co. and CIBC are said to be co-leads for the loan.

According to market sources, the loan is expected to consist of a $250 million term B tranche priced at Libor plus 300 basis points and a $90 million revolver. Only $40 million of the revolver will need to be syndicated, the source said, because Bear Stearns and CIBC are holding onto $25 million each.

"We will look at it," the source said. "It's finally something new to look at."

Roundy's is not anticipating offering a pro rata portion, the source said. However, they may have to, the source explained, because some people may feel slighted by the decision and request that a pro rata portion be brought to market.

The facility is a result of a leveraged buyout by Willis Stein & Partners, a Chicago-based private equity investment firm, announced on April 9, 2002. The agreement is subject to regulatory and shareholder approval and is expected to be completed in May, according to a company press release.

The company was not immediately available for comment. A syndicate source said that negotiations with the client are still ongoing and, therefore, would not confirm any details of the credit facility.

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