Tyco dips on company's refutation of bankruptcy rumor; Greif increases loan size

By Sara Rosenberg and Paul A. Harris

New York, July 25 - Tyco International Ltd.'s bank loan paper weakened slightly in the secondary market with the short-term debt bid and offered in the high 80's and the long-term debt bid and offered in the high 70's, a trader said. On Wednesday, Tyco's short-term debt was bid and offered in the low 90's and its long-term debt bid/offer was in the low 80's. The Pembroke, Bermuda manufacturing and service company's loan dipped following the company's announcement denying the hiring of bankruptcy counsel, the trader said.

"There are certain unfounded rumors in the marketplace," the company said in a press release. "Tyco reiterates that the company and its operations are on solid financial footing. The company has over $7 billion in cash on hand. Additionally, as presented during Tuesday's earnings conference call, based upon our current financial condition, we have the capability to meet our operating expenses and satisfy our debt obligations without a need for refinancing through November 2003. The company will opportunistically take advantage of market conditions to refinance debt and has already begun to repurchase debt in the open market. Any rumors to suggest that Tyco has engaged bankruptcy or reorganization attorneys is irresponsible and false."

The trader went on to explain that many people in the market had not heard the bankruptcy rumor in the first place. Once Tyco issued a statement, the rumor was brought to everyone's attention.

"The company panicked," the trader said. "They made the rumor public" resulting in the softening of the bank debt.

The company's bank paper didn't experience much, if any, trading, according to the trader.

In other news, Greif Brothers Corp. upsized its term loan C by $50 million to $300 million, according to a syndicate source, and downsized its bond deal. The term C has an interest rate of Libor plus 225 basis points.

"We had very strong demand for the term loan. And that really made it attractive to change the mix to substitute $50 million of term loan against the bond," Donald S. Huml, chief financial officer, told Prospect News. "We were still able to accomplish our objective of extending the maturity of our debt portfolio. But it did result in reduced transaction fees and interest expense."

"We were very pleased with the execution and the market's reception to the Greif story," Huml added.

"We had $500 million in the books prior to this upsize so [the term C] was almost two times oversubscribed," a syndicate source said. "The pro rata piece is doing well also."

The company's revolver remained at a size of $250 million and has an interest rate of Libor plus 225 basis points.

Salomon Smith Barney and Deutsche Bank are the lead banks on the $550 million credit facility (Ba3/BB). Proceeds are being used to repay exiting debt.

Greif is a Delaware, Ohio manufacturer of industrial shipping containers, containerboard and corrugated products.

Jostens Inc.'s $330 million six-year term loan C "is officially oversubscribed", a syndicate source said. The tranche is priced with an interest rate of Libor plus 275 basis points.

The company's $260 million pro rata portion remained in place but pricing was lowered to Libor plus 225 basis points for a fee of 10 basis points in conjunction with the launch of the new term C, a syndicate source said.

JPMorgan Chase and Deutsche Bank are joint leads on the deal.

Jostens is a Minneapolis, Minn. producer of yearbooks and class rings.

Also Thursday Solutia Inc. said it completed the extension and amendment of its credit facility, extending the maturity for two years and reducing the borrowing capacity to $600 million from $800 million. The loan consists of a $300 million term loan and a $300 million revolver. Total interest expense, including the new facility, is expected to be $107 million in 2002.

"We are pleased that we have completed refinancing the corporation," said Robert Clausen, chief financial officer, in a company press release. "Today's economic climate has made this process challenging, but the extended credit facility will give Solutia the financial flexibility needed to continue to manage our businesses for healthy returns to our investors. Solutia's strong portfolio of products and exciting growth opportunities continue to be a large part of our success, despite the uncertainty we are seeing in today's financial markets."

Service Corp. International, a Houston, Tex. provider of funeral and cemetery services, closed on a new $185 million secured revolving credit facility due July 2005. The loan includes facilities available to issue letters of credit, which will help the company release approximately $60 to $70 million in cash currently deposited with third parties.

J.P. Morgan Securities Inc. and Banc of America Securities LLC were joint lead arrangers and joint bookrunners. JPMorgan Chase Bank was administrative agent, Bank of America was syndication agent and Credit Lyonnais, Lehman Commercial Paper Inc. and Merrill Lynch Capital Corp. were co-documentation agents.

Interest rates are based on the company's leverage ratio. If the leverage ratio is greater than or equal to 4.0 to 1.0 the interest rate is Libor plus 250 basis points. If the leverage ratio is less than 4.0 to 1.0 and greater than 3.25 to 1.0 the interest rate is Libor plus 225 basis points. And, if the leverage ratio is less than 3.25 to 1.0 the interest rate is Libor plus 200 basis points, according to a filing with the Securities and Exchange Commission.

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