Armstrong breaks atop par; Transeastern gains more ground; Dura bounces around

By Sara Rosenberg

New York, Oct. 13 - Armstrong World Industries Inc.'s exit financing credit facility freed for trading on Friday, with the term loan B seesawing around in the lower par context.

In other trading news, Transeastern's term loan continued to inch its way higher still on follow through from a private lender call that was held during the previous session, and Dura Automotive Systems Inc.'s second-lien term loan saw a pop in early trading before coming back in due to a response to recent instability in the company's bond trading levels.

Armstrong World Industries' credit facility hit the secondary during market hours, with the $500 million seven-year term loan B opening up at par ¼ bid, par ½ offered, dropping down to par 1/8 bid, par 3/8 offered and then bouncing back up to the par ¼ bid, par ½ offered levels, where it closed the day, according to a fund manager.

The term loan B is priced with an interest rate of Libor plus 175 basis points with a step up to Libor plus 200 bps if the company's corporate credit ratings are downgraded. During syndication, pricing on this loan was reverse flexed from original talk of Libor plus 200 bps with the addition of the step.

Armstrong's $1.1 billion exit financing senior secured credit facility (Ba2/BB) also includes a $300 million five-year revolver and $300 million five-year term loan A, with both of these tranches priced in line with original talk at Libor plus 150 bps.

Bank of America and JPMorgan are the lead banks on the exit financing deal, with Bank of America the left lead.

The company emerged from Chapter 11 bankruptcy on Oct. 2 after its fourth amended plan of reorganization took effect, but the credit facility isn't expected to close until Oct. 16.

The reorganization plan includes a comprehensive settlement resolving Armstrong's asbestos liability by establishing and funding a trust to compensate all current and future asbestos personal injury claimants.

Armstrong is a Lancaster, Pa.-based flooring company.

Transeastern builds momentum

Transeastern's term loan was quoted higher for the second day in a row - a rare event in recent times for this paper - still buoyed by the company's private-side conference call that was held on Thursday afternoon, according to a trader.

The term loan closed the day at roughly 67½ bid, 70 offered, up from Thursday's levels of 67 bid, 68 offered, the trader said. On Thursday, the paper had moved up to the 67 bid, 68 offered context prior to the actual call taking place and held in at those levels following the call. By comparison, on Wednesday, the loan closed the day at 62 bid, 64 offered.

Details on what took place on the conference call were unavailable, only that it is all private-side information.

About two or three weeks ago the company warned that because of the disappointing Florida housing market conditions it would be unable to support its existing capital structure.

The Transeastern joint venture has about $600 million in debt at annual carrying costs of roughly $60 million and current business conditions only anticipate the company selling between 1,200 and 1,500 homes next year - translating to at least $40,000 of debt service for each home sold.

Transeastern also said that it is exploring various options to fix the liquidity problem, including requesting waivers from its lenders regarding potential defaults and permitting future advances under the revolver, and restructuring land bank obligations.

Once news of these troubling financials hit the market, the term loan plummeted over the course of many sessions from its 99 trading context into the 60s.

Transeastern is a joint venture of Technical Olympic USA Inc. and Falcone Group.

Neither Technical Olympic nor Falcone Group plan to put any more equity capital into the company until the capital structure problems are resolved.

Dura second lien fluctuates

Dura Automotive's second-lien term loan saw a nice upswing in trading levels early on in the Friday session before coming back in to end the day basically unchanged, according to a trader.

The second-lien paper closed the day at 83 bid, 83½ offered but traded as high as 85, the trader said. On Thursday, the loan went out around 83 bid, 84 offered, but traded as low as 821/2.

"The bonds have been all over the place so it's just kind of tracking the bonds," the trader said about the second-lien loan.

Apparently, the bonds have been unstable as market players are waiting to see if the company will make a scheduled $17.25 million interest payment that is due on its $400 million bonds on Monday, or if the standard 30-day grace period will be invoked.

Dura is a Rochester Hills, Mich.-based automotive parts maker.

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