Level 3, USA Mobility break; Charter up; Northwest Airlines, Aircast rework sizes and pricing

By Sara Rosenberg

New York, Nov. 18 - Level 3 Financing Inc.'s newly upsized term loan allocated and broke for trading on Thursday morning around the 103 context and USA Mobility Inc. hit the secondary near the 101 area. Also, on the trading front, Charter Communications Inc. was active at stronger levels on the company's recently successful move to push out maturities by pricing a convertible deal.

Meanwhile, the primary market saw a number of changes to in-market deals as Northwest Airlines Inc. shifted funds from its term loan A into its term loan B and - as was expected - reverse flexed both tranches, and Aircast Inc. upsized its term loans and reduced pricing on its first-lien debt.

Level 3's senior secured term loan (B3/NA/B-) opened around 103½ bid in the morning and then settled back down to 103 bid, 103¼ offered, according to traders.

One trader explained that the deal was basically trading to its call price since the credit agreement includes call protection at 103 in year one.

The company upsized the tranche to $730 million from $450 million as it increased the maximum amount it will accept in its tender offer for its bonds due 2008 to $1.105 billion from $450 million.

Pricing on the term loan is set at Libor plus 700 basis points, a source said. No other price talk had officially been in the market regarding the deal but, earlier this week, rumor had it that the term loan - when sized at $450 million - was subscribed at Libor plus 675 basis points.

Merrill Lynch is the sole lead bank on the deal, which was presented to lenders through a conference call on Monday of this week.

Proceeds from the term loan, along with proceeds from a proposed $320 million convertible senior notes offering (upsized from $200 million), will be used to help fund the company's announced tender offers for debt securities due 2008, including the 9 1/8% senior notes, the 11% senior notes, the 10½% senior discount notes and the 10¾% senior euro notes. The expiration of each tender offer was extended to Dec. 1 from Nov. 29 because of the change to the tender cap.

As of Nov. 15, the principal amount of debt securities tendered included $244.862 million of 9 1/8% notes, $229.226 million of 11% notes, $264.215 million of 10½% notes and €284.461 million 10¾% notes.

Level 3 Financing Inc. is a subsidiary of Level 3 Communications, a Broomfield, Colo., communications and information services company.

USA Mobility around 101

USA Mobility's new $140 million two-year senior secured term loan (Ba3), which carries an interest rate of Libor plus 250 basis points, allocated and broke for trading on Thursday with the paper quoted at par ½ bid, 101¼ offered, according to a trader.

Metrocall Inc. and Arch Wireless Operating, Inc., two subsidiaries of USA Mobility, are the borrowers under the term loan.

UBS was the lead bank on the deal.

Proceeds were used to help fund the $150 million cash portion of the consideration that Metrocall stockholders received in the merger between Metrocall Holdings Inc. and Arch Wireless Inc., which was completed Tuesday.

USA Mobility, the new holding company formed as the result of the merger, is an Alexandria, Va.-based provider of paging products and other wireless services.

Charter stronger

Charter's term loan A and term loan B were up about a quarter of a point each on Thursday as the company is in the process of taking care of 2005 debt maturities, with the A loan quoted at 98¾ bid, 99 offered and the B loan quoted at 99 7/8 bid, par 1/8 offered, according to traders.

"People are more comfortable with the credit because they pushed out maturities," one trader added.

On Tuesday evening, the St. Louis-based cable company sold $750 million of five-year convertible notes with proceeds earmarked primarily for the redemption of its 5.75% convertibles due 2005.

Northwest reworks deal

Northwest decreased the size of its term loan A to $575 million from $675 million and increased the size of its term loan B to $400 million from $300 million on Thursday morning, according to a market source.

Furthermore, pricing on the term loan A was reduced to Libor plus 525 basis points from Libor plus 550 basis points and pricing on the term loan B was reduced to Libor plus 675 basis points from Libor plus 750 basis points, the source said.

Recommitments from lenders were due on Thursday as well, giving investors less then a full day to absorb the changes. The original commitment deadline, prior to the changes, was Tuesday.

The term loan A is being offered at 99 and the term loan B is being offered at par.

Call protection on both term loan tranches remained unchanged at 103 in year one, 102 in year two and 101 in year three.

Talk of potential price cuts had been circulating throughout the market earlier this week as the deal was said to have turned into a "blowout" once commitments began coming after last week's collateral valuation call.

JPMorgan and Citigroup are the lead banks on the deal, with JPMorgan on the left, and Deutsche Bank is involved as well.

Proceeds from the $975 million credit facility (B1/B+) will be used by the Eagan, Minn.-based airline company to refinance existing revolver debt. The company currently has a $725 million five-year revolver due October 2005 and a $250 million 364-day revolver due October 2004 and renewable annually at the option of lenders. The revolvers carry an interest rate of Libor plus 325 basis points.

Aircast restructures, cuts pricing

Aircast Inc. also made some changes to its in-market credit facility, including upsizing both its term loan B and its second-lien term loan and reducing pricing on its revolver and term loan B tranches, according to a syndicate document.

The six-year term loan B is now sized at $55 million, compared to an initial size of $50 million, and is priced with an interest rate of Libor plus 275 basis points, compared to initial talk of Libor plus 325 basis points.

The 61/2-year second-lien term loan is now sized at $40 million compared to an initial size of $30 million. Pricing on the tranche remained at Libor plus 700 basis points.

Lastly, the $5 million five-year revolver was reverse flexed to Libor plus 275 basis points from Libor plus 325 basis points. There is a 50 basis points commitment fee under the tranche.

Credit Suisse First Boston and Wachovia are the joint lead arrangers and joint bookrunners on deal.

Proceeds from the upsized $100 million credit facility will be used to help fund Tailwind Capital Partners' leveraged buyout of the Summit, N.J.-based company that manufactures orthopedic devices.

In reaction to these changes, Standard & Poor's assigned new ratings to the deal, lowering the revolver and term loan to B from BB- and lowering the second-lien term loan to CCC+ from B-.

"The low, speculative-grade ratings on Aircast reflect the company's narrow product line, highly leveraged capital structure, and limited financial resources, which overshadow the company's brand recognition in niche markets," said S&P analyst Jordan C. Grant, in the rating release.

Moody's Investors Service did not officially announce change in its previous assigned ratings, but according to the syndicate document, Moody's will keep its B1 rating on the revolver and term loan, but lower the second-lien term loan to B3 from B2.

VCA Antech repricing smooth sailing

VCA Antech Inc.'s term loan E repricing proposal, which is technically being launched to investors via a conference call on Friday, "is not going to be an issue" as everyone, so far, is "rolling or upsizing" their positions, according to a market source.

The repricing would take the interest rate on the E loan down to Libor plus 175 basis points from Libor plus 225 basis points.

Goldman Sachs and Wells Fargo were the lead banks on the term loan when it was first obtained.

VCA Antech is a Los Angeles-based provider of pet health care services.

Center for Diagnostic Imaging sets launch

Center for Diagnostic Imaging Inc. has scheduled a bank meeting for Monday to launch its $95 million credit facility that will be used to help fund Onex Partners LP's acquisition of the company. JPMorgan is the sole lead bank on the deal.

The facility consists of a $75 million term loan B and a $20 million revolver that will be undrawn at closing, a company spokesman previously told Prospect News.

Onex is acquiring Center for Diagnostic Imaging for approximately C$225 million. In addition to using the term loan borrowings, the transaction will be funded by a C$93 million investment from Onex, and the rollover of equity by management and the founder and physician shareholders, all of whom will retain an ownership interest in the business.

Completion of the acquisition, which is expected to occur in December, is subject to customary terms and conditions, including regulatory approvals.

Center for Diagnostic Imaging is a Minneapolis-based provider of diagnostic and therapeutic radiology services.

Triton PCS closes

Triton PCS Inc. closed on its $250 million five-year senior secured term loan (B2/B) with an interest rate of Libor plus 325 basis points. Originally, it was talked at Libor plus 350 to 375 basis points but was reverse flexed during syndication.

Lehman was the sole lead bank on the deal, with Merrill Lynch as an agent.

Proceeds are being used for general corporate purposes, possible acquisitions and to retire, from time to time, some outstanding debt securities through open market purchases and privately negotiated transactions. The term loan replaced Triton's $100 million senior secured revolver.

Triton is a Berwyn, Pa. wireless phone service provider.

K&F closes

Aurora Capital Group completed its acquisition of K&F Industries Inc. for a cash purchase price of $1.06 billion, according to a company news release.

To help fund the transaction, K&F got a new $530 million senior secured credit facility (B2/B+) consisting of a $480 million term loan B with an interest rate of Libor plus 250 basis points and a performance-based grid that takes pricing to Libor plus 225 basis points under certain conditions, and a $50 million six-year revolver with an interest rate of Libor plus 250 basis points.

Originally, the term loan B was launched with pricing of Libor plus 275 basis points but was reverse flexed during syndication because of strong demand, and the size was originally set at $430 million but was increased in connection with a bond deal downsizing.

Lehman, JPMorgan, Goldman Sachs and Citigroup were the lead banks on the deal, with Lehman left lead.

K&F is a New York supplier to manufacturers and operators of commercial, general aviation and military aircraft. The company was previously jointly owned by Bernard L. Schwartz and Lehman Brothers Merchant Banking.

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