Brand Services emerges but quiet week seen; merchant energy firms

By Paul A. Harris

St. Louis, Mo., Sept. 6 - The leveraged loan market was heard to be drawing a breath Friday as some anticipated Wednesday's marking of the anniversary of the Sept. 11, 2001 terrorist attacks on New York and Washington D.C.

In terms of new business, a source mentioned that Bank of America is quarterbacking the Washington Redskins refinancing. And the launch window for St. Louis scaffolding firm Brand Services, Inc. appears to be the week of Sept. 9.

Aftermarket trading was quiet, sources said, although there is evidence that some interest is being taken in select merchant energy names.

Noting that Wednesday marks the first anniversary of the terrorist attacks on the U.S., one market source commented: "Most people have tried to avoid next week for launching anything."

This source also commented Friday that a certain amount of paper that is coming in the leveraged loan market hinges upon the ability of the companies to complete the high yield pieces of their transactions.

"It's kind of hand in glove to some extent," the source said.

"All of these acquisitions and refinancings and restructurings require some long-term passive capital in the form of sub debt. And when that market isn't there nothing happens."

The source mentioned Swift & Co.'s $550 million secured credit facility (Ba2/BB) via Citibank and JPMorgan Chase as a case in point.

The facility, comprised of a $350 million revolver at Libor plus 325 basis points and a $200 million term B at Libor plus 325 basis points, is coming with a restructured $250 million senior notes deal (expected: B1/B+) that hit the road last Friday.

Swift & Co. suffered a delay when ConAgra Foods, the company whose beef, pork and lamb operations Swift is acquiring, announced the recall of 18.6 million pounds of E. coli-tainted ground beef, in July.

"The banks have been sitting around with a commitment in hand waiting for that bond deal to get done," the source said. "That deal's waiting for some sub debt before the banks can actually close."

"You've got much the same thing with Le Reve," the source added, citing Wynn Las Vegas' $1 billion senior secured credit facility.

That deal, comprised of a $250 million seven-year delayed-draw term at Libor plus 425 basis points and a $750 million six-year revolver at Libor plus 400 basis points via Bank of America and Deutsche Bank, is said to be coming with $350 million of second mortgage notes due 2010 via Deutsche Bank Securities, Banc of America Securities, Bear Stearns & Co. and Dresdner Kleinwort Wasserstein.

Wynn will use the money to finance its new Le Reve entertainment, lodging and retail complex in Las Vegas.

"Wynn's got his money from the banks, there's no doubt about that," the source said. "Bank of America and Deutsche Bank put together a facility. They underwrote it. The banks are reasonably satisfied and I think it is circled up.

"But the bond has to get done and he has to raise some equity. So the three legs of the stool have to be in place and then he can start digging a hole out in Vegas."

This source told Prospect News that Bank of America is leading a refinancing of the Washington Redskins' bank facility, at Libor plus 250 basis points, rated BBB- by Fitch. Prospect News learned that the bank meeting had taken place during the week of Sept. 2.

"That deal's been very well received," the source said. "It seems to be oversubscribed. Sports-lending continues to be well-received. It's one of the most defensive industry sectors"

Prospect News also heard Friday that, Sept. 11 notwithstanding, Brand Services, Inc. is poised to launch an approximately $150 million credit facility during the week of Sept. 9. A market source identified Credit Suisse First Boston and JP Morgan as the lead banks. Brand Services will bring $165 million of new Rule 144A 10-year senior subordinated notes (B3), via Credit Suisse First Boston and JP Morgan. The deal, according to the one source, is likely to price in September.

A secondary market source reported Friday afternoon that trading seemed quiet. Not a lot of movement was seen on Fleming Cos.' paper, which was said to have suffered in the wake of last Thursday's announcement that the nation's largest wholesale food distributor's ability to meet earnings targets depends on a recovery in sales at Fleming's supermarkets to earlier levels - recovery that the company's chief financial officer Neil Rider says is not in evidence. Also hurting Fleming is controversy from lawsuits and criticism of its business practices, most recently in a Wall Street Journal article.

"No movement," a source said. "Fleming is just getting beaten down."

Another source reported positive interest in merchant energy firms Calpine Corp. and AES.

"There are some people who care about that stuff," the source said. "The trends have stabilized a little bit and are getting a little bit better.

"The depth of the bids is improving," the source added. "You're starting from a high-70s, low-80s base but the banks aren't actually dumping paper.

"The paper's not terribly well offered. But the bids are getting a little stronger. Somebody's got a view on it and they're trying to own the paper."

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