Wyndham trades up on news Starwood is selling notes to reduce debt

By Sara Rosenberg

New York, April 8 - Wyndham International Inc. moved up at least a point on Monday from last week's trading prices in the secondary bank loan market on news that Starwood Hotels & Resorts is planning a Rule 144A offering of $1 billion senior notes.

"The (senior note) offering will be in two tranches, a five-year tranche and a ten-year tranche, and Starwood expects to use the proceeds to repay all of its increasing rate notes and a portion of its senior credit facility," a company press release said.

There are two reasons as to why Starwood's announcement is affecting Wyndham's bank paper, according to a market professional. First, Starwood is taking a lot of paper out of the market since it using some of the proceeds from the new note offering to pay off outstanding bank debt. Due to this, investors are currently scrambling to get a hold of lodging paper, such as Wyndham, to replace the Starwood paper. Second, people believe that if Starwood can get a high-yield deal done, then that indicates that the high-yield market likes lodging paper, so Wyndham may pull off a high-yield offering as well. If Wyndham does actually follow in Starwood's footsteps by offering a new bond deal, than the bank paper would go up and investors would profit.

Before the Easter break, Wyndham traded higher on speculation that the company is planning a bond deal. Wyndham said then that it does not comment on market rumors.

In primary news, Associated Materials Inc. held its bank meeting last week regarding $165 million in new credit facilities (B1/B+). UBS PaineWebber and Credit Suisse First Boston are co-lead arrangers on the deal. The loan is divided into a $125 million seven-year term with an interest rate of Libor plus 375 basis points and a $40 million five-year revolver with an interest rate of Libor plus 300 basis points. The loan, according to a fund manager, is an "average leveraged buy out" by Harvest Partners Inc. News of the definitive merger agreement between Associated Materials and Harvest Partners was announced on March 17.

The new loan is expected to close during the last week of April, according to a source close to the deal. The source said that so far, the bank paper has received interest from institutional investors and several tickets were received last week.

However, according to a fund manager, rumor has it that the deal is "going fairly slowly" due to the fact that Associated Materials is a manufacturer of exterior residential building products. "It takes more time for people to like building supply companies," the fund manager explained. She continued to say that she's planning to keep an eye on the deal this week to see how it progresses.

Looking forward, Team Health Inc. is holding a bank meeting on Tuesday regarding a new $300 million credit facility (Ba3/B+). Fleet National Bank and Bank of America Securities are joint lead arrangers and joint bookrunners for the loan. Fleet National Bank will also act as administrative agent while Bank of America Securities is taking on the role of syndication agent.

The proposed credit facility will consist of a $75 million revolver, a $75 million term loan A and a $150 million term loan B. The revolver matures in five years, has an interest rate of Libor plus 275 basis points and has a commitment fee of 50 basis points, according to a company source. The term loan A matures in five years and has an interest rate of Libor plus 275 basis points, while the term loan B matures in 6½ years and has an interest rate of Libor plus 325 basis points, the company source said.

The loan is to be secured by basically all stock and assets of Team Health and its subsidiaries. Proceeds from the new credit facility will be used to refinance existing bank debt, to fund the acquisition of Spectrum Healthcare Resources and for general corporate purposes.

Also scheduled for this week is National Dairy Holdings' bank meeting on Thursday to discuss a new $425 million credit facility. Wachovia is the sole lead arranger and administrative agent for the deal. The new loan is expected to close by the end of April.

The new credit facility consists of three tranches, a syndicate source said. The $125 million revolver matures in six years, has an interest rate of Libor plus 225 basis points and a commitment fee of 50 basis points. The $125 million term A matures in six years and has an interest rate of Libor plus 225 basis points. The $175 million term B matures in seven years and has an interest rate of Libor plus 275 basis points.

According to a source close to the deal, there has been some investor interest in the deal already and, "most likely it's going to go fine."

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