WilTel cuts term B size, adds second-lien tranche; Charter, Qwest weaken in quiet secondary

By Sara Rosenberg

New York, Aug. 9 - WilTel Communications Group Inc. reworked its $385 million credit facility, reducing the first-lien term loan B and adding a second-lien term to the credit structure. Meanwhile, in the relatively calm summer Monday secondary market, Charter Communications Corp. unexpectedly saw little trading activity following earnings news while Qwest Communications International Inc. weakened a bit as a news article surfaced favoring some other comparable companies over Qwest.

WilTel's six-year term loan B (B3) was reduced to $260 million from $360 million and pricing came in at Libor plus 350 basis points compared to previous talk of Libor plus 350 to 375 basis points, according to a market source.

To compensate for the term loan B reduction, a $100 million second-lien term loan was added to the credit facility priced with an interest rate of Libor plus 600 basis points.

Both term loans are being offered to investors at par.

"They got the [term B] book to about $260 [million] on that price talk. The first lien is done. They have about $50 million in the second lien already, so it's getting there," the market source said, adding that the restructuring seems to have rebuilt momentum on syndication of the deal.

WilTel's facility also contains a $25 million five-year revolver (B3) with a commitment fee of 50 basis points. Pricing on the revolver also came in at Libor plus 350 basis points compared to previous price talk of Libor plus 350 to 375 basis points.

Credit Suisse First Boston is the sole lead arranger and sole bookrunner on the refinancing deal.

WilTel is a Tulsa, Okla., telecommunications provider to enterprises, carriers and the federal government.

Charter dips on numbers

Charter's bank debt defied expectations on Monday as very little trading activity was seen in the name despite the release of earnings numbers, but the paper did weaken slightly with levels dropping by about a quarter of a point.

Charter's term loan B was quoted at 97¾ bid, 98¼ offered, compared to 98 bid, 98½ offered on Friday, and the term loan A was quoted at 96¾ bid, 97¼ offered, compared to 97 1/8 bid, 98½ offered on Friday, according to traders.

The lack of trading activity came as a surprise since a lot of secondary players couldn't wait to hear what Charter had to say, especially being that its chief financial officer recently resigned. In anticipation of results, market players had pushed down levels on Charter over the past two weeks or so.

For the quarter ended June 30, the St. Louis cable company reported revenues of $1.239 billion, an increase of $71 million, or 6%, over pro forma second quarter 2003 revenues of $1.168 billion and an increase of 2% over second quarter actual revenues of $1.217 billion. Income from operations totaled $15 million, a decrease of $83 million on a pro forma basis and a decrease of $97 million on an actual basis compared to the same period last year, primarily due to special charges of $85 million related to the settlement of class action lawsuits. And, net loss applicable to common stock was $416 million, or $1.39 per common share, compared to $38 million, or $0.13 per common share, last year.

"It's in line with what we were expecting. [The bank debt] had come in so it was pretty much priced in already," one trader said.

"I don't think [earnings] were as bad as people made them out to be," a second trader added.

For the six months ended June 30, Charter generated pro forma revenues of $2.424 billion, an increase of 5% over pro forma revenues of $2.298 billion for the year-ago period and pro forma income from operations totaled $78 million, a decrease of $85 million compared to the same pro forma 2003 period.

Qwest comes third to AT&T, MCI

Qwest Communications International Inc.'s bank debt was "a little bit active" at levels that were down by about a quarter of a point on the heels of a weekend Barron's article that didn't shed the best light on the company, according to a trader.

The Denver telecommunications company's fixed-rate paper was quoted at 97¾ bid, 98¼ offered.

"Barron's came out with an article saying [Qwest] is a business worth buying but with AT&T and MCI out there is will probably be the least bargain of that bunch. The bonds came in a little bit, so the bank debt came in," the trader explained.

Ply Gem gets early commitments

Ply Gem Industries Inc.'s $161 million in incremental senior secured credit facilities (B1) already had "a bunch of commitments in the book mostly from existing lenders, [which is] mainly who it's going out to," ahead of Monday afternoon's bank meeting, according to a market source.

The facility consists of a $20 million five-year incremental revolver and a $141 million incremental term loan.

Since the company is basically layering the new debt on top of existing debt, pricing is expected to stay in line with the revolver at Libor plus 250 basis points and the term loan at Libor plus 275 basis points.

UBS Securities and Deutsche Bank are joint lead arrangers on the deal, with UBS left lead, and JPMorgan is a co-manager.

Proceeds will be used to help fund the acquisition of MW Manufacturers Inc. from Investcorp for about $320 million in cash. Investment vehicles associated with Caxton-Iseman Capital Inc., the New York-based private equity firm that acquired Ply Gem in February, have agreed to make an additional cash investment in Ply Gem to support the transaction as well.

Completion of the acquisition, which is expected to occur by the end of August, is subject to customary closing conditions.

Ply Gem is a Kearney, Mo., manufacturer and distributor of products for use in the residential new construction, do-it-yourself and professional renovation markets. MW is a Rocky Mount, Va., manufacturer of vinyl, clad-wood, vinyl-wood, wood and composite window and patio door products.

PanAmSat in waiting period

PanAmSat Corp.'s $2.91 billion credit facility is in a waiting period with allocations no longer anticipated to take place this week as Kohlberg Kravis Roberts & Co. LP, The Carlyle Group and Providence Equity Partners Inc. continue to evaluate PanAmSat's recent satellite trouble, according to market sources.

While no comment has been made, speculation has been that this event may potentially give the LBO sponsors an opportunity to negotiate a lower transaction price. And, the investor community is hoping that if a lower price is negotiated, it would result in less bank debt as opposed to less equity, one market source explained.

Last Thursday, PanAmSat announced that on Aug. 3 the secondary XIPS on the Galaxy 10R satellite experienced an unexpected shutdown, and the company has not been able to restart the system. The satellite is operating normally on its backup system, there has been no service interruption to customers and revenue is not expected to be affected.

However, under the terms of the PanAmSat sale agreement, the satellite failure allows the purchasers to back out of the transaction.

PanAmSat is in-market with a credit facility to help fund the LBO that consists of a $1.86 billion seven-year term loan B with an interest rate of Libor plus 275 basis points (after being flexed up by 25 basis points on the bonds pricing wide last week), a $250 million five-year revolver with an interest rate of Libor plus 250 basis points and a 50 basis points commitment fee, and an $800 million five-year term loan A with an interest rate of Libor plus 250 basis points.

Citigroup and Credit Suisse First Boston are the joint lead arrangers and joint bookrunners on the deal, with Citigroup listed on the left. Bear Stearns, Lehman Brothers and Bank of America are co-documentation agents.

PanAmSat is a Wilton, Conn., satellite operator.

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