Investors Cheer New Loan Deals
July 30, 2009
The leveraged loan market has seen a flurry of activity over the last couple of weeks that has garnered the attention of investors.
The biggest deal currently in the market is an $800 million exit facility for World Color Press, formerly Quebecor World, a Quebec-based multinational printing company for newspapers and magazines across the country. That deal is being shopped by GE and Credit Suisse.
The facility consists of a $450 million term loan and a $350 million revolver. Price talk on the term loan is at Libor plus 600 bps, while talk on the revolver is at Libor plus 450 bps. Both tranches will include a 3% Libor floor. World Color Press will also pay a fee of 100 bps if it uses less than 50% of the revolver, otherwise, it will pay a 75 bps fee to lenders.
Investors said they were keen on the price of the facility and the quality of the credit, despite the fact that the company is in a volatile market. They weren’t sure, however, how much the banks will shop to outside investors. The banks began arranging the deal late last week (LFN, July 24, 2009). Credit Suisse is the lead arranger on the term loan, and GE is the lead on the revolver. The company plans to use the proceeds of the exit facility to refinance the $1 billion debtor-in-possession loan it received from GE and Morgan Stanley last year.
The burst of activity on the leveraged loan primary shows that “investors are embracing risk again,” said a New York-based portfolio manager.
The World Color Press deal came on the heels of NTELOS, a $670 million credit facility JPMorgan is shopping for the Waynesboro, Va.-based telecommunications company.
The facility consists of a $635 million first-lien term loan and a $35 million revolver. The bank began arranging the deal last week (LFN, July 20, 2009). Price talk on the term loan is at Libor plus 375 bps, with an OID of 98.5 and a 2% Libor floor. Like the World Color Press deal, investors said they liked the structure, but they weren’t sure how much JPMorgan would offer to outside lenders.
The company said it is looking to receive commitments by mid-August. The proceeds will be used to refinance an existing term loan and for general corporate purposes. The company’s Ebitda for the second quarter is expected to be approximately $60 million, roughly $3 million more than in the second quarter of 2008. NTELOS is rated BB- by Standard & Poor’s.
At the same time, a $150 million term loan is being marketed for Wynnewood, Okla.-based Wynnewood Refining Co.
The Wynnewood Refining loan launched late last week (LFN, July 27, 2009). Price talk is at LIBOR plus 600 bps, with an OID of 90 and a 3% LIBOR floor. The company secured the term loan earlier this month (LFN, July 10, 2009). The proceeds will be used to refinance existing debt and finance the company’s $56 million Prime G project, which will enable it to meet low sulfur fuel requirements for gasoline. It couldn’t be determined which bank underwrote Wynnewood’s term loan.
Moody’s Investors Service assigned a B2 rating to the loan. The rating reflects the company’s single refinery status, which exposes its earnings and cash flows to unplanned downturns. The rating also reflects the inherent cyclicality and volatility of refining margins, the capital intensive nature of the refining sector, the potential for high working capital needs driven by highly volatile crude prices, and the company's reliance on uncommitted supplier credit lines.
Wynnewood Refining is a wholly owned subsidiary of Gary-Williams Energy. It produces 70,000 barrels of petroleum per day.
There was also a $66 million term loan for Terex Corp., a Westport, Conn.-based construction equipment manufacturer, arranged by JPMorgan. The company plans to use the proceeds to finance its acquisition of Fantuzzi Industries, an Italian port equipment manufacturer, and Noell Crane, a Chinese crane maker. That loan is being talked at Libor plus 375 bps.
And not only have there been a wide variety of borrowers, but also an array of deal features. Citigroup is in the market with a $303 million term loan for Charlotte, N.C.-based Polymer Group that will feature a floating-rate pricing mechanism that comes in addition to the changing Libor rate. The coupon will start at Libor plus 450 bps but could increase or decrease with the market. Investors have been interested in floating-rate securities because they give them the ability to take advantage of changes in the market.
The proceeds from the loan will be used to refinance an existing term loan and revolver. The new loan is rated B+ by S&P.
Another unique deal that launched this week was a $500 million forward start facility for U.K.-based satellite service provider Inmarsat. With forward start facilities, or FSFs, borrowers invite existing and potential lenders to pay off their debt when it matures. In exchange, those lenders get new debt with a higher coupon and better terms. FSFs differ from exchanges and amendments because the borrower doesn’t need unanimous consent from its lenders. Earlier this year, market participants predicted that the loan market could see more of these types of facilities (LFN, April 9, 2009). Inmarsat’s FSF consists of a $200 million amortizing loan and a $300 million revolver, both of which will mature in 2012.
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