Level 3 falls on management changes; Cash softens; Delphi floats talk; Hudson readies allocations

By Sara Rosenberg

New York, March 10 - Level 3 Communications, Inc.'s term loan spiraled lower on Monday after news emerged that the company's president and chief operating officer stepped down, and the cash market in general felt weaker in low volume.

In other news, Delphi Corp. came out with price talk on its restructured exit financing credit facility now that a relaunch of the transaction has been set for Tuesday, and Hudson Group is hoping to allocate its credit facility in the next few days with spreads expected at initial guidance.

Level 3's term loan lost some ground during market hours on news of a management shake-up, according to a trader.

The term loan was quoted at 86½ bid, 87½ offered, down from 87½ bid, 88½ offered on Friday, the trader said.

On Monday morning, the company announced that Kevin O'Hara, president and chief operating officer, resigned, effective immediately.

The company also announced that Sunit Patel, the current chief financial officer, will continue in his role and that the previously disclosed search for a new chief financial officer has been terminated.

Neil Hobbs, currently executive vice president, sales and network services, has been appointed to the newly created position of executive vice president, operations. Hobbs and Jim Crowe, chief executive officer, will be assuming O'Hara's responsibilities going forward, and Crowe will assume the additional title of president.

As part of the internal finance organization changes, the company appointed Neel Dev to the new position of senior vice president, finance with responsibility for financial planning, budgeting and analysis for operations and the company's customer facing market groups.

"Kevin O'Hara has worked closely with me for more than 20 years and this was obviously a difficult decision for both of us," Crowe said in a news release. "Kevin is one of the founders of our company and has made enormous contributions to its success. I want to personally thank him for his professionalism and commitment to our company over the many years we've been together. At this time, however, Kevin and I have agreed that a different perspective will be of benefit to our company.

"In October, we announced that we were beginning a search for a new CFO. At the same time, we began implementing internal organizational changes aimed at both retaining Sunit Patel and bolstering our financial operational capabilities.

"During the search process, it became clear that the company would be best served by Sunit remaining CFO. I am particularly pleased that our company will continue to benefit from Sunit's broadly recognized leadership and strategic financial thinking. He is a gifted, financial executive with a deep knowledge of and commitment to the company," Crowe added in the release.

Level 3 is a Broomfield, Colo.-based communications company.

Cash slides

The secondary market as a whole carried a softer tone on Monday with activity described as very light, according to traders.

One trader placed the market down by about a quarter of a point on the day.

"Just general market weakness. Nothing specific," the trader added.

Delphi price talk

Moving to the primary, Delphi released updated price talk on its exit financing credit facility in connection with the scheduling of a conference call for Tuesday that will be used to relaunch the deal to potential investors, according to market sources.

As was previously reported, the revised credit facility structure includes a $1.7 billion first-lien term loan, a $2 billion first-lien term note to be issued to an affiliate of General Motors Corp. (junior to the $1.7 billion term loan), an $825 million second-lien term loan, of which any unsold portion would be issued to General Motors and/or its affiliates, and a $1.6 billion ABL revolver,

Price talk on the $1.7 billion first-lien term loan is Libor plus 575 basis points, with a 3.25% Libor floor for life, sources said. Lenders will be offered an original issue discount on the loan in the low 90's area, likely around 92. The debt carries call protection of 102 in year one and 101 in year two.

Price talk on the second-lien term loan is Libor plus 875 bps, with a 3.25% Libor floor for life, sources continued. This loan carries call protection of 103 in year one, and 101½ in year two.

And, price talk on the ABL revolver is Libor plus 300 bps, sources added.

When the company first launched its exit facility in early January, the deal was comprised of a $3.7 billion first-lien term loan (Ba3/B+), an $825 million second-lien term loan (B3/B-), of which $750 million was expected to be issued to General Motors in connection with plan of reorganization distributions, and a $1.6 billion ABL revolver.

The first-lien term loan had been launched at Libor plus 450 bps, with an original issue discount of 96 and call protection of 102 in year one and 101 in year two.

The ABL revolver had been launched with talk of Libor plus 250 bps.

During the original syndication process, market sources had been saying that revisions to the deal were being contemplated and would be necessary in order for syndication to be successful, and some even speculated that General Motors would have to step in to help things along.

Initially, the second-lien loan was going to be sized at $1.5 billion, but it was downsized prior to launch as a result of a permanent improvement in liquidity as the company generated cash flow during the second half of 2007 in excess of the amount projected in its revised business plan.

General Motors increased involvement in the exit facility has raised some compliance questions by investors.

On Friday, the bankruptcy court said that while General Motors could not directly provide incremental exit financing to Delphi without the consent of the plan investors, the prohibition against additional agreements with General Motors did not extend to incremental financing provided through its subsidiaries or pursuant to certain other structures.

In its ruling, the court also observed that the company had been given sufficient guidance to proceed to seek exit financing on terms that are potentially achievable.

Although certain of the investors continue to object to the proposed exit financing, Delphi believes its proposed exit financing is consistent with the court's guidance and previously issued confirmation order.

JPMorgan and Citigroup are the lead banks on the deal that will be used to repay the company's debtor-in-possession financing facility, to fund other payments required upon emergence from Chapter 11 and to conduct post-reorganization operations.

The credit facility is being done on a best efforts basis.

Delphi's second-lien debtor-in-possession term loan was unchanged in trading on the news that the exit facility is attempting to find new life, a trader told Prospect News. The DIP loan was quoted at 98½ bid, 99½ offered.

Delphi is a Troy, Mich.-based automotive electronics manufacturer.

Hudson allocations near

Hudson Group is anticipating allocating its $295 million first-lien credit facility late this week, with pricing on the deal expected to firm up in line with original talk at Libor plus 400 bps, according to a market source.

Tranching on the deal is comprised of a $60 million revolver and a $235 million first-lien term loan.

CIT Group is the lead bank on the deal.

The company is also getting a $125 million second-lien term loan that is being led by hedge fund Magnetar and is already spoken for.

Proceeds will be used to help fund Advent International's buyout of the company.

Hudson Group is an East Rutherford, N.J.-based travel retail specialist that operates more than 550 newsstands, bookstores, cafes and specialty retail shops in 69 airports and transportation terminals.

Graphic Packaging closes

Graphic Packaging International, Inc. closed on its $1.2 billion senior secured term loan due May 16, 2014 and $100 million add-on to its revolving credit facility on Monday, according to an 8-K12B filed with the Securities and Exchange Commission.

Bank of America, JPMorgan, Goldman Sachs and Deutsche Bank acted as the lead banks on the deal.

Pricing on the term loan is Libor plus 275 basis points.

The company's existing $1.055 billion term loan due May 16, 2014 remained in place and continues to be priced at Libor plus 200 bps.

Proceeds were used to refinance existing bank debt in connection with the company's combination with Altivity Packaging LLC.

Graphic Packaging is a Marietta, Ga., paperboard packaging company.

Cogdell Spencer closes

Cogdell Spencer Inc. closed on its $250 million credit facility, consisting of a $100 million three-year term loan at the taxable REIT subsidiary level and a $150 million three-year amended and restated revolver at the Cogdell level, according to a news release.

The term loan was led by KeyBank and the line of credit was led by Bank of America.

Proceeds were used to help fund the acquisition of Marshall Erdman and Associates.

Cogdell Spencer is a Charlotte, N.C., real estate investment trust that focuses on specialty office buildings for the medical profession.

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