Tesoro Petroleum institutionally subscribed; Panavision bank meeting; Safety-Kleen trades up

By Sara Rosenberg

New York, March 21 - Bank loan primary performance was viewed positively by market professionals on Thursday as Tesoro Petroleum Corp.'s credit facility add-ons were subscribed by institutional investors and Panavision Inc. held a bank meeting for a new credit facility. Secondary activity was fairly normal with only Safety-Kleen prices changing enough to make participants take notice.

Tesoro Petroleum Corp.'s amended, restated $1.225 billion credit facility is, according to syndicate sources, performing well in the B market. Lehman Brothers is the sole lead on the deal.

An extra $425 million of borrowing capacity was added to the previous $800 million credit facility. The new additions to the tranches are: a $300 million addition to the term loan B due 2007 at Libor plus 300 basis points, a $75 million addition to the term loan A due 2006 at Libor plus 250 basis points and a $50 million addition to the revolver due 2006 at Libor plus 250 basis points.

According to the syndicate source, the $125 million pro rata portion is still in the market while the $300 million institutional side is subscribed. He added that the institutional side is not being closed to orders just yet but there are enough orders to fill the request.

The loan is expected to close on April 5.

Also in the primary, according to market sources, Panavision Inc. participated in a bank meeting on Thursday for its new $180 million senior secured credit facility which is coming in conjunction with $250 million of senior secured notes. J.P. Morgan Chase is the lead bank on the deal.

The new credit facility consists of a five-year $30 million revolver, which has an interest rate of Libor plus 350 basis points, and a six-year $150 million term loan B, which has an interest rate of Libor plus 400 basis points, a source said. Interest rates and structure could not be confirmed with the lead bank.

"Six months ago, Chase wouldn't have brought this deal to market," a market professional said. "The B market wasn't as hot back then."

The high yield market picked up during the past couple of months due to expectations of improvement in the economy, he explained. Money was added to the high-yield market, causing the refinancing of a lot of bank debt with bonds, creating the current atmosphere in the bank loan market in which institutional investors are looking for product and deals that are in the right sector get massively oversubscribed.

As for secondary market activity, according to one portfolio manager, the most noteworthy activity was the slight increase in price of Safety-Kleen from the low 30s to the high 30s.

The portfolio manager attributed the price change in part to the company's announcement that the U.S. Bankruptcy Court approved an extension to its debtor-in-possession (DIP) facility along with an increase in size of the DIP to $200 million from $100 million.

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