Lear DIP breaks, trades above par, existing term slides; Vought Aircraft rises on asset sale

By Sara Rosenberg

New York, July 7 - Lear Corp.'s debtor-in-possession term loan freed up for trading on Tuesday, and the company's existing term loan was once again lower as the new money hit the secondary market and a bankruptcy filing was announced.

In more trading happenings, Vought Aircraft Industries Inc.'s term loan debt headed higher after news emerged that the company will be selling its South Carolina operations to Boeing.

Lear DIP frees to trade

Lear's $500 million debtor-in-possession one-year term loan, which can be extended to 15 months, hit the secondary market during the session with levels jumping way above par, according to a trader.

The DIP term loan was quoted at 99½ bid, par offered on the break and then it moved up to 103 bid, 104 offered where it ended the day, the trader said.

Pricing on the DIP loan is Libor plus 1,000 basis points, with a 3.5% Libor floor.

JPMorgan and Citigroup acted as the joint lead arrangers and joint bookrunners on the deal that will be used for working capital and other general corporate needs.

The DIP financing will convert into exit financing term loan with a three-year term upon the company's emergence from Chapter 11.

According to an 8-K filed with the Securities and Exchange Commission, the exit facility will be priced at Libor plus 1,000 bps for the first 18 months, Libor plus 1,100 bps for the following 12 months and Libor plus 1,200 bps thereafter.

Like the DIP, the exit facility will also include a 3.5% Libor floor.

Lear term loan falls

Also on Tuesday, Lear's existing term loan gave up a couple more points, with one trader speculating that the paper just "got crammed down with the new money DIP."

The term loan was quoted by two traders at 71 bid, 72 offered, down from 75 bid, 76 offered, and by a third trader at 71½ bid, 72½ offered, down from 75¼ bid, 77¼ offered.

This is the second day in a row that the term loan slid lower after running up at the end of last week to the 77 bid, 79 offered context on the restructuring news.

Last week, Lear revealed that it reached an agreement in principle with a steering committee of its secured lenders and bondholders regarding the restructuring of about $2.3 billion of debt outstanding under its amended and restated credit and guarantee agreement, and about $1.3 billion of debt outstanding under its 8.5% senior notes due 2013, 5.75% senior notes due 2014, 8.75% senior notes due 2016, and zero-coupon convertible senior notes due 2022.

Lear files

On Tuesday, Lear announced that it received the support it was seeking from additional bank lenders and bondholders to move forward with the plan and, therefore, filed for Chapter 11.

The company said that about 68% in principal amount of its secured lenders and more than 50% in principal amount of its bondholders have entered into agreements supporting the plan.

"We are conducting business as usual and are very pleased to have received strong support from our lender and bondholder groups for our debt restructuring plan," said Bob Rossiter, chairman, chief executive officer and president, in a news release.

"We intend to proceed on an expedited basis and expect to submit the plan to the bankruptcy court within 60 days. Our goal is to emerge from this process quickly and with an appropriate capital structure to support our long-term business objectives as a leading global competitor with the financial flexibility to build on our strengths and take advantage of future growth opportunities," Rossiter added.

Lear post filing capital structure

Under the bankruptcy plan, Lear would have a new capital structure upon exiting that would consist of the up to $500 million exit financing first-lien term loan, a $600 million second-lien term loan and $500 million of series A convertible preferred stock.

There would also be a single class of common stock, including sufficient shares to provide for management equity grants, the issuance to the lenders of warrants to purchase common stock with a value of up to $25 million and the issuance to the holders of senior notes and certain other general unsecured claims of warrants to purchase 15% of the new common stock.

Specifically, senior credit facility claims would receive its pro rata share of the new second-lien term loan, the convertible preferred stock and about 26% of the new common stock.

Senior notes and other unsecured claims would receive about 46% of the new common stock and warrants to purchase 15% of the new common stock.

And, existing equity claims would have no recovery.

Lear is a Southfield, Mich.-based supplier of automotive seating systems, electrical distribution systems and electronic products.

Vought up with sale

Vought Aircraft's term loans were stronger on Tuesday following the announcement that it will be selling its business and operations at its South Carolina facility to Boeing, according to a market source.

The term loan B was quoted at 96¾ bid, 97¾ offered and the incremental term loan was quoted at 97½ bid, 99 offered, with both tranches up from around the 95 area, the source said.

The Vought facility that is being acquired by Boeing performs fabrication and assembly of structures and systems installation of 787 aft fuselage sections, which are made primarily of composite materials.

Boeing is purchasing the facility for about $580 million in cash.

The transaction is anticipated to close in the third quarter following satisfaction of customary conditions, including consent from Vought's lenders.

The company is scheduled to hold a lender call on Thursday to launch an amendment to its credit facility that would allow for the asset sale and change the administrative agent to Barclays from Lehman.

Vought is a Dallas-based aerostructures company.

USI pulls loan

In other news, USI Holdings Corp. canceled plans for its already in-market $117 million incremental senior secured term loan (B-) since the tender offer that the loan was going to fund was terminated, according to an informed source.

The term loan due in May 2014, which had been launched with a conference call around mid-June, was being talked at Libor plus 575 bps with an original issue discount of 90.

Goldman Sachs was acting as the lead bank on the deal.

USI had been tendering for up to $100 million of its outstanding senior floating-rate notes due 2014 and 9.75% senior subordinated notes due 2015.

However, this tender offer was pulled since there was minimal participation by the early tender date, leaving the company to believe that the contemplated benefits of the transaction would not be realized.

USI is a Briarcliff Manor, N.Y.-based distributor of property and casualty insurance and employee benefits products.

Commercial Barge closes

Commercial Barge Line Co. closed on its new $390 million, upsized from $350 million, four-year senior secured first-lien asset-based revolving credit facility, according to a news release.

Bank of America, UBS, SunTrust and Wachovia acted as the lead banks on the deal.

Price talk on the revolver was Libor plus 400 bps.

Proceeds from the revolver, along with proceeds from a $200 million senior secured second-lien notes offering, are being used to refinance the company's existing credit facility and for general corporate purposes.

Commercial Barge Line is a subsidiary of American Commercial Lines Inc., a Jeffersonville, Ind.-based marine transportation and service company.

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