Nalco upsizes, frees to trade; Discovery OID emerges; FairPoint lower; Chrysler Financial firms

By Sara Rosenberg

New York, May 6 - Nalco Holding Co. increased the size of its term loan B on Wednesday, firmed pricing and then proceeded to break for trading, with levels seen well above the original issue discount at which it was sold.

Meanwhile, Discovery Communications Holding LLC came out with original issue discount guidance on its term loan add-on and made a slight adjustment to the price talk that was announced prior to the deal's conference call launch.

In other news, FairPoint Communications Inc.'s term loan B softened after a strong run up during the previous session that occurred despite news of potential covenant issues and a possible restructuring.

Also, Chrysler Financial Services LLC's first-lien term loan has been grinding higher as people are recalibrating the refinancing risk of the debt since Chrysler Corp. LLC filed for Chapter 11, and the LCDX 12 index was stronger.

Nalco tweaks deal, breaks

Nalco came out with a change in the size of its seven-year term loan B, set pricing in line with the unofficial talk that had been making its way around the market, finalized the original issue discount and then started trading in the secondary, according to a market source.

The term loan B ended up with a size of $750 million, compared to an originally proposed size of $500 million, due to the tranche being massively oversubscribed.

Good demand was not only seen in the company's bank deal as its 8.25% bond offering, which priced on Wednesday at 97.863, was also upsized, moving to $500 million from $300 million.

In addition, pricing on the term loan B was nailed down at Libor plus 350 basis points with a 3% Libor floor, which is where unofficial talk had placed the deal earlier this week.

And, the original issue discount on the loan emerged at 971/2, the source said, adding that there had previously been no official talk on the discount price.

Nalco trades above discount

After the details on Nalco's term loan B were announced, allocations went out and the debt freed up for trading, the source continued.

The term loan B was seen at 99½ bid, par ½ offered on the break and then it moved up to par bid, par ½ offered by late afternoon, the source said.

Proceeds from the new term loan B, along with bond proceeds, will be used to repay existing debt, including the company's term loan A that comes due this year and most of its term loan B debt that matures next year.

The additional proceeds raised from the term loan B and bond upsizings will also go towards debt repayment.

Deutsche Bank, Bank of America and HSBC are the joint lead arrangers on the term loan B, which was just officially launched to investors on Tuesday with a conference call. Those three banks plus BMO are the joint bookrunners.

Nalco is a Naperville, Ill.-based provider of water treatment and process improvement products and services.

Discovery reveals OID

Discovery Communications held a conference call on Wednesday to officially launch its $500 million term loan B add-on, and in connection with the call, original issue discount talk surfaced and slightly different price talk was given out, according to a market source.

The term loan B was launched with talk of Libor plus 325 bps to 350 bps with a 2% Libor floor and an original issue discount of 98, the source said.

By comparison, on Tuesday, when news of the deal first came out, it was said that price talk was simply Libor plus 350 bps with a 2% Libor floor and that the discount was still to be determined.

Bank of America and JPMorgan are the lead banks on the deal that will be used for general corporate purposes, with Bank of America the left lead.

Commitments from lenders are due next week.

Pricing on the company's existing term loan B, which is Libor plus 200 bps, will not change in connection with the add-on since there is no Most-Favored-Nation language in the existing credit agreement.

Discovery Communications is a Silver Spring, Md.-based nonfiction media company.

FairPoint trades down

Back over in the secondary, FairPoint's term loan B was lower, after climbing by about 10 points on Tuesday even with the company's announcement that it may hire a financial adviser and that it could end up violating covenants, according to a trader.

The term loan B was quoted at 61 bid, 63 offered on Wednesday, down from levels that were seen Tuesday evening at 63 bid, 66 offered, the trader said.

On Tuesday morning, the term loan B was quoted at 52 bid, 53½ offered and it ran up by a few points during that day, but after the company filed its 10-Q with the Securities and Exchange Commission at around 5:30 p.m. ET, it leaped even higher, moving into the mid-60 area, the trader continued.

"Somebody must have read something good about it," the trader remarked about the 10-Q filing. "Jumped [the B loan] up, couldn't get anything done, tried to keep it there this morning, but then it faded."

FairPoint may restructure

In the 10-Q filing, FairPoint explained that it is considering getting a financial advisor to look at a potential restructuring and to evaluate its capital structure.

The company also said that it could fall out of compliance with the interest coverage covenant contained in its credit agreement as early as the second quarter.

This potential non-compliance is being attributed to the continuing adverse general economic conditions and various issues related to the cutover to its new platform of systems for Northern New England operations.

In the event of non-compliance, the company would try to seek a waiver from its lenders or an amendment of the covenants.

FairPoint is a Charlotte, N.C.-based provider of communications services.

Chrysler Financial moves up

Chrysler Financial's first-lien term loan was strong during Wednesday's market hours, with one trader attributing the loan's recent momentum to refinancing speculation.

The trader explained that people are starting to think that the loan will end up getting refinanced faster than previously expected as a result of the Chrysler Corp. bankruptcy.

The first-lien term loan was quoted at 82 bid, 83 offered, the trader said. This compares to levels of 78 bid, 81 offered late in the day Tuesday.

However, levels on the first-lien loan did actually take the jump to 82 bid, 85 offered after 6 p.m. ET on Tuesday, and managed to remain in that context on Wednesday, the trader added.

Chrysler Financial is a provider of financial services for vehicles.

LCDX rises with stocks

The LCDX 12 index was better in trading as the stock market got a bit of a boost, according to a trader.

The index was quoted at 82.70 bid, 83.10 offered, up from 81.80 bid, 82 offered on Tuesday, the trader said.

Nasdaq closed up 4.98 points, or 0.28%, Dow Jones Industrial Average closed up 101.63 points, or 1.21%, S&P 500 closed up 15.73 points or 1.74%, and NYSE closed up 119.79 points, or 2.08%.

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