Reynolds American higher on upgrade; Cinemark cuts loan pricing; Excel unveils $150 million deal

By Paul A. Harris

Sept. 22 - The Rosh Hashanah holiday thinned the ranks during Friday's session in the leveraged loan market, which sources characterized as a very quiet one.

On the new issue side, Excel Mining Systems Inc. set a Wednesday bank meeting for a $150 million facility.

NE Energy talked the first-lien and second-lien pieces of its $855 million deal.

And Cinemark USA Inc. flexed pricing on its term loan downwards.

Meanwhile in the secondary market Moody's upgrades of Reynolds American, Inc. prompted the price of that paper to rise.

However in the bad news auto parts sector, the loans of Dura Automotive Systems, Inc. and Visteon Corp. traded down, while Lear Corp. remained unchanged.

Excel unveils facility

A buy-side source, who expects a heavy calendar during the Sept. 25 week, said that Excel Mining Systems, a Cadiz, Ohio manufacturer of roof support systems for coal mines, is in the market with a $150 million credit facility to fund the buyout of the company by SPG Partners, LLC.

The Excel Mining Systems deal, which is being led by Credit Suisse, is comprised of a $20 million revolver and a $130 million term loan.

The bank meeting is set for Wednesday, the source added.

Cinemark tightens talk

Plano, Tex.-based Cinemark USA flexed down price talk to Libor plus 200 basis points from Libor plus 225 basis points on the $1.12 billion term loan that is part of the $1.27 billion senior credit facility (Ba2/B) it is putting in place to fund its acquisition of San Rafael, Calif.-based Century Theatres, Inc.

The facility, which is being led by Lehman Brothers and Morgan Stanley, also features a $150 million revolver talked at Libor plus 225 bps.

NE Energy sets talk

In other primary market news, NE Energy, the newly formed holding company set up by Energy Capital Partners to finance its acquisition of Northeast Utilities' competitive generation assets in Connecticut and Massachusetts, talked the first- and second-lien pieces of its $855 million credit facility.

The $550 million first-lien term loan B (/B+/BB-) is set to price at Libor plus 275 basis points with a 101 call. The $170 million second-lien term loan (/B-/B-) is talked at Libor plus 500 basis points with 102, 101 calls.

The Goldman Sachs and JPMorgan led deal also contains a $35 million revolver and a $100 million letter-of-credit facility.

HCA, a looming mammoth

The investor who anticipated a heavy calendar for the final week of September said on Friday that the bank loan market is becoming anxious to know how well the mammoth HCA Inc. $16.8 billion deal will ultimately do.

And if it does well, the investor added, what comes next?

The deal to fund the LBO of the health care company, being led by Bank of America, Citigroup, JPMorgan, Merrill Lynch, Deutsche and Wachovia, is comprised of a $2.25 billion six-year term loan A, a $9.3 billion seven-year term loan B, a $1.25 billion seven-year European term loan, a $2 billion six-year asset-based revolver and a $2 billion six-year senior secured revolver.

The investor said that the initial buzz held that HCA would come with a coupon of 200 to 225 basis points, but chalked that initial talk up to an investment banker's natural instincts to come out with low talk, knowing that it will ultimately be pushed up - especially, the investor added, when the deal is as big as HCA.

Specifying that HCA is "a good credit," the investor said that the deal will probably come 25 basis points wide of where it would have come were it not so huge.

The source added that if HCA goes well the flood gates could truly open wide to receive LBO transactions of gargantuan proportions.

"Who's next, IBM?" the investor asked rhetorically, adding that the size of LBO deals will only be constrained by the absolute maximum amount of paper that can be placed.

Reynolds up on Moody's rejig

Moody's Investors Service's changes in some of its credit analysis methodologies has resulted in a raft of bank loan upgrades, market sources told Prospect News on Friday.

Most conspicuous, according to one investor who owns the paper, is Reynolds American, which saw its $550 million senior secured revolver and its $1.55 billion senior secured term loan upped to an investment grade Baa2 from Ba1.

The investor commented that Reynolds American was up a little, and had been a nice double-B loan but was now a nice triple-B loan.

"It's hard to believe the banks won't be all over this," the investor said, adding that the paper has a nice spread (Libor plus 200 basis points) and security.

"How can you not like that?" the investor demanded.

Shortly later a trader spotted the term loan at 100.625 bid, 100.875 offered, up an eighth, and said that it did not seem dramatic.

This trader mentioned that 24 names in his portfolio had been positively impacted by the Moody's methodology change.

"People are pretty happy about it.

"But at the same time, it's facilities ratings, not corporate family ratings. So it's not really having a huge impact on the CLO's, and that's where the game is right now," the trader added.

Auto parts continue lower

The week appeared to be coming to a lackluster close for the auto parts sector.

Dura Automotive, a Rochester Hills, Mich.-based parts maker, saw its second-lien loan trade down ½ to ¾ point at 92.50 bid, 93.50 offered, according to a trader.

The second-lien paper has been watched closely since speculation of a potential bankruptcy filing surfaced recently, along with rumors that the company is having a hard time lining up debtor-in-possession financing on favorable terms.

Late Tuesday Dura was informed that it was in danger of being delisted from the Nasdaq Global Market, since its stock price has been below $1 per share for at least 30 consecutive days. However, the company has six months to fix the situation.

Meanwhile the Libor plus 300 basis points term loan of Van Buren Township, Mich., automotive parts supplier, Visteon Corp., was a little lower on Friday, according to the trader who saw it wrapped around par, down ¼ point.

However parts-maker Lear Corp. which traded down Thursday after announcing that production cuts by the Big Three auto-makers would cause it to revise its financial guidance lower, was unchanged on Friday, the trader said.

A bank loan investor sees the loss in value in the loan paper of the auto parts makers as inevitable.

"Under the restructurings at the big auto-makers, companies like Lear, which is a good company, are now facing a competitive disadvantage," the investor said.

"If you have 100,000 auto workers on the street, anybody can have cheap labor which was Lear's big advantage versus the Big Three.

"When Lear revised its guidance down it woke up a few people, temporarily.

"It's tough to be in the auto space.

"It's hard to imagine what an auto parts supplier is going to look like in two or three years."

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