Graham Packaging, Cinemark pull credit facilities from market as IPOs are tabled

By Sara Rosenberg

New York, July 23 -Unfavorable conditions in the initial public offering market prompted two companies to shelve their proposed equity offerings - Graham Packaging Co. and Cinemark Inc. - resulting in the removal of two new credit facility deals from the primary market.

Both companies have financing in place and performing capital, making it possible for management to choose to wait for better market conditions, market sources said.

"Why do something when you don't absolutely have to?" a market professional said in regards to the postponed IPO deals. "The market will come back so there will be a better time to do it. I think that's good business."

Graham Packaging Co. pulled a $700 million senior secured credit facility out of the market, according to a syndicate source, since the loan was contingent upon the completion of the company's IPO, which was tentatively slated for next week. The $100 million senior subordinated note sale was also shelved. Deutsche Bank and Citibank were the lead banks on the credit facility.

Graham Packaging is a York, Pa. designer, manufacturer and seller of customized blow molded plastic containers for the branded food and beverage, household and personal care and automotive lubricants markets.

Cinemark Inc. tabled a $250 million credit facility, which was also contingent upon the completion of the IPO. Lehman Brothers was the lead arranger for the Plano, Tex. movie operator's loan.

The credit facility, which was launched recently, was "a blowout", the market professional said. The attraction of the deal stemmed from the expectation that the equity plan would delever the company, he explained. Without the investment of junior capital, the deal "would just chug along."

"Cinemark is a reasonably good company," a fund manager said. "You would think that an IPO would be fairly easy to do. I wonder now if they'll be able to reprice Regal Cinemas as planned."

Regal Entertainment Group Inc. is hoping to reprice its $270 million term loan B to Libor plus 250 basis points from 350 basis points. The company's $100 million revolver was expected to remain at Libor plus 325 basis points but the size was supposed to be increased to $150 million, the fund manager said.

"I don't know if Cinemark will impact [Regal] all that much," the financial professional said. "They could be pushing the envelope though. The market has been unforgiving. If they can't catch a bid and rebuild the deal with lower pricing, they won't do it. Just look at SPX. Right now bringing in pricing at those levels doesn't make much sense."

SPX Corp., a Muskegon, Mich. diversified manufacturing and service company, pulled a refinancing deal last week, in which they were looking to bring pricing in by about 50 to 75 basis points.

In secondary news, Tyco International Ltd.'s bank loan paper experienced some trading activity in the secondary Tuesday and was quoted in the low 80's for the long-term piece, according to a trader.

"It's kind of flat but it was moving around a little bit," the trader said. "I think people are looking to manage exposure."

Tyco is a Pembroke, Bermuda diversified manufacturing and service company.

"It's hard to find buyers these days," the trader added. "People don't trust the markets. Everybody is just sitting on their hands."

Meanwhile, coming up on Wednesday both URS Corp. and Otis Spunkmeyer Inc. are scheduled to launch new credit facilities.

URS Corp.'s $650 million credit facility (Ba3), consists of a $200 million five-year revolver with an interest rate of Libor plus 300 basis points, a $100 million five-year term loan A with an interest rate of Libor plus 300 basis points and a $350 million six-year term loan B with an interest rate of Libor plus 350 basis points, a market source said. Credit Suisse First Boston is the lead bank on the deal.

Basically all assets secure the San Francisco, Calif. engineering and design services provider's loan.

Proceeds will be used to refinance outstanding debt and to back the acquisition of EG&G Technical Services from the Carlyle Group for $500 million.

Otis Spunkmeyer Inc.'s $140 million senior secured credit facility, consists of a $20 million six-year revolver with an interest rate of Libor plus 300 basis points and a $120 million 6½ year term loan B with an interest rate of Libor plus 350 basis points, according to market sources. Merrill Lynch and JPMorgan Chase are the lead banks on the deal.

The San Leandro, Calif. cookie company will use the proceeds to help fund the leveraged buyout by Code Hennessy & Simmons.

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