K&F breaks for trading, heads to near 102; Colfax sees some commitments within hours of launch

By Sara Rosenberg

New York, Nov. 17 - K&F Industries Inc. allocated and freed up for trading on Wednesday, with the term loan B opening in the mid-to-high 101 region and then creeping higher to straddle around 102. Meanwhile, Colfax Corp.'s newly launched loan had already gotten orders from investors by the end of the day, setting this deal off to a positive start.

K&F's $480 million term loan was first quoted around 101½ bid, 101¾ offered upon entering the secondary, according to a trader. But by late day the paper trudged upwards to 101.875 bid, 102.125 offered, another source added.

The term loan B had built a book that was somewhere around $1.5 billion pretty shortly after launch, so, as can be expected, allocations on the deal "were terrible," the source added.

The B loan is priced at Libor plus 250 basis points with a performance-based grid that takes pricing to Libor plus 225 basis points under certain conditions.

Originally the tranche was launched with pricing of Libor plus 275 basis points but was reverse flexed during syndication because of the strong demand, and the size was originally set at $430 million but was increased in connection with a bond deal downsizing.

K&F's $530 million senior secured credit facility (B2/B+) also contains a $50 million six-year revolver with an interest rate of Libor plus 250 basis points.

Lehman, JPMorgan, Goldman Sachs and Citigroup are the lead banks on the deal, with Lehman left lead.

Proceeds from the facility, along with proceeds from the senior subordinated note issue and a $315 million equity contribution from Aurora Capital Group, will be used to help finance Aurora's acquisition of the company for a cash purchase price of $1.06 billion.

K&F is a New York supplier to manufacturers and operators of commercial, general aviation and military aircraft. The company is currently jointly owned by Bernard L. Schwartz and Lehman Brothers Merchant Banking.

Colfax gets orders, sets price talk

On the primary front, Colfax got "a bunch of commitments in" following the Wednesday bank call "so there's good momentum," a market source told Prospect News.

Furthermore, now that the $165 million credit facility has launched, price talk came out, with the $50 million revolver talked at Libor plus 250 basis points and the $115 million term loan B talked at Libor plus 225 to 250 basis points, the source said.

Merrill Lynch is the lead bank on the deal that will be used to help fund a recapitalization of the Richmond, Va.-based industrial pump manufacturing company.

Northwest considering reverse flex

Northwest Airlines Inc.'s $975 million credit facility (B1/B+) ended up being a "blowout" after a bit of slow start to the syndication process. Both the term loan A and the term loan B are now oversubscribed, according to a market source.

"Just goes to show you the state of the market where people are desperate for paper," the source said. "Now they're talking about reverse flexing the B. I don't know to where. I didn't hear about the A but I wouldn't be surprised if they reverse flexed that one too."

Currently the facility consists of a $675 million five-year term loan A talked at Libor plus 550 basis points and a $300 million six-year term loan B talked at Libor plus 750 basis points. Both term loans contain call protection of 103 in year one, 102 in year two and 101 in year three.

Commitments didn't really start coming in on the deal until after the company held its collateral valuation lender call - which is standard practice for an airline deal - two days after the actual bank meeting.

Once the call was completed, orders started trickling in until the books reached oversubscription by Tuesday's commitment deadline.

JPMorgan and Citigroup are the lead banks on the deal, with JPMorgan on the left, and Deutsche Bank is involved as well.

Proceeds will be used by the Eagan, Minn.-based airline company to refinance existing revolver debt. The company currently has a $725 million five-year revolver due October 2005 and a $250 million 364-day revolver due October 2004 and renewable annually at the option of lenders. The revolvers carry an interest rate of Libor plus 325 basis points.

Harbor Freight considering call protection

Harbor Freight Tools is "seriously considering" adding one-year 101 call protection to its repricing proposal as a way to sweeten the deal a bit since investors are not thrilled with losing 50 basis points on paper they just got their hands on a few months ago, according to a fund manager.

"It's a brand new deal. The company has never been in the loan market before and the type of deal that it was - they paid out a huge dividend. Now they come back less then three months later and say they're going to bring it down to Libor plus 225," the fund manager said.

"These guys are doing well but there's not substantial financial information to back up a repricing just on three months performance. They have only had one quarter of financial information to us and that just came out," the fund manager added.

The company launched the mark-to-market repricing of its $440 million term loan that would lower pricing to Libor plus 225 basis points from Libor plus 275 basis points via a conference call on Friday via Credit Suisse First Boston and UBS.

Harbor Freight Tools is a Camarillo, Calif. tool and equipment catalog retailer.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.