Susquehanna Media upsizes credit facility to $600 million to fund bond redemption

By Sara Rosenberg

New York, Feb. 17 - Susquehanna Media Co. upsized its proposed credit facility (Ba1/BB-) to $600 million from $450 million, with the additional funds earmarked for the redemption of $150 million 8.5% subordinated notes, according to a market source.

The facility now consists of a $250 million term loan B, increased from $150 million, with an interest rate of Libor plus 200 basis points, a $150 million term loan A, increased from $100 million, with an interest rate of Libor plus 150 basis points and a $200 million revolver with an interest rate of Libor plus 150 basis points, according to the source.

In reaction to the upsizing, Standard & Poor's affirmed its BB- bank rating but lowered its recovery rating to 3 from 2 indicating expectations of a slightly lower, but still meaningful, recovery of 50% to 80% of principal in a default scenario.

The ratings reflect the company's high debt leverage, competition from larger radio operators in key markets, the capital spending needs and modest scale of its smaller cable systems, and the potential for additional debt-financed acquisitions. Factors partly offsetting these concerns include decent cash flow as a large market radio broadcaster, relatively stable cash flow from its cable business, and good asset values, S&P said.

The facility includes an uncommitted option to increase the loan by $200 million, according to S&P. On a fully drawn basis, the bank loan would represent 80% of total debt, or 84% including the incremental loan. Subordinated notes comprise the balance of debt. Financial covenants include total debt leverage of no more than 6.5x, senior debt leverage of no more than 5.0x, interest coverage of at least 2.0x and fixed charge coverage of at least 1.1x.

"The cushion of compliance with proposed covenants is healthy, and these tests start to tighten in September 2005. Half of excess cash flow must be used to reduce the loan if total leverage is greater than 5.0x. These terms provide the lenders with negotiating clout before substantial credit impairment occurs," S&P added.

Moody's Investors Service took a bit of a different route and placed Susquehanna Media's senior secured bank rating on review for possible downgrade.

"Given the high preponderance of secured bank debt to the company's overall debt capital structure, Moody's would be unlikely to continue to notch up the bank debt," the rating agency said.

"If the company does not refinance its senior subordinated notes with bank debt the company's bank ratings will not be lowered," Moody's added.

Ratings reflect the company's history of stable cash flow generation, opportunities for growth in 2004 and meaningful asset value relative to its debt burden. Offsetting the company's strengths is high financial leverage and debt-financed acquisition strategy.

Wachovia is the lead bank on the facility that will also be used to refinance the company's existing credit facility and help fund the acquisition of RCN Corp.'s Carmel, N.Y., cable system.

Closing on the credit facility is anticipated to take place in early March, according to an 8-K filed with the Securities and Exchange Commission on Tuesday.

Susquehanna Media is a York, Pa., communications holding company for radio broadcasting and cable television entities.

Ionics closes

Ionics Inc. closed on a new $225 million credit facility (B1/BB-) consisting of a $175 million seven-year term loan with an interest rate of Libor plus 300 basis points and an $80 million five-year revolver with an interest rate of Libor plus 275 basis points.

Originally, the deal was launched with a $75 million revolver, but the tranche was upsized by $5 million during syndication.

UBS Securities LLC acted as sole bookrunner, Bank of America acted as documentation agent and Fleet acted as syndication agent on the deal.

Proceeds were used to help fund the acquisition of Ecolochem Inc. and its affiliated companies for about $219 million in cash and 4.65 million shares of Ionics common stock.

"I am delighted by the overwhelming support that our shareholders have given us for this acquisition," said Douglas Brown, chief executive officer, in a company news release regarding the completion of the acquisition. "At our special meeting, 91% of the outstanding shares were voted, and more than 98% of the shares voting on the matter were voted to support the transaction. Clearly our shareholders share our vision for the future of Ionics and for the importance of this transaction."

Ionics is a Watertown, Mass., water treatment systems and services company.

Collins & Aikman closes

Collins & Aikman Corp. closed on its $285 million credit facility (B1/B+) due Dec. 31, 2005 consisting of a $100 million supplemental revolver with an interest rate of Libor plus 400 basis points and a $185 million tranche A-1 term loan with an interest rate of Libor plus 400 basis points.

J.P. Morgan Securities Inc. and Deutsche Bank Securities Inc. acted as joint bookrunners and lead arrangers on the deal.

The supplemental revolver will be available for revolving credit loans and letters of credit. Proceeds of the term loan A-1 will be used to prepay the existing two term loans, thereby improving liquidity and reducing interest rates.

Collins & Aikman is a Troy, Mich., designer, engineer and manufacturer of automotive interior components.

United Rentals closes

United Rentals Inc. closed on its $1.55 billion credit facility (Ba3/BB) consisting of a $650 million five-year revolver with an interest rate of Libor plus 225 basis points and a commitment fee of 50 basis points, a $750 million seven-year term loan B with an interest rate of Libor plus 225 basis points and a $150 million seven-year institutional letter-of-credit facility with an interest rate of Libor plus 225 basis points.

The term loan will be obtained in two draws, according to a company news release. An initial draw of $550 million was obtained upon the closing of the credit facility, and an additional $200 million is expected to be obtained on April 1.

JPMorgan, Bank of America and Credit Suisse First Boston acted as joint lead arrangers and joint bookrunners. JPMorgan also is the administrative agent, while Bank of America is syndication agent, and Credit Suisse First Boston and Citibank are co-documentation agents.

Proceeds, combined with proceeds from $1.375 billion of new notes, were used to help fund the company's previously announced refinancing plan that included repaying $640 million of term loans, all borrowings under the company's revolving credit facility and $845 million principal amount of 10¾% senior notes due 2008, and calling for redemption of $300 million principal amount of 9¼% senior subordinated notes due 2009 and $250 million principal amount of 9% senior subordinated notes due 2009.

United Rentals is a Greenwich, Conn., equipment rental company.

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