Hawker Beechcraft sets talk on add-on; existing debt trades down; JohnsonDiversey closes books

By Sara Rosenberg

New York, Nov. 18 - Hawker Beechcraft Acquisition Co. LLC came out with price talk on its incremental term loan on Wednesday, which was launched to investors towards the end of last week without guidance.

And, investors put some pressure on the Hawker Beechcraft's existing revolver and term loan B debt in the secondary market as a result of the knowledge that the yield on the add-on will be noticeably higher than the yield on the existing paper.

In other news, commitments on JohnsonDiversey Inc.'s multiply oversubscribed U.S. term loan B were due on Wednesday on the back of pricing firming up at the low end of talk and the original issue discount tightening from initial guidance.

Hawker Beechcraft talk surfaces

Hawker Beechcraft released price talk on its $200 million term loan add-on (Caa1/CCC+) almost a full week after the deal's actual launch, according to a market source.

The term loan add-on is being talked at Libor plus 900 basis points with a 2% Libor floor and an original issue discount of 92 to 93, the source said.

Credit Suisse is the lead bank on the deal.

Proceeds will be used to provide additional liquidity.

Hawker Beechcraft slides in trading

In connection with the price talk announcement, Hawker Beechcraft's existing revolver and term loan B moved lower in trading, according to a trader.

The revolver was quoted at 73½ bid, 75½ offered, down a half a point on the day, and the term loan B was quoted at 72 bid, 74 offered, down a point on the day, the trader said.

"Talking yield [on new] around 14%. [Existing] yields around 12½%, so downside pressure on the price," the trader explained.

Hawker Beechcraft downgraded

Also on Wednesday, Moody's Investors Service lowered Hawker Beechcraft's senior secured bank obligations rating to Caa1 from B3 and the outlook was revised to negative.

Moody's said that the downgrade came after several developments, including a recent amendment to the company's revolver that reduced the size of the commitment and revised financial covenants, the proposed term loan add-on and disclosure of some $0.7 billion of non-cash impairment and other charges during the third quarter.

Standard & Poor's, meanwhile, had already downgraded Hawker Beechcraft's senior secured credit facility to CCC+ from B- on Tuesday with a negative outlook.

Hawker Beechcraft is a Wichita, Kan., manufacturer of business, special-mission and trainer aircraft.

JohnsonDiversey deadline hits

JohnsonDiversey closed the books on its $450 million U.S. term loan B on Wednesday after setting pricing and lowering the original issue discount, according to sources.

The U.S. term loan B is priced at Libor plus 350 bps, the tight end of initial talk of Libor plus 350 bps to 375 bps, sources said.

In addition, the original issue discount was revised to 99 from initial guidance of 981/2, sources continued.

The 2% Libor floor on the loan was left unchanged.

"It's blowing out. The bonds are blowing out, too. Allocations [on the loan] are going to be tough on this one," one source remarked.

The bonds that the source referred to is a $400 million senior notes offering that is scheduled to price on Thursday. Price talk on the notes is in the 8½% area.

JohnsonDiversey B loan part of larger facility

In addition to the U.S. term loan B, JohnsonDiversey is also getting a $250 million multi-currency revolver, a $500 million euro equivalent term loan and a $50 million Canadian equivalent term loan; however, only the U.S. term loan B is being marketed at this time.

Covenants include a leverage ratio and an interest expense coverage ratio.

Citigroup, GE Capital, Goldman Sachs and JPMorgan are the joint bookrunners on the $1.25 billion senior secured credit facility (Ba2/BB-/BB-).

Proceeds from the credit facility, along with the notes, will be used to help fund a recapitalization transaction valued at $2.6 billion.

JohnsonDiversey refinancing debt

JohnsonDiversey's recapitalization plan includes the repurchase of its outstanding senior subordinated notes and the repayment of outstanding borrowings under its existing senior secured credit facility.

As part of the recapitalization, Clayton Dubilier & Rice Inc. will invest $477 million for a 46% equity interest in the company.

Meanwhile, the Johnson Family of Racine, Wis., will retain 50% ownership in the company and Unilever will retain a 4% ownership interest in the company.

JohnsonDiversey, which is changing its name to Diversey Inc., is a Sturtevant, Wis.-based provider of commercial cleaning, sanitation and hygiene products.

Western Refining term loan steady

In more loan happenings, Western Refining Inc.'s term loan was steady on Wednesday as news emerged that the company launched an amendment earlier this week, according to a trader.

The term loan was quoted at 95¾ bid, 96¾ offered, flat on the day, the trader said.

Under the amendment proposal, the company is asking lenders to relax the total leverage and interest coverage requirements and add a minimum EBITDA test.

In return, pricing on the term loan will increase to Libor plus 750 bps from Libor plus 600 bps and lenders will get paid a 25 amendment fee.

Bank of America is the lead bank on the deal.

Western Refining is an El Paso, Texas-based refining and marketing company.

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