Secondary sees strong bidding interest ahead of Labor Day lull, pushing some names higher

By Sara Rosenberg

New York, Aug. 19 - Overall the secondary bank loan market felt better bid on Tuesday as people started to get back into the swing of things after last week's unexpected power interruption and tried to get trades done before the complete termination of all activity due to Labor Day. Paper quoted higher included Wackenhut Corrections Corp, Oriental Trading Co. Inc., Alpharma Inc. and Allied Waste Industries Inc.

Wackenhut's new term loan B was quoted at par ¾ bid, 101 offered, while Oriental Trading's new term loan B was quoted at par 5/8 bid, par 7/8 offered. And Alpharma' term loan A was quoted at par bid, par ¼ offered, while the term loan B was quoted at par ½ bid, par ¾ offered. All three names were at least an 1/8 better bid from Monday's levels, according to a trader.

Allied Waste saw a bit of a stronger improvement with quotes about a quarter point higher at par ½ bid, 101 offered, according to the trader.

Wackenhut is a Palm Beach Gardens, Fla. developer and manager of privatized correctional and detention facilities. Oriental Trading is an Omaha, Neb. direct marketer of novelties, toys, party supplies, crafts, gift items, home décor products and garden accents. Alpharma is a Fort Lee, N.J. pharmaceutical company. Allied Waste is a Scottsdale, Ariz. solid waste management company.

Meanwhile, DRS Technologies Inc.'s bank debt has moved down to around par bid from par ¾ bid since its merger announcement Monday, due to the expectation that the existing paper will be taken out at par with a proposed amended and restated credit facility, according to a trader.

"But nobody will trade it. People don't want to let go of the paper," the trader added.

DRS signed a definitive merger agreement with Integrated Defense Technologies Inc., under which DRS will acquire all of the outstanding stock of IDT for $17.50 per share, made up of $12.25 in cash and 0.1875 shares of DRS common stock, subject to a collar.

The cash portion of the acquisition, together with the debt of IDT to be refinanced, will total approximately $437 million at closing. Total consideration for the acquisition, including an estimated $175 million of IDT's net debt to be refinanced, is approximately $550 million, representing a multiple of 1.5x the revenues and 8.5x the EBITDA expected to be contributed by IDT during DRS's next full fiscal year ending March 31, 2005.

DRS is looking to obtain a total of approximately $350 million through the issuance of high-yield notes and an increase in size of the company's existing term loan to help fund the acquisition. The company is expecting the blended interest rate on the bonds and the modified term loan to be around 5.5%, with the term loan anticipated at 4.5% to 5% and the bonds anticipated at 7.5% to 8%.

Bear Stearns & Co. has provided the company with a commitment letter for the additional term loan funds.

In addition to the amended term loan and the high-yield offering, the company intends to use excess cash on hand to help fund this transaction.

The acquisition is expected to close by the end of the year, subject to customary regulatory approvals and other closing conditions, including approval by a majority of IDT's stockholders at a special meeting.

SPX Corp. closed on the refinancing and amending of its senior secured credit facility, which entailed combining the existing term loan B (priced at Libor plus 225 basis points) and the existing term loan C (priced at Libor plus 250 basis points) into one large tranche and lowering pricing on the term loan C by 25 basis points, giving the new combined tranche an interest rate of Libor plus 225 basis points.

The new combined $1.092 billion term loan B matures in September 2009.

The amendment also affected certain covenants under the credit facility including dividend payment and stock repurchase provisions.

JP Morgan Chase was the lead bank on the Charlotte, N.C. manufacturer's deal.

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