Washington Group meets some skepticism on contractual business nature, collateral package

By Sara Rosenberg

New York, Sept. 10 - Washington Group International Inc. $350 million credit facility, which launched on Wednesday, was turned down by some potential investors due to the complexity of the company's financials and the lack of assets to secure the loan.

"It's hard to analyze the financial and have a lot of confidence in the financials because of the contract nature of their work," a fund manager told Prospect News. "If they finish 10% of the project they recognize 10% of the revenue but that may not be the nature of the revenue stream. If it was just one contract then fine, but it's like thousands of contracts. It's just too complicated.

"Plus they have no assets so there's nothing to fall back on. We turned it down," the fund manager concluded.

The facility consists of a $150 million four-year revolver with an interest rate of Libor plus 325 basis points and a commitment fee of 100 basis points, and a $200 million four-year revolver B with an interest rate of Libor plus 325 basis points and a commitment fee of 325 basis points.

Credit Suisse First Boston is the lead arranger on the deal.

Proceeds will be used to refinance existing debt.

On Jan. 25, 2002, the company obtained a $350 million senior secured revolver, consisting of a $208.35 million tranche A revolver and a $141.65 million tranche B revolver. The facility is slated to expire during mid-2004. Borrowings under the existing revolver are required to be allocated between the two tranches on a proportional split based upon the size of each tranche. The tranche A has an interest rate of Libor plus 550 basis points and a 3% Libor floor. The tranche B has an interest rate of Libor plus 550 basis points. As of July 4, 2003, the effective rate was 8.5% for tranche A and 6.6% for tranche B, according to a filing with the Securities and Exchange Commission. There were no amounts borrowed or outstanding under the revolver at July 4.

Washington Group is a Boise, Ida. provider of engineering, construction and construction management services, facilities management, environmental remediation and mining services.

Seminis Inc. also launched its $250 million credit facility on Wednesday, consisting of a $60 million revolver with an interest rate of Libor plus 300 basis points, which is already spoken for, and a $190 million six-year term loan with an interest rate of Libor plus 350 basis points, according to a market sources.

The term loan B is being offered to investors at par.

Citigroup and BMO Nesbitt Burns are the lead banks on the deal, sources said.

Proceeds will be used to help fund the acquisition of a majority stake in Seminis by Fox Paine & Co. from Savia, SA de CV.

Seminis is an Oxnard, Calif.-based vegetable and fruit seed company.

In the secondary, Dean Foods Co.'s repriced $750 million term loan B due 2008 headed higher on Wednesday, trading as high as 101 during market hours, according to a trader. The paper, which broke for trading around the last week of August, was previously quoted at par ½ bid, par ¾ offered.

"It's a tight market. It's been tough to buy paper. I guess a couple of guys reached in and bought it," the trader said in explanation of why Dean Food's traded up.

The term loan B is priced at Libor plus 200 basis points and was brought to market with a $1 billion revolver due 2007 with an interest rate of Libor plus 175 basis points and a $1 billion term loan A due 2007 with an interest rate of Libor plus 175 basis points. Wachovia Securities and Bank One are the lead banks on the deal.

Dean Foods is a Houston processor and distributor of milk and other dairy products.

Levi Strauss & Co.'s term loan B was quoted at par bid, 101 offered, unchanged on the news of a refinancing since it was already at the par level at which it will be taken out, according to a trader.

On Wednesday morning, the San Francisco brand name clothing company revealed that it is working on a new $1.15 billion credit facility via Bank of America.

The facility consists of a $650 million asset-based revolver maturing in 2007 and a $500 million senior secured term loan maturing in 2009, according to a news release.

This new financing would replace the company's existing senior secured credit facility consisting of a $375 million revolver and $365 million term loan, as well as $110 million of debt arranged under an accounts receivables securitization.

In follow-up news, American Securities Capital Partners completed its acquisition of Unifrax Holding Co. from Kirtland Capital Partners. As part of the transaction, Unifrax obtained a $135 million credit facility (B1/B+), consisting of a $100 million six-year term loan B with an interest rate of Libor plus 375 basis points and a $35 million five-year revolver with an interest rate of Libor plus 375 basis points.

Wachovia was the lead bank on the deal for the Niagara Falls, N.Y. producer of high temperature insulation products.

"Kirtland Capital has been a great partner the past seven years. We look forward to a similar relationship with ASCP. They are very enthusiastic about the future prospects of our business. We look forward to working with them," said William P. Kelly, president and chief executive officer of Unifrax, in a news release.

Ntelos Inc. closed on its new $261 million exit financing credit facility, consisting of $228.6 million in outstanding term loans and a $32.4 million revolver, all of which is currently available.

The Waynesboro, Va. digital wireless PCS provider's total debt is now approximately $320 million, about one-third of the nearly $950 million of debt and redeemable preferred obligations prior to the completion of the reorganization process and emergence from Chapter 11.

Under the Ntelos' joint plan of reorganization, which was confirmed by the bankruptcy court on Aug. 12, the restructured company will be privately held, with former senior noteholders owning approximately 94% of the new common stock. The remaining stock will be issued to former subordinated noteholders, purchasers of the company's new convertible notes and in settlement of other claims and equity interests. Existing shares of common stock have been cancelled, along with the company's senior and subordinated notes and outstanding preferred stock.

"The smooth progress we have made in concluding our financial restructuring reflects the overwhelming support we received from our creditors, the loyalty of our customers and the commitment of our employees. With their continued support and our greatly improved balance sheet, we believe we are positioned to grow our businesses - wireless and wireline - and continue to provide reliable service to our customers," said James S. Quarforth, chief executive officer, in a news release.

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