Crown Cork & Seal, RCN and Federal-Mogul trade higher on recent positive news

By Sara Rosenberg

New York, Feb. 7 - Despite the snow, the situation in Iraq and terrorism fears, it was a relatively busy day in the secondary bank loan market on Friday with some of the week's usual suspects continuing to actively trade. Included in the list of noticeable names was Crown Cork & Seal Co. Inc., still ticking upwards on its refinancing plan, RCN Corp., gaining on approval of an asset sale, and Federal-Mogul Corp., which continues to trade higher on its reorganization plan.

Crown Cork & Seal's bank debt traded on Friday at levels around 99¼ bid, 99 5/8 offered, according to a trader. The paper has been up about a quarter of a point each day since the company announced its refinancing plans in late January, the trader added.

Almost immediately following the announcement, Crown Cork & Seal jumped into the bank loan market with a new $1.05 billion credit facility via Deutsche Bank and Salomon Smith Barney. The loan consists of a $550 million first lien revolver with an interest rate of Libor plus 400 basis points and a $500 million first lien term loan B with an interest rate of Libor plus 425 basis points.

The comprehensive refinancing plan originally included $1.75 billion in senior secured second and third lien notes and the receipt of gross proceeds from the issuance of convertible notes and debt for equity exchanges in an aggregate of $325 million.

However, on Thursday, some changes in the plan were revealed as the company opted to upsize and restructure its junk bond deal while canceling its $250 million convertible note offering. The bond offering was increased to approximately $2.05 billion, consisting of $1.2 to $1.35 billion of senior secured second lien notes due 2011, an added tranche of €200 to €300 million eight senior secured second lien notes due 2011 and $500 to $625 million of third lien notes due 2013. The deal is expected to price during the week of Feb. 10.

When asked whether the change in the size of the bond offering and the cancellation of the convertibles would affect syndication of the bank loan, one market source told Prospect News that it was unlikely to change investor sentiment since the company's leverage would not really be affected by the modification.

With the refinancing, which is expected to be completed by the end of the first quarter, substantially all of the company's debt would have maturities in 2006 and beyond.

Proceeds from the refinancing plan will be used to refinance the company's existing revolver that was scheduled to mature on December 8, and approximately $900 million of senior notes, including all of the notes scheduled to mature in 2003 and approximately $300 million of the notes due in 2004 and 2005.

Crown Cork & Seal is a Philadelphia supplier of packaging products to consumer marketing companies.

Meanwhile, RCN's bank debt has moved up and is currently being quoted in the high 70s to low 80s on news that regulatory approval was obtained for an asset sale, according to a second trader.

"It's moved up in the last month from 70 to around 80," the trader added. "A lot of people want the bank debt."

On Wednesday, the company was granted regulatory approval for the sale of its New Jersey cable systems to Spectrum Equity Investors for $245 million. RCN anticipates using proceeds from the sale for reinvestment in its current business, a company spokesman told Prospect News on Friday.

Outstanding bank debt will not be repaid with any of the proceeds, according to the spokesman, who added: "If anything we'd want to pay off our high yield bonds first - that's trading at like 25 cents on the dollar. But we can't pay down [subordinated] debt first under our bank agreement."

Upon closing, which is expected to occur in the near future, according to the spokesman, the cable systems company will be known as Patriot Media and Communications LLC.

Currently Patriot Media has a $165 million credit facility floating around the primary market to help fund this spin off, consisting of a $65 million pro rata tranche with an interest rate of Libor plus 375 basis points and a $100 million term loan B with an interest rate of Libor plus 450 basis points. Bank of New York is the lead bank on the deal.

RCN is a Princeton, N.J. provider of bundled communications services to residential customers over its broadband network.

And, Federal-Mogul once again traded actively in the secondary market, moving up about half a point to 761/2, according to a trader.

The company's bank debt has been changing hands all week in response to last week's announcement regarding the company's reorganization plan.

Last Friday, the company announced that the Official Committee of Unsecured Creditors, the Official Committee of Asbestos Claimants, the Steering Committee of Pre-Petition Lenders, Icahn Associates and the Futures Representative have all agreed to the principal terms of a plan to reorganize Federal-Mogul and emerge from Chapter 11 free of asbestos liabilities, with a de-leveraged balance sheet. The reorganization plan, which is expected to be filed in early March, is still subject to court approval.

Federal-Mogul, a Southfield, Mich. automotive parts manufacturer, filed for Chapter 11 in October 2001.

In follow-up news, Sun Media closed on its new credit facility, which was increased in size and flexed down in pricing due to strong market reception. Bank of America Securities LLC and Credit Suisse First Boston were joint lead arrangers on the deal.

The loan contains a $230 million six-year term loan B, upsized from $200 million, with an interest rate of Libor plus 250 basis points, flexed down from an initial price of Libor plus 300 basis points. The facility also contains a C$75 million five-year revolver.

In addition to the credit facility, the company also closed its offering of $205 million 7 5/8% senior notes due 2013 led by Salomon Smith Barney.

"Obviously the market recognizes the exceptional performance of Sun Media, one of the best newspaper businesses in North America. We were confident when we met with prospective investors that Sun Media's strong performance would be recognized. The low coupon achieved on the senior notes in our view reflects the market's acknowledgment of the strength of our operations," said Pierre Francoeur, president and chief executive officer, in a news release.

"We are very pleased with the outcome of this refinancing as it allows us to rebalance our capital structure at an attractive market rate and provides Quebecor Media with increased financial flexibility and liquidity. The markets' reception is very supportive of both Sun Media's financial performance and QMI's long stated goals of focusing on operating efficiency, generating robust free cash flow and reducing debt," added Pierre Karl Peladeau, president and chief executive officer of Quebecor Inc., in the release.

The Toronto newspaper publisher will use net proceeds from the bonds and the bank debt, combined with cash on hand, to repay in full borrowings under the company's former credit facilities, redeem two series of outstanding senior subordinated notes and pay a dividend of C$260 million to the parent company.

LIN TV Corp. closed on its $175 million term loan with an interest rate of Libor plus 200 basis points, flexed down from initial pricing of Libor plus 225 basis points during the syndication process. J.P. Morgan Securities Inc. and Deutsche Bank Securities Inc. acted as joint lead arrangers and joint bookrunners on the deal. Scotia Capital, Fleet Bank and Morgan Stanley acted as co-documentation agents.

The Providence, R.I. television company is using the proceeds, together with cash on hand, to retire two debt issues at LIN Holdings Corp. - the $325 million aggregate principal amount of 10% senior discount notes due 2008 and $100 million aggregate principal amount of 10% senior discount add-on notes due 2008.

"This transaction will complete the re-capitalization of LIN TV that began with our successful IPO. With our reduced leverage, we are able to capitalize upon favorable capital market conditions. The upgrade in our ratings and the warm reception that our new term loan is receiving are a tribute to LIN TV's strong performance," said Gary R. Chapman, chairman, president and chief executive officer, in a news release.

With its new capital structure, the company expects to generate additional free cash flow in 2003.

Investcorp completed its leveraged buyout of PlayPower Inc., a news release said on Friday. In connection with the LBO, PlayPower obtained a new $150 million credit facility with UBS Warburg and The Royal Bank of Scotland leading the deal.

The loan consists of a $125 million seven-year term loan with an interest rate of Libor plus 425 basis points and a $25 million five-year revolver with an interest rate of Libor plus 375 basis points, a syndicate source previously told Prospect News.

"We are thrilled to be part of the Investcorp family of companies," said Michael Rivard, president and chief executive officer, in the release. "Investcorp provides us with the financial backing needed to maintain our leadership position in the market."

"PlayPower is uniquely positioned in the commercial play and recreational equipment sector, with exceptional product development and manufacturing capabilities, unparalleled distribution, an extensive customer base and a strong management team. It is the only competitor with both the breadth of products and the geographic reach to serve the world market," commented Bruce Tully, a member of Investcorp's management committee, in the release.

PlayPower is a St. Louis commercial play and recreation equipment manufacturer.

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