Allied Waste interest turns to revolver's trading future; Rite Aid heads up on refinancing

By Sara Rosenberg

New York, April 11 - Now that Allied Waste Industries Inc.'s $1.5 billion term loan B is said to be doing very well in its syndication process, with talk being that the tranche may have already sold out, some people have turned their attention to the $1.5 billion revolver, focusing on the future of the tranche in the secondary market.

Another focus on Friday was Rite Aid Corp.'s term loan B, which moved up to par from 99 following news that the company plans a $2 billion bank refinancing, according to a trader.

Questions on Allied Waste's revolver focus on its $1.5 billion size.

"That's just a huge revolver," a market professional told Prospect News, regarding Allied Waste. "There have been a lot of revolvers that size that have traded down dramatically."

Also, although the company said that revolver was fully committed before the deal even hit the bank loan market, the question remains: "What does fully committed mean," the market professional continued. "Do the banks want to hold $200 million each?"

According to a trader, the revolver will probably trade at the "relative value of the term loan". One major factor influencing the relative value would be how much of the revolver is drawn, he explained.

"A majority of revolvers trade that way," the trader continued. "Look at the difference between Nextel's revolver and its term loan B. Look at Sears for example."

Nextel Communications Inc.'s term loan B was quoted at 97.708 bid, 98.4 offer, according to LoanX, while the revolver was quoted at 94.234 bid, 95.297 offer.

JPMorgan and Citibank are the lead banks on the Scottsdale, Ariz. solid waste management company's deal with Credit Suisse First Boston, Deutsche and UBS Warburg participating as well.

The term loan B has a tenor of seven years and is priced at Libor plus 325 basis points. The revolver has a tenor of five years and is priced at Libor plus 300 basis points. Both tranches are rated Ba3/BB/BB.

Proceeds will be used to refinance existing debt.

Meanwhile, Rite Aid's term loan B moved up in anticipation of being refinanced, according to a trader. On Friday the Camp Hill, Pa. retail drugstore chain announced plans to syndicate a new $2 billion senior secured credit facility via Citigroup Global Markets Inc. and J.P. Morgan Securities Inc.

Proceeds will be used to repay the company's existing $1.37 billion senior secured credit facility due March 2005 and its $107 million synthetic lease due March 2005 and to replace the existing $500 million revolver.

Also Friday Aquila Inc. closed on a new $630 million credit facility. Credit Suisse First Boston served as the sole arranger for the new loans.

The facility consists of a $200 million one-year loan to UtiliCorp Australia, Inc. with an initial interest rate of 7% and a $430 million three-year term loan to Aquila with an initial interest rate of 8.75%. The initial amount drawn under the one-year loan will be $100 million, and the company will have an option to draw another $100 million within the next 30 days. The one-year loan is non-recourse to Aquila, according to a news release.

Security for the one-year loan includes the company's interests in its Australian investments, interests in its portfolio of U.S.-based independent power plants and two nonregulated power plants in Illinois.

Security for the three-year loan includes a combination of the company's non-regulated and regulated utility assets. Later this month the company will initiate regulatory proceedings to secure the three-year loan with additional U.S.-based regulated utility assets. Upon regulatory approval, the interest rate on the three-year loan will be reduced to 8% percent.

Proceeds from the loans will be used to terminate the company's existing 364-day senior bank facility, repay synthetic leases associated with two power plants in Illinois, and cash collateralized outstanding letters of credit.

"Completing this financing package is a key component of the overall plan we've been pursuing to achieve financial stability and return Aquila to its regulated utility roots," said Rick Dobson, interim chief financial officer, in the release. "We clearly have more work ahead, but with this financing in place, plus our existing cash and cash flow from operations, the company should have sufficient liquidity to execute the remainder of its restructuring plan."

Aquila is a Kansas City, Mo. operator of electricity and natural gas distribution networks.

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