Centennial Communications seen as smooth sailing as deal attracts good investor reception

By Sara Rosenberg

New York, Jan. 20 - Centennial Communications Corp.'s proposed $750 million senior secured credit facility is expected to be somewhat of a blowout type of deal based on the amount of early interest and commitments received prior to Tuesday afternoon's launch and on what was viewed as a positive bank meeting as well.

"There's a lot of interest particularly among the institutional guys," a market source said. "I would think this would be oversubscribed rather quickly. The bank meeting is at 2 p.m. [ET]. There will probably be some orders this evening but tomorrow will probably be a more active day for this deal."

"It went well," a second source said regarding the bank meeting, noting that the meeting had a good turnout and that the company "presents well." "They got the drill down from various bond offerings."

"There's [a] large existing lender group. There were a couple of hundred million in orders before the meeting from existing guys and some new guys. It's anticipated to go well," the source added.

The facility consists of a $150 million six-year revolver with an interest rate of Libor plus 325 basis points and a commitment fee of 50 basis points, and a $600 million seven-year term loan B with an interest rate Libor plus 325 basis points.

Investors get a point and a half upfront fee for a $10 million revolver commitment, while the term loan is being offered at par, according to a market source.

Commitments are due on Feb. 3, and closing is expected to take place on Feb. 9.

Credit Suisse First Boston is the joint lead arranger, joint bookrunner and administrative agent. Lehman Brothers is the joint lead arranger, joint bookrunner and syndication agent on the deal.

Term loan borrowings, together with proceeds from a senior notes offering, will be used to refinance and replace the existing secured credit facilities, which had an outstanding principal balance of about $628 million as of Nov. 30, fund the repurchase of all outstanding unsecured subordinated notes due 2009, which are accruing paid-in-kind interest at a rate of 13% and had an outstanding balance of about $194 million at Nov. 30, and pay related fees and expenses.

The company priced the bond deal at par to yield 8 1/8% at the end of last week and in fact opted to upsize the offering by $75 million to $325 million. However, despite this change in the high-yield sale, the bank deal remained unchanged, according to a source. The extra $75 million received through the bond sale will be used to purchase additional notes, the source added.

Closing on the bank and bond transactions is expected to take place in early February.

Moody's Investors Service assigned a B2 rating to the credit facility with a stable outlook.

"While Centennial does generate meaningful amounts of free cash flow, such amounts are expected to be modest relative to the company's debt burden. This debt burden is increasing with the pending transaction whereby Centennial is refinancing structurally subordinated PIK debt held by a strategic shareholder for structurally senior cash-pay public notes. This increase in debt is partially mitigated by the bank loan amortization relief Centennial will receive under the terms of a new $750 million credit facility," Moody's said.

"In assigning a B2 to this new senior secured credit facility, Moody's notes the reduced size of this facility compared to the existing credit agreement. With only $600 million of term loans fully drawn, and minimal if any drawings under the $150 million revolving facility, Moody's believes these lenders are well protected by their collateral and guarantee package from all the company's operating subsidiaries," Moody's added.

Standard & Poor's assigned a B- rating to the deal and a recovery rating of 2, indicating expectations of a substantial recovery of principal, 80% to 100%, in the event of a default.

"The regional wireless carriers have faced ongoing competition from the larger national players, such as Verizon Wireless and AT&T Wireless. Carriers such as Centennial are disadvantaged relative to the national players in terms of their ability to offer competitively priced national plans. Despite these risks, the company does benefit from a good business position in the Puerto Rican wireless market, where it is one of the dominant players," S&P said.

"Centennial also faces a high degree of financial risk given its fairly aggressive leverage. Debt to annualized EBITDA totaled 5.5x (on an operating lease-adjusted basis) for the second quarter of the fiscal year ending May 30, 2004," S&P added.

Centennial is a Wall, N.J., wireless telecommunications service provider.

SBA oversubscribed

In follow-up news, SBA Senior Finance Inc.'s proposed $350 million senior secured credit facility is "very significantly oversubscribed," according to a source close to the deal.

The deal, which launched last Tuesday, consists of a $75 million revolver due July 2008 with an interest rate of Libor plus 375 basis points and an upfront fee of 200 basis points for any sized commitment, and a $275 million term loan B due October 2008 with an interest rate of Libor plus 400 basis points and an offer price of par.

Commitments are officially due on Jan. 23, and the syndicate is looking to close on the deal by the end of the month.

Lehman and Deutsche Bank are the lead banks on the facility.

Security is a pledge of all the assets of SBA and its subsidiaries.

Proceeds will be used to repay borrowings under SBA's existing $195 million senior secured credit facility and for general corporate purposes, including calling the remaining $65.7 million of the company's 12% senior discount notes on March 1.

SBA Senior Finance is a wholly-owned subsidiary of SBA Communications Corp., a Boca Raton, Fla., owner and operator of wireless communications infrastructure.

DaVita trades actively

DaVita Inc.'s bank debt saw some activity on Tuesday for no specific reason other than a need to invest money, with banks fingered as the primary drivers behind the trades.

"A bunch of DaVita is trading in the 101 1/8, 101¼ context," a trader said. "Banks are the buyers. They're taking some positions off the Street."

DaVita is an El Segundo, Calif., provider of dialysis services.

Meanwhile, PacifiCare Health Systems Inc.'s term loan C bank debt remained steady at 1011/4, 101½ levels, according to a trader, despite news that the U.S. Medicare program raised the rates that it pays HMOs.

"The stock's up. But, this won't affect the debt too much. It's already high," the trader said. "It's pretty well put away. It doesn't trade much."

PacifiCare is a Cypress, Calif., provider of managed care and other health insurance products.

HealthSouth Corp.'s bank debt was up about two points compared to last week's levels, with the paper now quoted at 95 bid, 96 offered on the heels of the new term loan announcement that the company made on Friday, according to a trader.

Credit Suisse First Boston was the lead bank on the new $355 million senior subordinated term loan, which was used to refinance the company's 3.25% convertible subordinated debentures due April 1, 2003.

As was previously reported, the seven-year term loan has an interest rate of 10.375% per annum, payable quarterly, and is callable after the third year with a premium.

HealthSouth also issued warrants with an exercise price of $6.50 per share and a 10-year term to the lender to purchase 10 million shares of common stock.

With this latest refinancing, the company is now current on all of its outstanding principal and interest payments due under its various borrowing agreements.

HealthSouth is a Birmingham, Ala., provider of outpatient surgery, diagnostic imaging and rehabilitative healthcare services.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.