Roseburg Forest term B reverse flexes; Compression Polymers' books expected to fill up fast

By Sara Rosenberg

New York, Feb. 11 - Roseburg Forest Products Co. reverse flexed its term loan B for the second time since the deal launched at the end of January. Meanwhile, Compression Polymers Holdings LLC's newly launched deal is expected by some to be a massive blowout just like other recent deals in that sector have been.

Roseburg's $350 million six-year term loan B is now priced at Libor plus 200 basis points, compared to previous pricing of Libor plus 225 basis points and initial pricing at launch of Libor plus 250 basis points, according to a market source.

"They had over $1.5 billion in commitments," the source explained.

The $600 million credit facility (B1/BB+) also contains a $250 million four-year revolver with an interest rate of Libor plus 225 basis points and a 50 basis points commitment fee. Pricing on the pro rata tranche is unchanged since the deal fist came to market.

Credit Suisse First Boston is leading the term loan portion of the deal, while American AgCredit and US Bank are joint-lead arrangers on the revolver.

Proceeds will be used to refinance an existing credit facility.

Roseburg is a Roseburg, Ore., producer and supplier of wood products.

Compression demand expected

Compression Polymers Holdings LLC is expected by some to receive overwhelming investor interest and eventually flex down from initial pricing levels at some point during syndication like other recent building materials deals such as PGT Industries Inc. and Ply Gem Industries Inc.

"It's kind of a small deal so I would imagine this will blow out as all the other ones have," a fund manager said. "There's a big spread on the second lien so that will probably draw some interest. Even the first lien spread is higher than the 250, 275 spread that's been coming out. PGT, Ply Gem have all been pricing in that 275 kind of range. I'd put money on it that this one [reverse flexes] too. They'll at least price the first lien at 300 and the second lien will probably come in by 25 to 575."

The company's proposed $140 million credit facility, which launched via a bank meeting on Wednesday, currently consists of a $20 million five-year revolver with an interest rate of Libor plus 300 basis points, a $90 million six-year first lien term loan with an interest rate of Libor plus 325 basis points and a $30 million 61/2-year second lien term loan with an interest rate of Libor plus 625 basis points, according to the fund manager.

PGT Industries originally came to market with a $195 million credit facility consisting of a $120 million six-year first lien term loan with an interest rate of Libor plus 325 basis points, a $50 million 61/2-year second lien term loan with an interest rate of Libor plus 650 basis points and a $25 million five-year revolver with an interest rate of Libor plus 275 basis points.

However, during syndication the first lien was reverse flexed to Libor plus 300 basis points and the second lien was reverse flexed to Libor plus 625 basis points due to strong demand. UBS is sole bookrunner on the deal that will be used to help support the buyout of the Nokomis, Fla., manufacturer of custom windows, doors and patio rooms by JLL Partners Inc.

As for Ply Gem (B1/B+), the deal did not undergo any pricing changes since the $235 million seven-year term loan B was launched with an interest rate of Libor plus 275 basis points and a $65 million five-year revolver with an interest rate of Libor plus 250 basis points. The only change to take place on the deal was a reduction in size of the term loan B to $190 million following the pricing of an upsized bond offering.

However, the deal was intentionally launched to a small investor group of about 25 accounts in order to avoid massive oversubscription and a complicated allocation process. UBS and Deutsche Bank are joint bookrunners, and CIBC and Merrilll Lynch are co-arrangers and documentation agents on the facility. The facility will be used to help support the company's acquisition by Caxton-Iseman Capital Inc. from Nortek Inc. The Kearney, Mo., company manufactures and distributes products for use in the residential new construction, do-it-yourself and professional renovation markets.

Wachovia is the lead bank on the Compression Polymers deal.

Proceeds of the Compression Polymers deal will be used to refinance debt, general working capital and pay a dividend to shareholders, the source added.

Compression Polymers is a Moosic, Pa., manufacturer of engineering thermoplastic sheet and plate.

Builders FirstSource launches

Builders FirstSource, another company in the homebuilder sector, also launched a deal on Wednesday with this one sized larger than Compression Polymers at $405 million. UBS is acting as sole lead arranger and administrative agent, and Bear Stearns is acting as co-arranger and syndication agent.

The senior secured credit facility consists of a $90 million five-year revolver talked at Libor plus 275 basis points, a $150 million six-year first lien term loan facility talked at Libor plus 300 basis points and a $165 million 61/2-year second lien term loan facility talked at Libor plus 600 basis points.

Proceeds will be used to support JLL Partners recapitalization of the company.

The company generated net sales for the last 12 months ended Jan. 31 of about $1.67 billion and EBITDA of about $70 million, the source added.

Builders FirstSource is a Dallas supplier of building products to professional, large-scale homebuilders.

Patriot Media sees demand

Patriot Media & Communications CNJ LLC's increased and repriced term loan B is expected to be oversubscribed before the close of syndication as commitments continue to come in and investor interest continues to be strong, according to a market source.

The term loan B due 2011 is sized at $120 million, an increase of $20 million from its original size when obtained last year in connection with the purchase of RCN Corp.'s New Jersey cable systems, and is talked in the area of Libor plus 325 basis points, down from original pricing of Libor plus 450 basis points.

The company is also looking to reprice its $25 million term loan A due 2010 and $40 million revolver due 2010 with price talk in the area of Libor plus 300 basis points. These pro rata tranches are not officially being marketed, however, and lenders must approve the proposed changes.

Pro rata lenders are still going through the credit process being that deal only launched on Feb. 4 and responses from these lenders are expected to start coming in within the next few days to a week.

Commitments are officially due on Feb. 19 with the deal expected to close by month's end.

Moody's Investors Service rated the credit facility B1 late in the day Tuesday. This was the first time that a public rating was sought after for the credit facility. However, when Patriot Media first got the loan last year, Moody's privately placed it at B2 so this new rating was "kind of like an upgrade," the source said.

Moody's said the ratings for Patriot broadly reflect the company's high financial leverage on an absolute basis; the limited size and geographic concentration of the company's subscriber base and cable systems; and the very modest amount of free cash flow that is projected to be generated over the intermediate term, which could be further constrained and possibly turn to a cash drain again if incremental capital spending is required to provision telephony and/or other services.

The ratings also reflect lingering execution risk as the company shifts from infrastructure deployment and network rebuild activities to a more aggressive rollout of its bundled products and services; and increasing competitive risk from direct broadcast satellite operators and regional Bell operating companies.

Moody's said the ratings benefit, however, from the very strong demographic characteristics of the markets in which Patriot operates, which correlate to good consumer demand for its product offerings; the related above-average levels of subscription revenue and EBITDA from its customers, which are expected to grow further now that plant upgrades have mostly been completed; management's demonstrated ability to successfully achieve its operating and financial goals during its first full year of operations; and the presence of a large financial sponsor through which sufficient equity contributions have been made (and near-term backstop financings are available) to effect a more prudently capitalized company than many of its peers.

Standard & Poor's is expected to rate the credit facility B+, which is in line with where the rating agency unofficially rated the deal last year.

Bank of New York is the lead bank on the Greenwich, Conn., cable operator's deal.

Allied Waste dips

Allied Waste Industries Inc.'s bank debt was "down just a hair" on Wednesday following the release of disappointing earnings news with the paper quoted at 101 5/8 bid, 101 7/8 offered, compared to previous levels of 101¾ bid, 102 offered, according to a trader.

The Scottsdale, Ariz., solid waste management company announced financial results that included revenues of $1.313 billion for the fourth quarter, up 1.7% compared to the fourth quarter of 2002, and $5.248 billion for the full year ended Dec. 31, 2003, compared to $5.191 billion in 2002. The company had operating income of $243 million for the quarter, down from $308 million last year, and $1.035 billion for full year, down from $1.22 billion in 2002.

Allied Waste reported cash flow of $179 million for the quarter, compared to $240 million last year, and $784 million for the year, compared to $977 million for 2002; free cash flow of $71 million for the quarter, compared to $139 million last year, and $330 million for the year, compared to $427 million for 2002; and a net loss from continuing operations of $2.29 per share in the quarter, compared to net income from continuing operations of $0.14 per share last year, and $2.36 per share for the full year, compared to net income of $0.62 per share for 2002.

At Dec. 31, the company had $7.79 billion of debt, representing a $205 million decrease in net debt during the fourth quarter and $913 million for the year.

In 2004, the company is expecting free cash flow in the $290 to $330 million area and debt repayment in the $665 to $705 million area. Allied Waste also said in a company news release that consistent with the historical quarterly results of the business, the first quarter of 2004 is expected to reflect a normal seasonal downturn, followed by a positive upswing in the second and third quarters, and a downturn again in the fourth quarter.

Wellman closes

Wellman Inc. closed on its $625 million credit facility consisting of a $175 million asset-based revolver (B1/BB-) with an interest rate of Libor plus 250 basis points, a $185 million five-year first lien term loan (B1/B+) with an interest rate of Libor plus 400 basis points and a $265 million six-year second lien term loan (B2/B-) with an interest rate of Libor plus 675 basis points and a 2% Libor floor.

Originally, the deal was launched with the first lien term loan sized at $125 million and the second lien term loan sized at $300 million, however, the sizes of the tranches were changed last week when pricing finally emerged on the deal. There was no price talk when the facility first launched since the syndicate was trying to get a read on investor sentiment due to this first lien, second lien structure.

In response to the size changes of the term loans, Standard & Poor's downgraded its rating on the first lien term loan to B+ from BB- and revised the recovery rating on the tranche to 3 from 1, indicating that the first-lien term loan lenders can still expect meaningful recovery of 50% to 80% of principal in the event of default.

"The rating on the proposed $185 million first-lien term loan, which has been increased in size from $125 million, reflects the lenders' recovery prospects in the event of a default, after a review of Wellman's revised financing plan," said S&P credit analyst Franco DiMartino, in the rating release.

The revolver is secured by a first-priority lien on the receivables, inventory and the related intangible assets. The term loans are secured by the company's domestic assets.

Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc. acted as joint bookrunners on the term loans, and Deutsche Bank Securities Inc. acted as sole bookrunner on the revolver.

Proceeds were used to refinance the company's revolver, private placement notes and financial instruments, and to repay a $150 million sale and leaseback obligation entered into in 1999, a $28 million accounts receivable securitization program and an $87 million prepayment of a raw material contract.

In the first quarter of 2004, Wellman expects to incur about $47 million in pretax charges, or about $0.95 per share after tax, resulting from the new financings and costs associated with the financings that were repaid. After closing the new debt financing, the company has about $490 million in total outstanding debt.

"We are very pleased to have completed this financing. These new facilities provide the company with substantial financial flexibility, with approximately $100 million in available liquidity at closing and no significant debt maturities until 2009," said Tom Duff, chief executive officer, in a company news release.

Wellman is a Shrewsbury, N.J., manufacturer and marketer of polyethylene terephthalate packaging resins and high-quality polyester products.

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