Express Scripts up on earnings; Calpine CCFC II higher as investors adjust to pulled deals

By Sara Rosenberg

New York, Feb. 25 - Express Scripts Inc.'s bank debt shrugged off news of an investigation by the U.S. Labor Department and instead headed higher in response to favorable earnings. Meanwhile, Calpine Construction Finance Co. II LLC's revolver strengthened as investors had time to digest the news of the company's cancelled deals.

Express Scripts bank debt was quoted at 101 bid, 101½ offered, up about a quarter of a point on the day, according to a trader.

Late Tuesday the company reported fourth quarter numbers that included net income of $67.4 million, or $0.86 per diluted share, compared to $56.7 million, or $0.72 per diluted share for the fourth quarter of 2002, an increase of 19% in per share amounts. Cash flow from operations was $176.5 million compared with $139 million in the same quarter last year. Revenues were $3.5 billion, a 4% increase over the same quarter last year.

For full year 2003, net income was $249.6 million, or $3.16 per diluted share, compared to $202.8 million, or $2.55 per diluted share for 2002, an increase of 24%. Cash flow from operations was $457.9 million compared to $426 million in 2002. Revenues were $13.3 billion, an 8% increase over last year.

"As we close the books on 2003, we believe we are well-positioned for 2004 and beyond," said Barrett Toan, chairman and chief executive officer, in a company news release. "Our business model, which aligns our interests with those of our clients and members in making prescription drugs more affordable, differentiates us in the marketplace and contributed to strong new sales.

"Our recently announced alliance with the National Association of Chain Drug Stores to seek endorsement of a jointly-sponsored Medicare discount card demonstrates our commitment to making the use of drugs safer and more affordable for Medicare beneficiaries."

However, there was one revelation that was not as positive as the earnings results - an investigation was commenced Feb. 9 by the U.S. Labor Department into possible violations of the Employee Retirement Income Security Act, according to a 10-K filed with the Securities and Exchange Commission on Wednesday.

This investigation was apparently dismissed by bank loan investors and stock market players as well, as was evident by the bank debt's small rise and the stocks improvement to $71.02 from $66.83.

Express Scripts is a Maryland Heights, Mo., independent pharmacy benefit manager.

CCFC II stronger

Calpine Construction Finance Co. II LLC's revolver moved higher on the day with levels quoted at 96 bid, 96¾ offered, compared to previous quotes more in the 95½ bid, 96½ offered area, according to a trader.

"Knowing the information is better than not knowing," the trader said in explanation of the debt's upward movement. "Also, people weren't pushing it out at the lower levels."

The revolver headed to mid-90 context from around 98 earlier in the week on speculation that the debt would not end up getting refinanced at this time since both the proposed bank and bond deals were heard to be struggling. These rumors proved true on Tuesday as Calpine announced that it was canceling the proposed transactions.

Calpine Corp.'s second lien term loan remained pretty much unchanged at 95 bid, 96 offered, according to the trader. This paper had traded lower on Tuesday moving to around 95 from 95¾ bid, 96¾ offered in sympathy with the CCFC II news.

Calpine is a San Jose, Calif.-based power company.

Eaton Vance selling portfolio

Eaton Vance is selling a $208 million portfolio of "all pretty liquid names," a trader told Prospect News. Bank of America is arranging the sale.

There are 10 dealers bidding on the portfolio with bidding expected to close either Thursday or Friday, the trader added.

MultiPlan oversubscribed

MultiPlan Inc.'s $180 million five-year term loan is already oversubscribed ahead of Thursday's commitment deadline, according to a market source. The tranche is priced with an interest rate of Libor plus 300 basis points.

The $200 million credit facility (B+) also contains a $20 million five-year revolver with an interest rate of Libor plus 275 basis points.

UBS is the sole bookrunner on the deal.

Proceeds will be used to help fund the acquisition of U.S. Health Business, a subsidiary of BCE Emergis Inc., for $213 million in cash. The acquisition, which was announced this past Friday, is subject to regulatory and BCE Emergis shareholder approval.

MultiPlan is a New York healthcare network.

Builders FirstSource shifts

Builders FirstSource's $405 million senior secured credit facility underwent a variety of changes including shifting $50 million from the first lien to the second lien tranche and increasing pricing on the second lien paper.

The six-year first lien term loan (B+) is now sized at $200 million, compared to initial sizing of $150 million. Pricing remained unchanged at Libor plus 300 basis points.

The second lien term loan is now sized at $115 million, compared to initial sizing of $165 million, and pricing on the tranche was increased to Libor plus 750 basis points from Libor plus 600 basis points, according to a market source.

"The first lien was so oversubscribed that by shifting the company is saving in interest expense," the source said. "[But], there's more secured debt ahead of the second lien so [they] had to increase the spread."

The credit facility, which was restructured Tuesday afternoon, also contains a $90 million five-year revolver (B+) with an interest rate of Libor plus 275 basis points, unchanged since launch.

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

UBS is acting as sole lead arranger and administrative agent, and Bear Stearns is acting as co-arranger and syndication agent.

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

Roseburg Forest closes

Roseburg Forest Products Co. closed on its $600 million credit facility (B1/BB+), according to a company spokesman. Credit Suisse First Boston was the lead bank on the term loan portion of the deal, and American AgCredit and US Bank were co-leads on the revolving portion of the deal.

The $350 million six-year term loan B is priced with an interest rate of Libor plus 200 basis points, and the $250 million four-year revolver is priced with an interest rate of Libor plus 225 basis points with a 50 basis points commitment fee.

During syndication, the term loan B was reverse flexed twice since launching at the end of January due to strong investor demand. Initially the tranche was priced at Libor plus 250 basis points, however, the spread was soon decreased to 225 basis points and then once again to 200 basis points. It was said that there were more than $1.5 billion in commitments for the institutional tranche.

Pricing on the pro rata tranche remained unchanged throughout the syndication process.

Proceeds were used to refinance an existing credit facility.

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

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