Calpine CCFC II refinancing continues to spark talk with speculation on who will lead deal

By Sara Rosenberg

New York, March 8 - The potential refinancing of the Calpine Construction Finance Co. II LLC revolver continues to spur talk as rumors on potential lead banks and possible deal timing fly around from market professional to market professional.

"I heard that Goldman may be bringing something today. We opened at 973/4, 98¼ to feel out the market and see if anyone would hit the bid. It didn't trade," a trader said.

"Everyone has been trying to pitch a deal. People are scrambling to get a deal in front of them. Some accounts have pointed a finger at Goldman, saying they're pretty involved. If Goldman does get this deal there may be some resistance because of they way Goldman handled the second lien deal," the trader continued.

Goldman Sachs had no comment on Calpine and the market rumors.

"Once something gets affirmed we should see [the CCFC II revolver] trade up to 99ish," the trader concluded.

Last week the CCFC II paper was also floating around the secondary market on refinancing talk as rumors emerged early last week that Calpine would be bringing its recently cancelled financing package back to the market but with a different underwriter this time around.

On Feb. 24, the San Jose, Calif., power company announced that it pulled its $1.3 billion non-recourse first priority secured institutional term loan from the bank loan market and its $1.05 billion secured notes offering from the high-yield market. The deals were said to be cancelled due to current market conditions.

Deutsche Bank was the lead bank on the pulled bond and bank deals that were going to be used to refinance the CCFC II revolver.

Ispat Inland up on paydown

Ispat Inland Inc.'s bank debt moved higher on Monday as investors gear for an expected paydown at par with the proceeds from a proposed bond offering, according to a trader.

"It was trading around 96, 97 this morning and then it traded up to 971/2, 981/2. Now it's probably 981/2, 991/2. It's up five or six points over the last couple of days," the trader said.

He explained that the paper rallied on news that UBS would be bringing a new $800 million senior secured notes offering to the market, with proceeds earmarked for bank debt repayment. The bond deal is expected to consist of a six-year fixed-rate tranche and a 10-year floating-rate tranche with the roadshow anticipated to begin on Wednesday.

"There's a little bit of deal risk [reflected] in the bank debt, but not as bad as Calpine," the trader said in explanation of why the bank debt did not immediately move up to par levels. "There's about a point to a point and a half of deal risk. I think most people think it would get done."

Ispat Inland is an East Chicago, Ind., manufacturer of bar and flat-rolled steel.

Warner Music launch near

Warner Music Group's proposed credit facility is expected to launch to retail investors "in a couple of weeks" with the anticipation being that the bank meeting may occur this month, according to a market source.

Previously, it was reported that the credit facility would contain a $1 billion-plus institutional term loan B and a revolver tranche. These estimates are still considered valid although specifics on the financing have still not firmed up, the source added.

Bank of America, Deutsche Bank, Lehman Brothers and Merrill Lynch are the lead banks on the deal.

Proceeds would be used to support the already completed acquisition of Warner Music by an investor group led by Thomas H. Lee Partners, Edgar Bronfman Jr.'s Lexa Partners, Bain Capital and Providence Equity Partners. Under the acquisition agreement, the investor group bought the music company from Time Warner Inc. for about $2.6 billion in cash.

Allegheny closes

Allegheny Energy Inc. closed on its new $300 million three-year credit facility with an interest rate of Libor plus 300 basis points, consisting of a $200 million unsecured revolver and a $100 million unsecured term loan. Citigroup Global Markets Inc. and Scotia Capital Inc. were the lead banks on this financing.

Furthermore, Allegheny Energy Supply Co. closed on its $750 million seven-year secured term loan B with an interest rate of Libor plus 300 basis points that was led by Citigroup Global Markets and J.P. Morgan Securities Inc. and its $500 million 71/4-year second lien term loan C with an interest rate of Libor plus 425 basis points that was led by Citigroup Global Markets and Banc of America Securities, according to a company news release.

Originally, the term loan B was expected to be sized at $800 million, but the company opted to reduce the tranche size by $50 million since it found an extra $50 million in cash on the balance sheet.

Price talk on the B loan had been Libor plus 300 to 325 basis points, and price talk on the second lien loan had been Libor plus 450 to 475 basis points.

Citigroup and Bank of America are the lead banks on the Hagerstown, Md., energy company's deal.

Proceeds from the credit facility were used to repay and refinance all of the company's bank debt that was restructured in February 2003.

"Refinancing our debt was Allegheny's most important goal for 2004," said Paul J. Evanson, chairman and chief executive officer, in the release. "The new loans and credit facility and the reduction in the level of our debt outstanding will reduce our interest payments by more than $60 million annually, extend maturities, and significantly improve financial flexibility. We can now focus on other initiatives, especially further reducing leverage and building a high-performance organization."

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