Reliant's revolver drops 50 basis points on potential criminal indictment for price manipulation

By Sara Rosenberg

New York, March 9 - Reliant Resources Inc.'s bank debt was slightly weaker on Tuesday in response to news that the United States Attorney in the Northern District of California intends to seek a criminal indictment against Reliant Energy Services Inc. regarding allegations of price manipulation.

The revolver was quoted at 94 bid, 95 offered, about half a point lower than previous levels, according to a trader. The term loan, however, was unchanged at 97½ bid, 98½ offered.

On Monday evening, Reliant revealed that its subsidiary, Reliant Energy Services, which is responsible for purchasing fuel for and marketing the power produced by its electric generation facilities, is possibly being indicted based on allegations that it engaged in price manipulation by curtailing Reliant's electricity generation in California on two days in June 2000, according to a company news release.

"Reliant believes that the actions that are the subject of the United States Attorney's investigation were not in violation of laws, tariffs or regulations in effect at the time and intends vigorously to contest any charges.

"Reliant does not believe that this action against its subsidiary will have a material impact on its ongoing business operations, including any impact on its credit or debt agreements, the wholesale license held by Reliant Energy Services, the retail and wholesale licenses held by its other subsidiaries or contracts and agreements to which Reliant Energy Services is a party," the news release said.

Reliant is a Houston electric and energy services company.

VWR well attended

VWR International's Tuesday bank meeting was well attended and the deal has already received positive investor attention with a "significant" amount of orders already placed on the deal, according to a source close to the deal.

The company launched a $125 million five-year revolver with an interest rate of Libor plus 250 basis points, a $415 million seven-year term loan with an interest rate of Libor plus 275 basis points and a €150 million seven-year term loan with an interest rate of Libor plus 300 basis points.

Deutsche Bank and Citigroup are leading the transaction.

Proceeds will be used to support the acquisition of VWR by Clayton, Dubilier & Rice Inc. from Merck KGaA for $1.65 billion. The transaction is subject to normal regulatory approvals and is expected to close by April.

VWR is a West Chester, Pa., distributor of laboratory supplies to the industrial, pharmaceutical, educational and government markets.

ATP sees commitments

ATP Oil & Gas Corp.'s bank meeting for a proposed $175 million five-year term loan went pretty well as a lot of questions were asked with management providing "all the answers," according to a market source. Furthermore, by late afternoon, "a few commitments" had already made their way into the books, the source added.

The unrated term loan is priced with an interest rate of Libor plus 850 basis points, contains a 1.5% Libor floor and is being offered to investors at 99.

Security for the term loan is all of the company's U.S. and U.K. assets.

Proceeds will be used to refinance the company's existing $125 million credit facility that contains a U.S. facility of $110 million due in August 2007 and a U.K. facility of $15 million due on Jan. 31, 2005. As of the end of February, the average effective interest rate on the U.S. facility was approximately 9% per annum. Advances under the U.K. portion of the credit facility bear interest at the rate of 15% per annum, according to an 8-K filed with the Securities and Exchange Commission on Feb. 27.

The new term loan "is significantly cheaper than the U.K. deal and more expensive than the U.S. deal," the source said.

When asked why the company was looking to increase its bank line by $50 million with this newest proposal, the source responded, "It's incremental liquidity to bring a couple of projects on reserve."

"We currently have outstanding $96 million under the U.S. portion of our existing credit facility. Changes in the amount and type of reserves reflected on our reserve report will affect the calculation of our borrowing base. In order to satisfy this additional reserve requirement, remain in compliance with our existing credit facility and meet our capital expenditure needs, we expect to require approximately $30 million in additional financing before the end of the first quarter 2004," the Feb. 27 SEC filing said.

Credit Suisse First Boston is the lead bank on the Houston natural gas and oil company's deal.

Builders FirstSource structure

Although the syndicate has been going out to accounts since late last week, it was not until Tuesday that the recent structural proposal for Builders FirstSource's $405 million senior secured credit facility was finalized, according to a market source.

The deal is expected to allocate and break for trading within the next couple of days, the source added.

The final structure includes a $90 million five-year revolver (B+) with an interest rate of Libor plus 275 basis points, a $230 million first lien term loan (B+) with an interest rate of Libor plus 325 basis points and an $85 million 61/2-year second lien term loan with an interest rate of Libor plus 850 basis points, a 2% Libor floor, an upfront fee of 1% and call protection of 102 in the first year and 101 in the second year.

Originally the deal was launched with a $150 million first lien term loan priced at Libor plus 300 basis points and a $165 million second lien term loan priced at Libor plus 600 basis points.

The deal was later restructured to include a $200 million first lien term loan priced at Libor plus 300 basis points and a $115 million second lien term loan priced at Libor plus 750 basis points.

So since launching into the primary market, the first lien term loan has been increased by a total of $80 million and flexed up by 25 basis points, and the second lien term loan was decreased by a total of $80 million, flexed up by a total of 250 basis points and saw the addition of both a Libor floor and an upfront fee.

When the deal was first changed to increase the first lien piece, decrease the second lien piece and up pricing on the second lien paper, a market source explained that the first lien term loan was oversubscribed so the company opted to shift funds to save on interest expense. And, the source explained that pricing on the second lien piece had to be upped because of the increased amount of secured debt ahead of it.

The revolver has remained unchanged throughout the entire syndication process.

Proceeds from the credit facility 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.

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

Switch and Data closes

Switch and Data closed on its new $110 million senior credit facility, according to a company news release. Deutsche Bank was lead agent and sole bookrunner on the transaction, BNP Paribas acted as syndication agent and CIT Group Inc. acted as documentation agent.

The facility consists of a $5 million revolver with an interest rate of Libor plus 475 basis points, a $35 million delayed draw term loan A with an interest rate of Libor plus 475 basis points and a $70 million term loan B with an interest rate of Libor plus 450 basis points.

Proceeds are being used to replace the company's existing credit facility and to fund acquisitions.

"This financing is indicative of the financial strength of Switch and Data," said George Pollock Jr., senior vice president and chief financial officer, in the release. "The financial markets continue to support our business model and management team by providing access to low cost of debt capital. Even with such additional debt, Switch and Data remains modestly leveraged and will continue to generate significant free cash flow. This transaction will enable us to augment our organic revenue growth with new acquisitions."

Switch and Data is a Tampa, Fla., neutral internet communications interconnection and collocation company.

Susquehanna closes

Susquehanna Communications' subsidiary, Carmel Cable Television Inc., completed its acquisition of RCN Corp.'s Carmel, N.Y., cable systems for $120 million, according to a RCN news release.

In order to help fund the acquisition and refinance debt, Susquehanna got a new $600 million credit facility (Ba1/BB-) consisting of a $250 million term loan B with an interest rate of Libor plus 200 basis points, a $200 million revolver with an interest rate of Libor plus 150 basis points and a $150 million term loan A with an interest rate of Libor plus 150 basis points.

Wachovia was the lead bank on the credit facility.

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