Reliant Energy rallies on sale of power generating plants to Brascan

By Sara Rosenberg

New York, May 19 - Reliant Energy Inc.'s bank debt headed higher in an improved secondary environment as the electric company's latest asset sale and debt reduction announcement sparked enthusiasm amongst investors.

The company's revolver was quoted at 94½ bid, 95½ offered, up about a point on the day, its term loan A was seen trading with a 98 handle and the term loan B was quoted at 98 3/8 bid, 99 offered, up from Tuesday's levels of 97¼ bid, 98¼ offered, according to a trader.

Late Tuesday evening, Houston-based Reliant announced that it would sell its 770 megawatts of power generating plants in upstate New York to Brascan Corp. for $900 million in cash. The generating assets include 71 hydropower plants and the Carr Street Generating Station cogeneration plant in East Syracuse, N.Y.

Proceeds from the asset sale will be used to repay bank debt of its Orion Power New York and Orion Power Midwest units. Reliant acquired the assets in February 2002 as part of its purchase of Orion Power Holdings.

After repaying the bank debt, Reliant said it will have reduced net debt by nearly $3.0 billion since Sept. 30, 2003.

US Oncology launches

US Oncology Inc. set price talk on its proposed $500 million credit facility now that the deal launched via a bank meeting on Wednesday, with both the $100 million six-year revolver and the $400 million seven-year term loan B talked at Libor plus 250 basis points, according to a market source.

JPMorgan Chase Bank, Wachovia Bank and Citicorp North America Inc. are the lead banks on the deal.

Originally, it was anticipated that the deal would be sized at $550 million with a $100 million revolver and a $450 million term loan, but that was much earlier in the process when the structure was still fluid, a source previously explained.

Proceeds will be used to help fund the acquisition of US Oncology by Oiler Acquisition Corp., an affiliate of Welsh, Carson, Anderson & Stowe IX LP.

The company will issue high-yield bonds as well to fund this transaction.

Under the merger agreement, the holders of US Oncology common stock, other than Welsh Carson who already owns about 14.5% of the common stock, will receive $15.05 per share in cash for their shares, which represents an 18.5% premium above the March 19 closing price of $12.70. The transaction is valued at about $1.7 billion, including consideration for outstanding stock options and the assumption of debt.

Closing of the deal, which is expected to take place in the second quarter of 2004, is subject to various conditions including majority approval from US Oncology's shareholders excluding Welsh Carson and members of senior management participating in the transaction, closing of the financing transactions, closing of a tender offer for US Oncology's public debt, the expiration of the applicable waiting period under the Hart-Scott-Rodino Act and other customary conditions.

US Oncology is a Houston cancer-care services company.

Goodyear near 101

The Goodyear Tire & Rubber Co.'s bank debt shrugged off news of additional restatements and fourth quarter 2003 earnings numbers remaining in an unchanged context of par 7/8 bid, 101 offered, according to a trader.

The company announced $164.8 million in restatement adjustments in addition to the $84.7 million of adjustments previously disclosed in the third quarter of 2003 and the $31.3 million in adjustments recorded in the second quarter of 2003. These adjustments include about $65 million announced on April 12, as well as an additional adjustment of $100.1 million resulting from the company's reassessment of the discount rate used in valuing its obligations in respect to domestic pension and other post-retirement benefit plans, a company news release said.

The total impact of the restatements, including the adjustments, increased the net loss by about $56.2 million for 2003; by $121.2 million for 2002 and by $50.5 million for 2001.

For the quarter, the Akron, Ohio, tire company reported sales of $3.91 billion, an increase of 11.6% from $3.51 billion for the fourth quarter of 2002, and a net loss of $434.4 million or $2.49 per share, compared to a net loss of $1.2 billion or $6.96 per share for the same period last year.

"Our fourth quarter total segment operating income more than doubled compared to the 2002 period, and margins increased in six of our businesses, including North American Tire," said Robert J. Keegan, chairman and chief executive officer, in a company news release. "Clearly, we are achieving positive results from the initiatives we have implemented in our businesses over the past 18 months. We focused on stabilizing our North American Tire business and accelerating the momentum in our other six businesses in 2003, and we look for both market and financial gains in 2004."

For full year 2003, Goodyear reported record net sales of $15.1 billion, an increase of 9.1% over $13.9 billion in 2002, and a net loss of $802.1 million or $4.58 per share, compared to a net loss of $1.2 billion or $7.35 per share in 2002.

For the first quarter of 2004, the company expects to report strong first quarter performance relative to the first quarter of 2003, driven by price and mix improvements as well as cost reductions, the news release said.

Nextel Partners closes

Nextel Partners Inc. closed on its upsized $700 million term loan C (B1) due May 31, 2011 that is priced with an interest rate of Libor plus 250 basis points. JPMorgan and Morgan Stanley were joint lead arrangers and joint bookrunners on the deal, with JPMorgan listed on the left.

Proceeds from the term loan C were used to repay the company's existing $375 million term loan B due Nov. 30, 2010 that was priced with an interest rate of Libor plus 300 basis points.

The company will also use proceeds from the new term loan to fund a portion of the tender offer for its 11% senior notes due 2010. Nextel Partners has accepted for purchase about $352.5 million principal amount of the outstanding notes, representing about 98.8% of the total principal amount outstanding immediately prior to the start of the tender offer, according to a company news release.

Nextel Partners is also using proceeds from a private placement of $25 million principal amount of 8 1/8% senior notes due 2011 to help fund the tender offer, which expires May 25.

Originally, the company was looking to get a $575 million term loan and come to market with a high-yield offering, but as has been the case with many a deal lately, the company opted to skip the high-yield deal and just upsize its term loan.

Nextel Partners is a Kirkland, Wash.-based wireless communications company.

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