U.S. Can, Otis Spunkmeyer launch, Nextel gains on Moody's upgrade review

By Paul A. Harris

St. Louis, May 26 - Two companies, U.S. Can Corp. and Otis Spunkmeyer, launched deals in the leveraged loan market on Wednesday, while Georgia-Pacific Corp. was heard to be off in the wings with a deal that is expected to get underway during the post-Memorial Day week.

Meanwhile in the secondary market the prices of existing paper firmed during the session, as cash is heard to be coming into the asset class.

The paper of Nextel Communications Inc. gained on news that Moody's Investors Service is considering raising the company's ratings, including its senior implied rating.

Moody's decision to put Nextel on review for upgrade was prompted by the wireless company's increased market share as it attracts the industry's most desirable subscribers, the rating agency said.

Moody's also noted Nextel's strengthened balance sheet, which it attained by refinancing debt at lower interest costs and longer maturities.

Noting that the move affects approximately $10 billion of debt and credit facilities, one trader had Nextel's term loan A at 99.625 bid, 100 offered and the Nextel term E at 100.75 bid, 101 offered - both firmer.

That trader also claimed to see firming in the existing loan paper of Charter Communications.

"We're trading a lot of paper, today, and getting lifted on just about every offer we have," said the trader.

"Accounts are aggressively looking to buy some paper.

"Our forward calendar is actually quite heavy. There is a lot of new cash coming into our market. It's coming from CLOs and primary funds - pretty much everybody."

UGS loan breaks, trades up

The new UGS PLM Solutions loan broke for trading at 10:30 a.m. ET Wednesday and was subsequently spotted by trading at 101 bid, 101.25 offered.

The Plano, Texas, provider of PLM software obtained a $625 million credit facility (B1/B+) via JPMorgan, Citigroup and Morgan Stanley.

The acquisition financing deal was comprised of a $125 million revolver at Libor plus 275 basis points and a $500 million term B at Libor plus 275 basis points

"It's been pretty slow," commented the source who furnished the UGS levels.

"Most things are firmer. All the wireless names are firmer: Centennial is trading around par, Western Wireless is 100.50, Nextel Partners is 101, all up an eighth to a quarter.

"There are better buyers today. There are a couple of funds that got money and are ramping up now."

Attractive alternative to junk

One market source told Prospect News on Wednesday that the prospect of rising interest rates is adding to the attractiveness of the leveraged loan market.

"People are doing everything under the sun to try to avoid going to the high-yield market right now," said the official "They're trying larger second liens and all-senior deals...whatever they can think of.

"But the two markets are related," added the source. "There is some sluggishness developing in the bank loan market because the high-yield market is flat on its back."

U.S. Can, Otis Spunkmeyer launch

A conference call was scheduled Wednesday for U.S. Can Corp.'s new $315 million senior secured credit facility (B2/B), which is being led by Deutsche Bank.

The Lombard, Ill-based steel and plastic non-beverage container company's facility is comprised of a $65 million five-year revolver and a $250 million 5.5-year term loan.

Pricing on the institutional component is Libor plus 350 basis points.

Also on Wednesday Otis Spunkmeyer Inc. launched a $160 million credit facility via JP Morgan and Merrill Lynch & Co.

The refinancing deal for the San Leandro, Calif. baked goods company is comprised of a $140 million 6.5-year term loan B and a $20 million six-year revolver.

Pricing on both components is Libor plus 375 basis points.

Finally, Prospect News learned that Georgia-Pacific Corp. will hold a bank meeting during the post-Memorial Day week for a new credit facility.

Citigroup will figure prominently in the deal.

A representative from the Atlanta-based paper products company said that the company is renegotiating $2.2-$2.3 billion of credit facilities maturing in November 2005.

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