Aquila jumps on the break; DirecTV plans rate cut; Charter lower as COO leaves

By Paul A. Harris

St. Louis, Sept. 17 - Considering it was Friday, and factoring in the Rosh Hashanah holiday, Friday's session in the loan market turned out to be a surprisingly active one, according to market sources.

The Aquila, Inc. $320 million deal broke for trading, with talk that it was bid up as high as 104 in the aftermarket.

Meanwhile DirecTV Holdings announced its intentions of shaving 25 basis points off of its $1.05 billion term loan B.

And Norcross, Ga.-based biological research group Serologicals Corp. was heard to be coming into the market with a new $110 million credit facility.

Meanwhile the existing paper of Charter Communications fell after the company disclosed that its chief operating officer would depart, just one month after its chief financial officer - who had only been aboard for seven months - left to hang his shingle with rival Cablevision.

Also the existing loans of Atkins Nutritionals Inc. fattened up, as did the paper of Calpine Corp.

Aquila breaks, trades up

The $320 million credit facility of Kansas City, Mo. electricity and natural gas company Aquila Inc. broke for trading on Friday, according to an informed source.

The company's new facility is made up of priced a $220 million five-year term loan and a $100 million five-year revolver, both at Libor plus 575 basis points, with Credit Suisse First Boston in the lead.

Early Friday afternoon there were reports that the paper had traded as high as 104 before easing off.

"It's a pretty wide market," an informed source commented, contextualizing it as 102 bid, 104 offered.

"It has traded a bunch of times," the source added. "The midpoint would probably be 103."

DirecTV to shave 25 points

Meanwhile El Segundo, Calif.-based DirecTV Holdings will hold a conference call on Monday to reprice its term loan B (BB/Ba2).

The company wants to reprice the deal at Libor plus 200 basis points from the present Libor plus 225 rate.

Deutsche Bank and Bank of America are running the deal.

Originally a $1.05 billion institutional loan, in a 10-Q document filed with the U.S. Securities and Exchange Commission in August, the company stated that it prepaid $201 million on April 15, 2004.

An informed source said that the loan was the second largest term B to price in the past five years.

Serologicals $110 million to launch Thursday

News of one new loan circulated on Friday.

Serologicals Corp., a Norcross, Ga.-based biological research group, will launch a $110 million credit facility on Thursday via JP Morgan

The facility will be comprised of an $80 million term loan, price talk Libor plus 225 basis points, and a $30 million revolver.

Bell Sports still expected to flex

One investor told Prospect News on Friday that the calendar is at present "fairly heavy," and that recent news of massively subscribed bank loans may be just a little overblown.

Having said so, however, the investor did concede that news of massive buildup in the Bell Sports deal is true, and the price is still expected to flex.

On Thursday the Riddell Bell Holdings Inc. (Bell Sports Corp.) $160 million credit facility (B1/BB-), via Goldman Sachs and Wachovia, was heard to have $600 million of orders in the book for the $110 million term loan.

The loan had been talked at Libor plus 275 to 300 basis points, however the Irving, Texas, helmet-maker's deal has attracted so much attention that sources were saying it could flex as low as 225 basis points.

"We're looking at that deal," the investor commented on Friday.

"Everybody expects it to flex, although there has been no official word as yet.

"I'm a little surprised by how enthusiastic people are on that three-B deal," the buy-sider added. "It's a pleasant company with a recognizable product, but it's not incredibly under-leveraged. And it does not have incredible growth prospects.

"The massive oversubscription is somewhat mystifying."

Not flying out the door

The investor added that, Bell Sports notwithstanding, evidence is slim that market technicals - i.e. too much cash chasing too little paper - are causing investor subscription books to build tumultuously.

"It's not as though all the other deals aren't flying out the door.

"Graham Packaging, for example, is a very big deal. You could put a lot of money to work in that. But the bank loan is building somewhat slowly.

Graham's $1.95 billion credit facility, via Deutsche Bank, Citigroup and Goldman Sachs, is comprised of a $250 million revolver (B2/B) talked at Libor plus 275 bps, a $1.35 billion term B (B2/B) talked at Libor plus 275 bps, and a $350 million second-lien term C talked at Libor plus 475-500 bps (Caa1/CCC+).

Mentioning that the $1.35 billion term B was rumored to have just north of $400 million of commitments, the investor commented: "You're a little bit on the margin with Graham, with respect to the 2-times coverage number. You have to be pretty happy with their pro forma adjustments on EBITDA in order to get to that. Or you have to be a little more aggressive on multiples than I think some people will want to be.

"Also the triple-C bond issues are fairly large, but yet deeply subordinated to the banks. So I suspect the bond market might be a little bit touchy on those issues.

"And nobody wants to buy a bank loan issue where the bond issue is difficult to get done in the way that PanAmSat was difficult to get done."

The buy-sider went on to say that investors, particularly in the bond world, would be taking a hard look at the company's leverage situation.

"Graham Packaging, owned by Blackstone, wanted to do an IPO two years ago but couldn't get it done," said the buy-sider. "I think Blackstone has had to put in additional money over time.

"It's a nice company but it has pretty full leverage. And then they bought Owens-Illinois' plastics business, which O-I wanted to get out of. So they're buying it 100% for new debt.

"So you end up with a bigger company which is more IPO-able, which will fit Blackstone's needs. But the structure is going to be inherently pretty damn debt-heavy, kind of like Graham Packaging, only bigger.

"I'm happier on the bank loan side than I would be on the bond side."

Later in the session another market source told Prospect News that commitments on the Graham term B had shot up to $1 billion.

Charter COO resignation sends paper down

News that Charter chief operating officer Margaret Bellville will leave the company effective Sept. 30 caused the company's existing loan paper to trade lower, according to two sources on Friday.

One trader, noting that last month the St. Louis-based cable TV company's chief financial officer, Michael Huseby, left the company after just seven months, to take up the same position at rival Cablevision, spotted Charter's term loan B at 98.75, down from 99 on Thursday.

Meanwhile the above quoted buy-sider had Charter down half a point.

"The market is waiting and waiting to see what kind of debt reduction package they will come out with," the investor commented. "But there is no incredible short term pressure on them to do that.

"People are willing to own the bonds, figuring they can get out before things get bad, and/or an equity offering comes to reduce debt, which would make everything good.

"Charter's bank loan per-subscriber amount is quite modest," the source added. "I don't think anyone in the market thinks they wouldn't get all of their money back on a Charter bank loan. The issue is only 'What are the odds of being paid off?'

"It's one of the few bank loans that trades below par. But that is probably because there is so much of it, and because it's cable paper, and people have plenty of cable paper."

Not long before Friday's close another trader reported seeing "no reaction to the news," with regard to trading activity in Charters loans.

Calpine up on news of preferred deal

San Jose, Calif. power generator Calpine Corp. announced plans in a Friday press release to issue $360 million of two-year redeemable preferred shares, subject to regulatory approval.

Proceeds will be initially loaned to Calpine's 1,200-megawatt Saltend cogeneration power plant located in Hull, Yorkshire, England, and the payments of principal and interest the loan will fund payments on the redeemable preferred shares, the release added.

Sources in both the bond and bank loan secondary markets said that the new seemed to be impacting Calpine's existing debt favorably.

"One source had Calpine's loan paper a quarter of a point.

A trader, meanwhile, saw a similar pop, spotting the Calpine second lien loan at 87 bid, 88 offered.

Atkins up on earnings news

News Friday that Atkins Nutritionals reported earnings numbers in line with expectations calmed market players' nerves following fears heard earlier in the week that the company might require a waiver.

One trader had the company's first lien paper up on the session, trading in the high 80s.

"The earnings numbers were definitely in line with what people expected, which is why the paper is better."

Another source had the first-lien paper at 87.50 bid, 89.50 offered, from 80 bid, 83 offered on Thursday.

Meanwhile the source reported that the second-lien paper rose to 65 bid, 67 offered from 58 bid, 62 offered on Thursday.

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