Headwaters, Rockwood break with good trading flow; Tower Automotive recoups some losses

By Sara Rosenberg

New York, Oct. 6 - Headwaters Inc.'s $850 million credit facility broke for trading on Wednesday, with both term loans trading actively at strong levels. Also breaking and very active was Rockwood Specialties Group Inc.'s add-on with levels wrapping around 101. While in other secondary doings, Tower Automotive Inc. bounced back slightly from Tuesday's loss as investors had time to digest the financial revisions and get a bit more comfortable with the news.

Headwaters' $640 million first-lien term loan maturing in April 2011 (B1/B+) opened at par ¾ bid, 101 offered and then traded up to 101 bid, 101½ offered by late day, according to a trader. The tranche is priced at Libor plus 325 basis points, with a stepdown to Libor plus 300 basis points if leverage is less than 3.75x. At launch, the term loan had originally gone out to lenders with price talk of Libor plus 275 basis points.

The $150 million second-lien term loan due September 2012 (B3/B-), which carries an interest rate of Libor plus 550 basis points, opened at 101½ bid, 102 offered and then traded up to 102 bid, 103 offered by late day, the trader added. At launch, the tranche was talked at Libor plus 600 basis points but was reverse flexed during syndication on high demand.

Amortization on the first-lien term loan is quarterly installments of 1% per year with the remaining balance due in three equal installments in November, February and April of the final year. The second lien-term loan does not have an amortization schedule but rather is due in one single payment at maturity.

Headwaters' facility also contains a $60 million five-year revolver that was downsized from $75 million during syndication. The revolver is expected to be undrawn at closing.

Morgan Stanley and JPMorgan are the lead banks on the deal, with Morgan Stanley listed on the left.

Proceeds from the credit facility, which was funded before syndication, combined with balance sheet cash, were used to help fund the completed acquisition of Tapco Holdings Inc. from Fremont Partners for $715 million in cash and to repay outstanding senior debt.

At closing, Headwaters has approximately $972 million in long-term debt and a debt-to-EBITDA ratio of approximately 4.4, based on pro forma last-12-month results as of June 30.

Headwaters is a South Jordan, Utah, provider of technology and services that maximize the value of fossil fuels. Tapco is a Wixom, Mich., designer, manufacturer and marketer of building products and professional tools used in exterior residential remodeling and construction.

Tapco will become part of Headwaters Construction Materials, an expanding division of Headwaters that manufactures, distributes and sells manufactured stone, masonry mortars, blocks, stucco materials, and specialty molded siding accessories.

Rockwood around 101

Rockwood's $225 million term loan B add-on hit the secondary on Wednesday at par ¾ bid, 101¼ offered and stayed in that same context throughout the day, according to a trader.

The add-on is priced at Libor plus 250 basis points, in line with pricing on the existing term loan B.

Credit Suisse First Boston, UBS and Goldman Sachs are the lead banks on the deal that will be used to partially repay subordinated term debt.

Rockwood is a Princeton, N.J., specialty chemicals and advanced materials company.

Tower Automotive stronger

Tower Automotive's first-lien bank debt was up about a quarter of a point on the day at 98¼ bid, 99¼ offered, according to a trader, after dropping by about three quarters of a point in Tuesday's session to the 98 bid area on downward guidance revisions.

"Guys are still trying to figure out where this should trade so it's been a topical name," the trader said.

The company revised its third quarter earnings guidance to a net loss of between $22.5 million and $25 million, or $0.39 to $0.43 per diluted share, compared to previous guidance of a net loss between $10.4 million and $12.8 million, or $0.18 to $0.22 per diluted share.

Furthermore, the Novi, Mich.-based designer and producer of vehicle structural components and assemblies lowered revenues for the quarter to a range of $710 million to $720 million versus previous guidance of between $725 million and $735 million.

The revisions were attributed to lower vehicle production volumes in North America, continued escalation of steel costs and, to a lesser extent, higher launch costs on new business.

Dresser-Rand sees good demand

Dresser Rand Co.'s recently launched deal is going quite well as a number of commitments had already been received on the $300 million U.S. term loan by Wednesday afternoon and the $300 million revolver is already subscribed, according to a market source.

In fact, syndication of the U.S. term loan is moving along so nicely that the tranche is expected "to be fully subscribed really soon," the source said.

Meanwhile, progress on the $100 million euro term loan was not as profound by midday since the European investors did not get to listen to the launch call until Wednesday and "they usually take a little longer" to commit to deals, the source added.

The U.S. term loan and the revolver are talked at Libor plus 250 basis points, while the euro term loan is talked at Libor plus 275 basis points. Both term loans are being offered to investors at par.

The company held a meeting for the senior managing agent (SMA) tier on Sept. 23 and launched the deal for retail syndication on Tuesday of this week.

Citigroup and Morgan Stanley are the lead banks on the deal, with Citigroup listed on the left. UBS is involved as well.

Proceeds will be used to help fund First Reserve Corp.'s acquisition of Dresser-Rand from Ingersoll-Rand Co. Ltd. for about $1.2 billion in cash. This acquisition will be the first investment made in First Reserve Fund X, a $2.3 billion private equity fund raised earlier this year.

The sale, which is subject to government regulatory approvals and other customary closing conditions, is expected to close in the fourth quarter.

Olean, N.Y.-based Dresser-Rand is a supplier of infrastructure equipment, including compressors, turbines and engines, as well as related after-market parts and services, to the energy industry.

Boise Cascade moving along

Syndication of Boise Cascade LLC's $2.905 billion credit facility is "doing pretty well" with a "lot of commitments" already in the books, according to a market source, although whether the deal is already subscribed was unavailable prior to press time.

Prior to the meeting, a broad array of investors expressed interest in the facility, including institutional lenders, commercial banks, farm credit companies and insurance companies, creating positive sentiment toward the deal's success.

And, more recently adding to the feel good attitude was Standard & Poor's Tuesday announcement that it was rating the credit facility at BB. "The BB rating is above expectations so that was pretty positive," the market source said. "At the bank meeting [they] said that weak-BBs was expected as opposed to mid-BBs."

Boise's facility, which launched Sept. 29, consists of a $350 million six-year revolver talked at Libor plus 225 basis points, a $1.33 billion seven-year term loan B talked at Libor plus 250 basis points and a $1.225 billion six-year term loan C talked at Libor plus 225 basis points. The revolver has an undrawn fee of 50 basis points.

As for upfront fees, the term loans are being offered to investors at par and revolver commitments of $15 million will get 75 basis points.

Commitments are due Oct. 13.

The reason behind the 25 basis point variation in pricing between the term loan B and the term loan C has to do with a repayment provision. If the company sells the timberland assets, proceeds repay the term loan C in its entirety before going toward the term loan B, and there are plans to sell the assets, a source previously explained.

Boise Cascade LLC, a new company formed by Madison Dearborn Partners LLC that will be based in Boise, Idaho, is getting this new credit facility to acquire Boise Cascade Corp.'s paper, forest products and timberland assets for about $3.7 billion.

Under the timberland portion of the acquisition, Boise Cascade LLC will own or control about 2.3 million acres of timberland in the United States, 35,000 acres of eucalyptus plantations in Brazil, and a 16,000-acre cottonwood fiber farm near Wallula, Wash.

Also being acquired is Boise Building Solutions, a producer of plywood, lumber, particleboard and engineered wood products, and Boise Paper Solutions, a manufacturer of uncoated free sheet papers.

In addition to getting the new credit facility, the company kicked off a roadshow for a $650 million bond offering on Wednesday to help fund this transaction as well. The acquisition is expected to close by mid-November.

JPMorgan and Lehman Brothers are joint lead arrangers on the loan, with JPMorgan listed on the left. Deutsche Bank and Goldman Sachs have signed on as agents.

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