AxleTech reworks tranches, firms pricing; Refco rollercoaster continues; Kodak, Chart Industries break

By Sara Rosenberg

New York, Oct. 14 - AxleTech International tweaked its credit facility Friday, shifting some funds into its term loan B and out of its second-lien term loan, firming up pricing levels, and adding a step down and soft call protection to the term loan B.

In secondary doings, Refco Inc. was once again bouncing all over the place, quoted anywhere from the low-60s to the low 70s throughout the session as the company announced the unwinding of positions at its brokerage unit, resulting in an additional rating downgrade, and a private lender call was held.

Also in the secondary, Eastman Kodak Co.'s term loan freed up for trading in the low-par context, while Chart Industries Inc.'s term loan broke for trading the upper-par context.

AxleTech decided to move $10 million out of its second-lien term loan tranche into its first-lien term loan B tranche as demand for the first-lien was really quite strong and it results in a cheaper cost of capital for the company, according to a market source.

Furthermore, the syndicate firmed up pricing on the deal, with the first-lien tranches coming in at the tight end of talk, while the second-lien tranche ended up at the wide end of talk.

Lastly, the syndicate decided to add a step down in pricing to the first-lien term loan B and in return, investors were given 101 soft call protection for one year, the source said.

The seven-year first-lien term loan B (B2/B+) is now sized at $140 million, up from $130 million, and pricing firmed up at Libor plus 225 basis points from initial price talk of Libor plus 225 to 250 basis points. Pricing on the tranche can step down to Libor plus 200 basis points based on leverage.

The 71/2-year second-lien term loan (Caa1/B-) is now sized at $75 million, down from $85 million, and pricing firmed up at Libor plus 650 basis points from initial price talk of Libor plus 625 to 650 basis points, the source said. Call protection of 102 in year one and 101 in year two that the tranche was launched with, remained in place.

AxleTech's $50 million six-year revolver (B2/B+) was left untouched in terms of size but pricing was finalized on this tranche as well at Libor plus 225 basis points from initial price talk of Libor plus 225 to 250 basis points, the source continued.

Most investors were expected to have their recommitments in on the deal by the close of business Friday, the source added.

Merrill Lynch, JPMorgan and CIBC are the lead banks on the credit facility, with Merrill left lead.

Proceeds from the $265 million credit facility will be used to help fund The Carlyle Group's leveraged buyout of the company from Wynnchurch Capital and other minority shareholders.

AxleTech is a Troy, Mich., supplier of axles, brakes and other drivetrain components for off highway and specialty vehicles to the commercial and military markets.

Refco ride continues

Refco's bank debt was quoted all over the place during Friday's session, with levels seesawing over more than a 10 point span as the influx of negative news refused to slow down and a private lender call took place.

By the end of the day, the bank debt was quoted at 64 bid, 68 offered but it was seen as low as 61 and as high as 72 bid, 74 offered during trading hours, one trader said. A second trader had the high of the day quoted slightly wider at 70 bid, 75 offered.

By comparison, on Thursday, the bank debt closed out the session around the 72 bid, 74 offered context but was seen at 86 bid, 88 offered in the morning hours and as low as 57 bid, 60 offered in the afternoon hours.

Prior to the onslaught of scandalous news around a week ago, the bank debt was being quoted right around 101.

Refco has been on everybody's radar lately as people have been watching a slew of negative events unfold ever since the scandal broke early this past week about an approximately $430 million receivable owed to the company by an entity controlled by Phillip R. Bennett, now ex-chief executive officer and chairman of the board of directors.

Bennett was said to have repaid the receivable in cash, including all accrued interest. However, the impact is still being felt as problems with previous and upcoming financial statements resulted from the fraud, credit ratings downgrades and then more downgrades were announced, and most recently, business units are being unwound.

On Friday, the company announced that its regulated broker dealer, Refco Securities LLC, has started unwinding proprietary and client positions. Refco Securities will now only be engaging in security transactions to the extent necessary to offset and effectively liquidate outstanding long and short customer and proprietary positions.

In reaction to this announcement, Standard & Poor's downgraded Refco's senior secured debt to CC from B-.

"These announcements indicate that a technical default by Refco Group on its rated debt is almost certain to occur and that a payment default is highly likely due to Refco Group's negative tangible net worth and the deterioration of its franchise," S&P said. "The CC rating indicates a high vulnerability to nonpayment," S& added.

This is not the first downgrade that Refco has received this week. On Thursday, Moody's cut the senior secured bank credit facility rating to Caa2 from B2 and S&P cut the corporate rating to B- from B+. Prior to that, on Tuesday, Moody's had dropped the company's senior secured credit facilities to B2 from B1 and S&P had dropped the company's senior secured debt to B+ from BB-.

The Thursday downgrades were sparked by the company's announcement that the liquidity within its non-regulated subsidiary Refco Capital Markets Ltd. is no longer sufficient to continue operations, prompting a 15 day moratorium on all activities of Refco Capital Markets to be imposed.

Refco has retained as special advisors to its board of directors Arthur Levitt, formerly chairman of the SEC and chairman of the American Stock Exchange, and Eugene A. Ludwig, formerly U.S. Comptroller of the Currency and currently chief executive officer of Promontory Financial Group LLC.

Goldman, Sachs & Co. has been retained as the company's financial advisor.

The company also disclosed earlier this past week that, as a result of the scandal, financial statements for the periods ended Feb. 28, 2002, Feb. 28, 2003, Feb. 28, 2004, Feb. 28, 2005, and May 31, 2005 can no longer be relied upon and the company's 10-Q filing for the period ending Aug. 31 will likely be delayed because of the current audit committee investigation.

Refco is a New York-based diversified financial services organization.

Kodak breaks

Kodak allocated its credit facility on Friday, with the term loan portion of the deal freeing up for trading late in the day at par bid, par ¼ offered, according to a trader.

The $1.7 billion term loan, of which $500 million is delayed-draw, is priced with an interest rate of Libor plus 225 basis points. The funded portion of the tranche was upsized to $1.2 billion from $1 billion during syndication. Furthermore, pricing on all the term loan debt stepped up from original price talk of Libor plus 175 basis points based on a pricing grid that was always included in the deal following a rating downgrade from Standard & Poor's to BB- from BB.

The delayed-draw term loan is available until June 2006.

Kodak's $2.7 billion credit facility (Ba2/BB-) also contains a $1 billion revolver with an interest rate of Libor plus 200 basis points. The revolver was downsized from $1.2 billion in connection with the term loan upsizing during syndication. Just like the term loan, pricing on the revolver stepped up after the S&P downgrade, although it reset from original price talk of Libor plus 150 basis points.

Citigroup Global Markets Inc. is the lead arranger on the deal.

Borrowings under the revolver, which will replace the company's existing $1.225 billion five-year revolver expiring in July 2006, will be available for general corporate purposes.

Term loan proceeds will be used to repay existing company debt primarily arising out of the acquisition of Creo, which was completed on June 15.

Kodak is a Rochester, N.Y.-based digital imaging products, services and solutions company.

Chart Industries breaks

Chart Industries allocated its new deal on Friday, with the term loan tranche freeing up for trading in the par ½ bid, 101 context area, which is where it closed out the session as well, according to a trader.

The $180 million term loan B is priced with an interest rate of Libor plus 200 basis points. Pricing was reverse flexed from original talk at launch of Libor plus 275 basis points during syndication on strong investor demand.

Chart Industries' $240 million credit facility (B1/B+) also contains a $60 million revolver with an interest rate of Libor plus 250 basis points.

Citigroup and Morgan Stanley are the lead banks on the deal, with Citi left lead.

Proceeds will be used to help fund First Reserve Corp.'s leveraged buyout of Chart for a cash purchase price of $65.74 per share, and a total transaction value of approximately $460 million, including the repayment of Chart's debt.

The transaction is expected to close by the end of October, assuming satisfaction of customary closing conditions.

Chart is a Garfield Heights, Ohio, supplier of products and systems for low temperature and cryogenic applications.

Express Scripts closes

Express Scripts inc. closed on its new $2.2 billion credit facility consisting of a $600 million five-year revolver with an interest rate of Libor plus 75 basis points and a $1.6 billion five-year term A with an interest rate of Libor plus 75 basis points.

Credit Suisse First Boston and Citibank acted as joint lead arrangers on the deal.

Proceeds were used to refinance the company's existing credit facility and fund the now completed acquisition of Priority Healthcare Corp. in a cash transaction for $28 per share, or a total of approximately $1.3 billion.

Express Scripts is a St. Louis-based independent pharmacy benefits manager. Priority Healthcare is a Lake Mary, Fla.-based biopharmaceutical pharmacy and distribution company.

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