Boart Longyear launches $650 million deal; pulp and paper pressured; Hertz $3.6 billion next week

By Paul A. Harris

St. Louis, Oct. 26 - The leveraged loan market remained choppy on Wednesday as existing bank loans in the pulp and paper sector and the automotive sector was heard to have come under pressure.

Meanwhile sources say that leveraged loan investors remain focused on the primary market.

In Wednesday's primary South African mining firm Boart Longyear Co. held a bank meeting for its new $650 million facility. And sources told Prospect News that The Hertz Corp. will launch its $3.6 billion credit facility next week.

Focus on the primary

On Wednesday morning one market source told Prospect News that the forward calendar is presently very strong.

However, the source added, the dynamics of the market are changing.

"I think the days of 101.50 on the break are over for right now, unless we start to see some give-back on the coupon from issuers," the source commented.

"With high-yield selling off the way it has been, it seems like the quick flip in order to make a point-and-a-half in bank loans is gone for right now."

Pulp and paper off

Throughout the session traders said names in the pulp and paper sector, as well as in the auto sector, seemed to be under some pressure.

One name that came up was Abitibi-Consolidated Inc., which reported a net loss of $0.09 compared to $0.03 in the third quarter of 2004 due to higher manufacturing and distribution costs.

The company plans to use proceeds from its $600 million Asian Paper Co. sale, expected to close in the fourth quarter, to reduce long-term debt

The trader said that the present strength in the Canadian dollar has been hurting Abitibi.

Also under pressure, the trader added, was the paper of newsprint and coated mechanical papers manufacturer Bowater, Inc.

The Greenville, S.C. company reported a net loss of $9.5 million, or $0.17 per share compared to a net loss of $1.8 million or $0.03 per share in the third quarter of 2004.

The company reported improvement in product pricing but added that it had incurred significant cost pressures related to energy, chemical and distribution costs.

The company, which plans to sell $300 million of assets by the end of 2006, has also suffered from the strength of the Canadian dollar, the trader said.

Auto names under pressure

Traders also said that auto names, conspicuous among them interior systems supplier Lear Corp., had come under pressure Wednesday.

For the third quarter of 2005 Lear posted net sales of $4 billion and a net loss of $750.1 million, or $11.17 per share, including an estimated goodwill impairment charge of $9.98 per share and costs related to restructuring actions and fixed asset impairment charges of $1.09 per share.

Those results compare to net sales of $3.9 billion and net income of $91.7 million, or $1.26 per share, for the third quarter of 2004.

A trader had seen Lear's Libor plus 150 bps issue, quoted at 98.25 bid, 99 offered on Tuesday.

Elsewhere in the secondary the paper of scandal-ridden Refco was seen holding in unchanged at 94 bid, 95 offered while the company's junk bonds had taken another tumble.

Blockbuster draws attention

Meanwhile another trader, commenting Wednesday afternoon that it had been a "dead" session, said that a lot of people continue to be focused on Blockbuster, Inc. The source saw Blockbuster's term loan B at 97.125 bid, 98.125 offered, unchanged, and spotted the revolver at 96.50 bid, 98 offered.

On Wednesday the company put out a press release stating that it had met with its lender group to discuss modifications to its credit agreement that would give Blockbuster improved operating flexibility over the term of the original credit agreement.

As part of the modifications, the company will pursue raising additional capital that will be used for working capital purposes including debt reduction.

Boart Longyear launches

South African mining concern Boart Longyear held a bank meeting Wednesday for a $650 million credit facility, which is being led by UBS.

The facility is comprised of a $500 million first-lien term loan and a $75 million revolver (B2/B+), both priced at Libor plus 300 basis points, and a $75 million second lien term loan (Caa1/B-) priced at Libor plus 700 basis points.

Proceeds will be used to fund a dividend recapitalization.

Boart Longyear closed on a $500 million credit facility during the past summer in order to fund Advent International's acquisition of Boart Longyear from Anglo American plc in a transaction with an enterprise value of $545 million.

Hertz to launch next week

Sources told Prospect News on Wednesday that The Hertz Corp. will launch its $3.6 billion credit facility next week.

A buy-side source who said that the deal is expected to be marketed with a comparatively long investor roadshow, likely lasting for approximately three weeks.

Deutsche Bank, Lehman Brothers and Merrill Lynch are leading the deal.

The facility is comprised of a $2.1 billion term loan and a $1.5 billion asset-based revolver.

The company is also expected to sell $3.5 million of high-yield bonds.

Proceeds will be used to help fund the LBO by Clayton, Dubilier & Rice Inc., The Carlyle Group and Merrill Lynch Global Private Equity from Ford Motor Co.

Elsewhere in the primary market an informed source told Prospect News that Sorenson Communications' $585 million credit facility, via Bank of America and Royal Bank of Scotland, was doing well.

The source added that the books for the company's $405 million first-lien term loan, talked at Libor plus 300 basis points, and its $160 million second-lien term loan, talked at Libor plus 725 basis points, were both 75% complete.

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