Insurance Auto, Shea Mountain break for trading; Collins & Aikman Corp. nosedives on warnings

By Sara Rosenberg

New York, May 12 - Insurance Auto Auctions Inc. allocated its new credit facility on Thursday, with the term loan B freeing up for trading in the upper-par context. Shea Mountain House also allocated its deal on Thursday, but its term loan B was quoted more around the lower par area on the break.

In other secondary doings, Collins & Aikman Corp.'s bank debt fell by a handful of points and levels definitely widened out after the company revealed liquidity issues, compliance issues and management changes.

Insurance Auto Auctions' $115 million term loan B opened for trading on Thursday at par 3/8 bid, par 7/8 offered and pretty much stayed in that context throughout the session, according to a market source. The paper was sold to investors at par during syndication.

As for allocations, "they were tiny" since the deal was "well oversubscribed" and it's a relatively small term loan, the source added.

The term loan B is priced with an interest rate of Libor plus 275 basis points and contains a step down to Libor plus 250 basis points when leverage falls below 33/4x. Originally, the tranche was launched with price talk of Libor plus 300 basis points but was reverse flexed with the addition of the step down during syndication on strong demand.

Insurance Auto Auctions' $165 million credit facility (B2/B) also contains a $50 million revolver with an interest rate of Libor plus 275 basis points.

Bear Stearns and Deutsche Bank are the lead banks on the deal that will be used to help fund Kelso & Co.'s leveraged buyout of the company.

The company sold $150 million of 11% eight-year senior unsecured notes in late-March to help fund the LBO as well. Price talk on the notes was 10½% to 10¾%.

In addition, Kelso has committed to provide $148.7 million in equity financing.

Under the terms of the agreement, Insurance Auto stockholders will receive $28.25 per share in cash upon the closing of the merger. The total value of the merger is about $385 million.

Insurance Auto is a Westchester, Ill., provider of automotive total loss and specialty salvage services.

Shea Mountains breaks

Shea Mountain House's $150 million six-year term loan B freed up for trading Thursday with the paper estimated to be around par bid, par ½ offered although no trades were seen in the name, according to a trader.

The tranche is priced with an interest rate Libor plus 200 basis points.

Shea Mountain's $650 million real estate financing credit facility (Ba2/BB-) also contains a $250 million four-year revolver with an interest rate of Libor plus 175 basis points and a $250 million four-year "subscription facility" with an interest rate of Libor plus 75 basis points.

JPMorgan is the lead bank on the deal that will be used to build a planned community in California with Calpers sponsoring the transaction.

Collins & Aikman sinks

Collins & Aikman's bank debt dropped by about five points on the bid side after the company revealed that it is facing liquidity challenges, the resignation of its chief executive officer, as well as the need to seek loan waivers.

The bank debt was quoted wide at 91 bid, 95 offered compared to Wednesday's levels of 96 bid, 98 offered, according to a trader.

"That one was just a freefall," another trader added.

On Thursday, the company said that it would be seeking a waiver under its credit facility of the consolidated leverage ratio covenant because it anticipates being unable to comply with this requirement based on estimated first-quarter 2005 performance.

The company also said that it had already received a waiver of this covenant under its accounts receivables facility and amended the accounts receivables facility to address immediate liquidity issues resulting from the recent simultaneous credit ratings downgrades of Ford Motor Co. and General Motors Corp. by Standard & Poor's to junk status.

Under the terms of the receivables facility, the downgrades resulted in a change in receivables concentration limits relative to these customers and, therefore, required a partial paydown of the receivables facility and reduced ongoing availability under the facility. Based on receivables balances on the day following the downgrades, the company would have been obligated to reduce its receivables balances by about $70 million.

An amendment and waiver was required since the company did not have the funds to make the paydown and availability would otherwise have been insufficient for ongoing operating obligations.

Collins & Aikman went on to say that it continues to face significant near-term liquidity challenges. Its credit facility is fully drawn so it must rely fully on timely access to its receivables facility, foreign receivables factoring arrangement and fast pay financing programs to fund ongoing operations.

It also has a significant foreign factoring arrangement, under which outstanding factored balances were about $96 million at March 31. These are generally terminable on short notice.

Furthermore, a material European factoring arrangement that relates principally to one customer is due to expire at the end of this month. If this facility is not extended or renewed, Collins & Aikman will seek more favorable payment terms from the customer.

The company said it is looking at ways to improve results and enhance liquidity. It is transitioning the General Motors fast pay program administered by GECC to one administered by GMAC that will provide a commitment to October. Also, it is continuing to work with its largest customers and suppliers to enhance commercial terms to improve operating results, cost recovery and liquidity.

As of May 11, Collins & Aikman had cash and availability under its financing arrangements of $13.4 million.

In addition to these liquidity problems, the company also revealed a shake up in management. David A. Stockman, chief executive officer, chairman of the board and director, resigned. Charles E. Becker, a former director of the company, has agreed to serve as acting chief executive officer. Marshall Cohen, a current director of the company, was named as non-executive interim chairman of the board of directors.

Collins & Aikman is a Troy, Mich., designer, engineer and manufacturer of automotive interior components.

AFC closes

AFC Enterprises Inc. closed on its new $250 million credit facility (B1/B+) consisting of a $60 million five-year revolver and a $190 million six-year term loan B, with both tranches priced with an interest rate of Libor plus 200 basis points.

JPMorgan was the lead bank on the deal.

Proceeds were used to refinance existing bank debt and help fund a stockholders dividend payment.

AFC is an Atlanta developer, operator and franchiser of quick-service restaurants, bakeries and cafes.

Sinclair closes

Sinclair Television Group Inc. closed on its new $275 million amended and restated credit facility (Ba1/BB) consisting of a $100 million term loan A due Dec. 31, 2011 with an interest rate of Libor plus 125 basis points and a $175 million revolver due June 30, 2011 with an interest rate of Libor plus 125 basis points.

Both tranches contain step downs in pricing based on leverage grids.

JPMorgan was the lead bank on the deal that was used along with $285 million gross proceeds from the sale of the company's Sacramento, Calif., television station and cash on hand to redeem the $397.5 million in term loans that were outstanding at quarter-end March 31.

The revolver was undrawn at closing.

"The current lending environment, along with our improved credit profile due to our recent television station sales and free cash flow generation, have allowed us the opportunity to access the bank lending markets at more favorable terms. The amended facility provides for lower interest costs, longer maturities and the covenant flexibility to capitalize on financial and operating opportunities," said David Amy, executive vice president and chief financial officer, in a company news release.

Sinclair Television is a wholly owned subsidiary of Sinclair Broadcast Group Inc., a Hunt Valley, Md., television broadcasting company.

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