ILC Industries, HIT Entertainment break for trading; Delphi revolver falls on Ford, GM downgrades

By Sara Rosenberg

New York, Aug. 24 - ILC Industries Inc. and HIT Entertainment plc freed up for trading on Wednesday, with both deals' first-lien term loans settling in the upper-101 context by the end of the day.

Meanwhile, Delphi Corp.'s revolving credit facility took a step back after Ford Motor Co. and General Motors Corp. were downgraded to junk status by Moody's Investors Service.

ILC Industries' credit facility began trading on Wednesday, with both the $195 million 61/2-year first-lien term loan (B2/B) and the $77.5 million seven-year second-lien term loan (B3/CCC+) quoted at 101½ bid, 102 offered from the break until the close with limited trading seen in either tranche, according to a trader.

"Most of it has been put away. Not a ton of it has traded," the trader added, explaining that the new deal was only syndicated to existing lenders who primarily just want to hold on to the paper.

The first-lien term loan is priced with an interest rate of Libor plus 250 basis points and contains a step down to Libor plus 225 basis points when leverage is 4.75x or below. Pricing on the tranche was recently reverse flexed from original talk of Libor plus 275 basis points.

The second-lien term loan is priced with an interest rate of Libor plus 575 basis points and contains call protection of 102 in year one and 101 in year two. Pricing on the tranche was recently reverse flexed from original talk of Libor plus 650 basis points.

Both terms loans were originally issued to investors at par.

ILC's $302.5 million credit facility also contains a $30 million six-year revolver with an interest rate of Libor plus 250 basis points. Pricing on this tranche was also recently reverse flexed from original price talk of Libor plus 275 basis points.

UBS and GE Capital acted as the lead banks on the deal that closed Wednesday.

Proceeds are being used to support Behrman Capital's dividend recapitalization of the company.

ILC is a Bohemia, N.Y., defense electronics and engineered softgoods provider.

HIT breaks

HIT Entertainment's new credit facility also hit the secondary Wednesday, with the $376 million seven-year first-lien term loan B (B1/B) bouncing around in the mid-to upper-101s during the session, while levels on the $172 million 71/2-year second-lien term loan (B2/CCC+) remained fairly steady in the upper-102s.

The first-lien term loan B was quoted anywhere from 101 3/8 bid, 101 5/8 offered to 101 5/8 bid, 101 7/8 offered during trading hours before settling in around 101½ bid, 101¾ offered by close, according to a trader.

Meanwhile, the second-lien term loan was quoted at 102½ bid, 102¾ offered basically throughout the entire day, the trader added.

HIT's first-lien term loan B is priced with an interest rate of Libor plus 225 basis points and contains 101 soft call protection for one year. Pricing on the tranche was recently reverse flexed from original talk of Libor plus 250 basis points, at which time the soft call was added as well.

The second-lien term loan is priced with an interest rate of Libor plus 550 basis points, is non-callable for one year, and then callable in year two at 102 and callable in year three at 101. Pricing on the tranche was recently reverse flexed from original talk of Libor plus 575 to 600 basis points.

HIT added the second-lien tranche earlier this month after the decision was made to pull its previously planned $172 million eight-year senior subordinated note offering.

The company's $625 million credit facility also contains a $77 million six-year revolver (B1/B) with an interest rate of Libor plus 225 basis points. Pricing on this tranche was left unchanged throughout syndication.

Merrill Lynch and Deutsche Bank are the lead banks on the deal, with Merrill the left lead on the revolver and term loan B and Deutsche the left lead on the second-lien term loan.

Proceeds from the credit facility will be used to help fund Apax Partners' leveraged buyout of the company.

HIT Entertainment is a London-based producer of children's television programming, including "Barney and Friends" and "Bob the Builder."

Delphi revolver backtracks

Delphi's revolving credit facility fell off toward the end of the day by about half a point after Moody's downgraded both Ford Motor Co. and General Motors Corp. to junk - a move that was basically expected being that Standard & Poor's did the same thing months ago.

Delphi's revolver was quoted at 95½ bid, 96 offered by day's end after trading in the 96 bid, 96¼ offered context earlier in the session, according to a trader.

"It came in after Ford and GM were downgraded by Moody's. It's really no surprise being that they were already junk by S&P. It's really a non-event but it came in anyway," the trader said.

The company's term loan was unchanged at 103 bid, 103½ offered, the trader added.

On Wednesday, Moody's lowered Ford's senior unsecured rating to Ba1 from Baa3 with a negative outlook and GM's senior unsecured rating to Ba2 from Baa3 with a negative outlook.

Ford's downgrade reflects further erosion in the operating results and cash flow generation in consideration of weakened market share and continued challenges in addressing its uncompetitive cost structure in North America. Since improvement in the company's cost structure can only be implemented over a period of time, financial performance is expected to remain weak, Moody's said.

GM's downgrade reflects continuing operating losses in its North American automotive operations as well as challenges in restructuring the company to achieve a viable long-term competitive position as a leading global automaker, Moody's explained.

Earlier this month, both Delphi's revolver and the term loan suffered some losses after the company revealed that it drew $1.5 billion under its revolver in order to have cash readily available to finance operations if needed.

But, Delphi's bank levels have been steadily inching their way higher as investors have gotten more comfortable with the idea of a General Motors Corp. financial bailout and started considering a potential Chapter 11 filing as less and less likely.

Delphi is a Troy, Mich., supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology to vehicle manufacturers.

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