Intelsat term loan price talk surfaces as launch nears; Northwest, AMR slump on Delta fare speculation

By Sara Rosenberg

New York, Jan. 4 - Price talk on Intelsat's $350 million term loan B surfaced on Tuesday as the syndicate is gearing up to launch the long anticipated deal via a bank meeting on Thursday. While on the secondary front, airline paper was in play as names like Northwest Airlines Corp. and AMR Corp. dipped slightly, coming under some pressure on rival company Delta Air Lines Inc.'s rumored decision to cut fares.

Intelsat's term loan B is being talked in the Libor plus 225 basis points area, according to a market source. And, although the launch hasn't officially happened yet, the syndicate has already spoken to some accounts about the deal and has basically gotten the ball rolling on syndication since the name has been floating around the marketplace for quite some time now, the source added.

The company had to delay its bank meeting at the end of November due to a failure in the Americas-7 satellite, which under the terms of the purchase agreement with Zeus Holdings Ltd. - the reason which the debt is being obtained in the first place -allows Zeus to cancel the acquisition.

The Americas-7 satellite was actually recovered in December. However, because of the investigation into the satellite's mysterious problems, Intelsat opted to temporarily delay the launch of its IA-8 satellite - another move that could have potentially impacted the acquisition agreement.

Intelsat's $650 million credit facility also contains a $300 million revolver.

The meat of the financing for the leveraged buyout of Intelsat is actually coming from a $2.55 billion three-part bond offering, which is kicking off via a roadshow on Monday.

Deutsche Bank, Credit Suisse First Boston and Lehman Brothers are the lead banks on the credit facility, with Deutsche listed on the left.

Zeus, a company formed by a consortium of funds advised by Apax Partners, Apollo Management, Madison Dearborn Partners and Permira, originally agreed to acquire Intelsat, a Pembroke, Bermuda-based satellite communications company, in a transaction valued at about $5 billion, including about $2 billion of existing net debt.

Northwest, AMR weaker

Both Northwest and AMR fell by about a quarter of the point on the day as news of Delta's "SimpliFares" program, which would cut fares to increase passenger traffic, continued to circulate through the market, according to a trader.

Eagan, Minn.-based Northwest's term loan B was trading in the low 103s and Fort Worth, Texas-based AMR's term loan B traded around 102, the trader said.

According to unconfirmed news reports Atlanta-based carrier Delta reduced the number of fares per flight to two in first class and six in economy - there previously were as many as 40 different fares available on some flights - and cut the highest fares by as much as 60%. As part of the simplification plan, Delta also eliminated the Saturday night-stay requirement on flights out of the Ohio hub city. The airline also plans on cutting ticket change fees to $50 from $100.

On Tuesday, Northwest released a response on the reported Delta fare initiative saying, "Although any analysis of the effects of the reported Delta fare initiative depends upon the details of Delta's proposal, if it occurs, Northwest believes that 'fare simplifications' of the sort being described are revenue negative. Northwest expects that such an initiative, if it becomes general, would immediately adversely and significantly affect industry revenues."

Ryerson Tull closes

Ryerson Tull Inc. closed on its $1.1 billion revolving credit facility, according to a company news release. JPMorgan and GE Capital were the lead banks on the deal.

Borrowings under the revolver were used to help finance the acquisition of Integris Metals Inc. from its shareholders, Alcoa Inc. and BHP Billiton, for $410 million plus assumption of about $234 million of Integris' debt.

"With the new financings in place, we have adequate liquidity - with approximately $300 million available under our credit facility - and the financial flexibility to support our expanded organization and corporate initiatives," said Neil S. Novich, chairman, president and chief executive officer, in a company news release.

Ryerson Tull is a Chicago distributor and processor of metals and other materials.

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