Time Warner cuts spread; Excel Mining sets talk; Lyondell, Applied break; Transeastern slide progresses

By Sara Rosenberg

New York, Sept. 28 - Time Warner Telecom Holdings Inc. lowered pricing on its term loan B and added a step down that's based on meeting a leverage test, and Excel Mining Systems Inc. released price talk on its recently launched deal.

In secondary happenings, Lyondell Chemical Co. and Applied Systems Inc. both saw their credit facilities free for trading with their term loans quoted atop par, and Transeastern's bank debt continued to nosedive as the market is still spooked by the company's problematic financials and capital structure.

Time Warner Telecom reverse flexed pricing on its $600 million term loan B and added a step down provision as the tranche received somewhere around $1.9 billion in orders from investors, according to a market source.

The term loan B is now priced with an interest rate of Libor plus 225 basis points, down from original talk at launch of Libor plus 250 bps, and pricing can drop to Libor plus 200 bps at less than 2.5 times total leverage, the source said.

Currently, it is anticipated that the company will meet the leverage test for the step down to become effective around the third quarter of 2008, the source added.

Time Warner Telecom's $700 million secured credit facility (Ba2/B) also includes a $100 million revolver with an interest rate of Libor plus 250 bps, in line with original price talk.

Wachovia is the lead bank on the deal.

Proceeds from the term loan will be used to refinance $440 million of secured debt and partially finance the cash portion of the consideration for the acquisition of Xspedius Communications, LLC.

Revolver borrowings will be available for general corporate purposes.

Following the closing of the term loan, the company intends to call for redemption the entire $240 million principal amount of second-lien floating-rate notes due 2001.

Time Warner Telecom is a Littleton, Colo., provider of managed network services.

Excel price talk

Excel Mining Systems announced price talk of Libor plus 300 bps on its proposed $130 million seven-year term loan B on Thursday, according to a market source.

The company's $150 million credit facility, which was actually launched with a bank meeting during the Wednesday session, also contains a $20 million six-year revolver with a 50 bps commitment fee.

Credit Suisse and CIBC are the lead banks on the transaction.

Proceeds will be used to fund SPG Partners LLC's acquisition of the company.

Excel Mining Systems is a Cadiz, Ohio-based manufacturer of mine roof support systems.

First American Payment ups pricing

First American Payment Systems LP increased pricing on its $125 million term loan B to Libor plus 325 bps from original talk at launch of Libor plus 250 to 275 bps, according to a market source.

The company's $150 million credit facility also includes a $25 million revolver.

JPMorgan is the lead bank on the deal that will be used to refinance existing debt and fund a dividend payment to Lindsay Goldberg & Bessemer.

First American Payment Systems is a Fort Worth, Texas, merchant acquirer that provides comprehensive electronic transaction processing services.

Lyondell frees to trade

In trading news, Lyondell Chemical's credit facility hit the secondary with the $1.775 billion seven-year term loan quoted at par 3/8 bid, par 5/8 offered immediately on the break and then settling in a little to close the day at par ¼ bid, par ½ offered, according to a trader.

The term loan is priced with an interest rate of Libor plus 175 bps with a step up to Libor plus 200 bps on higher leverage. During syndication, pricing on the loan was reverse flexed from original talk of Libor plus 200 bps with the addition of the step.

JPMorgan is the lead arranger on the deal. Morgan Stanley is documentation agent.

Lyondell's $2.575 billion credit facility (Ba3/BB) also includes an $800 million five-year revolver.

Proceeds will be used to fund a tender for $849 million of the company's 9 5/8% senior secured notes due May 1, 2007 and to repay a portion of the seven-year term loan used to finance Lyondell's acquisition of Citgo Petroleum Corp.'s 41.25% interest in Lyondell-Citgo Refining LP.

Lyondell is a Houston-based independent, publicly traded chemical company.

Applied breaks

Applied Systems also broke for trading on Thursday with the $220 million seven-year first-lien term loan B quoted at par ½ bid, par ¾ offered, according to a trader.

The term loan B is priced with an interest rate of Libor plus 275 bps. During syndication, pricing firmed up at the low end of original guidance of Libor plus 275 to 300 bps as the tranche was five times oversubscribed.

Applied Systems' credit facility also includes a $30 million six-year revolver with an interest rate of Libor plus 300 bps. This tranche was also originally launched with talk of Libor plus 275 to 300 bps.

Credit Suisse and JPMorgan are the lead banks on the credit facility, with Credit Suisse the left lead.

Proceeds will be used to help fund the leveraged buyout of Applied Systems by Bain Capital Partners from Vista Equity Partners, LLC. Chairman and chief executive officer James P. Kellner will remain a significant investor in the company.

In addition to the credit facility, the company will be getting $165 million of eight-year mezzanine debt for acquisition financing.

Applied Systems is a University Park, Ill., provider of insurance agency and broker management system software.

Transeastern plummeting

Transeastern, the joint venture between Technical Olympic USA, Inc. and Falcone Group, continued to watch its bank debt plunge on Thursday as the market is still reacting to the recent troubling financial and capital structure update, according to a fund manager.

The term loan closed the day quoted at 73 bid, 77 offered, down from Wednesday's levels of 79 bid, 81 offered and from late last week's trading levels in the 98-99 context, the fund manager said.

This past Wednesday, Technical Olympic announced that it met with the lenders to the Transeastern joint venture to update them on the financial position of the joint venture and the Florida housing market conditions.

The actual conference call with the lending group actually took place on Monday, but no movement was seen in the bank debt until the news became public on Wednesday, creating a situation where more of the market could react.

Basically, Technical Olympic explained to these lenders that the Florida housing market has been suffering from, among other things, weak demand, an over supply of new and existing inventory homes and increased competition.

The company went on to say that Transeastern's revised sales and delivery projections are not adequate to support its existing capital structure.

Transeastern is exploring various options to fix the liquidity problem, including requesting waivers from its lenders regarding potential defaults and permitting future advances under the revolver, and restructuring land bank obligations.

Technical Olympic and Falcone said they do not intend to contribute further capital under the current structure.

The Transeastern debt is non-recourse to Technical Olympic "except that we have agreed to complete any property development commitments on the existing work in process at the time of closing in the event the Transeastern JV defaults and to indemnify the lenders for losses resulting from fraud, misappropriation and similar acts," according to Technical Olympic's most recent 10-K filed with the Securities and Exchange Commission.

In reaction to the announcement, Moody's Investors Service placed all of the ratings of Technical Olympic under review for possible downgrade.

On Monday, Standard & Poor's revised its outlook on Technical Olympic to negative but affirmed the company's ratings.

Technical Olympic is a Hollywood, Fla.-based builder and seller of single family homes.

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