Hawkeye Renewables, Insurance Auto set talk; Frontier tweaks deal; Portfolio auctions nab attention

By Sara Rosenberg

New York, June 7 - Hawkeye Renewables LLC came out with price talk and more details on the actual structure of its proposed credit facility as syndication on the deal officially kicked off. Also announcing price talk Wednesday was Insurance Auto Auctions Inc. as it launched its term loan upsizing and repricing in the afternoon.

Also in the primary, Frontier Drilling made some changes to its credit facility, including eliminating the delayed-draw tranche by moving those funds into the funded piece and firming up pricing at the high end of guidance.

Switching to the secondary, focus was turned toward two portfolio auctions that went off in the afternoon and the anticipation of a third portfolio being sold Thursday.

Hawkeye Renewables released price talk on its proposed $710 million senior secured credit facility and outlined tranching on the deal - which ended up containing a first- and a second-lien piece - as the transaction was presented to potential lenders through a bank meeting during market hours, according to a source.

The $500 million first-lien term loan and the $60 million revolver were both launched with opening price talk of Libor plus 325 basis points, and the $150 million second-lien term loan was launched with opening price talk of Libor plus 700 basis points, the source said.

The revolver carries a 50 basis point commitment fee.

Hawkeye is selling the first- and second-lien term loans as a strip; however, if a lender wants just to participate in the first-lien then the lead banks will try to accommodate that lender.

Credit Suisse and Bank of America are joint lead arrangers and joint bookrunners on the deal, with Credit Suisse also the administrative agent.

Proceeds from the credit facility will be used to fund the acquisition of an approximate 80% ownership interest in Hawkeye by Thomas H. Lee Partners LP, to refinance the company's $185 million term loan, to refinance its $55.6 subordinated notes and for working capital and general corporate purposes.

In connection with the Thomas H. Lee purchase, Hawkeye Holdings Inc. is planning an initial public offering of common stock. Prior to the IPO, a new holding company structure will be implemented under which Hawkeye Renewables will become an indirect wholly owned limited liability company subsidiary of Hawkeye Holdings.

Those who choose to participate in Hawkeye's new credit facility will be offered on a pro rata basis $20 million of co-invest in the equity with final allocations, the source added.

When Hawkeye recently outlined details on its proposed IPO with the Securities and Exchange Commission, it was said that the credit facility would carry a size of $700 million comprised of $650 million in term loan facilities and a $50 million revolver.

Specifics on the term loan tranches and the company's decision to syndicate a revolver with a slightly expanded size of $60 million were unknown until Wednesday's launch.

Hawkeye Renewables is an Iowa Falls, Iowa, manufacturer of alcohol-based fuel derived from corn.

Insurance Auto spread guidance

Continuing on the price talk front, Insurance Auto Auction revealed on its lender conference call Wednesday afternoon that it would be marketing its $230 million upsized/repriced term loan with an opening spread of Libor plus 250 basis points, according to a market source.

The $230 million is comprised of about $114 million of existing term loan debt that is being repriced from a current spread of Libor plus 275 basis points, $86 million of incremental funded term loan debt and $30 million of delayed draw for six months term loan debt with an unused fee of 50 basis points.

Proceeds from the new debt will be used to fund a series of tuck-in acquisitions.

Bear Stearns and Deutsche Bank are the lead banks on the deal.

Also on Wednesday, Insurance Auto announced that it expects to report lower volumes and consolidated EBITDA for the second quarter of 2006 compared to the prior-year quarter, according to an 8-K filed with the Securities and Exchange Commission.

More specifically, consolidated EBITDA for the second quarter is expected to be down by about 10% when compared to consolidated EBITDA.

The decline in year-over-year performance is primarily due to the loss of more than 5,000 vehicles that were damaged due to a flood in Insurance Auto's Grand Prairie, Texas, facility and higher tow costs, the company said in the filing.

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

Standard Steel price talk

Standard Steel LLC price talk surfaced on Wednesday now that the deal has already been presented to lenders, according to a market source.

The $20 million revolver, $100 million six-year first-lien term loan and $20 million six-year delayed-draw first-lien term loan were all launched with opening price talk of Libor plus 275 basis points, the source said.

Meanwhile, the $25 million seven-year second-lien term loan was launched with opening price talk of Libor plus 600 basis points, the source continued.

The delayed-draw term loan carries a ticking fee of 100 basis points.

The second-lien term loan carries call protection of 102 in year one and 101 in year two.

UBS, Jefferies and Bear Stearns are the lead banks on the $165 million credit facility that was launched through a bank meeting on Tuesday, with UBS the left lead.

Proceeds from the funded term loan debt will be used to help fund the acquisition of Standard Steel by Trimaran Capital Partners from Citicorp Mezzanine Partners LP and certain members of management.

Proceeds from the delayed-draw term loan will be used to help fund a $30 million capital expansion project in Pennsylvania that the company has planned.

The revolver is expected to be undrawn at closing.

Standard Steel is a Pittsburgh-based manufacturer of steel wheels and axles for use in freight railcars, locomotives and passenger railcars.

Frontier Drilling retranches

Frontier Drilling reworked its credit facility structure, removing the delayed-draw term loan piece by shifting those funds into the funded term loan and setting pricing at the wide end of talk, according to a market source.

The funded seven-year term loan is now sized at $265 million, up from an original size of $165 million, and pricing is set at Libor plus 300 basis points, the high end of original guidance of Libor plus 275 to 300 basis points, the source said.

On the flip side, the $100 million delayed-draw term loan was removed from the capital structure altogether.

Frontier Drilling's $315 million credit facility (B3/B-) also contains a $50 million five-year revolver.

Morgan Stanley and Lehman are the lead banks on the deal, with Morgan Stanley the left lead.

Proceeds will be used to fund capital expenditures to upgrade two rigs, to refinance existing debt and for working capital and general corporate purposes.

Frontier Drilling is a Bergen, Norway, independent test and early production and drilling contractor.

Portfolio auctions take spotlight

As for the secondary market Wednesday, the big event of the session was that bids were due early on in the afternoon on two separate portfolios that were being sold, according to a trader.

One portfolio is sized around $275 million and the other portfolio is sized around $100 million, the trader said, adding that both portfolios are comprised of par and distressed debt.

In addition, a third portfolio sale is also in the works, with bids due on Thursday for the just over $100 million compilation of primarily par names.

"Trading felt somewhat halted to that fact," the trader remarked. "Between these portfolios and the primary, there wasn't much secondary."

EnergySolutions closes

EnergySolutions LLC completed its $396 million acquisition of Duratek Inc., under which Duratek shareholders received $22 in cash per share, according to a company news release.

To fund the acquisition, EnergySolutions got a new $870 million credit facility (Ba3/BB-) consisting of a $75 million revolver, a $25 million synthetic letter-of-credit facility and a 770 million term loan B, all priced with an interest rate of Libor plus 225 basis points.

In addition to funding the acquisition, proceeds from the credit facility were used to repay in full the company's existing $170 million second-lien term loan C and to refinance existing first-lien debt.

Originally, the company was planning on leaving the second-lien term loan in place, while amending it to allow for the acquisition of Duratek, but during syndication of the new deal, the company opted to upsize the term loan B to $770 million from $600 million so as to be able to repay the second-lien tranche.

Citigroup acted as the lead bank on the deal.

EnergySolutions is a Salt Lake City-based national energy services company. Duratek is a provider of radioactive materials disposition and nuclear facility operations for commercial and government customers.

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