Cash, LCDX weakening persists on negative outlook; Leap steady on waiver news; Sequa extends deadline

By Sara Rosenberg

New York, Nov. 21 - The cash market in general and LCDX were lower once again as investors continue to take a negative stance toward the loan market.

In other trading news, Leap Wireless International Inc.'s term loan held firm after news emerged that the company successfully completed its loan waiver and raised pricing.

Meanwhile, in the primary, Sequa Corp. decided to leave the books open on its credit facility instead of keeping to the original timetable under which commitments were due on Wednesday.

The cash market and LCDX 9 were both softer, which is a trend that has been seen every day this week, as "continued negative sentiment" is taking its toll on the secondary, according to a trader.

In cash, generally speaking everything was down by anywhere from a quarter to half a point, including names like Alltel Communications Inc., First Data Corp., Texas Competitive Electric Holdings Co. LLC (TXU) and Georgia-Pacific Corp.

Alltel, a Little Rock, Ark., provider of wireless voice and data communications services, saw its term loan B-3 end the day at 95 bid, 95½ offered, down from 95¼ bid, 95¾ offered, the trader said.

First Data, a Greenwood Village, Colo., provider of electronic commerce and payment services for businesses, saw its term loan B-2 go out at 94¼ bid, 94 5/8 offered, down from 94 5/8 bid, 95 1/8 offered.

Texas Competitive, a Dallas-based energy company, saw its term loan B-2 close at 97 3/8 bid, 97 5/8 offered, down from 97½ bid, 98 offered, the trader continued.

Georgia-Pacific, an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals, saw its term loan B end the day at 94 bid, 94½ offered, down from 94¾ bid, 95¼ offered, the trader added.

As for LCDX, traders said that levels went out around 94.90 bid, 95.05 offered, down from Tuesday's closing levels of 95.40 bid, 95.60 offered.

"There hasn't been any good news in the market all week," one trader told Prospect News. "And, Chrysler was a disaster."

On Tuesday, Chrysler Corp. LLC (Chrysler Auto) officially pulled its $7.5 billion first-lien term loan (B1/BB-/BB+) from market due to the complete lack of demand for the paper and did not give any indication as to if or when the deal may return.

Of the total term loan amount, approximately $4 billion was originally planned to be syndicated when the loan was launched on Nov. 7, and then that number was changed to approximately $2 billion last week because of investor reception.

Also, at launch, investors were told the original issue discount on the paper would be in the 97 to 97½ range, but last week the discount was increased to the 95½ to 96 area.

The first-lien term loan was being talked at Libor plus 400 basis points, with call protection of non-callable for one year, then at 104 in year two, 102 in year three and 101 in year four.

Chrysler Auto had already pulled the deal once before. In late June, the deal was launched to investors with a structure of one $10 billion tranche that was talked at Libor plus 325 bps, with call protection of non-callable for one year then at 101 in year two. During that syndication attempt, price talk had been flexed up to Libor plus 375 bps before the deal was postponed in July because of market conditions.

Proceeds from the already funded term loan were used to help fund the acquisition of a majority interest in the company by Cerberus Capital Management, LP from DaimlerChrysler AG.

When the loan funded in August, it was documented as a $5 billion first-out term loan (Ba3/BB-) and a $5 billion second-out term loan (B3/B).

Since funding this summer, $2.5 billion of the original $10 billion amount had been repaid using restricted cash on the balance sheet, which is why on its return to market in November, the total size of the deal was set at $7.5 billion.

JPMorgan, Goldman Sachs, Citigroup, Bear Stearns and Morgan Stanley are the bookrunners on the loan, with JPMorgan, Goldman and Citigroup the joint lead arrangers.

Chrysler Auto is a producer and seller of Chrysler, Dodge and Jeep vehicles.

Leap firm as waiver gets done

Leap Wireless' term loan was steady during the quiet, shortened, pre-holiday market on the news that it received a loan waiver and increased spreads, according to a trader.

The term loan was quoted unchanged at 97¾ bid, 98¾ offered, the trader said.

On Wednesday morning, the company announced that it got the OK on a waiver regarding certain and potential defaults arising from the restatement of financials and the delay in filing its 10-Q for the third quarter.

Under the waiver, the company has until Dec. 14 to finalize its third-quarter financial statements and until Dec. 31 to finalize the restatement of its prior financial statements.

If the restatements result in a cumulative net reduction in operating income for the period from Jan. 1, 2005 through June 30, 2007 in excess of $35 million, these events would result in a default under the credit facility.

To get lenders to sign off on the waiver request, Leap increased pricing on the credit facility by 75 bps, so that its term loan now carries an interest rate of Libor plus 300 bps.

In addition, lenders were paid a 25 bps fee.

The company also amended its credit facility to provide that an entry into an agreement leading to a change of control no longer constitutes an event of default, unless and until the change of control occurs.

Leap is a San Diego-based provider of wireless services.

Sequa keeps books open

Sequa extended the commitment deadline on its $1.35 billion senior secured credit facility (B1/BB-) from the previous Wednesday deadline of noon ET, according to a market source.

Details on how much longer investors will be given to commit to the deal were unavailable, the source added.

The credit facility consists of a $1.2 billion seven-year term loan and a $150 million six-year revolver, with both tranches talked at Libor plus 325 bps.

The term loan is being offered to investors with an original issue discount in the 98 area.

The revolver has a 50 bps commitment fee.

There is a maximum senior secured leverage ratio covenant contained in the credit facility.

Lehman Brothers, Citigroup and JPMorgan are the lead banks on the deal, which will be used to help fund the leveraged buyout of the company by the Carlyle Group for $175 per share in cash. The total transaction value is $2.7 billion.

Other buyout financing will come from $700 million of high-yield bonds and, according to filings with the Securities and Exchange Commission, about $967.6 million in equity.

Total pro forma debt to pro forma adjusted EBITDA is around 6.7 times, and pro forma adjusted EBITDA to pro forma interest expense is around 1.6 times.

Sequa is a New York-based diversified industrial company.

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