Sequa, Chem Rx break; Community Health, AMR rise on divestitures; Calumet sets OID; Dura sets talk

By Sara Rosenberg

New York, Nov. 28 - Sequa Corp. and Chem Rx Corp. both allocated and freed up for trading during market hours, with Sequa's term loan quoted above its discount price and Chem Rx's term loan debt quoted right around its discount levels.

In other trading news, Community Health Systems, Inc. and AMR Corp. both saw their term loans head higher after news of divestitures hit the market, and LCDX and cash were both noticeably stronger in sympathy with equities.

Meanwhile, in the primary, Calumet Specialty Products Partners LP revealed the original issue discount on its term loan debt as the deal launched on Wednesday and Dura Automotive Systems, Inc. released price talk on its credit facility as it too held a bank meeting during the session.

Sequa's credit facility hit the secondary market late in the session, with the $1.2 billion seven-year term loan quoted at 95½ bid, 96 offered on the break and then moving up to 96 bid, 96½ offered, where it closed out the day, according to a trader.

The term loan is priced at Libor plus 325 basis points and was sold at an original issue discount of 95.

During syndication, the discount on the term loan was increased from original guidance that was in the 98 area.

Sequa's $1.35 billion senior secured credit facility (B1/BB-) also includes a $150 million six-year revolver that is priced at Libor plus 325 bps, with 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 is expected to come from $700 million of high-yield bonds and about $967.6 million in equity, according to filings with the Securities and Exchange Commission.

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.

Chem Rx frees to trade

Chem Rx's credit facility also broke for trading on Wednesday, with the strip of funded and delayed-draw first-lien term loan debt as well as the second-lien term loan all quoted at 99 bid, 99¼ offered, according to a trader.

The $80 million six-year first-lien term loan (B1/B+) and $20 million six-year delayed-draw term loan (B1/B+) are both priced at Libor plus 400 bps, and the $37 million seven-year second-lien term loan (Caa1/CCC+) is priced at Libor plus 800 bps.

The first- and second-lien term loan debt was sold to investors at an original issue discount price of 99.

Second-lien call protection is 103 in year one, 102 in year two and 101 in year three.

Chem Rx's $162 million senior secured credit facility also include a $25 million five-year revolver (B1/B+) that is priced at Libor plus 400 bps as well.

The first-lien debt contains a covenant regarding a minimum fixed-charge coverage ratio, a maximum total leverage ratio and limitations on consolidated capital expenditures, and the second-lien debt has only a covenant regarding a maximum total leverage ratio, which will be less stringent than that applicable to the first-lien debt.

CIBC acted as the lead bank on the deal.

Prior to launch, the company amended its credit facility commitment, reducing the total size from $177 million, increasing pricing and revising second-lien call premiums.

Under the original commitment, the facility consisted of a $25 million five-year revolver at Libor plus 300 bps, a $90 million six-year first-lien term loan at Libor plus 300 bps, a $20 million six-year delayed-draw term loan at Libor plus 300 bps and a $42 million seven-year second-lien term loan at Libor plus 650 bps.

Second-lien call protection under the original commitment was 102 in year one and 101 in year two.

Proceeds from the credit facility were used to help fund the already completed acquisition of the company by Paramount Acquisition.

The revision to the credit facility commitment was a result of a change to the acquisition agreement, which reduced the amount of cash consideration payable to the sellers. In lieu of such cash consideration, Paramount issued to the sellers 10% unsecured subordinated promissory PIK notes.

Proceeds from the delayed-draw term loan can be used to finance the contingent "initial earnout" payments that may become payable to the sellers in 2008 as well as the first annual milestone earnout, if the making of such payment through the issuance of shares would cause the sellers to own more than 20% of Paramount's outstanding common stock and Paramount elects to pay out such shares in excess of 20% in cash.

Chem Rx is a Long Beach, N.Y.-based long-term care pharmacy. Paramount is a New York-based special-purpose acquisition corporation.

Community Health up with asset sale

Community Health Systems' term loan B traded up in an overall stronger secondary market on the heels of the company's announcement that it is selling nine hospitals to Capella Healthcare, Inc., according to a trader.

The term loan B ended the day at 95¼ bid, 96 offered, up from 95 bid, 95¾ offered, the trader said.

Community Health is selling the nine hospitals for $315 million.

"With this transaction, Capella is getting a fine group of properties while we have the opportunity to reduce our outstanding debt and devote more concentrated operating energies to the balance of our hospital portfolio," Wayne T. Smith, chairman, president and chief executive officer of Community Health, said in a company news release.

The transaction is subject to the typical closing contingencies for a transaction of this size and is expected to close on Jan. 31.

Community Health is a Franklin, Tenn.-based hospital company.

AMR stronger on American Eagle divestiture

AMR's term loan B also gained some ground on Wednesday as the company announced plans to divest American Eagle, its wholly owned regional carrier, according to a trader.

The term loan B ended the day at 96¼ bid, 97 offered, up from 96 bid, 96½ offered, the trader said.

The form of the divestiture is still being evaluated but may include a spinoff to AMR shareholders, a sale to a third party or some other form of separation from AMR.

The Fort Worth, Texas-based airline company expects to complete the transaction in 2008.

LCDX, cash better with stocks

Also in the secondary, LCDX 9 and the cash market in general saw positive momentum in trading as they followed equities higher, according to traders.

The index went out around 96.70 bid, 96.90 offered, up from around 95.75 bid, 95.95 offered, traders said.

And, according to the traders, cash was up about a quarter of a point across the board.

"The index definitely rallied more than the cash market. I wouldn't be surprised if it sold off a bit tomorrow," one trader added.

Nasdaq closed the day up 82.11 points, or 3.18%, Dow Jones Industrial Average closed up 331.01 points, or 2.55%, S&P 500 closed up 40.79 points, or 2.86%, and NYSE closed up 269.29 points, or 2.83%.

Calumet sets OID

Moving to primary happenings, Calumet Specialty Products Partners held a bank meeting on Wednesday to kick off syndication on its proposed $510 million senior secured credit facility, and in connection with the launch, the original issue discount on the term loan debt was announced, according to market sources.

The $385 million funded term loan B and the $75 million delayed-draw term loan are both being offered at a discount of 97, sources said.

Price talk on the term loan debt is Libor plus 350 bps.

Calumet's credit facility also includes a $50 million synthetic letter-of-credit facility that is also talked at Libor plus 350 bps.

Prior to the launch, it was expected based on filings with the Securities and Exchange Commission that the credit facility would carry a total size of $425 million consisting of a $375 million term loan, of which $275 million was anticipated to be funded, and a $50 synthetic letter-of-credit facility.

Bank of America is the lead bank on the deal.

Proceeds from the credit facility, along with the issuance of common units, will be used to fund the acquisition of Penreco from ConocoPhillips Co. and M.E. Zukerman Specialty Oil Corp.

The letter-of-credit facility will support crack spread hedging.

Calumet is an Indianapolis-based producer of specialty hydrocarbon products. Penreco is a Dickinson, Texas-based manufacturer and marketer of highly refined petroleum products and specialty solvents.

Dura price talk surfaces

Dura Automotive Systems came out with price talk on its proposed $425 million senior secured exit financing credit facility as this deal was launched with a bank meeting during the morning hours, according to a market source.

The $125 million ABL revolver was presented to lenders with talk of Libor plus 250 bps, the $225 million first-lien term loan B was presented with talk in the Libor plus 550 bps area and the $75 million second-lien term loan was presented with talk in the Libor plus 850 bps area, the source said.

The first- and second-lien term loans are both being offered to investors at an original issue discount of 99, the source continued.

Furthermore, the first- and the second-lien term loans both have call protection provisions, the source added. The first-lien term loan has call protection of 102 in year one and 101 in year two, and the second-lien term loan is non-callable for one year, then at 102 in year two and 101 in year three.

Goldman Sachs and Barclays Capital are the lead banks on the deal, which will be used, along with a proposed rights offering, to repay the company's debtor-in-possession facility and pre-bankruptcy second-lien term loan, as well as to fund plan distributions.

Dura is a Rochester Hills, Mich.-based automotive parts maker.

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