Hawker Beechcraft up with numbers; LCDX, cash gain ground; Sleep Innovations expected to be amended

By Sara Rosenberg

New York, Feb. 13 - Hawker Beechcraft Acquisition Co. LLC's strip of institutional bank debt rallied on Wednesday after the company released positive earnings, and LCDX 9 and cash in general were both noticeably stronger as stocks were up and buyers stepped into the market.

In other news, Sleep Innovations Inc.'s proposed amendment of loan covenants was anticipated to garner enough votes to pass by Wednesday's close of business deadline as a good number of lenders had already jumped on the bandwagon by early afternoon.

Hawker Beechcraft's strip of synthetic letter-of-credit facility and term loan debt jumped up a couple of points during market hours after earnings for the nine months ended Dec. 31 were announced, according to a trader.

The strip of bank debt was quoted at 88½ bid, 89½ offered, up from 84½ bid, 86 offered, the trader said.

For the nine months ended Dec. 31, sales were $2.793 billion and operating income was $148.3 million.

Included in the operating results were non-recurring, non-cash charges of $105.2 million resulting from the step-up in the cost basis of finished goods and work in process inventory.

Operating cash flow totaled $579.2 million since the acquisition of the company in March 2007, reflecting the company's operating income, increase in customer deposits, reduction in the level of used aircraft inventory and other working capital initiatives implemented throughout the period.

"Hawker Beechcraft has had a terrific first nine months with tremendous customer response to our new product introductions, as is evident by our unprecedented growth in bookings and record backlog," Jim Schuster, chief executive officer, said in a company news release. "International markets continue to expand, with approximately 60% of our backlog coming from international customers."

Hawker Beechcraft is a Wichita, Kan.-based manufacturer, designer and marketer of aviation products and services for businesses, governments and individuals.

LCDX, cash move higher

LCDX 9 and the cash market both rallied on Wednesday as buyers appeared to be coming back into the secondary and equities improved, according to a trader.

The index went out around 91.85 bid, 92.00 offered, up from Tuesday's levels of around 91.10 bid, 91.30 offered, the trader said. During market hours, the index traded as high as 92.15.

Cash, meanwhile, was up anywhere from one to two points, depending on the name, the trader continued.

For example, Texas Competitive Electric Holdings Co. LLC (TXU), a Dallas-based energy company, saw its term loan B-2 and B-3 quoted at 91 bid, 92 offered, up from 90 bid, 91 offered.

Alltel Communications Inc., a Little Rock, Ark., provider of wireless voice and data communications services, saw its term loan B-3 quoted at 91 bid, 92 offered, up from 90 bid, 91 offered, the trader remarked.

Georgia-Pacific Corp., an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals, saw its term loan B quoted at 90 bid, 91 offered, up from 89 bid, 90 offered.

First Data Corp., a Greenwood Village, Colo., provider of electronic commerce and payment services, saw its term loan Bs quoted at 89 bid, 90 offered, up from 88 bid, 89 offered.

Freescale Semiconductor Inc., an Austin, Texas, designer and manufacturer of embedded semiconductors, saw its term loan quoted at 84¼ bid, 85¼ offered, up from 83 bid, 84 offered, the trader said.

Univision Communications Inc., a Los Angeles-based Spanish-language media company, saw its term loan B quoted at 81 bid, 83 offered, up from 78½ bid, 79½ offered.

"Saw a lot of guys today come in and try to lift offerings from a few days ago. Seems like the guys that were standing on the sideline were getting back into cash. Guys saw things stabilize last week [and] that stability has brought more people in. Loans are trading very cheap. At some point guys are going to step in and it seemed like today was the day," the trader added.

Also helping the cause was stocks as Nasdaq closed up 53.89 points, or 2.32%, Dow Jones Industrial Average closed up 178.83 points, or 1.45%, S&P 500 closed up 18.35 points, or 1.36%, and NYSE closed up 108.13 points, or 1.21%.

Kinder Morgan inches up

Kinder Morgan Inc.'s term loan B felt stronger as market chatter is that the previously announced debt repayment will be happening very soon, according to traders.

According to one trader, the term loan B went out at 99¾ bid, par offered, up from Tuesday morning levels of 98 bid, 99 offered, but pretty much unchanged from Tuesday's closing levels. A second trader, however, said that the term loan B went out on Tuesday a 98½ bid, 99½ offered.

Late last year, Kinder Morgan said that it is selling 80% of the ownership interests of MidCon to a syndicate of investors led by Babcock & Brown at a price equivalent to a total enterprise value of approximately $6.58 billion, subject to certain adjustments.

MidCon's wholly owned subsidiary, Natural Gas Pipeline Co. of America, owns and operates roughly 9,700 miles of interstate natural gas pipelines, storage fields, field system lines and related facilities, consisting primarily of two major interconnected natural gas transmission pipelines terminating in the Chicago area.

Under the acquisition agreement, a newly formed wholly owned subsidiary of MidCon will issue about $3 billion of debt prior to closing, the proceeds of which will be held in escrow and used to repay debt owed to Kinder Morgan.

Between the proceeds from the sale of MidCon and the debt financing, Kinder Morgan expects to receive approximately $5.3 billion of after-tax cash proceeds.

Kinder Morgan plans to use virtually all of the cash proceeds to repay debt, starting with the debt it incurred in connection with its going-private transaction. Once that debt is repaid, the company will no longer have any material secured debt.

Closing of the transaction is expected to occur in the first quarter.

Kinder Morgan is a Houston-based energy infrastructure provider.

Sleep Innovations amendment likely to pass

Switching gears, Sleep Innovations' credit facility amendment was expected to get enough consents by the end of the day Wednesday being that it was most of the way there by around midday, according to a fund manager.

The amendment would give the company more room under the leverage and interest coverage covenants, and in return, lenders will get an increase in spreads.

Revolver pricing will go up to Libor plus 350 basis points from Libor plus 250 bps, first-lien term loan pricing will go up to Libor plus 350 bps from Libor plus 275 bps and second-lien term loan pricing will go up to Libor plus 800 bps (75 bps PIK, 725 bps cash) from Libor plus 650 bps.

Furthermore, under the amendment, the equity sponsors will have to put in $25 million plus a $5 million letter-of-credit.

Lenders were not offered an amendment fee.

By noon on Wednesday, over 51% of lenders on the second-lien loan and about 40% of lenders on the first-lien loan had already approved the amendment, the fund manager said.

In order to be successful, 51% approval is needed on both the second- and the first-lien loans, the fund manager added.

Consents weren't due until the close of business Wednesday.

JPMorgan is the agent on the deal.

Sleep Innovations is a West Long Branch, N.J., fabricator and marketer of foam bedding, sleep products and accessories.

Goodman closes

Hellman & Friedman LLC completed its buyout of Goodman Global Inc. for $25.60 in cash per share, according to a news release.

To help fund the buyout, Goodman got a new $1.1 billion senior secured credit facility consisting of a $300 million ABL revolver priced at Libor plus 200 bps and an $800 million term loan B (Ba3/BB) priced at Libor plus 425 bps, with an original issue discount of 96, a 3.25% Libor floor to maturity and 101 hard call protection for one year.

During syndication, pricing on the term loan B was flexed up from initial talk of Libor plus 375 bps, the original issue discount widened from original guidance of 98½ and the Libor floor and call protection were added.

Barclays Capital, GE Capital and Calyon acted as the lead banks on the deal, with Barclays the left lead on the term loan B and GE the left lead on the revolver.

Goodman Global is a Houston-based manufacturer of residential and light commercial heating, ventilation and air-conditioning equipment.

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