Delphi reworks exit facility structure; FairPoint readies allocations; Cash, LCDX move higher

By Sara Rosenberg

New York, March 24 - Delphi Corp. came out with some changes to its credit facility, eliminating the junior first-lien term note and moving those funds into the second-lien term loan, which then saw a reverse flex in pricing.

In other news, FairPoint Communications Inc.'s term loan B is expected to be fully syndicated at the recently revised original issue discount levels and allocations on the deal will likely be going out on Tuesday.

Moving to the secondary, the cash market in general and LCDX 9 were both better as equities got a boost from the revised JPMorgan Chase & Co./Bear Stearns Cos. Inc. acquisition agreement.

Delphi revised its credit facility structure as it removed the $2 billion junior first-lien term note that was going to be issued to an affiliate of General Motors Corp., upsized the second-lien term loan by $2 billion, lowered pricing on the second-lien and increased the unused fee on the ABL revolver, according to market sources.

The eight-year second-lien term loan is now sized at $2.825 billion, up from $825 million, and pricing was reduced to Libor plus 695 basis points from Libor plus 875 bps, sources said.

As was the case before these changes, the second-lien term loan has a 3.25% Libor floor for life and call protection of 103 in year one and 101½ in year two.

General Motors will be taking the entire second-lien term loan, so the 92 original issue discount that was previously being offered on the tranche is no longer part of the deal, sources remarked.

Previously, it was known that any unsold portion of the second-lien loan would be issued to General Motors and/or its affiliates.

In addition, Delphi modified the unused fee on its $1.6 billion six-year ABL revolver, raising it to 150 bps from 50 bps, sources continued. Pricing on the ABL was left unchanged at Libor plus 300 bps.

Delphi's $6.125 billion exit facility also includes a $1.7 billion seven-year first-lien term loan priced at Libor plus 575 bps, with a 3.25% Libor floor for life, an original issue discount of 92, and call protection of 102 in year one and 101 in year two.

When the company first launched its exit facility in early January, the deal was comprised of a $3.7 billion first-lien term loan (Ba3/B+), an $825 million second-lien term loan (B3/B-), of which $750 million was expected to be issued to General Motors in connection with plan of reorganization distributions, and a $1.6 billion ABL revolver.

The first-lien term loan had been launched at Libor plus 450 bps, with an original issue discount of 96 and call protection of 102 in year one and 101 in year two.

The ABL revolver had been launched with talk of Libor plus 250 bps.

Then, on March 11, the deal was relaunched, structured as a $1.7 billion first-lien term loan (Ba2/BB-), a $2 billion junior first-lien term note (B2/B), an $825 million second-lien term loan (B3/B-) and a $1.6 billion ABL revolver.

Also, initially, the second-lien loan was going to be sized at $1.5 billion, but it was downsized prior to the first launch as a result of a permanent improvement in liquidity as the company generated cash flow during the second half of 2007 in excess of the amount projected in its revised business plan.

JPMorgan and Citigroup are the lead banks on the deal that will be used to repay the company's debtor-in-possession financing facility, to fund other payments required upon emergence from Chapter 11 and to conduct post-reorganization operations.

Delphi is a Troy, Mich.-based automotive electronics manufacturer.

FairPoint nears completion

FairPoint's decision late last week to increase the original issue discount on its term loan B appears to have gotten the job done as the facility was expected to be fully syndicated by the end of Monday's session and allocations are planned for Tuesday, according to a market source.

The $1.13 billion seven-year term loan B is priced at Libor plus 275 bps, with a 3% Libor floor for three years, and call protection of 102 in year one and 101 in year two against optional prepayments. The original issue discount on the loan is 88, after recently being revised from the originally proposed 93 level.

After the original issue discount was changed on Thursday morning, lenders were being asked to get their commitments in that day. However, some accounts were given till the end of Monday to place their orders.

The Libor floor under the term loan B had been added earlier on in the syndication process.

FairPoint's credit facility also includes a $200 million six-year revolver priced at Libor plus 275 bps, a $500 million six-year term loan A priced at Libor plus 250 bps and a $200 million one-year delayed-draw term loan, with seven-year final maturity, priced at Libor plus 275 bps.

The revolver, term loan A and delayed-draw term loan were marketed together.

There were two tiers of upfront fees towards the revolver, term loan A and delayed-draw term loan. Senior managing agents committing $60 million got an upfront fee of 5%, while managing agents committing $40 million got an upfront fee of 4%.

The revolver has a 37.5 bps unused fee and the delayed-draw term loan has a 75 bps unused for six months, stepping up to 125 bps thereafter.

The delayed-draw term loan carries call protection of 102 in year one and 101 in year two against optional prepayments.

Earlier on in syndication, improvements were made to the excess cash flow sweep under the entire $2.03 billion senior secured credit facility agreement (Ba3/BB+/BB+) that aligned it with regulatory stipulations.

In addition, at that time, change-of-control language was modified so that it's a 95% lender issue as opposed to a majority lender issue.

Proceeds from the credit facility will be used to help fund FairPoint's merger with Verizon Communications Inc.'s wireline operations in Maine, New Hampshire and Vermont.

In the merger, FairPoint will issue about 53.8 million of its common shares to be distributed in a tax-free Reverse Morris Trust transaction to the shareholders of Verizon as well as assume roughly $1.7 billion of debt. The transaction will give FairPoint's shareholders 40% ownership and Verizon's shareholders 60% ownership of the combined company.

Other financing will come from $540 million of senior unsecured notes.

FairPoint currently expects that it will borrow at least $150 million under the delayed-draw term loan during the one-year delayed-draw period to fund certain capital expenditures and other expenses associated with the merger.

Financial covenants under the credit facility include a minimum cash interest coverage ratio of 2.50 to 1.00 and a maximum total leverage ratio of 5.50 to 1.00.

Lehman Brothers, Morgan Stanley, Bank of America, Deutsche Bank, Wachovia, Merrill Lynch and CoBank are the lead banks on the deal, with Lehman the left lead.

Pro forma as of Dec. 31, the combined company's senior secured debt to EBITDA is 2.5 times, total debt to EBITDA is 3.4 times, net debt to EBITDA is 3.3 times, EBITDA to interest expense is 3.6 times and EBITDA minus capital expenditures to interest expense is 2.5 times.

FairPoint is a Charlotte, N.C., provider of communications services to rural communities.

Cash, LCDX stronger with stocks

Switching to trading news, cash in general and LCDX 9 gained some ground on Monday in sympathy with equities, according to a trader.

The cash market saw most stuff move up by about an eighth to a quarter of a point in relatively light trading, while LCDX 9 was quoted at 93.30 bid, 93.50 offered, up from 92.40 bid, 92.50 offered, the trader said.

Nasdaq ended up 68.64 points, or 3.04%, Dow Jones Industrial Average ended up 187.32 points, or 1.52%, S&P 500 ended up 20.37 points, or 1.53%, and NYSE ended up 142.05 points, or 1.63%.

A big part of the markets' positive momentum had to do with the revised purchase agreement between JPMorgan and Bear Stearns.

Under the amended agreement, each share of Bear Stearns common stock will be exchanged for 0.21753 shares of JPMorgan common stock, up from 0.05473 shares, reflecting an implied value of about $10 per share, up from about $2 per share.

In addition, JPMorgan will purchase 95 million newly issued shares of Bear Stearns common stock, or 39.5% of the outstanding Bear Stearns common stock after giving effect to the issuance, at the same price as provided in the amended merger agreement. The purchase of the 95 million shares is expected to be completed on or about April 8.

The Federal Reserve Bank of New York's $30 billion special financing associated with the transaction has also been amended so that JPMorgan will bear the first $1 billion of any losses associated with the Bear Stearns assets being financed and the Fed will fund the remaining $29 billion on a non-recourse basis to JPMorgan.

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