Ashland floats OID; Herff Jones postpones launch; Wabtec oversubscribed; Delphi rises; LCDX plummets

By Sara Rosenberg

New York, Sept. 15 - Ashland Inc. came out with an original issue discount on its term loan B on Monday as the deal was launched to retail investors and Herff Jones revealed that it is delaying its bank meeting to a so far undetermined date.

In other news, Wabtec Corp.'s proposed credit facility received strong interest during its syndication period, which took place even before the deal was publicly announced.

Moving to the secondary market, Delphi Corp.'s second-lien debtor-in-possession term loan was stronger on news that General Motors Corp. will be providing it with more money, but General Motors' term loan was weaker with the rest of the cash market.

Also in trading, LCDX 10 posted a sizeable loss over the course of the session as it followed the general market tone, and Lehman Brothers has put a portfolio up for sale.

Ashland held a retail bank meeting on Monday afternoon to kick off syndication on its proposed $1.75 billion senior secured credit facility (Ba1/BBB-), and in connection with the launch, the original issue discount on the term loan B was disclosed, according to sources.

The $750 million seven-year term loan B is being offered to investors at a discount price of 98, sources said.

As was previously reported, price talk on the term loan B is Libor plus 350 basis points with a 3% Libor floor.

Ashland's credit facility also includes a $500 million five-year revolver and a $500 million five-year term loan A, with both of these tranches talked at Libor plus 325 bps.

By comparison, according to filings with the Securities and Exchange Commission, pricing on the revolver and term loan A were said to be expected at Libor plus 275 bps, and pricing on the term loan B was said to be expected at Libor plus 325 bps.

In addition, under the commitment letter, the term loan A was sized at $600 million and the term loan B was sized at $850 million. However, as was allowed under the letter, the company decided to replace $100 million of the term loan A and $100 million of the term loan B with an accounts receivable securitization facility.

As for the bank meeting itself, one source said that there were "not a lot of questions from investors but extremely well attended."

Bank of America and Scotia Capital are the joint lead arrangers and joint bookrunners on the credit facility, with Bank of America the administrative agent.

Financial covenants under the facility include a maximum leverage ratio and a minimum fixed-charge coverage ratio.

Proceeds from the credit facility, along with $750 million of senior unsecured notes, will be used to help fund the acquisition of Hercules Inc. for $18.60 per share in cash and 0.093 of a share of Ashland common stock. The total transaction value is about $3.3 billion, including $0.7 billion of net assumed debt.

Twenty five percent of the revolver will be used for letters-of-credit at close, one source added.

Upon close, Ashland will have pro forma combined revenue for the 12 months ended March 31 of more than $10 billion, including about $3.5 billion generated outside North America. For the same period, Ashland generated EBITDA of $365 million excluding certain items, while Hercules reported ongoing EBITDA of $392 million excluding certain items.

Closing is expected to occur in November, subject to the approval of Hercules' shareholders, the receipt of regulatory approvals and other customary conditions.

Ashland is a Covington, Ky., chemical company. Hercules is a Wilmington, Del., manufacturer and marketer of specialty chemicals.

Herff Jones delays launch

Herff Jones told investors during market hours that it postponed the bank meeting for its $735 million senior secured credit facility (Ba3/BB+) from Tuesday to a yet to be determined date, although it is expected that the launch will occur in about two to three weeks from now, according to a buyside source.

The facility consists of a $100 million five-year revolver talked at Libor plus 325 bps, a $210 million five-year term loan A talked at Libor plus 325 bps and a $425 million seven-year term loan B guided in the Libor plus 350 bps to 375 bps context.

All tranches have a 3% Libor floor.

The revolver and the term loan A were already launched to commercial banks during the second week of August and, since then, have received a strong response from the banks, especially among agents, sources previously told Prospect News.

Originally, it was thought that the term loan B would be sized at $300 million and the term loan A would be sized at $335 million, but based on the amount of pro rata commitments already received, the banks decided to move some funds into the B loan prior to retail launch.

Although this structure is how the deal is being marketed, term loan A and term loan B sizes are not yet final as some additional term loan A commitments may come in.

Bank of America and Wachovia are the lead banks on the deal for the Indianapolis-based manufacturer and publisher of educational products, recognition awards and graduation-related items, with Bank of America the left lead.

Proceeds will be used to help fund the acquisition of American Achievement Group Holding Corp., an Austin, Texas-based provider of commemorative jewelry, class rings, yearbooks, letter jackets and other jewelry, from Fenway Partners.

The buyside source said that the delay of the retail bank meeting was most likely a result of the Bank of America merger with Merrill Lynch, the Lehman Brothers bankruptcy filing and the hurricane.

"Probably not the best time to try to get investors focused," the source added.

On Monday, Bank of America said that it is purchasing Merrill Lynch in a $50 billion all-stock transaction, under which Merrill shareholders will get 0.8595 shares of Bank of America common stock per share.

Bank of America said that after the transaction, it would be the number one underwriter of global high yield debt, the third largest underwriter of global equity and the ninth largest adviser on global mergers and acquisitions based on pro forma first half of 2008 results.

The transaction is expected to close in the first quarter of 2009, subject to shareholder votes at both companies and standard regulatory approvals.

Also on Monday, Lehman Brothers Holdings Inc. announced that it filed for Chapter 11 and that it is exploring the sale of its broker-dealer operations and, as previously announced, is in advanced discussions with a number of potential purchasers to sell its Investment Management Division.

Wabtec overfills

In more primary news, Wabtec's proposed $500 million credit facility, which was first announced by the company on Monday, is already oversubscribed as the lead banks marketed the transaction to commercial banks, according to an informed source.

"Now just waiting for the transaction to close," the source said.

Proceeds from the credit facility will be used to fund the acquisition of Standard Car Truck, news of which just emerged on Monday as well.

Under the agreement, Wabtec is buying Standard Car Truck, a Park Ridge, Ill.-based rail equipment supplier, for about $300 million in cash.

The transaction is expected to be completed in the fourth quarter, subject to customary closing conditions and antitrust clearance under the Hart Scott Rodino Act.

The credit facility consists of a revolver and a term loan. The source declined to comment any further on the structure of the deal.

PNC Capital Markets, JPMorgan and RBS are the lead arrangers on the facility.

Wabtec is a Wilmerding, Pa., provider of technology-based products and services for the rail and transit industry.

Delphi trades up

Switching to secondary happenings, Delphi's second-lien DIP term loan was better on a day-over-day basis on the back of news that the company will be getting more capital from General Motors, according to a trader.

The second-lien loan was quoted at 88¼ bid, 89¼ offered, up from Friday's closing levels of 85 bid, 86 offered, the trader said. On Monday morning, the loan had opened at 89 bid, 90 offered, but it slid lower over the course of the day with the rest of the cash market.

Late Friday, Delphi announced that it entered into modified settlement and restructuring agreements, under which General Motors will provide Delphi with support of $10.6 billion for its emergence from Chapter 11, increased from roughly $6 billion in the January settlement.

In addition, the agreement will modify the mechanics and expand the amount of Delphi's net hourly pension liability transfer to General Motors to $3.4 billion from $1.5 billion.

In exchange for General Motors' willingness to undertake these obligations, Delphi has agreed to treatment of General Motors claims in the Chapter 11 cases, and to release General Motors from certain claims and causes of action upon the effectiveness of the amended agreements.

Delphi also said on Friday that it is taking action to preserve and fund its hourly and salaried pension plans, complete the reaffirmation process for the its 2008 to 2011 business plan and establish its intent to enter the capital markets with its reaffirmed business plan.

A hearing in the bankruptcy court will take place on Sept. 23 to consider Delphi's motions on pension plans, amended global settlement agreement and amended master restructuring agreement.

Through the implementation of the amended global settlement agreement and amended master restructuring agreement, General Motors' financial support of Delphi, which previously was to be received upon Delphi's emergence from bankruptcy, is being pulled forward to the effectiveness of the amendments.

As a result, General Motors will make payments to Delphi of $1.2 billion in connection with the effectiveness of the amended agreements, and through the remainder of 2008.

The payments by General Motors combined with Delphi's existing cash on hand and amounts available under its revolving credit facility, will provide the company with ample liquidity over the course of the year.

Furthermore, Delphi said that by immediately implementing the amended master restructuring agreement, it will be in a position to pursue exit financing in the capital markets, including through an equity-based rights offering.

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

GM, Ford slide with market, LCDX down

Although Delphi saw a boost from the General Motors news, General Motors' term loan saw the opposite reaction, with the move attributed to the general market tone on Monday, according to a trader, who remarked that Ford Motor Co.'s term loan was down as well.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 76 bid, 77 offered, down from 78 bid, 79 offered on Friday, the trader said.

And, Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 77¼ bid, 78¼ offered, down from 80 bid, 81 offered.

The trader explained that these names were down with the rest of the cash market, which was probably off about a half a point across the board on the news that Bank of America is buying Merrill Lynch and Lehman Brothers filed for bankruptcy.

"Held in pretty well relative to stocks being down 5%," the trader remarked.

On Monday, Nasdaq closed down 81.36 points, or 3.60%, Dow Jones Industrial Average closed down 504.48 points, or 4.42%, S&P 500 closed down 59 points, or 4.71%, and NYSE closed down 411.69 points, or 5.09%.

Following this general market tone in loans and stocks was LCDX, as levels in the index dropped considerably, the trader pointed out.

The index was quoted at 95.15 bid, 95.25 offered, down from Friday's levels of 96.95 bid, 97.05 offered.

Lehman offers loan portfolio

News emerged on Monday that Lehman is selling an $852 million portfolio of leveraged loans that includes par and distressed names, according to sources.

There are more than 150 tranches of debt in the portfolio, sources said.

Bids are due on Tuesday at 2 p.m. ET, sources added.

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