GM dips on revolver draw, Ford drops in sympathy; Herff Jones floats potential date; Fresenius may upsize

By Sara Rosenberg

New York, Sept. 22 - General Motors Corp.'s bank debt headed lower on the back of news that the company is borrowing the remaining funds under its revolving credit facility, and Ford Motor Co.'s term loan followed suit.

Also in trading, LCDX 10 and the cash market in general were softer on the day, as pretty much everything, except for oil, was down.

In other news, Herff Jones revealed the targeted date for the launch of its proposed new bank deal, which was delayed the other week because of the volatility in the market, and rumor has it that Fresenius Kabi may increase the size of its term loan B and downsize its bridge loan, being that the term loan B was so well received by investors.

General Motors' credit facility debt posted some losses during Monday's trading session as investors reacted to the company's plan to draw down its revolver in full, according to traders, who said that the performance in General Motors helped push Ford lower as well.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 71 bid, 73 offered, down from 73 bid, 75 offered, and its revolver, which was pretty active on the day, quoted at 69 bid, 71 offered, down from 71 bid, 73 offered, one trader said.

A second trader placed General Motors' term loan at 70½ bid, 72½ offered, down from Friday's levels of 72½ bid, 74 offered.

Meanwhile, Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 73 bid, 74 offered, down two points from previous levels as well, the first trader added.

Late Friday, General Motors announced that it intends to borrow the remaining $3.5 billion of its $4.5 billion secured revolver.

The company said that the draw is being done to maintain a high level of financial flexibility for its ongoing restructuring during the current uncertain times in the capital markets.

Proceeds from the draw would not only improve liquidity, but they would also be available for the retirement of $750 million of debt maturities coming due in October, and to pay Delphi Corp. in excess of $1.2 billion as part of its reorganization efforts, assuming court approval of the revised agreements between General Motors and Delphi that were filed with the court on Sept. 12.

"Accessing the funds available to us is a prudent liquidity measure. Drawing on the revolver now improves our liquidity position at a time when the capital markets have become more challenging," said Walter Borst, treasurer, in a news release.

In addition, on Friday, General Motors announced the completion of a $322 million debt to equity exchange, which results in improved liquidity since debt and interest costs were reduced.

Under the exchange, the company issued 28.3 million new shares of its common stock in exchange for $322 million principal amount of its 1.5% series D senior convertible debentures due in June 2009.

LCDX, cash fall

LCDX 10 and the overall cash market were weaker on Monday as equities and "everything else" was lower as well, according to a trader.

The index was quoted at 95 bid, 95.20 offered, down from previous levels of 95.65 bid, 95.75 offered, the trader said.

And, the cash market in general was down about a half a point to a point on the day, except for autos, which were down a little bit more, the trader added.

As for equities, Nasdaq closed down 94.92 points, or 4.17%, Dow Jones Industrial Average closed down 372.75 points, or 3.27%, S&P 500 closed down 47.99 points, or 3.82%, and NYSE closed down 268.52 points, or 3.28%.

Herff Jones tentative launch emerges

Moving to the primary market, Herff Jones is currently looking at Sept. 30 as the day to hold a bank meeting for the retail launch of its proposed $735 million senior secured credit facility (Ba3/BB+), and firm timing on the deal is hoped to emerge in the very near future, according to an informed source.

Originally, the facility was scheduled to launch on Sept. 16, but the day before the bank meeting was set to take place, news surfaced that Bank of America is purchasing Merrill Lynch and Lehman Brothers filed for bankruptcy.

"So much volatility going on. Everyone's attention was diverted. Company still has plenty of time on their anti trust clearance, so it's not like they're on a pressed timeline," the source said in explanation of the timing delay.

When the postponement of the bank meeting was announced last week, it was said that the launch would probably take place within two to three weeks of the original date.

Herff Jones' credit facility consists of a $100 million five-year revolver talked at Libor plus 325 basis points, a $210 million five-year term loan A talked at Libor plus 325 bps and a $425 million seven-year term loan B talked in the Libor plus 350 bps to 375 bps area.

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.

Herff Jones is an Indianapolis-based manufacturer and publisher of educational products, recognition awards and graduation-related items.

Fresenius Kabi term B upsizing possible

Market talk is that Fresenius Kabi may be increasing the size of its term loan B by $500 million to $1.5 billion and decreasing the size of its bridge loan to $800 million from $1.3 billion as a result of how successful syndication on the term loan B went, according to sources.

Firm word on the upsizing was unavailable prior to press time, sources said.

The six-year term loan B is being talked at Libor plus 350 bps with a 3.25% Libor floor and an original issue discount of 99.

Fresenius Kabi's senior credit facility, which was marketed to U.S. and European investors, also includes a $450 million five-year revolver and a $1 billion five-year term loan A, with both of these tranches talked at Libor plus 287.5 bps.

The $2.45 billion deal (Baa2/BBB-), which may go up to $2.95 billion, is oversubscribed on the institutional as well as on the pro rata debt.

The revolver and the term loan A tranches were actually completely done from commitments that came in during the senior managing agents round that took place this summer. The retail syndication round didn't kick off until earlier this month.

In August, Fresenius said that during the senior managing agents phase of syndication, 20 of its key relationship banks from Europe, North America and Japan, acting as mandated lead arrangers and joint lead arrangers, provided strong commitments towards the deal, oversubscribing the target amount.

As a result of this strong demand that was received during the senior managing agents round, the structure on the facility had been revised prior to the start of the retail syndication round.

Under the original structure, the term loan A was expected to be sized at $900 million and the term loan B was expected to be sized at $850 million.

The funds for the original upsizing were taken out of the bridge loan commitment, which was revised to $1.3 billion from $1.65 billion. This bridge financing could be replaced by high-yield financing opportunities.

Deutsche Bank, Credit Suisse and JPMorgan are the senior mandated lead arrangers on the credit facility, with Deutsche Bank the global coordinator.

The revolver has $200 million of uncommitted availability. Of the revolver amount, $150 million will be made available to APP Pharmaceuticals Inc. and $300 million, along with the $200 million uncommitted, will be made available to a financing subsidiary of Fresenius.

Financial covenants under the facility include a consolidated leverage ratio, a consolidated fixed-charge coverage ratio, an interest expense coverage ratio and limits amounts spent on capital expenditure.

Proceeds from the facility, along with the bridge loan, are being used to help fund the recently completed acquisition of APP Pharmaceuticals, refinance APP's existing senior credit facility, and for general corporate and working capital purposes.

Under the agreement, Fresenius Kabi purchased APP for $23 per share and a registered and tradeable contingent value right that could deliver up to $6 per share, payable in 2011, if APP exceeds a cumulative adjusted EBITDA target for 2008 to 2010.

Fresenius Kabi is a Bad Homburg, Germany, infusion therapy and clinical nutrition company. APP is a Schaumburg, Ill., hospital-based injectable pharmaceutical company.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.