TXU slides as rumored lock-up end nears; Cash stays positive; FairPoint timing emerges

By Sara Rosenberg

New York, Feb. 26 - Texas Competitive Electric Holdings Co. LLC (TXU) saw its term loan B-2 and B-3 come under some pressure in what was mostly categorized as an up cash market on Tuesday with speculation being that the rumored end to the lock-up on the B-1 later this week could be the driving force behind the fall.

In other news, FairPoint Communications Inc. came out with timing on its proposed credit facility now that the last of the regulatory approvals for its merger with certain Verizon Communications Inc. wireline operations has been obtained.

Texas Competitive's term loan debt headed lower during market hours possibly because of the ongoing chatter that the company's B-1 debt could potentially hit the secondary on Thursday, according to a trader.

The company's term loan B-2 was quoted at 91¼ bid, 92¼ offered, down from 92 bid, 93 offered, the trader said.

And, the term loan B-3 was quoted at 91 bid, 92 offered, down from 91¾ bid, 92¾ offered, the trader continued.

"Don't know if guys are trying to make room for the B-1s, but that might be something in the back of peoples' minds," the trader added.

Talk is that on Thursday, the lock-up agreement on the company's unsyndicated $3.45 billion term loan B-1 will come to an end, which would then allow underwriters to attempt to sell down the paper in the secondary market, if they wanted to do so.

This B-1 paper may currently be more attractive to some investors because it has no call protection, whereas the B-2 and the B-3 both have call premiums, providing potential investors with the opportunity to get paid down at par.

Texas Competitive is a Dallas-based energy company.

Cash continues to rise

Meanwhile, the cash market in general was overall positive and active, with many names moving up by a fairly considerable amount, according to a trader.

For example, 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 93 bid, 94 offered, up from around the 92½ bid, 93½ offered context, the trader said.

Ford Motor Co., a Dearborn, Mich.-based automaker, saw its term loan quoted at 86½ bid, 87½ offered, up from 85½ bid, 86½ offered, the trader remarked.

Community Health Systems Inc., a Franklin, Tenn.-based hospital company, saw its term loan B quoted at 92 bid, 93 offered, up from 91 bid, 92 offered.

And, VNU NV, a Haarlem, Netherlands-based information and media company, saw its term loan B quoted at 90 bid, 91 offered, up from 88¾ bid, 89¾ offered, the trader added.

FairPoint launches coming soon

Switching to the primary market, FairPoint released timing on the senior managing agent and retail bank meetings for its proposed credit facility quickly after news emerged that its merger with some Verizon wireline businesses cleared the last of its regulatory hurdles, a market source told Prospect News.

The up to $2.08 billion credit facility is set to launch to senior managing agents on Friday and to retail investors on March 6, the source said.

According to filings with the Securities and Exchange Commission, the credit facility, as committed on Jan. 15, 2007, consists of a $200 million six-year revolver, an up to $200 million one-year delayed-draw, with eight-year final maturity, term loan, and an up to $1.68 billion eight-year term loan B.

The filings said the revolver will have a 37.5 bps unused fee and the delayed-draw term loan will have a 75 bps unused fee.

The filings also said that covenants would include a minimum cash interest coverage ratio of 2.25 to 1.0, and a maximum total leverage ratio to EBITDA of 5.75 to 1.0 in year one and 5.50 to 1.0 thereafter.

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.

In the merger, FairPoint is combining with Verizon's wireline operations in Maine, New Hampshire and Vermont. 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.

On Tuesday, FairPoint announced that the New Hampshire Public Utilities Commission issued a written order approving the acquisition of Verizon's wireline business in New Hampshire. With this approval, FairPoint has now received written orders from all three states approving the transaction, and the necessary approvals from the Federal Communications Commission have already been obtained as well.

"We are deeply gratified that after 13 months since announcing our agreement to acquire Verizon's northern New England wireline operations, we now have all of the required regulatory approvals necessary to close the transaction," said Gene Johnson, chairman and chief executive officer of FairPoint, in a news release.

"Today, we finish this chapter in our company's evolution. Subject to satisfaction of certain conditions and closing of related financing transactions, we now expect to close the transaction on March 31, 2008."

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

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