FairPoint increases B loan discount; Consolidated Precision Products sets talk, OID

By Sara Rosenberg

New York, March 20 - FairPoint Communications Inc. widened the original issue discount on its term loan B on Thursday morning and gave lenders the day to throw in their orders.

Also in the primary, Consolidated Precision Products narrowed down price talk and came out with the original issue discount on its credit facility as the deal was launched with a bank meeting during the shortened pre-holiday session.

FairPoint raised the original issue discount on its $1.13 billion seven-year term loan B and asked lenders to commit to the deal by the end of the day Thursday, according to a market source.

The term loan B is now being offered at a discount of 88 as opposed to the 93 level that was announced at launch, the source said.

All other terms on the B loan were left unchanged, including pricing of Libor plus 275 basis points, the 3% Libor floor for three years, and call protection of 102 in year one and 101 in year two against optional prepayments.

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

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

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

There are two tiers of upfront fees towards the revolver, term loan A and delayed-draw term loan. Senior managing agents committing $60 million will get an upfront fee of 5%, while managing agents committing $40 million will get 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 aligns it with regulatory stipulations.

In addition, at that same 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 that are being talked in the 11½% area and are expected to price early during the week of March 24.

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.

Consolidated Precision talk, OID emerge

Consolidated Precision Products held a bank meeting on Thursday to kick off syndication in its proposed $157 million credit facility, and in connection with the launch, specific price talk and the original issue discount on the deal surfaced, according to a market source.

Both the $20 million revolver and the $137 million term loan were presented to lenders with talk of Libor plus 450 bps, the source said. By comparison, prior to the launch, guidance on the deal was circulating at Libor plus 425 bps to 450 bps.

In addition, both tranches are being offered to investors at a discount of 981/2, the source continued.

GE Capital and the Bank of Ireland are the lead banks on the facility that will be used to help fund the acquisition of the company by Arlington Capital.

Other acquisition financing will come from $59 million of mezzanine debt provided by Audax.

Leverage through the credit facility is 3.39 times and total leverage is 4.85 times. The company has $180 million of sales and $40 million of EBITDA.

Consolidated Precision Products is a manufacturer of highly engineered, complex metal components and assemblies supplying the commercial aerospace, military and defense markets.

Charter closes

Charter Communications Operating LLC closed on its new $500 million term loan (B1/B+/B) due March 6, 2014, according to a news release.

The term loan is priced at Libor plus 500 bps, with a 3.5% Libor floor, and was sold at an original issue discount of 96.

During syndication, the original issue discount on the loan finalized at the wide end of original guidance of 96 to 97 and the size was increased from $275 million.

JPMorgan and Citigroup acted as the lead banks on the term loan, with JPMorgan the left lead.

Net proceeds of $471 million are being used to repay revolver borrowings and for general corporate purposes.

Charter is a St. Louis-based broadband communications company and cable operator.

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