Market participants may be spread thin as six new deals flood in for Thursday meetings

By Sara Rosenberg

New York, July 17 - On Thursday, bank meetings for new deals are hitting the market with a vengeance as six new issues are expected to launch - IASIS Healthcare Corp., Agrilink Foods Inc., New World Pasta Co., Greif Bros. Corp., Horizon Natural Resources Co. and Constar International Inc. The question is with so much action taking place, which bank meetings will be well attended and who is going to focus on what. Market participants may even be forced to shuttle back and forth from meeting to meeting.

The straight refinancing deals may be less staffed, according to an investment banker, simply because they're "no-brainers", whereas deals that are slightly tougher, meaning there's a story to be told, may see higher attendance.

"IASIS, Agrilink, New World Pasta all had performance issues in the past but not anymore," the banker said. "Greif had and still has no performance issues. They are fundamentally good businesses and good sectors. All stuff that the market has received well."

IASIS is launching a refinancing $463 million credit facility, according to market sources. The loan consists of a $125 million five-year revolver with an interest rate of Libor plus 350 basis points and a $338 million six-year term B with an interest rate of Libor plus 350 basis points, market sources said. Bank of America and BNP Paribas are leading the deal.

IASIS is a Franklin, Tenn. acute care hospital company that is a portfolio company of Joseph Littlejohn & Levy.

Agrilink is launching a new $470 million credit facility to support the leveraged buyout by Vestar Capital Partners, according to market sources. The loan consists of a $200 million five-year revolver with an interest rate ranging between Libor plus 250 basis points and Libor plus 275 basis points and a $270 million seven-year term loan B with an interest rate of Libor plus 300 basis points, according to market sources. JPMorgan Chase, Bank of America and Bank of Montreal are the lead banks on the deal.

Agrilink is a Rochester, N.Y. frozen vegetable company. The company is levered 3.5 times on a senior debt basis and 5.25 times on a total basis, according to the investment banker.

New World Pasta is launching a new $230 million credit facility consisting of a $200 million seven-year term loan B with an interest rate of Libor plus 325 basis points and a $30 million five-year revolver with an interest rate of Libor plus 325 basis points, according to a syndicate source. Morgan Stanley is the lead bank on the deal.

The Harrisburg, Pa. dry pasta maker is using proceeds to refinance existing debt including the repayment of a term C bridge loan that was provided by Joseph Littlejohn & Levy.

Greif Bros. is launching a $500 million credit facility (BA3/BB) consisting of a $250 million revolver and a $250 million term loan to repay existing debt. Salomon Smith Barney and Deutsche Bank are the lead banks on the deal.

Greif is a Delaware, Ohio manufacturer of industrial shipping containers, containerboard and corrugated products.

Horizon Natural Resources Co., previously AEI Resources Holding Inc., is launching a new $250 million revolving exit financing facility with an interest rate of Libor plus 350 basis points, according to a syndicate source. Deutsche Bank is the sole lead arranger on the deal.

Horizon Natural Resources is an Ashland, Ky. producer of steam coal.

Constar is launching a new $250 million credit facility. The loan will consist of a $150 million seven-year term and a $100 million five-year revolver, according to a filing with the Securities and Exchange Commission. The term loan will require annual payments of $1.5 million with the rest due at maturity, the filing said.

Proceeds from the term loan will be used to repay outstanding debt. Constar's initial public offering, headed by Salomon Smith Barney, is dependant upon the successful completion of this credit facility and a $200 million senior subordinated note sale.

Constar is a Philadelphia-based producer of PET plastic containers for food and beverages.

Meanwhile in secondary activity, Nextel Communications Inc.'s bank loan paper traded off a little bit on Wednesday with a bid of 82½ and an offer of 83, a trader said. On Tuesday, the paper was quoted as being bid at 83 and offered at 84, but traded as high as 86 during the day on news of positive net income for the second quarter of 2002.

The Reston, Va. mobile communications provider experienced the slight downturn in secondary prices because of market technicals, the trader said. "There was some selling pressure," he explained.

"It feels good the first day, kind of good the next day and then it starts to slide," a fund manager said regarding bank loan paper performance following the release of positive company news. "Nextel had one really good quarter. But once you've raised the guidance that much, how are you going to beat it?"

Furthermore, past market sentiment towards the wireless sector was not very favorable. Despite the fact that Nextel's bank loans were at approximately 2 times cash flow and that the odds of the bank loans not getting repaid under a bankruptcy scenario were low, the paper dropped to a low of around 78 because people didn't like the sector, the fund manager explained. "If negative sector news comes out, say from Sprint PCS, then the negative sentiment will come back," he said, adding that Nextel's paper may once again be pushed down on market sourness towards wireless companies.

Sprint PCS Group is expected to release results for the second quarter on Thursday.

More importantly though then the company's cash flow results and sector sentiment is that approximately $1.1 billion in debt and preferred stock was retired during the second quarter and an agreement to repurchase $400 million in debt has been entered into. Due to the repayment of debt, Nextel will not violate the "debt to cash flow covenant in the first quarter of 2003," the fund manager said. "Some thought that there was a chance of violation although I'm not saying that the banks wouldn't have waived it."

In other news, market talk is that Swift & Co. flexed down its $200 million term loan B to a spread of Libor plus 300 basis points from Libor plus 325 basis points. The $350 million revolver portion was said to remain the same with an interest rate of Libor plus 325 basis points. The syndicate was not immediately available to confirm this information. Citibank and JPMorgan Chase are the lead banks on the deal that is being used to help fund the leveraged buyout of Conagra Foods Inc.'s beef and pork processing business by sponsors Hicks, Muse, Tate and Furst.

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