Qwest breaks above par on floating-rate, below par on fixed-rate; Owens-Illinois breaks above par

By Sara Rosenberg

New York, June 5 - In somewhat of a quick fashion, Qwest Corp.'s $1.75 billion credit facility broke for trading on Thursday after first launching at the beginning of this week. Also joining the secondary was Owens-Illinois Inc.'s $1.6 billion credit facility, which broke for trading just above par.

Qwest's $1.25 billion four-year unsecured, non-amortizing senior term loan (Ba3/B-/B) was quoted at 101 bid, 101½ offered by the end of the day. The tranche was priced at Libor plus 475 basis points, was offered at 99 and has a Libor floor of 175 basis points.

The Denver telecommunications company's $500 million fixed-rate incremental term loan due 2010 was quoted at 99¾ bid, par offered by the end of the day. Price talk on the tranche was 7% to 7¼%.

Originally, the new facility was expected to only consist of a $1 billion floating-rate tranche, but since more than $3 billion in commitments was received at the start of the week, the company opted to add the $500 million fixed-rate loan and increase the floating-rate loan by $250 million.

The deal moved along so quickly because there were hedge funds and high-yield guys involved, according to a trader, as opposed to banks who usually take longer to commit.

Merrill Lynch & Co., Credit Suisse First Boston and Deutsche Bank are leading the deal, which will be used to refinance debt due in 2003 and fund business needs.

Owens-Illinois' $750 million five-year term loan B was quoted at par ¼ bid, par ¾ offered, according to a trader. The tranche was priced with an interest rate of Libor plus 325 basis points (flexed down during syndication from original pricing of Libor plus 350 basis points) and had an upfront fee of 25 basis points.

The $1.6 billion facility also consists of a $650 million four-year revolver with an interest rate of Libor plus 325 basis points and a $500 million four-year term loan A with an interest rate of Libor plus 325 basis points.

The upfront fee on the pro rata was 100 basis points upfront fee for a commitment of $25 million and a 75 basis points upfront fee for a commitment of $15 million.

Deutsche Bank and Bank of America are the lead banks on the Toledo, Ohio manufacturer of packaging products' refinancing deal.

In follow-up news, there is a possibility that pricing may come down on Domino's Inc.'s proposed $685 million senior secured credit facility because the deal has been pretty much oversubscribed since its launch on Monday, according to a fund manager.

The facility currently consists of a $560 million seven-year term loan B with an interest rate of Libor plus 325 basis points and a $125 million six-year revolver with an interest rate of Libor plus 325 basis points. The term loan B is being offered at par.

"I heard pricing may come down to at least 300 since it's two to three times oversubscribed," the fund manager said.

Some people thought the deal was aggressively priced based on the B1/B+ ratings it received and the amount of leverage that the company would have following completion of this deal. In fact, leverage is expected to be in the range of five times with the revolver undrawn once this facility is obtained, one market professional previously told Prospect News.

The fund manager did not disagree with this reasoning and admitted that the deal was aggressive. However he also admitted to putting in orders due to the lack of new deals in the specific sectors he focuses on - such as aerospace, defense and food - and the amount of paydowns that have recently occurred.

"Flower Foods got taken out. There was a big paydown on Dole when they issued their bonds. Cott has been paying down their debt quite a bit. Del Monte had a small repayment recently. Land O'Lakes has been paying down their debt."

On April 24, Flower Foods Inc. used proceeds from the sale of its Mrs. Smith's Bakeries LLC frozen dessert business to The Schwan Food Co. to pay off its term loan A and term loan B, leaving a zero balance on these tranches.

On May 14 Dole Food Co. Inc. priced $400 million of senior notes, using proceeds to repay senior secured bank debt.

Cott Corp., in its latest 10-K filing with the Securities and Exchange Commission, revealed that it used cash from operations along with $21.7 million in additional short-term borrowings to repay $37.8 million of the term loan to take advantage of lower interest rates on its revolver. At March 29, the company's long-term debt totaled $320.1 million as compared with $355.8 million at the end of 2002. There was $48.8 million outstanding under its term loan.

And, Land O'Lakes Inc. revealed in its latest 10-Q that in the three months ended March 31 the company made a $35 million payment on its term loan A and a $26.2 million payment on its term loan B,

With all these paydowns, "you have to jump into these [new] deals when you can," the fund manager explained.

Another factor influencing the fund manager's decision is the company's overall performance. "Near-term numbers have been soft compared to numbers say a year ago or so. But, they're generating a lot of cash flow and they're able to service their debt."

Security on the Domino's credit facility is a first priority lien on specified parcels of real property and tangible and intangible personal property, as well as a pledge of all of the company's capital stock, the capital stock of most of its material domestic subsidiaries and 65% of the capital stock of some of its foreign subsidiaries.

The new facility is part of a recapitalization plan and will replace the company's existing senior secured credit facility that was entered into on July 29, 2002.

JPMorgan is the lead bank on the Ann Arbor, Mich. pizza chain's deal.

United Components Inc. upsized its credit facility (B1/BB-) by $25 million for a new total of $415 million, while downsizing its high-yield bond offering by the same amount.

Originally the facility consisted of a $275 million term loan B talked at Libor plus 375 basis points and $115 million pro rata talked at Libor plus 325 basis points.

Lehman and JPMorgan are leading the bank deal for the Jersey City, N.J. auto parts manufacturer, which will be used to help fund the leveraged buyout of United Components by the Carlyle Group from UIS Inc.

Cross Country Healthcare Inc. closed on its $200 million senior secured credit facility (Ba1/BB-), consisting of a $75 million five-year revolver and a $125 million six-year term loan B with an interest rate of Libor plus 325 basis points. Citigroup was the lead bank on the deal for the Boca Raton, Fla. healthcare staffing service.

Approximately $125 million of the facility and $10 million of existing cash were used to finance the Med-Staff Inc. acquisition, which was completed on Thursday, to refinance all of Cross Country's existing debt and to pay financing-related fees.

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