DS Waters, Solo Cup, Hanger Orthopedic steal spotlight in secondary on uncertainties

By Sara Rosenberg

New York, June 21 - DS Waters of America LP, Solo Cup Co. and Hanger Orthopedic Group Inc. have all become the names to watch in the secondary bank loan market. Levels on DS Waters have backed off, leaving many scratching their heads in search of a reason. Solo Cup investors are waiting to see what an upcoming call may reveal. And, Hanger Orthopedic's recent surge of bad news has left many wondering what to expect next.

DS Waters' bank debt is being quoted at 98 bid, 99 offered, according to one trader, and although a second trader agreed with the offered level, he was reluctant to quote the paper on the bid side saying that bids have dried up.

"It was always above par. It seems like a lot of people are staying away from it and I don't know why," the second trader said.

"It looks like there may be some private news out there," another trader said. "We're trying to see what the news is. No one knows what's pushing it. We're just trying to figure that out."

However, yet another trader seemed to have the answer, simply stating "there's uncertainty about the numbers that they're about to announce."

DS Waters is an Atlanta home and office water delivery service.

Focus on Solo Cup ahead of call

Solo Cup's bank debt is being quoted around par ¾ bid, according to one trader who placed the paper down about a quarter of a point from recent levels and down about a point from its highs. However, a second trader placed the bank debt basically unchanged from Friday when the paper traded at 101 1/8.

What's really sparking peoples' interest on this name is not so much the bank debt levels but really the recent performance of the company's bonds and market talk that the company will be holding an investors conference call on either Tuesday or Wednesday to give investors more confidence.

"The bonds have been off 10 or 12 points over the last two weeks. People are watching the bonds and wondering if the bank debt is okay. But I think most people think it is," a trader explained. "They're just trying to give people a little pep talk on an investor call. Earnings were disappointing last week."

Solo Cup is a Highland Park, Ill., manufacturer of single-use foodservice cups, bowls, plates, cutlery and related items made from plastic, foam and paper.

Hanger Orthopedic distressed?

Hanger Orthopedic's has been surrounded by controversy lately as the company has been dealing with billing problems, an internal probe and governmental investigations leaving some investors wondering whether this name will soon be trading off distressed desks as opposed to the par desks on which it's now quoted.

According to one trader the paper is being quoted around par. A second trader was hesitant to put a level on the debt as no bid was seen in the marketplace.

"It was 101 a couple of weeks ago. Now where's the bid?" the second trader said. "The bonds were 108. Now they're 981/2, par. The stock hasn't had an uptick since June 8. And, since June 10 the stock has dropped like a rock. This smells ugly. It's still a par name but it's hinting at distressed levels."

The company's stock closed Monday at $9.34, down $2.47 on the day.

Late in the day Friday, Hanger Orthopedic revealed that on Thursday it had received a subpoena from the U.S. Attorney's Office for the Eastern District of New York requesting documents relating to alleged billing irregularities and seeking information concerning 14 of the company's patient care centers located in downstate New York. The Securities and Exchange Commission also has requested information from the company relating to the allegations.

The company release went on to say that, also on Thursday, the audit committee of the board of directors engaged the law firm of McDermott Will & Emery to serve as special counsel to the committee to conduct an independent investigation.

"Hanger Orthopedic Group is absolutely committed to maintaining the highest standards of integrity and compliance. We will aggressively determine the facts relating to these allegations and will endeavor to cooperate with regulatory authorities. We look forward to the completion of a thorough investigation," said Ivan R. Sabel, chairman and chief executive officer, in the release.

The billing allegations arose at the start of last week and included claims by an employee in the company's patient care center in West Hempstead, N.Y., that one of the clinicians was signing doctors' signatures on prescription forms.

Immediately following the allegations, the company put out a release saying that it initiated a thorough investigation into the matter.

Hanger Orthopedic is a Bethesda, Md., provider of orthotic and prosthetic patient-care services.

American Coal term B

American Coal Holding Inc.'s $775 million credit facility is expected to contain a $425 million term loan B, according to a market source, although confirmation of this detail by the syndicate was unavailable prior to press time.

Previously, the structure of the deal was said to be undetermined, even though the Wednesday bank meeting is fast approaching.

Citigroup and Credit Suisse First Boston are joint lead arrangers and joint bookrunners, with Citi also acting as administrative agent and CSFB also acting as syndication agent. UBS is documentation agent.

Proceeds from the facility will be used to help fund the acquisition of American Coal by a private equity consortium consisting of First Reserve Corp., The Blackstone Group and American Metals & Coal International from RAG Coal International for a purchase price of about $1 billion.

American Coal is a Linthicum Heights, Md., coal mine company.

Cumulus Media refi

Cumulus Media Inc. is said to be coming to market with a refinancing of its existing bank debt via JPMorgan, according to a market source. No further details were available prior to press time.

As of March 31, the company had $106.9 million outstanding under its $112.5 million seven-year term loan facility, $321.8 million outstanding under its $325 million eight-year term loan facility and $38 million outstanding under its $112.5 million seven-year revolver.

The company repriced its $325 million term loan facility in January of this year at Libor plus 225 basis points.

Cumulus Media is an Atlanta owner and operator of radio stations.

Rent-A-Center launch

A bank meeting date has been nailed down for Rent-A-Center Inc.'s proposed $600 million senior credit facility, with the launch slated to take place on Tuesday, according to an informed source. Previously it was expected that the deal would launch this week but specific timing was unavailable.

Lehman Brothers and JPMorgan are co-lead arrangers and joint bookrunners on the deal, with Lehman listed on the left.

The facility consists of a $400 million term loan and a $200 million revolver. Price talk on the tranches is not being revealed.

The company is looking to refinance its existing credit to get lower interest rates and to renegotiate covenants, including the basket to repurchase stock and the capital expenditures requirement, a company spokesman previously told Prospect News. The decision to seek the refinancing at the present time was based on the strength of the credit market and the company's enhanced credit standing since being upgraded by Standard & Poor's.

Rent-A-Center's existing credit facility contains a $400 million term loan with an interest rate of Libor plus 225 basis points, a $120 million revolver with an interest rate of Libor plus 200 basis points and an $80 million letter-of-credit facility with an interest rate of Libor plus 225 basis points, the spokesman added. At March 31, the company had a total of $397 million outstanding under its term loan and $90.3 million of availability under its revolver.

In addition to repaying the existing facility, Rent-A-Center will use proceeds for general corporate purposes.

The Plano, Texas, operator of rental purchase stores expects to complete the transaction in the third quarter.

NCI closes

NCI Building Systems Inc. closed on its $325 million senior secured credit facility (Ba2/BB), according to a company news release. Wachovia and Bank of America were the lead banks on the deal, with Wachovia listed on the left.

The facility consists of a $200 million six-year term loan and a $125 million five-year revolver, both of which are secured by receivables, inventory, machinery and equipment.

The term loan carries an interest rate of Libor plus 225 basis points, and the revolver carries an interest rate of Libor plus 175 basis points.

Proceeds were used to refinance its existing credit facility and to redeem $125 million of 9¼% senior subordinated notes due 2009 at a redemption price of 104.625%.

After repayment of its previous bank borrowings and the redemption of the senior subordinated notes, NCI expects to have about $115 million in available borrowings under the new facility.

"These transactions continue a multi-year trend in which NCI has steadily strengthened its financial position, resulting in a recent increase in the company's corporate credit and bank loan ratings by Standard & Poor's and Moody's. The restructuring of our debt at today's interest rates is expected to reduce our annual interest payments by approximately $8 million, assuming current average loan balances. It also enhances our ability to improve our industry leadership position through continuing initiatives to expand our market share, product line and geographic reach," said A.R. Ginn, chairman and chief executive officer, in the release.

NCI is a Houston manufacturer of metal products for the nonresidential building industry.

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