Vanguard Health breaks around par on Thursday in week of multiple loans entering secondary

By Sara Rosenberg

New York, Dec. 19 - Vanguard Health Systems Inc. broke for secondary trading in a busy week for new deals starting to trade, with its new loan quoted at 99 7/8 bid and par and ¼ offer, according to a trader.

Other names that recently began trading include PerkinElmer Inc., Hercules Inc. and Del Monte Foods Inc.

Vanguard Health's new loan is a $150 million add-on term loan B with an interest rate of Libor plus 425 basis points. Bank of America is the lead bank on the deal.

Proceeds from the term loan will be used to help fund the purchase of five acute care hospitals from Baptist Health System.

Vanguard Health is a Nashville owner and operator of acute care hospitals and complimentary facilities.

PerkinElmer broke on Wednesday with a 99 7/8 bid and a par and ¼ offer, according to a trader.

The company's new loan consists of a $100 million five-year revolver with an interest rate of Libor plus 300 basis points and a $320 million term loan with an interest rate of Libor plus 400 basis points.

Merrill Lynch is the lead bank on the Boston technology company's deal that will be used to help redeem convertibles and replace the existing revolver.

On Tuesday, Hercules' credit facility began to trade in the secondary with a par bid and a par and ¼ offer on the term loan B.

The $350 million loan consists of a $150 million four-year revolver with an interest rate of Libor plus 275 basis points and a $200 million 41/2-year term B with an interest rate of Libor plus 325 basis points.

Credit Suisse First Boston and Wachovia are the lead banks on the Wilmington, Del. chemical company's deal that will be used to retire the existing credit facility and short-term debt, and for general corporate purposes.

And, lastly, on Monday Del Monte hit the secondary with a par and 5/8 bid and par and 7/8 offer. The paper was still being quoted at these levels on Thursday, according to a trader, who added that he had seen about $100 million in volume trade over the last four days.

The San Francisco, Calif. processed food company's $1.245 billion bank loan consists of a $300 million six-year revolver with an interest rate of Libor plus 350 basis points, a $195 million six-year term loan A with an interest rate of Libor plus 350 basis points, an approximately €45 million eight-year term loan B with an interest rate of Libor plus 375 basis points and a $705 million eight-year term loan B with an interest rate of Libor plus 375 basis points.

Bank of America, JPMorgan Chase, UBS Warburg, Morgan Stanley and Bank of Montreal are the lead banks on the deal that will be used to help fund the merger with certain H.J. Heinz Co. businesses.

Meanwhile, yet another deal has been slated for the first quarter of 2003. The launch of Dole Food Co. Inc.'s $1.15 billion senior secured credit facility, which could take place as early as January, may be received with some investor hesitancy, according to a market professional. Deutsche Bank, Scotia Capital and Bank of America are the lead banks on the deal.

Currently, the facility is expected to consist of an up to $850 million of term loans and a revolver of up to $300 million, a portion of which will be drawn upon on the closing date of the merger, according to a filing with the Securities and Exchange Commission.

Proceeds will be used to help fund the buyout of Dole by DHM Acquisition Co., which is wholly owned by chairman David H. Murdock.

The company also plans to use up to $450 million of high-yield bonds to help finance the transaction.

"I think people figured equity would be used to it keep out of the low single B quality," the market professional explained, adding that as it appears now, the entire transaction will be funded with debt and "that could easily put it down there in a low single B quality. Companies like this ought to have more equity to deal with price wars and weather. It may get a fair degree of skepticism and it may need equity to get the bank and bond deals done.

"[Also], the big question is why would he want to take the company private," the market professional continued. "When the deal comes in January I think he'll get a lot of questions like that."

Dole is a Westlake Village, Calif. producer and marketer of fresh fruit, fresh vegetables and fresh-cut flowers, and markets a growing line of packaged foods.

In follow-up news, Ball Corp. closed on its $1.35 billion credit facility that was used to refinance existing bank debt and fund the acquisition of Schmalbach-Lubeca AG for approximately €900 million in cash. In addition to the cash price, Schmalbach retained approximately €19 million in debt and €250 million in German pension liabilities.

The loan consists of a $450 million multi-currency revolver with an interest rate of Libor plus 200 basis points, a 250 million euro/sterling term loan A with an interest rate of Libor plus 200 basis points, a €300 million term loan B with an interest rate of Libor plus 250 basis points and a $350 million term loan B with an interest rate of Libor plus 225 basis points, flexed down from original pricing of Libor plus 250 basis points.

The multi-currency revolver was reduced by $50 million in size to a $450 million during the syndication process following the increase in the bond offering to $300 million from $200 million.

Deutsche Bank and Bank of America were the lead banks on the deal.

The company also sold $300 million in senior notes to help fund the acquisition.

"We were able to restructure our debt with very attractive terms and extend maturities in the process," said Raymond J. Seabrook, senior vice president and chief financial officer, in a news release. "We believe the interest rate of 6.875% we will be paying on our $300 million of new senior notes is among the lowest ever for a comparable 10-year high yield offering. Our solid performance and strong cash flow helped us achieve the attractive financing we did, and we expect to use that strong cash flow to pay down debt by $600 million over the next three years."

The acquired business will operate under the new name of Ball Packaging Europe, will be headed by Hanno C. Fiedler and will be headquartered in the former Schmalbach offices in Ratingen, Germany.

"It was our goal to complete the acquisition before year-end so we would have a full year of the benefits from the acquisition in 2003," said R. David Hoover, chairman, president and chief executive officer of Ball Corp., in the release. "Having achieved that goal, we continue to expect that Ball Packaging Europe will be accretive to our 2003 results by more than 15% and should add significantly to our already strong cash flow from operations."

Ball is a Broomfield, Colo. supplier of metal and plastic packaging to beverage and food industries.

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