Dresser-Rand cuts U.S. term loan pricing; Peabody, JW Aluminum break for trading

By Sara Rosenberg and Paul A. Harris

New York, Oct. 14 - Dresser-Rand Co. lowered pricing on its U.S. term loan tranche by 50 basis points Thursday morning as a result of overwhelming investor demand. And, once again, some more new paper hit the secondary market as Peabody Energy Corp. and JW Aluminum broke for trading.

Dresser-Rand's $300 million term loan is now priced at Libor plus 200 basis points as opposed to pricing of Libor plus 250 basis points that was announced at launch, according to market sources.

Pricing on the $100 million euro term loan remained at Libor plus 275 basis points and pricing on the $300 million revolver remained at Libor plus 250 basis points, sources added.

"The deal was four times oversubscribed at Libor plus 250," one source said about the U.S. term loan.

Both term loans are being offered to investors at par.

Syndication of the U.S. term loan started off with a bang as a number of commitments had already been received within one day of the Oct. 5 retail bank meeting, leading many to believe that the tranche would be fully subscribed rather quickly. And, the revolver was already fully subscribed by that time.

The company held a meeting for the senior managing agent tier on Sept. 23.

Proceeds from the $700 million credit facility (B1/B+) and from a $420 million bond deal priced at 7 3/8% will be used to help fund First Reserve Corp.'s acquisition of Dresser-Rand from Ingersoll-Rand Co. Ltd. for about $1.2 billion in cash. This acquisition will be the first investment made in First Reserve Fund X, a $2.3 billion private equity fund raised earlier this year.

The sale, which is subject to government regulatory approvals and other customary closing conditions, is expected to close in the fourth quarter.

Olean, N.Y.-based Dresser-Rand is a supplier of infrastructure equipment, including compressors, turbines and engines, as well as related after-market parts and services, to the energy industry.

Citigroup and Morgan Stanley are the lead banks on the deal, with Citigroup listed on the left. UBS is involved as well.

Peabody par plus

Peabody's $450 million 51/2-year term loan A was quoted at par ¼ bid, par ½ offered during its first trading session and the $900 million 51/2-year revolver was quoted at par bid, according to traders.

Both tranches are priced at Libor plus 125 basis points.

Proceeds from the $1.35 billion credit facility (Ba1/BB+) are being used by the St. Louis coal producer to refinance institutional term loan debt.

Wachovia Securities and Bank of America are the lead banks on the deal.

JW Aluminum around 101

JW Aluminum's $100 million six-year first-lien term loan was quoted on "both sides of 101" on the break but the relatively small tranche was "not very active" during market hours, according to a trader.

The term loan, which was upsized from $90 million during syndication, is priced with an interest rate of Libor plus 325 basis points.

JW Aluminum's $155 million credit facility also contains a $25 million five-year revolver with an interest rate of Libor plus 325 basis points and a $30 million seven-year second-lien term loan (that was downsized from $40 million) with an interest rate of Libor plus 750 basis points (after being flexed up by 50 basis points during syndication).

Credit Suisse First Boston is the sole lead arranger and bookrunner on the dividend recapitalization deal for the Mount Holly, S.C., maker of aluminum products.

Lake Las Vegas location prime focus

Lake Las Vegas Resort's recently launched $460 million credit facility is "probably" going to get done at the current structure, according to a fund manager, although the location of the facility and the use of proceeds did spark some debate.

The facility is structured as a $360 million five-year first-lien term loan (Ba3/BB) talked at Libor plus 275 basis points and a $100 million six-year second-lien term loan (B1/B) talked at Libor plus 600 basis points.

"Nice resort but not what you think of when you first think of Vegas. It's about 16 miles away from the strip, which to me seems like a negative. If people are going to Vegas they want to be staying at one of the hotels on the strip right in the heart of the action," the fund manager said.

"The management team for Lake Las Vegas Resort feels differently though," the fund manager continued. "They are catering to a different crowd. They want people who want to gamble but also want to enjoy the setting of a resort and all its amenities. They say it's a different lifestyle that they're catering to."

This "different crowd" theory found some support amongst bank debt players, as one source pointed out that people who live in Vegas don't want to be near the strip, but rather get away from it, and those are the people that would love this resort.

"Everyone seemed to be very impressed by the property," another source said. "It's like a second home. It doesn't really cater to the weekend, I'm going out to Vegas, gambling crowd."

But another issue - one that has come up a lot in the current market environment as irksome to investors but really hasn't hurt any deals in terms of syndication - is the use of bank debt to pay off equity.

"I'm not very excited about using the majority of the proceeds from the loans to pay a large dividend to the partners," the fund manager said.

"Equity players want to get paid out. This has been going on for a year and a half now. You would think people would get used to it by now," a source countered.

"Pricing never compensates enough on any deal but you work with what you're given. I need to spend some more time on this one before I decide what we're going to do," the fund manager added.

Besides the dividend, proceeds will also be used to refinance the company's existing credit facility, which happens to be pretty small.

Credit Suisse First Boston is the lead bank on the loan that launched via a bank meeting in Vegas on Wednesday.

Lake Las Vegas is a Henderson, Nev., residential, golf and resort community.

Allegheny sees good response

Allegheny Energy Supply Co. LLC's proposed amendment was off to a good start after Thursday morning's conference call as some commitments were already placed before day's end and some existing lenders even began looking into increasing their positions.

"All existing guys could be guaranteed their pro rata amount of what they're holding, but a lot of people are topping up," a market source said. "Haven't heard anything contentious so it should be fine."

Under the proposal, Allegheny is looking to combine its existing term loan B and term loan C into one large term loan with lower pricing.

The new term loan B would be sized at $1.044 billion with pricing of Libor plus 275 basis points. After closing on the amendment, once the company pays down $200 million of the new tranche using cash flow, net cash proceeds from asset sales or net cash proceeds from the issuance of equity, pricing will step down to Libor plus 250 basis points, the source said.

Currently, the company has a total of $1.244 billion of term B and term C debt, with the term B priced at Libor plus 300 basis points and the term C priced at Libor plus 425 basis points. The $200 million that is not being refinanced under the amendment is being paid down using $50 million of cash and $150 million of equity proceeds raised by parent company, Allegheny Energy Inc., the source added.

Citigroup is the lead bank on the deal.

Allegheny Energy Supply is Greensburg, Pa., owner and operator of electric generating facilities.

TRW price talk

It was confirmed on Thursday by an informed source that TRW Automotive Holdings Corp. did in fact launch its $300 million term loan E to investors with price talk of Libor plus 175 basis points on Wednesday afternoon - an impressive difference from the Libor plus 225 basis points area that company officials talked about during its conference call, pointing to existing term loan pricing as the basis for the estimation.

JPMorgan and Bank of America are the lead banks on the deal.

Proceeds from the term loan, combined with about $200 million of cash on hand, will be used to repurchase a subordinated 8% pay-in-kind seller note from Northrop Grumman Corp. that was issued in connection with The Blackstone Group LP's acquisition of Northrop's automotive business in February 2003 and settle various contractual issues stemming from the acquisition for the net amount of $493.5 million.

The transaction is expected to close within the next 30 days.

TRW is a Livonia, Mich.-based provider of advanced technology products and services for the automotive markets.

Serologicals closes

Serologicals Corp. completed its acquisition of Upstate Group Inc. for total consideration of $205 million, consisting of $102.5 million of cash and about 4.3 million shares of common stock, according to a company news release.

To help fund the transactions, Serologicals got a new $110 million credit facility (Ba3/BB-) via JPMorgan comprised of an $80 million seven-year term loan and a $30 million five-year revolver.

Serologicals is a Norcross, Ga.-based biological research group.

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