Alpha Natural Resources $110 million revolver meeting sees better-than-expected attendance

By Sara Rosenberg

New York, Jan. 17 - In primary news, Alpha Natural Resources held a bank meeting on Friday, wrapping up a very hectic week of new issues. The facility launched is a $110 million senior secured revolver with an interest rate of Libor plus 350 basis points, according to a syndicate source.

There is a 50 basis point unused commitment fee on the revolver.

"The expectation was that it was going to go well," a source close to the deal said. "There were a number of attendees. More than we expected."

PNC is the lead bank on the deal.

Security for the loan is receivables, inventory and substantially all hard assets of the Kingswood Mine, the syndicate source told Prospect News.

The company is being formed to acquire certain assets that will allow it to become a mining entity in the Appalachia region, the syndicate source explained. With the revolver and some subordinated debt, that will include seller notes, the company will acquire coal assets of Pittston, coal assets of Coastal and domestic operations of AMCI.

In the secondary, Nextel Communications Inc. traded off about a point on Friday with the term loan B trading at 91 5/8 and term loans B and C trading at 94 1/8, according to a trader.

"Most things are a little weaker in sympathy to the stock market and bonds," the trader explained. He also attributed Nextel's mini-downfall to "sellers taking profits".

Last Friday, Nextel was also reported as taking a little breather as sellers decided to take the opportunity to get rid of some paper at a time when the bank debt may be at its high.

Nextel's term loan B and term loan C bank debt were quoted with a 94¼ bid and a 94¾ offer on January 10, down about 3/8, a trader previously told Prospect News, explaining that the run-up on the paper was so quick that people decided it might be good time to sell.

The Reston, Va. telecommunications company's paper rallied to a 94 bid and a 95 offer in the beginning of January on optimistic guidelines for 2003, including achieving positive free cash flow.

As a point of comparison, during mid-July, Nextel's B, C bank debt traded as high as 86 and settled down to quotes of around 83 bid, 84 offered (up about two points from the prior day's performance) immediately after the company announced positive second quarter results, which included a first-time achievement of positive net income. By mid-August the paper remained in the 83 bid, 84 offered region and by mid-October it had reached levels of 86½ bid, 87½ offered, again on favorable earnings expectations. By Nov. 21, the company's paper had already reached levels in the low 90's.

Although a lot of bank paper was weaker on Friday in sympathy to other markets, names "with no overhang out there are being bid well," the trader added. For example, PerkinElmer Inc., which used to trade at par, is currently being quoted with a par 5/8 bid and a par 7/8 offer.

"There's little supply. It's a smaller deal," the trader said, adding that the paper is being well bid by "CLOs that are looking to warehouse" and investors that have some money to invest.

Towards the end of 2002, the company obtained a new $415 million credit facility that consists of a $315 million six-year term loan with an interest rate of Libor plus 400 basis points and a $100 million five-year revolver with an interest rate of Libor plus 300 basis points.

Originally, the term loan B was expected to be sized at $345 million and pricing was set at Libor plus 350 basis points, however, these terms were modified during the syndication process.

Merrill Lynch was the lead bank on the deal that was used to redeem convertibles and replace the existing revolver.

The loan broke in the secondary with a 99 7/8 bid and a par ¼ offer.

PerkinElmer is a Wellesley, Mass. global technology company, which provides products and systems to the telecom, medical, pharmaceutical, chemical, semiconductor and photographic markets.

In other secondary news, Levi Strauss & Co. is expected to allocate on Friday and "trade really well," a trader said. "It will be right around par."

Levi Strauss recently launched an $800 million credit facility (B1/BB) consisting of a $400 million 31/2-year term loan B with an interest rate of Libor plus 400 basis points and a $400 million three-year revolver with an interest rate of Libor plus 375 basis points.

Scotiabank, Citibank and Bank of America are the lead banks on the San Francisco clothing company's deal that will be used to refinance existing debt.

Meanwhile, Charter Communications Inc.'s bank debt was described as "wide" on Friday with "really no trades" taking place, a trader told Prospect News. The paper was quoted with an 84½ bid and an 85½ offer.

"People really aren't focusing on it today," he added.

Charter's bank debt fell off a bit earlier this week following the downgrade of the company's and its subsidiaries debt by Moody's Investors Service.

Included in the downgrade was Charter Communications Operating LLC, Falcon Cable Communications LLC, CC VI Operating LLC and CC VIII Operating LLC senior secured bank debt to B2 from B1.

"The downgrades are attributed to the growing probability of expected credit losses which Moody's believes will be sustained in connection with an increasingly likely debt restructuring over the near-to-intermediate term," Moody's said. "Rapidly growing term loan amortization payments and debt maturities scheduled for year-end 2003 (Avalon) and 2005 (CCI converts) will be very difficult to meet without some form of restructuring and/or capital injection.

"Moody's notes its revised expectation that maximum permitted financial leverage maintenance covenants in Charter's four subsidiary bank credit agreements, which are scheduled to step-down this quarter and again later this year, may need to be modified and/or waived in 2003. This could be particularly problematic if the prior flexibilities afforded by the company's pre-funded excess cash balances and its ability to equitize intercompany loans have been reduced in any way given the operating cash flow shortfall for the fourth quarter of 2002," Moody's added.

Ratings do anticipate that banks may accommodate the St. Louis cable company's liquidity needs by amending covenants due to their structural seniority and the sizeable asset coverage that exists. However, due to recent performance levels and growth assumptions, the company is still expected to be unable to fully service its debt-burden, Moody's said.

The B2 rating assigned to the credit facilities reflects the expectation that banks would realize full recovery in a more distressed and potential default scenario.

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