Alpharma shrugs off downgrade, bid/ask stays wide; Wyndham unmoved by debt cut

By Sara Rosenberg

New York, Sept. 3 - On the first day back after a long holiday weekend, bank loan market participants spent time trying to settle back in to their daily work routine. News emerged that Alpharma Operating Corp. was downgraded one notch by Moody's Investors Service and Wyndham International Inc. eliminated debt maturities in 2002. However, both companies' bank debt remained at previous levels, feeling little to no affect from these developments, according to market sources.

Alpharma's bank debt continued to be bid in the low 90's and offered in the mid 90's following the Moody's downgrade, according to a trader. The rating change did not cause a dip in the bank debt since "it was expected", the trader explained.

Moody's downgraded Alpharma Operating's bank debt to B2 from B1 on Tuesday due to lower-than-expected operating earnings, on-going integration risks associated with the company's growth from debt and equity financed acquisitions and the need to stabilize operations to improve profitability. Affected bank debt includes a $300 million guaranteed senior secured revolver due 2007, a $137 million guaranteed senior secured term loan A due 2007 and a $353 million guaranteed senior secured term loan B due 2008.

The Fort Lee, N.J. pharmaceutical company's secondary paper has a bid/ask spread of approximately five points. When asked why the spread was so large, the trader responded that "there aren't any motivated sellers out there and the bid is waiting for more news. It doesn't trade very much."

Previously, a fund manager had pointed out this spread, saying that it is "very unusual" in this market.

"I'm guessing someone wants to sell and no one sees a reason to buy," the fund manager previously told Prospect News. "Or a desk or customer thinks there's a desire to sell and is maybe trying to tempt it out at lower levels."

Overall Alpharma has been disappointing investors, according to the fund manager, with stock that has basically been heading downwards and company issues such as a need to improve one of their plants. "There has just been several quarters of disappointing news," the fund manager explained.

Wyndham announced that the refinancing of some of its debt was successful, eliminating all significant debt maturities in 2002. Furthermore, the Dallas, Tex. hotel operator has already begun addressing debt maturities in June 2003 and beyond, a company news release said.

Secondary bank debt, however, did not show much reaction to the company's debt cutting, as Wyndham's loan was quoted "sideways" in the low-to-mid 80's, according to a trader.

"It was quiet in the name," the trader said. "No Street activity."

Otherwise, it was relatively slow in the secondary as people are beginning to get back into the flow of things after a long holiday weekend.

"It was pretty quiet today," another trader said. "After a long weekend it takes people time to settle in and get things rolling again. Trading should pick up a little bit tomorrow."

In other news, Ball Corp.'s bank loan (Ba2), which will be used to help fund the €900 million acquisition of Schmalbach-Lubeca AG, is said to be expected to launch in mid-October with a size of approximately $1.55 billion, according to market sources. The company told Prospect News Deutsche Bank and Bank of America will be co-lead arrangers on the deal and market sources added that Lehman Brothers and Bank One will participate in the facility as well.

Neither the syndicate nor the company would confirm the size and the timing of the loan. "Details on the loan are still to be determined," one syndicate source told Prospect News.

In a ratings release last week, Moody's Investors Service had the loan sized at $1.85 billion, consisting of a $500 million revolver with a $35 million Canadian dollar tranche, a $250 million term loan A, a $200 million equivalent euro term loan B, a $600 million term loan B and a $300 million term C bridge loan to be used f the bond offering does not occur.

"This is a very big deal for them and I think they'll get good reception," a fund manager said. "They did very well with their last acquisition. They delevered like they promised. Basically, the company kept to its word, which is rare these days."

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

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