Goodyear bank debt heads lower as investors react to financial restatement news

By Sara Rosenberg

New York, Oct. 23 - The Goodyear Tire & Rubber Co.'s U.S. term loan fell by about a point Thursday on news that the company will restate financial results for 1998 through 2002 and for the first and second quarters of 2003.

The term loan was quoted at 97 5/8 bid, 98 5/8 offered, according to a trader.

After market close Wednesday, the Akron, Ohio revealed it expects to restate results, citing implementation of an enterprise resource planning accounting system in 1999 and errors in inter-company billing systems as the reasons behind the need for the financial adjustments.

"Although the company is still reviewing the matter, the adjustments are currently expected to decrease net income over the restatement period by up to $100 million. It is expected that the adjustments will result in an improvement in the net loss for the first half of 2003. The improvement is attributable to certain charges previously recognized during the first half of 2003 that will be reflected in the restatement for prior years. A reduction is anticipated in shareholders' equity as of June 30, 2003 of up to $120 million, of which $20 million relates to periods prior to 1998," a news release said.

The restatements are not expected to affect the company's net cash position or its ability to access its credit facilities, the release added.

Medco Health Solutions Inc.'s bank paper was bid as high as 101 on Thursday following the release of third quarter earnings, and 2003 and 2004 guidance late-day Wednesday.

"It's at least par ¾ bid. But I think you can find 101 bids out there. It traded at par 7/8 yesterday. It's been trading up. It's got a pretty low coupon but people like the paper," a trader said.

For the third quarter, earnings per share were $0.37 ($0.42 per share excluding $0.05 per share in amortization of intangible assets), in line with analyst consensus estimates. Net revenues reached $8.5 billion compared to $8 billion in the same period last year, representing a 6% increase. Net income was $100.3 million, an 11% increase over $90.2 million in the same period last year. And, EBITDA was $251.1 million, up 15% over $218.2 million in EBITDA during the same period last year.

As of Sept. 27, cash and short-term investments were $871 million and total debt was $1.496 billion.

For 2003 the company expects full-year earnings per share in the range of $1.53 to $1.56, or $1.73 to $1.76 excluding $0.20 per share in amortization of intangible assets.

For 2004 the company expects full-year earnings per share in the range of $1.75 to $1.86 or $1.95 to $2.06 excluding $0.20 per share in amortization of intangible assets.

Medco is a Franklin Lakes, N.J. pharmacy benefits management company.

Meanwhile, Xerox Corp.'s revolver was quoted at 94¾ bid, 95¾ offered, pretty much unchanged from previous levels, according to a trader, following the release of its third quarter earnings that included earnings per share of $0.11, equipment sale growth of 5%, total revenue of $3.73 billion (a 2% decline from the same period last year) and a worldwide cash balance of $2.3 billion.

"Despite a tough business climate, we are quite encouraged by our progress this year and confident in the business decisions we've made to grow installs in key markets, generate significant operating cash flow, and strengthen our global operations," said Anne M. Mulcahy, chairman and chief executive officer, in a news release. "We expect consistent performance in the fourth quarter. Growth in equipment sales along with the benefits of our operational improvements will offset any continuing economic weakness and yield strong full-year results."

In primary news, PanAmSat Corp.'s seven-year term loan B, which was launched via a conference call on Oct. 7, has undergone some changes recently, including an upsizing of the tranche as well as a reverse flex in pricing, according to a syndicate document.

The term loan B is now sized at $650 million, compared to an initially expected size of $455 million, and pricing is now set at Libor plus 250 basis points, compared to initial pricing of Libor plus 275 basis points.

Credit Suisse First Boston is the sole lead arranger on the deal, which will be used to refinance existing debt.

PanAmSat obtained a $1.25 billion credit facility in 2002 consisting of a $250 million revolver due 2007, a $300 million term loan A due 2007 and a $700 million term loan B due 2008. At June 30, the revolver and term loan carried an interest rate of Libor plus 275 basis points and the term loan B carried an interest rate of Libor plus 350 basis points.

However, in July 2003 the company made a $350 million pre-payment on its bank debt, reducing the term loan A to $195 million and reducing the term loan B to $455 million, according to a filing with the Securities and Exchange Commission.

PanAmSat is a Wilton, Conn. provider of video, broadcasting and network services through satellites.

It appears as if there might be some changes in the works on FHC Health's credit facility, which launched on Oct. 14, including a possible size change as well as interest rate change.

According to the latest syndicate release, the credit facility is currently sized at up to $305 million (B/B1) with the six-year delayed draw now ranging from $120 million to $150 million. Previously, the deal was expected to contain a $150 million delayed drawdown tranche.

Furthermore, pricing on the delayed drawdown piece as well as on the $130 million six-year term loan (size unchanged) is now reported as to be determined, whereas before pricing was set at Libor plus 650 basis points on the term loan and Libor plus 825 basis points on the delayed drawdown.

The $25 million three-year revolver (size unchanged) remains at Libor plus 375 basis points. The commitment fee on the revolver is still to be determined.

Credit Suisse First Boston and Goldman Sachs are the joint lead arrangers on the refinancing deal.

FHC is a Norfolk, Va. Provider of behavioral health care services.

Waste Connections Inc. closed on its new $575 million senior secured credit facility (Ba2/BB+), consisting of a $400 million five-year revolver with an interest rate of Libor plus 200 basis points and a $175 million seven-year term loan B with an interest rate of Libor plus 200 basis points, according to a syndicate source.

Originally the deal was launched as a $500 million credit facility, consisting of a $350 million revolver and a $150 million term loan B, but was upsized during the syndication process.

Fleet and Deutsche acted as joint lead arrangers, with Wells Fargo, Credit Lyonnais, Union Bank of California and LaSalle Bank participating as agent banks.

The Folsom, Calif. solid waste company used the proceeds to refinance its existing $435 million senior credit facility.

"This financing provides additional capacity to fund our growth strategy and the flexibility to address our outstanding $150 million convertible subordinated notes due 2006. We were especially pleased to receive credit rating upgrades from both Moody's and Standard & Poor's in conjunction with the refinancing" said Ronald J. Mittelstaedt, chairman and chief executive officer, in a news release.

Dobson Cellular Systems Inc., a wholly owned subsidiary of Dobson Communications Corp., closed on its new $700 million senior secured credit facility (Ba3/B-) consisting of a $550 million 6 1/2-year term loan B with an interest rate of Libor plus 325 basis points and a $150 million six-year revolver with an interest rate of Libor plus 325 basis points.

Lehman Brothers and Bear Stearns acted as joint lead arrangers and book managers, with Morgan Stanley participating as co-arranger and documentation agent. Lehman Commercial Paper Inc. is administrative agent and Bear Stearns Corporate Lending Inc. is syndication agent.

Security is a pledge of Dobson Communications' equity interest in the borrower and by all the assets of the borrower and its material subsidiaries.

Proceeds will be used to fund the previously announced tender offers for all outstanding 12¼% senior notes due 2008 of Dobson/Sygnet Communications Co. and a portion of Dobson's outstanding 12¼% senior preferred stock, to repay the $54 million balance outstanding under the credit facility of Sygnet Wireless, and for general corporate purposes.

In connection with the closing of its credit facility, Dobson also announced that it had merged its subsidiaries, Dobson/Sygnet Communications, Sygnet Communications and Sygnet Wireless Inc. into Dobson Cellular Systems.

Dobson is an Oklahoma City provider of rural and suburban wireless communications services.

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