Goodyear heads closer to par on paydown news; Allegheny meeting sees good attendance

By Sara Rosenberg

New York, Feb. 12 - The Goodyear Tire & Rubber Co.'s U.S. and euro term loans were both quoted higher on the day, moving closer to the par area as investors seemed relatively confident of the company's ability to successfully execute a newly proposed bond deal that would result in more paydowns.

While on the primary side, Allegheny Energy Inc.'s $1.6 billion credit facility received a warm reception from potential investors with commitments already starting to flow in.

Goodyear's euro term loan was quoted at 99½ bid, 99 7/8 offered, and the U.S. term loan was quoted at 99¾ bid, par offered, according to a trader, who placed both tranches up about 3/8 of a point on the bond news.

"I saw them a little wider then that," a second trader remarked. "I haven't seen the U.S. The euro is 99 [bid], par [offered] on the Street."

On Thursday, the Akron, Ohio, tire company announced that it is planning to sell about $650 million of senior secured notes in a private offering. The notes will be secured by junior liens on certain of the collateral securing the company's senior secured U.S. credit facilities.

Being that the company opted to approach the private market instead of the public market for its bonds, and being that the bonds are collateralized, Goodyear has a better chance of getting the deal done, a market professional said.

Proceeds from the bond deal will be used to prepay Goodyear's U.S. term loan facility, to reduce a portion of the commitments under its U.S. revolver, to repay other debt of the company, including temporary reductions of outstanding balances under its revolver, and for general corporate purposes.

The company is also basically done with the syndication of the recently launched add-on to its existing $1.3 billion asset-based credit facility. In fact, the deal was so oversubscribed that the company decided early last week to upsize the add-on to $650 million from $300 million.

The term loan, which is talked in the area of Libor plus 425 to 450 basis points, is being led by JPMorgan and Citigroup.

Proceeds will be used to partially repay the company's existing U.S. term loan, to repay other debt and for general corporate purposes.

However, there is still some skepticism out there regarding Goodyear's ability to complete its financial transactions due to the grayness surrounding the Securities and Exchange Commission investigation, which has recently been upgraded to formal status and has been expanded from investigating Europe to include other overseas operations of the company.

"The potential delay in the filing of Goodyear's 2003 10-K and the expansion of the internal accounting investigation could hinder the company's efforts to complete several proposed financings designed to increase liquidity and extend debt maturities," Standard & Poor's said in a release announcing its decision to leave the company's ratings on CreditWatch negative.

"Goodyear has announced plans to put in place a $650 million asset-based term loan and sell $650 million of other senior secured notes in a private placement transaction. The accounting uncertainties could diminish investor receptivity to the new financing. An extended delay in the filing of financial statements would violate provisions of existing credit agreements, which, if not waived, could limit access to the facilities. Goodyear is engaged in discussions with its various constituents regarding these issues.

"Standard & Poor's continues to be concerned about potential accounting issues at Goodyear's overseas operations, which have been viewed as solidly profitable. In addition, the SEC investigation and the delayed filing of financial statements raises concerns about Goodyear's ability to access the capital markets and remain in compliance with existing debt agreements.

"The company has $1.9 billion of debt maturing in 2005 and $1.5 billion of debt maturing in 2006. Mandatory pension payments will total $250 million-$270 million in 2004 and could increase substantially in future years. Meanwhile, Goodyear's North American tire operations continue to be very weak because of the high cost structure and high raw material costs," S&P added.

Allegheny sees good turnout

Allegheny Energy Inc.'s bank meeting went well on Thursday morning as "there was a lot of people who attended and good questions afterwards," a market source said.

Commitments have already started to come in on the deal but specific numbers were not being disclosed, the source added.

The company's $1.6 billion facility consists of an $800 million seven-year first lien term loan with price talk of Libor plus 300 to 325 basis points (B1/NR/BB-), a $500 million 71/4-year second lien term loan with price talk of Libor plus 450 to 475 basis points (B1/NR/BB-) and a $300 million three-year unsecured revolver with price talk of Libor plus 300 basis points (B2).

The term loans are being obtained at the Allegheny Energy Supply Co. level and are being offered to investors at par.

Commitments are due on Feb. 20, and the syndicate is looking to close on the deal on Feb. 27.

Citigroup and Bank of America are the lead banks on the Hagerstown, Md., energy company's deal that will be used to repay and refinance all of the company's bank debt that was restructured in February 2003.

Nellson Nutraceutical closes

Nellson Nutraceutical Inc. closed on its $100 million of bank debt financing that consists of a $25 million add-on to the company's first-lien term loan and a new $75 million second-lien term loan, according to a Fremont Partners news release.

UBS was the lead bank on the deal.

Proceeds from the financing were used to repurchase shares, including those from co-investors and Fremont Partners Fund III limited partners.

"The financing was well received by investors. This is the result of Nellson's strong operating performance since its 2002 acquisition by Fremont Partners, the company's attractive cash flow characteristics and the continued underlying growth within the functional bar and powder markets," the release said.

"In the last year, Nellson has successfully completed two add-on acquisitions and the outlook for the business remains extremely positive. The current dividend was achieved while maintaining a prudent amount of total leverage," the release added.

Nellson Nutraceutical, an Irwindale, Calif., formulator and manufacturer of functional bars and powders, was acquired by Fremont in October 2002 through its $920 million Fremont Partners III fund.

Ply Gem closes

Ply Gem Industries Inc. closed on its $255 million credit facility (B1/B+) consisting of a $190 million seven-year term loan B with an interest rate of Libor plus 275 basis points and a $65 million five-year revolver with an interest rate of Libor plus 250 basis points.

The deal was originally launched with a $235 million term B, but the tranche was later downsized following the pricing of an upsized bond offering.

UBS and Deutsche Bank are joint bookrunners, and CIBC and Merrilll Lynch are co-arrangers and documentation agents on the facility that was used to help support the company's acquisition by Caxton-Iseman Capital Inc. from Nortek Inc.

Ply Gem is a Kearney, Mo., manufacturer and distributor of products for use in the residential new construction, do-it-yourself and professional renovation markets.

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