Secondary bank market strengthens on soaring stock market; Nextel, Charter inch up

By Sara Rosenberg

New York, Oct. 1 - Overall, the secondary bank loan market felt stronger on Tuesday in reaction to the fine performance given by equities, according to market sources. For example, the upward movement of both Nextel Communications Inc.'s and Charter Communications Inc.'s bank debt by approximately a quarter of a point was attributed to Nextel's stock improving by 7.68% to close at $8.13 and Charter's stock improving by 8.06% to close at $2.01.

Nextel, a Reston, Va. telecommunications company, was bid at 86 5/8 and offered at 873/4, according to a trader. "It's just a little better than yesterday," the trader said. "It has a better tone."

Charter, a St. Louis, Mo. cable company, was bid at 87 1/8 and offered at 88 for its term loan B, the trader said. "It's also a little better than yesterday," he said. "Stocks traded up."

In both cases, the trader said, the loans were quoted up by about a quarter of a point from Monday's levels.

The Dow Jones Industrial Average closed at 7938.70, up 346.80 while the S&P 500 closed at 847.92, up 32.64.

Meanwhile, American Greetings Corp.'s bank debt saw some trading activity on Tuesday with a bid of par and 5/8 and an offer of par and 3/4, the trader told Prospect News. "It doesn't trade all that much, we just happened to [trade it] today. It has a 103 prepayment premium through June 2003."

American Greetings is a Cleveland, Ohio greeting card company.

Primary activity has essentially come to a screeching halt as fund managers and syndicate sources alike agree that the calendar of upcoming bank meetings is scarce. Most people continue to hold on to their capital waiting for the billion dollar-plus credit facilities that are expected to hit the market possibly this month.

The credit facilities and companies that are launching them have been talked about ad infinitum leaving potential investors salivating on the sidelines with anticipation. Included in those upcoming deals is: QwestDex's approximately $1.5 billion facility that will be used to help fund its leveraged buyout by The Carlyle Group and Welsh, Carson, Anderson & Stowe; Burger King Corp.'s approximately $900 million facility that will be used as part of its leveraged buyout by equity sponsors Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners from Diageo plc; Ball Corp.'s approximately $1.55 billion facility that will be used to help fund acquisition of Schmalbach-Lubeca AG; and Del Monte Foods Co.'s approximately $1.4 billion facility that will be used to help fund the merger with certain H.J. Heinz Co. businesses.

However, one new deal that hasn't been reported on much is anticipated to hit the market next week - United States Filter Corp.'s $325 million credit facility. The loan consists of a $75 million six-year revolver with an interest rate of Libor plus 275 basis points and a $250 million seven-year term loan B with an interest rate of Libor plus 325 basis points, sources said. However, all details on the loan are subject to change.

JPMorgan, Goldman Sachs and UBS Warburg are the lead banks on the deal.

Proceeds from the loan will be used to help fund the acquisition of United States Filter's waterworks distribution business by a company jointly owned by JPMorgan Partners and Thomas H. Lee Partners.

United States Filter is a Palm Desert, Calif. provider of water and wastewater systems.

In follow-up news, Integrated Defense Technologies Inc.'s $130 million add-on term loan (BB-) has received some orders after launching last week, a fund manager told Prospect News. "People are still working on that one," he said. "I would imagine that as we get closer to the commitment date the book will shape up rather nicely. It may even be a little bit oversubscribed."

Integrated Defense is a Huntsville, Ala. provider of electronics and technology products to defense and intelligence industries. "The sector is favorable right now," the fund manager said in explanation of why syndication is expected to go off without a hitch. "If we go to war with Iraq, that works in their favor as well."

The term loan, which will be used to help fund the acquisition of a division of BAE Systems, is priced with an interest rate of Libor plus 325 basis points. CIBC World Markets is the lead bank on the deal.

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