NRG upsizes deal, lowers pricing, reduces floor; Bombardier breaks; El Paso up on debt reduction plans

By Sara Rosenberg

New York, Dec. 15 - NRG Energy Inc.'s exit financing facility (BB) under went some changes including an increase in the term loan size, price reductions on both the institutional and the pro rata pieces, Libor floor reductions on both pieces and a reduction in the upfront fee on the term loan.

Meanwhile in secondary news, Bombardier Recreational Products' credit facility allocated and broke for trading on Monday with the term loan B quoted at plus par levels. And, El Paso Corp.'s 2005 revolver ticked higher by about a quarter of a point following the company's announcement regarding a turnaround plan.

NRG's credit facility now contains a $1.2 billion 61/2-year term loan B, increased from an original size of $950 million. The tranche now carries an interest rate of Libor plus 400 basis points compared to initial pricing of Libor plus 450 basis points and a Libor floor of 1.50% compared to an initial Libor floor of 1.75%, according to a source close to the deal. Lastly, the upfront fee on the tranche was reduced to 99½ from 99.

The $1.45 billion facility also contains a $250 million four-year revolver with an interest rate of Libor plus 400 basis points, flexed down from initial pricing of Libor plus 425 basis points, and an unchanged commitment fee of 100 basis points. The Libor floor on this pro rata tranche was reduced to 1.50% from 1.75% as well. However, the upfront fee remained the same at 99, the source said.

In addition to the changes made to the bank deal, the company also changed its proposed bond offering, increasing the size to $1.25 billion from $1 billion.

These size changes are not completely unexpected as the company had reserved the right, based on demand, to upsize either the bank deal or the bond deal by a total of $500 million to refinance the plan of reorganization notes.

Pricing reductions on the credit facility are also of little surprise as the deal had in excess of $3 billion in the book two days after launching via a conference call.

The modifications to the debt offerings were actually made late in the day Friday, however most people did not hear about the changes until Monday.

Allocations are expected to take place this week, and the syndicate is aiming to close and fund the facility by Dec. 23.

Credit Suisse First Boston and Lehman Brothers are acting as joint lead arrangers on the Minneapolis energy company's deal.

NRG filed for Chapter 11 protection in May. On Dec. 5, the company announced that it successfully completed its Chapter 11 reorganization and emerged from bankruptcy. Through the reorganization process, the company eliminated corporate level debt and other claims totaling more than $6 billion, and emerged from Chapter 11 with $510 million of corporate debt and about $4.4 billion in project level debt.

Bombardier's $275 million term loan B (or C$360) hit the secondary market with quotes of par ¾ bid, 101 offered, according to a fund manager.

The tranche is priced with an interest rate of Libor plus 300 basis points, flexed down during syndication from Libor plus 325 basis points.

The facility also contains a C$250 million revolver with an interest rate of Libor plus 300 basis points.

BMO and Royal Bank of Canada are leading the revolver portion of the deal, and Merrill Lynch and UBS Securities are leading the term loan portion.

Proceeds will be used to help fund the previously announced acquisition of the company by a group of investors comprised of the Bombardier family, Bain Capital and the Caisse de depôt et placement du Québec from Bombardier Inc.

Bombardier Recreational Products is a Canadian-based manufacturer of recreational products.

El Paso's revolver was quoted at 98¾ bid, 99¼ offered, up a quarter of a point from Friday's levels, according to a trader.

On Monday, the company revealed a plan that is expected to result in reduced debt levels of about $17 to $18 billion by the end of 2004 and about $15 billion by the end of 2005 from approximately $22 billion at Sept. 30.

Furthermore, in a conference call, the Houston energy company revealed that it plans to pay off its term loan before year-end and make continued repayments on debt outstanding under its revolver.

Lastly, the company announced the sale of a 50% interest in the general partner of GulfTerra Energy Partners LP, 14 million GulfTerra common units and some processing assets to Enterprise Products Partners LP for about $1.1 billion in cash, with about $1 billion of the proceeds earmarked for debt reduction.

In follow-up news, Tenneco Automotive closed on an amended and restated $800 million senior credit facility (B1/B/B+) that consists of a $220 million five-year revolver with an interest rate of Libor plus 325 basis points, a $400 million seven-year term loan B with an interest rate of Libor plus 325 basis points and a $180 million seven-year prefunded letter-of-credit facility with an interest rate of Libor plus 325 basis points. JPMorgan and Deutsche were the lead banks on the deal.

Originally, the deal was launched with a $200 million revolver and a $200 prefunded letter-of-credit facility, but the sizes were modified during syndication.

Obtaining the new credit facility was part of a refinancing plan that also included the recently completed private offering of $125 million of 10.25% senior secured notes due July 15, 2013 and the issuance of a $350 million senior secured note in June.

Through this refinancing plan, the company managed to replace its existing revolver with a new source of long-term liquidity, extend most of its debt maturities to 2009 and beyond with a minimal pro forma increase to its interest expense and reset its financial covenant ratios through 2010, according to a company news release.

Proceeds from the credit facility were used to repay all amounts previously outstanding under the company's senior credit facility. Prior to these transactions, the company's existing $964 million credit facility consisted of $514 million of term loans maturing in 2005, 2007 and 2008 and a $450 million revolver, which was scheduled to terminate in 2005. The prior term loans had a weighted average interest rate of Libor plus 405 basis points.

"We are very pleased to successfully complete this transaction, which will improve Tenneco Automotive's financial flexibility by providing a committed long-term source of liquidity, favorably adjusting our financial covenant ratios through 2010, and extending nearly all of our debt maturities to 2009 and beyond," said Mark P. Frissora, chairman and chief executive officer, in the release.

Tenneco is a Lake Forest, Ill., manufacturer of automotive emissions control and ride control products and systems.

Nextel Communications Inc. closed on its new $2.2 billion term loan due December 2010 with an interest rate of Libor plus 225 basis points. JPMorgan was the lead bank on the deal.

The new term loan was used to refinance/reprice the company's existing term loans B, C and D, which carried an average interest rate of Libor plus 332 basis points.

Furthermore, the company reduced the principal amount of the term loans outstanding by $575 million since prior to the refinancing, Nextel's term loans totaled $2.775 billion.

In addition to using proceeds from the $2.2 billion term loan to repay the outstanding bank debt, the Reston, Va., wireless communications company used cash on hand as well.

The reduction of debt combined with the cheaper rate of borrowing is expected to reduce consolidated interest expense by about $49 million per year, the company said.

"Nextel continues to improve its financial position," said Paul Saleh, executive vice president and chief financial officer, in a company news release. "We have reduced our total long term debt outstanding to a current level of $10.2 billion, significantly reduced interest expense and extended maturities while still maintaining ample liquidity."

Hanover Compressor Co. closed on its $350 million revolving credit facility that amends the company's previous loan, according to a news release. J.P. Morgan Securities Inc. and Banc One Capital Markets Inc. are the co-lead arrangers on the loan, with Bank One acting as syndication agent and JPMorgan Chase Bank acting as administrative agent.

The interest rate on the revolver can range from Libor plus 250 basis points to Libor plus 350 basis points depending on leverage. There is a commitment fee of 62.5 basis points. And, a final maturity date of Dec. 29, 2006, according to a filing with the Securities and Exchange Commission.

The company was able to close on the facility due to the successful completion of a $200 million offering of 8.625% senior notes and a $143.75 million offering of 4.75% convertible senior notes.

Hanover Compressor is a Houston-based provider of full-service natural gas compression and service, fabrication and equipment for natural gas processing and transportation applications.

Lions Gate Entertainment Corp. completed its merger with Artisan Entertainment, according to a company news release. In connection with this merger, Lions Gate obtained a $350 million credit facility consisting of a $100 million term loan B with an interest rate of Libor plus 325 basis points and a $250 million pro rata tranche with an interest rate of Libor plus 275 basis points.

JPMorgan was the lead bank on the deal.

"This transaction creates a powerful and unique company that combines the library assets, diversified business portfolio, product pipeline and home entertainment resources of a major with the agility, entrepreneurial culture and overhead of an indie," said Jon Feltheimer, chief executive officer, in a news release. "The combined entity is like no other company in the independent marketplace, and this will translate into tremendous opportunity going forward."

Lions Gate is a Vancouver, B.C.-based producer and distributor of film and television entertainment content.

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