Fleming rebounds on plans for retail asset sales; primary waiting for October business

By Sara Rosenberg

New York, Sept. 27 - Fleming Cos., Inc.'s bank debt rebounded after the company announced plans to sell its retail division, with quotes on the B loan at the end of the week in the high 90s from their levels in the mid 90s previously.

Fleming's paper has seen a considerable drop over the past few weeks, according to market sources, as investors worried over the company's exposure to Kmart Corp., its grocery store subsidiary not performing well and an unfavorable article on how the company allegedly strong-arms suppliers in the Wall Street Journal.

"They say [the retail division sale] will generate $450 million in proceeds," a fund manager said. "And they're using it to pay down bank debt. So the bank debt will be reduced by about 50%.

"[The B loan] probably hasn't reached par because it will still be highly leveraged after the sale," the fund manager added.

The company has already initiated conversations with potential buyers for the retail operations and the actual disposal of the assets is anticipated to occur in a series of sales beginning in the fourth quarter of 2002 and ending in 2003, a news release said.

Fleming is a Lewisville, Tex. distributor of consumable goods and operator of price impact supermarkets.

Both distressed and par/near par loan traders admitted that it was essentially a non-day in the secondary bank loan market on Friday as the Deutsche Bank high yield conference in Scottsdale, Ariz. came to a close. Even companies that saw their bank debt drop or strengthen earlier in the week or just put out positive or negative news saw basically no movement. When asked about Nortel, Lucent, Xerox and so on, one trader responded, "I got nothing for you", while a second trader simply stated, "today was very quiet".

Meanwhile, the calendar of upcoming bank meetings has been relatively scarce, according to market sources, as people continue to hold their breath in expectation of October's big credit facility deals.

Investors are standing at the sideline, saving capital for the large, liquid, near-future deals such as, QwestDex, Burger King Corp., Ball Corp. and Del Monte Foods Co.

"People are waiting for these deals to come and are waiting to see if they can get done," a market professional said.

"Small things are hitting here and there but I think they're finding it kind of tough because people are holding on to capital for the big [more liquid] deals," an investment banker previously told Prospect News. "Until one of those breaks, I think it's going to be kind of slow."

QwestDex, a directory services company, is expected to launch approximately $1.5 billion in bank debt to help fund its leveraged buyout by The Carlyle Group and Welsh, Carson, Anderson & Stowe. JPMorgan, Bank of America, Deutsche Bank, Lehman Brothers and Wachovia Securities are lead banks on the deal.

Burger King, a Miami, Fla. hamburger fast-food chain, is expected to launch about $900 million in bank debt as part of its leveraged buyout by equity sponsors Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners from Diageo plc. JPMorgan and Salomon Smith Barney are said to be lead banks on the deal.

Ball, a Broomfield, Colo. supplier of metal and plastic packaging to beverage and food industries, is expected to launch approximately $1.55 billion in bank debt to help fund acquisition of Schmalbach-Lubeca AG. Deutsche, Bank of America, Lehman and Bank One are said to be the lead banks on the deal.

And lastly, Del Monte, a San Francisco, Calif. processed food company, is expected to launch about $1.6 billion in bank debt to help fund the merger with certain H.J. Heinz Co. businesses. Bank of America, JPMorgan Chase, UBS Warburg and Morgan Stanley are the lead banks on the deal.

In follow-up news, the leveraged buyout of Global eXchange Services by Francisco Partners was completed. In order to help fund the acquisition, GXS obtained a new $210 million credit facility (Ba3/BB-), consisting of a $175 million six-year term B with an interest rate of Libor plus 375 basis points and a $35 million five-year revolver with an interest rate of Libor plus 350 basis points. In addition, GE provided GXS with $235 million of senior subordinated notes through GE Capital Corporation.

Credit Suisse First Boston was the lead bank on the Gaithersburg, Md. e-commerce company's credit facility.

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