El Paso hits the secondary, dipping a touch lower by day's end on investor clean up

By Sara Rosenberg

New York, Nov. 19 - El Paso Corp.'s credit facility broke for trading on Friday with the institutional paper quoted around the high par to 101 context before trading down slightly to mid to high par levels.

El Paso's institutional synthetic letter of credit facility was quoted at par ¾ bid, 101 offered and the term loan B was quoted at par 7/8 bid, 101 1/8 offered in the earlier part of the afternoon, according to one trader. A second trader had the term loan B quoted a little higher at 101 bid, 101½ offered.

However, by late afternoon a third trader quoted the letter of credit facility at par 3/8 bid, par 7/8 offered and the term loan B at par ½ bid, par 7/8 offered.

"It moved lower. It's a big deal so it's a little sloppy. It will trade down and then pop up when all the flippers clear," the third trader explained.

The $750 million institutional synthetic letter of credit facility, which was added to the deal at the start of this week, is priced with an interest rate of Libor plus 275 basis points.

The $1.25 billion five-year term loan B, which was upsized from an initial launch size of $750 million - although the tranche always contained the ability to increase to up to $1.25 billion - is priced with an interest rate of Libor plus 275 basis points as well after reverse flexing from an initial price talk of Libor plus 325 to 350 basis points this past Monday.

El Paso's $3 billion credit facility (B3) also contains a $1 billion three-year revolver, downsized from $1.75 billion when the letter of credit facility was added, with an interest rate of Libor plus 275 basis points. This tranche was reverse flexed during syndication from initial price talk of Libor plus 350 basis points.

Citigroup and JPMorgan are the lead banks on the term loan and the letter of credit facility, with Citi left lead. JPMorgan and Citigroup are the lead banks on the revolver, with JPMorgan left lead.

El Paso, a Houston-based energy company, plans to use proceeds from the revolver and term loan to refinance its existing $2.5 billion revolver due June 30, 2005 that currently bears interest at Libor plus 350 basis points and carries a 75 basis points commitment fee.

This existing revolver was originally sized at $3 billion but in connection with the sale of a majority of El Paso's interests in GulfTerra Energy Partners LP to Enterprise Products Partners LP in September the borrowing capacity was reduced.

As of Sept. 30, El Paso had no borrowings outstanding under its existing revolver and had approximately $1.1 billion of letters of credit issued under the facility.

Over the past several months, El Paso received several waivers on its existing revolver because of necessary financial restatements. The company also received an extension until Nov. 30 to file its second quarter 2004 10-Q. These waivers continue to be effective.

Harbor Freight sweetens repricing

Harbor Freight Tools, after soft circling with investors, added some new terms to its proposed repricing that are expected to appease lenders enough to get the deal done, according to a market source.

However, despite the modifications, the basic proposal under which the spread on the $440 million term loan would be lowered to Libor plus 225 basis points from Libor plus 275 basis points remained the same.

The first change, which was said to be under serious consideration by the syndicate earlier this week and was therefore somewhat expected, was the addition of call protection at 101 in year one.

The second change was the addition of a step up in pricing to Libor plus 250 basis points if leverage goes over 31/4x "down the road", the source said.

Investors were originally upset by the repricing proposal because they were losing 50 basis points on paper they just got their hands on a few months ago, especially since the company was a new issuer at the time and has only had one quarter of financial information to lenders so far, a source previously explained.

The company launched the mark-to-market repricing through a conference call last Friday via Credit Suisse First Boston and UBS.

Harbor Freight Tools is a Camarillo, Calif. tool and equipment catalog retailer.

Regal repricing basically done

Regal Cinemas Corp.'s repricing of its $1.592 billion term loan is "done without call protection [as] a bunch of investors want to upsize their positions. So even if anyone wants to drop out it will get done," a market source explained.

The company approached lenders on Tuesday with the proposal that would change the pricing grid to Libor plus 200 basis points with a step down to Libor plus 175 basis points if leverage falls to 3x or lower from a pricing grid of Libor plus 225 basis points with a stepdown to Libor plus 200 basis points.

This is the second repricing since the term loan was first obtained in May of this year. In July, the company repriced the grid to the current status and prior to the July repricing, grid pricing had the term loan at Libor plus 275 basis points with a step down to Libor plus 250 basis points.

Credit Suisse First Boston is the lead bank on the Centennial, Colo.-based theaters circuit's deal.

UAL waiver expected to pass

UAL Corp.'s waiver regarding possible non-compliance with the EBITDAR covenant is expected to pass, and in fact, seems to have gotten enough consents ahead of Friday's deadline to make signing off on the proposal just a matter of collecting a fee at this point.

"There's a 12½ basis points fee. It only requires 51%. And I think they've already got enough people on board to do that so you've got to be a fool not to get your signature page in on it and pass up the amendment fee," an informed source told Prospect News.

The Elk Grove Township, Ill.-based parent of airline United Air Lines Inc. was worried about missing the covenant requirement because of high fuel prices coupled and weak revenue.

CPI consents due

Consents were also due from lenders on Friday for Communications & Power Industries Inc.'s (CPI) proposed amended and restated credit agreement that basically would lower pricing on the company's term loan to Libor plus 250 basis points from Libor plus 300 basis points.

This proposal, led by UBS, is expected to get done as is, a market source added.

CPI is a Palo Alto, Calif. developer, manufacturer and distributor of components for systems used to generate, amplify and transmit high-power/high-frequency microwave and radio frequency signals.

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