Hudson Products increases OID; Hawaiian Telcom drops on downgrade; TXU down with market

By Sara Rosenberg

New York, Aug. 19 - In new deal happenings on Tuesday, Hudson Products Corp. widened the original issue discount on its term loan B, and now that this change has been made, the plan is to allocate the deal next week.

Meanwhile, over in the secondary market, Hawaiian Telcom Communications Inc.'s term loan C slid lower after the debt was downgraded because of liquidity concerns, and Texas Competitive Electric Holdings' (TXU) term loan levels were softer as the overall market felt heavier.

Hudson Products raised the original issue discount on its term loan B and is requesting lender comments on the credit documents by Thursday at 3 p.m. ET, with the expectation being that closing will take place on Friday and allocations will go out next week, according to a market source.

The $220 million seven-year term loan B is now being offered to investors at a discount price of 97, compared to the initial talk of 98 that was announced at launch, the source said.

Pricing on the term loan B is Libor plus 500 basis points with a 3% Libor floor for life.

Earlier on in syndication, pricing on the term loan B had been flexed up from original talk of Libor plus 425 bps.

Hudson Products' $250 million credit facility (Ba3/BB-) also includes a $30 million five-year revolver that is priced at Libor plus 500 bps with a 3% Libor floor for life as well.

Pricing on the revolver had also been increased from Libor plus 425 bps earlier in the syndication process.

BNP Paribas is the lead bank on the facility that will be used to help fund the buyout of the company by Riverstone Holdings LLC from the Sterling Group LP.

Other buyout financing will come from $125 million of mezzanine debt.

Hudson Products is a Sugar Land, Texas, designer and manufacturer of air-cooled heat exchanger equipment to serve the oil, gas and petrochemical processing industries.

Hawaiian Telcom falls

Switching to trading news, Hawaiian Telcom's term loan C weakened after Standard & Poor's announced that it downgraded the debt as well as the company's corporate credit rating, according to a trader.

The term loan C went out at 78½ bid, 79½ offered, down from Monday's closing levels of 79½ bid, 80½ offered, the trader said.

Earlier in the Tuesday session, levels had dropped to 78 bid, 79 offered, but they rebounded slightly prior to the close, the trader continued.

"Downgrade affected it as holders were less inclined/unable to hold CCC rated paper," the trader explained.

On Tuesday, S&P cut the company's credit facility and corporate credit rating to CCC+ from B-. The outlook is negative.

"The downgrade reflects our increased concerns that Hawaiian Telcom's cash balance - it's only source of liquidity - will be inadequate to fund operations through 2009 given the challenging business environment, the company's weak operating results, and its excessive leverage," said Susan Madison, S&P credit analyst, in the rating release.

In May, Hawaiian Telcom revealed that it had drawn all available funds under its revolving credit facility in response to uncertain conditions in financial markets.

The company also put in a request to increase the borrowing capacity under the revolver to $150 million from $90 million, but that request was denied by the Public Utilities Commission of the State of Hawaii.

The company's right to elect to increase the revolver borrowing capacity expired on June 1.

Then, last week, in a 10-Q filed with the Securities and Exchange Commission, the company said that it is conducting a strategic review to consider possibilities to improve cash flow and liquidity, including product development opportunities, cost reduction initiatives, asset rationalization, capital raising opportunities and debt reduction options.

For the second quarter, Hawaiian Telcom reported adjusted EBITDA of $35.7 million, down from $42.3 million last year.

Operating revenue for the quarter was $115.3 million, down 5.1% from $121.4 million in the second quarter 2007.

And, net loss for the quarter was $30.5 million, compared to net income of $21.4 million in the previous comparable period.

At the end of second quarter, the company had $71.8 million in cash and cash equivalents, compared to $93 million at the end of the first quarter and $4.7 million a year ago.

The company ended the quarter with a total of roughly $1.075 billion in debt.

Hawaiian Telcom is a Honolulu-based telecommunications provider.

TXU slides

Texas Competitive's term loan debt lost some ground in a decent amount of trading on Tuesday as the overall tone in the cash market was negative, according to a trader.

The Dallas-based energy company's term loan B-1 was quoted at 92 7/8 bid, 93½ offered, down from 93¼ bid, 94 offered; the term loan B-2 was quoted at 93 bid, 93¾ offered, down from 93½ bid, 94 1/8 offered; and the term loan B-3 was quoted at 92 7/8 bid, 93½ offered, down from 93¼ bid, 93 7/8 offered, the trader said.

The trader explained that Texas Competitive's term loans were likely lower because the cash market in general was down with equities, and LCDX 10 weakened for the same reason as well.

The index was quoted at 96.45 bid, 96.65 offered, down from Monday's closing levels of 96.75 bid, 96.85 offered, the trader added.

As for stocks, Nasdaq closed down 32.62 points, or 1.35%, Dow Jones Industrial Average closed down 130.84 points, or 1.14%, S&P 500 closed down 11.91 points, or 0.93%, and NYSE closed down 69.39 points, or 0.84%.

Broadlane closes

TowerBrook Capital Partners LP completed its acquisition of Broadlane from Tenet Healthcare Corp. for about $160 million, according to a news release.

To help fund the transaction, Broadlane got a new $155 million credit facility (Ba3/BB-), consisting of a $15 million revolver and a $140 million term loan B.

Pricing on both tranches is Libor plus 525 basis points with a 3.25% Libor floor and an original issue discount of 981/2.

During syndication, the term loan B was upsized from $135 million after the mezzanine financing for the deal was downsized to $62.5 million from $67.5 million.

The term loan B upsizing was done so as to help lenders with allocations being that the tranche was 1½ times oversubscribed.

Jefferies acted as the lead bank on the deal.

Total leverage is 4.4 times.

Broadlane is a Dallas-based technology-oriented health care services company.

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