Protection One secures early tickets, sets opening pricing; Collins & Aikman downgrade sends levels lower

By Sara Rosenberg

New York, March 21 - Protection One Inc. snagged some early orders after it launched to a good sized audience at price talk in the 300-plus basis points range. Meanwhile, in the secondary, Collins & Aikman Corp. - a name that has recently been plagued with bad news - saw its bank debt pushed lower on the heels of additional troubling news, a ratings downgrade.

Protection One came out with price talk of Libor plus 350 basis points on its $250 million term loan B and price talk of Libor plus 325 basis points on its $25 million revolving credit facility at the "well attended" bank meeting that was held Monday, according to a market source.

"Good questions," the source said about the bank meeting. "Already got some tickets in," he added.

The term loan B is being offered to investors at par, and revolver commitments of $10 million get an upfront fee of 75 basis points.

Commitments are due from investors on April 4.

Bear Stearns and Lehman Brothers are the lead banks on the $275 million credit facility (B2/B+), with Bear Stearns the left lead.

Proceeds will be used to refinance existing bank debt and some bond debt.

Protection One is a Lawrence, Kan., provider of commercial and residential security services.

Collins & Aikman weaker

Collins & Aikman's bank debt traded lower by about half a point on Monday after its debt was downgraded, with levels closing out the day at 99 7/8 bid, par 1/8 offered, according to one trader.

According to a second trader, the bank debt was only down about 25 basis points, with the paper trading on top of par.

The push lower was sparked by Moody's Investors Service's decision to downgrade the company's bank debt to B3 from B1, guaranteed senior subordinated notes to Caa2 from B3 and guaranteed senior unsecured notes to Caa1 from B2.

In addition, Moody's downgraded the company's speculative grade liquidity rating to SGL-4, indicating that the company now has weak liquidity, and assigned a negative outlook.

"The rating downgrades reflect that a series of challenging industry and company-specific developments are driving meaningful deterioration in C&A's near-to-intermediate-term revenues, margins, and liquidity," Moody's explained.

"Despite the fact that C&A refinanced a substantial portion of its debt facilities during August 2004, extended the maturity of its $250 million accounts receivable securitization agreement to March 2006 with higher advance rates, and still receives meaningful accounts receivable support from at least two original equipment manufacturers, the company experienced unused effective liquidity levels to $85 million or below during January 2005 and additionally plans to seek financial covenant amendments to its recently executed credit agreement," Moody's added.

Late last week, Collins & Aikman announced that it missed the filing deadline for its fiscal 2004 10-K and filed for a 15-day extension to try and complete a review of accounting issues regarding supplier rebates that may have led to premature or inappropriate revenue recognition.

The company expects to restate its results for the nine months ended Sept. 30, 2004 - reducing its previously reported operating income by $10 million to $12 million - and is evaluating whether a restatement of its 2003 results will be necessary.

Collins & Aikman also said that it is evaluating its financial covenant compliance under its senior credit facility, as well as other compliance issues under other financing arrangements, because of the potential restatements and financial reporting delay.

"The downgrade brought out more paper," one of the traders said. "But, recent trouble in the sector has been pushing it lower. It's been sliding lower over the past month."

Collins & Aikman is a Troy, Mich.-based designer, engineer, and manufacturer of automotive interior components.

HealthSouth closes

HealthSouth Corp. closed on its $715 million five-year amended and restated credit facility consisting of a $315 million term loan with an interest rate of Libor plus 250 basis points, a $250 million revolver with an interest rate of Libor plus 275 basis points, a $65 million letter-of-credit facility with an interest rate of Libor plus 275 basis points and an $85 million synthetic letter-of-credit facility with an interest rate of Libor plus 250 basis points.

Originally, all tranches were talked at Libor plus 275 basis points, but the term loan and the synthetic letter-of-credit facility were reverse flexed by 25 basis points during syndication.

J.P. Morgan Securities Inc. and Wachovia Capital Markets LLC acted as co-lead arrangers and joint bookrunners on the deal, and Deutsche Bank Securities acted as arranger.

Proceeds are being used by the Birmingham, Ala.-based healthcare services provider to refinance existing debt and for general corporate purposes.

"We are very pleased with the overwhelming response from the financial community on this credit facility, which is a first step in being able to access the capital markets," said John Workman, chief financial officer, in a company news release. "This provides us with financial flexibility that the company has not had over the past 18 months and the liquidity to satisfy future obligations. The substantial interest from the investment community allowed us to gain more competitive pricing, reducing our annual fees by almost $1 million."

"Beginning with the resolution last summer of the bondholder litigation and continuing with the recent CMS/DOJ civil settlement, the resolution of this final technical default is another significant step in working through the fraud-related issues unique to the company," added Jay Grinney, president and chief executive officer, in the release.

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