Peabody goes banks only with new deal; Huntsman sets meeting; General Growth structure emerges

By Paul A. Harris

St. Louis, Sept. 15 - The mid-week session in the leveraged loan market saw news emerge on new deals from Peabody Energy Corp., which is seen to be abandoning the institutional market, and Salt Lake City chemical firm Huntsman LLC, which announced earlier in the week that it proposes to go public.

Also PacifiCare Health Systems Inc. announced a new $750 million credit facility, and details emerged on General Growth Properties Inc.'s $6.15 billion bank loan.

Meanwhile in the aftermarket traders reported that most names were holding their own with the exceptions of Atkins Nutritionals Inc., Calpine Corp., and DS Waters of America LP.

Huntsman, Peabody bank meetings

News of a Thursday bank meeting for Huntsman LLC's new credit facility circulated the market on Wednesday.

No details were available on the size and structure of the deal, which will be led by Deutsche Bank, according to market source.

The Salt Lake City chemical company announced a proposed initial public offering of common stock in a Sept. 13 press release.

Meanwhile a bank meeting is expected to take place on Wednesday Sept. 22 for Peabody Energy Corp.'s all pro rata $1.35 billion credit facility (Ba1/BB+), via Wachovia Securities and Bank of America.

The credit facility will be comprised of a $900 million revolver and a $450 million term loan, with pricing on both at Libor plus 125 basis points.

"They are walking away from the institutional markets and going straight to the banks," a buy-side source commented on the deal. The St. Louis coal company will use proceeds to take out its institutional term loans.

"It will be interesting to see if they can do that kind of size in a bank-only execution," the investor added.

"They probably will get it done, but it's aggressive."

General Growth Properties structure

Elsewhere in the primary market structure and price talk emerged Wednesday on General Growth Properties Inc.'s planned $6.15 billion bank loan, via joint lead arrangers and joint bookrunners Lehman Brothers, Credit Suisse First Boston, Wachovia and Bank of America.

The Chicago shopping mall owner's deal, which is expected to launch in early to mid October, will be comprised of a $250 million three-year revolving credit facility. It will also include up to a $3.9 billion three-year term loan A talked at Libor plus 225-250 basis points, and a $2.0 billion four-year term loan B talked at Libor plus 250-275 basis points.

The bank loan is part of a $9.75 billion credit facility of which $3.6 billion is a bridge loan to be taken out by the CMBS deal.

"Pricing will be ultimately be based upon where this thing comes out from a ratings standpoint," commented one source close to the deal.

PacifiCare plans deal

Finally Cypress, Calif. consumer health organization PacifiCare Health Systems Inc. announced in a Wednesday press release that it will obtain a new $750 million credit facility to fund its acquisition of American Medical Security Group.

The facility will be comprised of a $550 million term loan, $150 million of which will be used to refinance the company's existing term loan, and a $200 million revolving credit facility.

A little more selective

Generally, the buy-side source quoted above said the bank loan market still has plenty of money around although not quite as much as in the early summer, a trend reflected in the higher interest rates being paid by new issuers.

"We still have a highly liquid market," commented the source.

"This market more or less peaked in July, with record low coupons. Since then it has given up 35 to 50 basis points, depending upon where you look.

"You were hearing that the market was a little battered, through August, in terms of what happened to prices in the primary and secondary markets. They were coming off of historic lows, meaning five-to-seven year lows.

"And all of the issuance did eat into some of the liquidity. So it's no longer a feeding frenzy. People are being a little more selective."

Credit issues

The investor also mentioned that "credit issues" involving Atkins Nutritionals Inc. and DS Waters were serving as a reminder to leveraged loan players that the market is not exactly safe as milk.

"They are reminding people that there is risk in this world," noted the buy-sider.

"Both are fairly new deals, and both have had some credit issues that required some covenant relief, etc.

"People are focused on them to the extent that they emphasize that this is not a risk-free market."

One trader told Prospect News on Wednesday that news that Atkins had hired a turnaround specialist amid its struggles with competition from rival food companies and declining consumer interest in low-carb diets is "making people nervous.

"That's been a story for the last few days," the trader added. "Definitely everything is down. I heard the first lien was trading in the low 80s. The second lien is a big mystery.

"I hear they had a bank meeting to try to change the covenants and the pricing."

On Monday, a trader told Prospect News the first-lien paper was thought to be in the 80 bid to 83 offered area and the second-lien paper in the 60s. He added that some had mid-to-high 70s on the first-lien debt but he disagreed with those levels.

By comparison, at the start of last week, the first-lien bank debt was in the mid-to-high 80s area and the second-lien paper was in the low 80s, the trader added.

The fall has been influenced by meetings that have been taking place between Atkins - a Ronkonkoma, N.Y. -based provider of food, nutritional and information products for controlled carbohydrate lifestyles - and its bank lenders regarding concerns about financial numbers.

DS Waters slips

Meanwhile DS Waters of America, the Atlanta-based company that was created from the North American operations of Groupe Danone and Suntory International, also continued to ease on Wednesday.

"They had a bank meeting," the trader said, adding that the company's paper is now in the high 80s

"I heard they were going to blow through covenants and pricing will go to Libor plus 400," the trader added.

"Their covenant is something like 3.4-times leveraged through the end of September. And I think they will probably blow through that with the current numbers.

"Supposedly they're losing a lot of customers and costs are just going through the roof."

On Friday, DS Waters launched a proposed amendment to its facility, asking lenders to increase the leverage covenant to 4½ times from 3½ times to avoid a potential default.

In connection with the amendment, DW Waters is offering to increase pricing on its credit facility to Libor plus 400 basis points and pay lenders a 25 basis point amendment fee, the source said.

JPMorgan is leading the amendment process for the Atlanta-based home and office water delivery service.

Allied Waste holds its own

Meanwhile traders reported no further decline Wednesday in the paper of Allied Waste Industries, Inc.

On Tuesday, the Scottsdale, Ariz.-based waste disposal firm revealed that for a second time this year it was reducing its forecast operating income before depreciation and amortization for 2004 by about 3% to 4% from previous guidance.

Reacting to the downward guidance revision, as well as weaker operating earnings and cash generation, and higher leverage than anticipated over the last 12 months ended June 30, Moody's Investors Service placed Allied Waste's ratings on review for possible downgrade, including the Ba2 bank debt rating.

The events had caused bank debt to be quoted lower by about half a point on both the term loan B and the revolver on Tuesday. However traders reported a dearth of activity in the paper on Wednesday.

"The bonds are down but not the bank debt," one trader commented, spotting the loan at 101.375.

Finally, one trader also told Prospect News that the paper of San Jose, Calif., power generator Calpine Corp. had "weakened a little" during the session, although the trader could offer no explanation.

"Other than that most names are holding ground," the trader added."

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