Centennial higher as asset sale viewed favorably; Interstate Bakeries rebounds on investor focus

By Sara Rosenberg

New York, Sept. 7 - Centennial Communications Corp.'s (formerly Centennial Cellular) bank debt headed higher Tuesday spurred on by news of an asset sale and overall better market performance as people returned from August vacations bringing new life to the secondary in the form of better bids. Trading, however, remained light as investors were still settling in.

Also on the secondary side, Interstate Bakeries Corp. finally found reason to celebrate as the bank debt moved up by a couple of points following a disappointing downturn during the first half of last week.

Centennial's bank debt was quoted at par ¾ bid, 101 1/8 offered, about 3/8 of a point better on the day, according to a trader.

The Wall, N.J., wireless telecommunications service provider announced early Tuesday morning that it has entered into a definitive agreement to sell its wholly owned subsidiary, Centennial Puerto Rico Cable TV Corp., to Hicks, Muse, Tate & Furst Inc. for about $155 million in cash.

"This has proven to be a good time to monetize our cable television business and this transaction accelerates the de-leveraging of the company," said Michael J. Small, chief executive officer of Centennial, in a company news release.

And, although proceeds from the sale will be used to fund the build out of the Lansing and Grand Rapids, Mich., licenses the company expects to acquire from AT&T Wireless as well as other contemplated capital requirements - not to pay down debt - the "asset sale gave [the] loan a little pop," the trader explained.

"[The] market [is] better in general. Feels good with everyone back," the trader added.

Completion of the asset sale is subject to customary closing conditions, including regulatory approval of the transfer of Centennial Cable TV's cable franchises, and is expected to occur in early 2005.

Interstate stronger

Interstate Bakeries' bank debt was quoted higher at 94½ bid, 96 offered from previous levels of 92 bid, 94 offered, according to a trader, with market sources attributing Tuesday's positive performance to "people focusing" on the name.

This was a nice reprieve for the Kansas City, Mo., wholesale baker's bank debt after dropping from the low 98s to as low as 91 bid last week on news of missing the deadline for and delaying filing of a 10-K annual report for the fiscal year ended May 29 and a downgrade of the company's bank debt to Caa1 from B2 by Moody's Investors Service.

General Growth launch ahead

A bank meeting for General Growth Properties Inc.'s proposed $9.75 billion credit facility is expected to take place in the late September to early October timeframe, according to a market source. Lehman Brothers, Credit Suisse First Boston, Wachovia and Bank of America are joint lead arrangers and joint bookrunners on the deal.

Of the total amount, $3.6 billion will come in the form of a bridge loan that is hoped to later be taken out by a commercial mortgage-backed securities deal.

The average interest rate of the new debt will be in the Libor plus 225 to 275 basis point range, the majority of debt having a term of three years, with some four-year debt.

Proceeds, along with $500 million of new equity, will be used to help fund the acquisition of The Rouse Co. for $7.2 billion, including the assumption of about $5.4 billion of Rouse debt, and to redo $2 billion of General Growth's unsecured credit.

The transaction is expected to close in the fourth quarter of 2004.

Post closing, General Growth will have about $23 billion of debt, or about 71% of total pro forma capitalization of $32.5 billion based upon the current stock price. Estimated interest coverage is approximately 1.6x for the first full year after closing, assuming the transaction closes in the fourth quarter.

Lehman Brothers, as well as Credit Suisse First Boston and Wachovia Bank, served as advisers for General Growth, a Chicago-based shopping mall owner.

Titan closes

Titan Corp. closed on the repricing of its $343 million term loan B, lowering the interest rate to Libor plus 275 basis points from Libor plus 325 basis points, with a step down to Libor plus 250 basis points if both Moody's Investors Service and Standard & Poor's take the company's rating off negative watch and a step up to Libor plus 300 basis points if the ratings are downgraded by one or both of the rating agencies.

Originally, the syndicate went out with pricing of Libor plus 250 basis points on the term loan B with a step down to Libor plus 225 basis points upon removal from negative rating watch, but investors fought that proposal hard enough to get pricing increased by 25 basis points.

The term loan carries soft call protection of 101 for one year against a refinancing.

Furthermore, under the amendment, the definition of EBITDA was changed to exclude settlement charges relating to the FCPA investigations by the Securities and Exchange Commission and Department of Justice, subject to certain limitations.

Wachovia is the lead bank on the credit facility.

The amendment was effective Sept. 2, according to a company news release, the day consents were due from lenders.

Titan is a San Diego technology developer and systems integrator that provides a range of systems solutions and services primarily to government agencies.

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