New names surface in primary market; Sierra Pacific, QwestDex credit facilities launch

By Sara Rosenberg

New York, Oct. 7 - It appears as if some market participants are getting what they wished for as new loans other than the high-profile giant deals from Del Monte Foods Co., Burger King Corp., Ball Corp. and QwestDex (which had its institutional launch on Monday) are once again scheduled to hit the primary in the near future. Some such deals that are anticipated this week include White Mountains Insurance Group Ltd., The Aerostructures Corp. and United States Filter Corp. Already launched this week was Sierra Pacific Power Co.'s $100 million term loan.

Leveraged players have been getting fidgety, as new issuance has been relatively scarce over the past few weeks. One sells-side source confided in Prospect News: "The same stuff we have on the calendar now, we had on for the past few months. I hope it picks up before the end of the year. It is close to year-end and people have limited capital so they're probably holding on to it [for the large deals]." While last week's Bank of America Securities syndicated finance weekly report stated: "The leveraged loan calendar remains full of deals that feel like they have been talked about forever, but have yet to launch."

But these individuals can now breathe a sigh of relief as this week's calendar may end up bringing new life into the previously dead primary.

White Mountains Insurance Group Ltd. is scheduled launch a $230 million term loan C with an interest rate of Libor plus 300 basis points on Tuesday, according to market sources. Lehman Brothers is the lead bank on the deal.

Proceeds are being used to take out the term loan A, giving the company amortization relief, one source told Prospect News.

"I think [White Mountains Insurance has] traded well so I don't see any problem [with this deal]," he added.

White Mountains Insurance is a Bermuda-domiciled financial services holding company.

The Aerostructures Corp. is scheduled to hold a bank meeting on Wednesday regarding a new $165 million credit facility, according to market sources. Lehman Brothers is the lead bank on the deal.

On a preliminary basis, the loan is said to consist of a $130 million six-year term loan B with an interest rate of Libor pus 375 basis points and a $35 million five-year revolver with an interest rate of Libor plus 325 basis points, market sources said. However, one fund manager previously told Prospect News that he anticipates a change in the pricing before the actual launch. "There's no way an aircraft deal will get Libor plus 375. That's a little weak," he explained.

The syndicate was not immediately available to confirm this information.

The Nashville, Tenn. supplier of airframe structures will use proceeds from the new loan to refinance existing debt.

The credit facility is expected to close around Nov. 1.

United States Filter Corp. is expected to launch a new $325 million credit facility this week, according to market sources. JPMorgan, Goldman Sachs and UBS Warburg are the lead banks on the deal.

The loan consists of a $75 million six-year revolver with an interest rate of Libor plus 275 basis points and a $250 million seven-year term loan B with an interest rate of Libor plus 325 basis points, sources said. However all details on the loan are subject to change.

Proceeds from the loan will be used to help fund the acquisition of United States Filter's waterworks distribution business. The business is being bought by a company jointly owned by JPMorgan Partners and Thomas H. Lee Partners for a cash purchase price of $620 million.

Unites States Filter is a Palm Desert, Calif. provider of water and wastewater systems.

A bank meeting has been scheduled for Oct. 15 for Lyondell Citgo Refinery, according to a fund manager. The loan consists of a $70 million revolver and a $450 million term loan. Credit Suisse First Boston is the lead bank on the deal.

"Traditionally, [their credit facilities] have been unsecured," the fund manager said. Interestingly though, "this one will be secured for 18 months."

Other names floating around the primary market include Tucson Electric Power Co., Rexnord Corp., a Milwaukee, Wis. power transmission and conveying components manufacturer, and Bell Atlantic Canada for the leveraged buyout of its directory business.

Sierra Pacific Power Co. was said to have held a bank meeting on Monday regarding a $100 million five-year term loan, according to market sources. The Reno, Nev. electric utility's deal is being led by Lehman Brothers.

QwestDex held its highly anticipated institutional bank meeting for approximately $1.5 billion credit facility on Monday. The loan was anticipated to consist of a 61/2-year term loan B sized at about $700 with an interest rate of Libor plus 350 basis points and a six-year pro rata portion sized at approximately $800 million with an interest rate of Libor plus 300 basis points, a source close to the deal previously told Prospect News.

The directory services company's deal has been presented to top-tier agents and some larger institutions already, sources say.

The launch apparently took up most of the afternoon, according to market participants and the syndicate, making official launch details not immediately available at press time.

The only concern amongst investors at this time is that when QwestDex West hits the bank loan market next year, the QwestDex East paper might suffer, a fund manager explained, adding that investors are trying to obtain a guarantee that if the West loan prices differently than the East loan due to a change in market conditions, etc. the East loan will be adjusted to match.

JPMorgan, Bank of America, Deutsche Bank, Lehman Brothers and Wachovia Securities are the lead banks on the deal.

Proceeds will be used to help fund the leveraged buyout of QwestDex by The Carlyle Group and Welsh, Carson, Anderson & Stowe.

In follow-up news, Brand Services Inc. restructured its credit facility recently, modifying both the size and pricing, according to market sources. The company downsized its term loan B by $20 million to $130 million and flexed the rate up by 50 basis points to Libor plus 400 basis points.

"They changed the structure of the entire deal," a fund manager said. "Now its $35 million of mezzanine notes at the holding company, the subordinated debt was reduced by about $15 million and the term loan B is $130 million, reduced from $150 million. Pro forma leverage will now be 4.1 times and senior debt will be 2.0 times."

Some market participants expected the upward flex on the term B when the deal first launched (after being delayed from surfacing in the primary market in August). "It's a good credit but under-priced," a buy-side source previously told Prospect News. "I think this will have to break 400 before it gets done. It's B1 rated. Just look at Kerasotes, which is 400 and is also B1. I won't commit at this level."

This initial reaction left the company with no choice but the change the deal in order to complete the syndication process. "People weren't that enthusiastic about it," the fund manager continued. "It's B1, was L+350 and is a scaffolding company. All B1's are getting 400 over and [the industry has] a cyclical nature."

The 10-year note offering, which was reduced to $150 million from $165 million, came on Friday with a coupon of 12%, pricing at 97.189 to yield 12½%.

Credit Suisse First Boston and JPMorgan are the lead banks on the deal.

Proceeds will be used to help finance the purchase of the St. Louis, Mo. scaffolding company by J.P. Morgan Partners from DLJ Merchant Banking.

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