Autos drop as bailout hits glitch; Cash, LCDX fall; Aquilex tweaks deal; King launches with new structure

By Sara Rosenberg

New York, Nov. 20 - General Motors Corp., Ford Motor Co. and Chrysler Financial Services LLC all saw their term loans head lower in an overall weak secondary market as immediate government help was denied, and LCDX 10 continued its downward spiral.

In other news, Aquilex Holdings LLC revised the structure of its credit facility that has not yet hit the market and the changes are being viewed as an improvement over the original proposal, and King Pharmaceuticals Inc. decided to launch its credit facility on Thursday with a completely different structure than was previously contemplated.

Autos slide on bailout worries

Auto names, such as General Motors, Ford and Chrysler Financial, continued to come under pressure on Thursday as news emerged that the companies are being denied immediate access to government cash, according to a trader.

General Motors, a Detroit-based automotive manufacturer, saw its term loan quoted at 33 bid, 34 offered, down from 36½ bid, 38½ offered.

Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted at 33 bid, 34½ offered, down from 35¾ bid, 36¾ offered, the trader said.

And, Chrysler Financial, a provider of automotive financial products and services, saw its first-lien term loan quoted at 52¾ bid, 53¾ offered, down from 55½ bid, 56½ offered.

Early on in the day there were reports that a government bailout for the auto companies could be coming soon, although there was also chatter that a proposal might not get approved, the trader remarked.

Later on in the session, talk turned to the companies being unable to access any government help right away and that instead, the automakers would have to make their case to Congress next month, the trader added.

Ford downgraded

Also on Thursday, Ford's corporate credit rating was lowered to CCC+ from B- by Standard & Poor's, and removed from CreditWatch.

S&P said that the downgrade reflects increasing and ongoing cash use in the company's automotive operations caused by plummeting light-vehicle demand and the dramatic consumer shift away from large pickup trucks and sport utility vehicles.

In addition, the rating reflects the possibility that the problems the company faces could overwhelm its cash and liquidity during 2009, the rating agency added.

Cash, LCDX still hurting

The cash market in general and LCDX 10 felt progressively worse during Thursday's trading session, a trend that has been pretty common recently, according to a trader.

Cash overall was probably down about another two points on the day, the trader said, remarking, "The market sucked today" because there was "no bid."

LCDX 10 was quoted around 77 bid, 77.50 offered, down from around 79.70 bid, 79.90 offered on Wednesday, the trader added.

Meanwhile, stocks were also weaker, with Nasdaq down 70.30 points, or 5.07%, Dow Jones Industrial Average down 444.99 points, or 5.56%, S&P 500 down 54.14 points, or 6.71%, and NYSE down 360.78 points, or 7.20%.

Aquilex retranches

Moving to primary happenings, Aquilex decided to rework the structure of its proposed credit facility before coming to market so as to make the deal "new, better and improved," a market source told Prospect News on Thursday.

Timing on the launch of the deal is still being decided upon, the source said.

Under the new structure, which is rated at BB- by S&P, the facility is sized at $310 million, broken down into a $50 million revolver, a $50 million term loan A and a $210 million term loan B, the source remarked.

By comparison, under the old structure, which was rated at B1 by Moody's Investors Service, the deal was sized at $357 million, consisting of a $307 million first-lien term loan and a $50 million revolver.

Aquilex using more mezzanine and equity

To make up for the $47 million in lost term loan funds that resulted from the change in structure, Aquilex will be getting additional mezzanine financing and equity for its buyout transaction, the source explained.

The company is being purchase by Teachers' Private Capital from Harvest Partners, and the transaction is scheduled to close in December, subject to regulatory approvals.

RBC is the lead bank on the credit facility.

Aquilex is an Atlanta-based provider of service, repair and overhaul services, and industrial cleaning services to the energy and power generation sectors.

King reworks structure, launches

King Pharmaceuticals held a bank meeting at 2 p.m. ET on Thursday to kick off syndication on its proposed credit facility, but the deal was presented to lenders with a completely new structure than the one that was being circulated earlier on, according to a market source.

The company only ended up launching a $300 million four-year term loan, and is now looking to keep its existing $475 million revolver in place, while amending it to allow for the term debt and bump up pricing, the source said.

The proposed term loan is being talked at Libor plus 500 basis points with an original issue discount of 96, and it amortizes at a rate of 15% in year one, 20% in years two and three, and 45% in year four.

Under the previously expected structure, the company was going to approach lenders with a $1 billion senior secured credit facility (Ba2/BBB-), comprised of a $150 million revolver talked at Libor plus 500 bps, a $350 million term loan A talked at Libor plus 500 bps with an original issue discount of 96 and a $500 million term loan B talked at Libor plus 550 bps with an original issue discount of 95.

Credit Suisse and Wachovia are the joint lead arrangers and bookrunners on the deal that was initially set to launch this past Tuesday but was delayed by two days. Credit Suisse is the administrative agent.

King revolver pricing moving up

As part of King Pharmaceuticals proposed revolver amendment, pricing on the tranche would be increased to Libor plus 500 bps from Libor plus 87.5 bps, the source remarked.

In addition, the commitment fee on the revolver would be raised to 50 bps from 20 bps, lenders would receive a 100 bps amendment fee for their consents, and there would be mandatory quarterly commitment reductions of 15% in year one and 20% in years two and thereafter, with the remainder due at maturity on April 2012, the source remarked.

Proceeds from the proposed term loan, along with $425 million in revolver borrowings, will be used to help fund the hostile takeover attempt of Alpharma Inc. through a tender offer of $37 per share for all of Alpharma's outstanding shares of class A common stock. The $1.6 billion offer was taken directly to Alpharma shareholders.

King leverage in the ones

King Pharmaceuticals' leverage through the credit facility would be 1.0 times and total leverage would be 1.5 times.

Other financing for the acquisition of Alpharma will come from cash on hand. The amount of company cash being used for the deal will be increased as a result of the reduction in the amount of term loan debt, the source explained.

The tender offer expires on Nov. 21, after being extended from an original Oct. 10 deadline. As of Oct. 10, about 18.8 million shares, or 45%, of the class A common stock of Alpharma were tendered.

King Pharmaceuticals is a Bristol, Tenn.-based integrated branded pharmaceutical company. Alpharma is a Bridgewater, N.J.-based specialty pharmaceutical and animal health company.

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