Veritas DGC joins calendar, Kmart DIP trades down

By Paul A. Harris

St. Louis, Mo., Oct. 22--As the week of Oct. 21 got underway in the leveraged loan market sources reported that a general quiet was pervading in both the primary and the secondary.

"Let's face it," one source said, "the only ones who are coming into this market are the ones that really need the money."

New paper from Veritas DGC, Inc. was heard to be headed into the market and National Waterworks Inc.'s bank meeting was reported to be set for Wednesday. Meanwhile Constar International Inc.'s deal, to help fund its spin-off from Crown Cork & Seal, was heard to have launched last Friday.

In the secondary Wyndham International Inc.'s paper was heard to be firming. Meanwhile sources reported that the Kmart DIP was suspiciously trading at a discount.

Also Monday, FMC Corp. said it closed on its new $500 million senior secured credit facility and a $40 million supplemental secured standby letter of credit facility. The loan closed along with $355 million of 10¼% seven-year senior secured notes.

The Philadelphia chemical company's facility, comprised of a three-year $250 million revolver and a five-year $250 million term loan, was the object of curiosity from at least one market source Monday.

"The B ended up getting done at Libor 475 with two points, at a discount," the source said.

"The bank debt seems to be trading pretty much in sympathy with the bonds. That's interesting in that it's five Bs, if not six, and it's in the chemical sector.

"That spread looks amazingly wide for that rating. I think it's really more of a comment on the cyclical chemical markets. I think they have a little bit of overhang of asbestos risk.

"I understand it broke from syndicate and tried to trade up a half to a point. So the deal got done and it's trading reasonably well. But what's interesting is the absolute story it took to get the thing done."

The term loan B was flexed up twice, starting at Libor plus 325 basis points, increasing to Libor plus 375 basis points before finally going to Libor plus 475 basis points.

One informed source reported that the bank meeting on the National Waterworks Inc.'s $325 million credit facility, via JPMorgan, Goldman Sachs and UBS Warburg, would take place on Wednesday.

The deal has a $75 million six-year revolver at Libor plus 275, and a $250 million seven-year term B at Libor plus 325. A $200 million 10 -year senior subordinated deal to fund the acquisition of the Vivendi subsidiary is also heard to be in the works, with timing dependent upon the strength of the high-yield market.

Houston-based geophysical services provider Veritas DGC also hopes to shake investors awake with a $275 million credit facility via Deutsche Bank, according to a market source, who added that the deal will be comprised of a $200 million term loan and a $75 million revolver. One source said that the meeting could conceivably take place during the week of Oct. 21.

Meanwhile the cork was heard to have popped last Friday on the Constar International's $250 million credit facility via Deutsche Bank and Citigroup. The facility is comprised of a $150 million seven-year term loan B at Libor plus 325 basis points, and a $100 million five-year revolver at Libor plus 300 basis points.

Of the smattering of news that emerged Monday from the secondary market, one source expressed an interest in the Kmart DIP. On Monday it was reported that despite the dearth of good news from the retail sector the company is expected to emerge from Chapter 11 during 2003.

"The Kmart DIP is trading down," this official and others told Prospect News on Monday.

"DIP loans are not supposed to trade at discounts," the source added. "You've got a super-priority lien. Other than our friends at Windstar, almost every DIP in my memory you get your money back.

"It's interesting that Citigroup is trying to buy the paper at 96.50 which is a fairly significant discount for a DIP. That tells me there is some concern about the viability of Kmart even in restructure."

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