Allegheny, Boise Cascade, Dresser-Rand break for trading; Lake Las Vegas reverse flexes

By Sara Rosenberg

New York, Oct. 26 - Allegheny Energy Supply Co. LLC, Boise Cascade LLC and Dresser-Rand Co. hit the secondary loan market Tuesday at strong levels, with all institutional paper either topping 101 or at the very least wrapping around 101.

Meanwhile, in the primary, Lake Las Vegas Resort made yet another change to its in-market credit facility, reducing pricing on both the first- and second-lien term loans just one day after increasing the sizes of both tranches.

Allegheny's $1.044 billion term B was quoted at 101 3/8 bid, 101 5/8 offered, according to traders, with the paper basically trading within those levels throughout the day.

The term loan, which is priced at Libor plus 275 basis points, had been extremely well received as basically no existing lenders dropped out of the deal and more than a dozen requested significant increases in their positions.

The Greensburg, Pa., owner and operator of electric generating facilities is basically getting this new term loan B through an amendment of its credit facility.

The new term loan B would be used to combine Allegheny's existing term loan B and term loan C into one large term loan with lower pricing. Currently, the company has a total of $1.244 billion of term B and term C debt, with the term B priced at Libor plus 300 basis points and the term C priced at Libor plus 425 basis points. The $200 million that is not being refinanced under the amendment is being paid down using $50 million of cash and $150 million of equity proceeds previously raised by parent company, Allegheny Energy Inc.

After closing on the amendment, once the company pays down $200 million of the new term B tranche using cash flow, net cash proceeds from asset sales or net cash proceeds from the issuance of equity, pricing will step down to Libor plus 250 basis points.

Citigroup is the lead bank on the deal, which is expected to close Wednesday.

Boise Cascade breaks

Boise Cascade's term loans started trading late in the day Tuesday, with the term loan B quoted at 101 5/8 bid, 101¾ offered, according to traders. The term loan C was quoted by one trader at par 5/8 bid, 101 offered almost immediately on the break and then at par 7/8 bid, 101 1/8 offered a little later in the session by a second trader, who said that he saw the paper trading right around 101.

Both the $1.33 billion seven-year term loan B and the $1.225 billion six-year term loan C are priced at Libor plus 225 basis points. The two term loans, which were offered at par, were sold as a package, meaning that all commitments that came in were sold on a proportional basis.

Originally, the B loan was priced at Libor plus 250 basis points, but the tranche was reverse flexed during syndication on strong demand.

Also helping the matter was the pricing of $650 million of high-yield bonds at 12.5 basis points inside of price talk. The company sold $250 million of eight-year senior floating-rate notes at par to yield three-month Libor plus 287.5 basis points and $400 million of 10-year senior subordinated notes at par to yield 7 1/8%.

The reason behind the original 25 basis point variation in pricing between the term loan B and the term loan C had to do with a repayment provision. If the company sells the timberland assets, proceeds repay the term loan C in its entirety before going toward the term loan B, and there are plans to sell the assets, a source previously explained.

But, the book was so oversubscribed that the syndicate was able to line up pricing on the two tranches without making any changes to this repayment clause.

Boise Cascade LLC, a new company formed by Madison Dearborn Partners LLC that will be based in Boise, Idaho, is getting this new credit facility to acquire Boise Cascade Corp.'s paper, forest products and timberland assets for about $3.7 billion.

Under the timberland portion of the acquisition, Boise Cascade LLC will own or control about 2.3 million acres of timberland in the United States, 35,000 acres of eucalyptus plantation in Brazil, and a 16,000-acre cottonwood fiber farm near Wallula, Wash.

Also being acquired is Boise Building Solutions, a producer of plywood, lumber, particleboard and engineered wood products, and Boise Paper Solutions, a manufacturer of uncoated free sheet papers.

Boise's $2.955 billion credit facility (Ba3/BB), which launched Sept. 29, also contains a $400 million six-year revolver that was upsized during syndication from $350 million. The revolver is priced at Libor plus 225 basis points with an undrawn fee of 50 basis points. Revolver commitments of $15 million got 75 basis points upfront.

JPMorgan and Lehman Brothers are joint lead arrangers on the loan, with JPMorgan listed on the left. Deutsche Bank and Goldman Sachs are agents.

Dresser-Rand 101 plus

Dresser-Rand's $300 million term loan, like Allegheny, was quoted at 101 3/8 bid, 101 5/8 throughout the day, with trading taking place primarily within that context, according to a trader.

The term loan, which was sold at par, is priced at Libor plus 200 basis points. Originally, the tranche was launched with pricing of Libor plus 250 basis points but it was reverse flexed during syndication on overwhelming investor demand.

Dresser-Rand's $700 million credit facility (B1/B+) also contains a $100 million euro term loan with an interest rate of Libor plus 275 basis points and a $300 million revolver with an interest rate of Libor plus 250 basis points.

Citigroup and Morgan Stanley are the lead banks on the deal, with Citigroup listed on the left. UBS is involved as well.

Proceeds from the credit facility and from a $420 million bond deal will be used to help fund First Reserve Corp.'s acquisition of Dresser-Rand from Ingersoll-Rand Co. Ltd. for about $1.2 billion in cash. This acquisition will be the first investment made in First Reserve Fund X, a $2.3 billion private equity fund raised earlier this year.

The sale, which is subject to government regulatory approvals and other customary closing conditions, is expected to close in the fourth quarter.

Olean, N.Y.-based Dresser-Rand is a supplier of infrastructure equipment, including compressors, turbines and engines, as well as related after-market parts and services, to the energy industry.

Lake Las Vegas cuts pricing

Lake Las Vegas reduced pricing on both of its term loans on Tuesday even though both rating agencies downgraded their debt rating by one notch as a result of the deal's recent upsizing.

The $435 million five-year first-lien term loan, increased from $360 million on Monday, is now priced at Libor plus 250 basis points, compared to initial pricing of Libor plus 275 basis points, and the $125 million second-lien six-year term loan, increased from $100 million on Monday, is now priced at Libor plus 550 basis points, compared to initial pricing of Libor plus 600 basis points, the fund manager said.

These tranches were multiply oversubscribed by the end of last week, with the first lien reported to be two times oversubscribed and the second lien reported to be three times oversubscribed.

But, being that the deal was downgraded, the syndicate had to ask lenders to recommit to the deal - a process that obviously went incredibly well seeing that pricing was reduced.

On Monday, Moody's Investors Service downgraded the first-lien term loan to B1 from Ba3 and the second-lien term loan to B2 from B1 due to the increased leverage but left the outlook at stable.

On Tuesday, Standard & Poor's joined the party downgrading the first-lien term loan to B+ from BB and the second-lien term loan to B- from B.

"The downgrades were prompted by revisions in the terms of the secured credit facilities, which would allow the borrowers to incur materially higher indebtedness than originally contemplated," explained S&P credit analyst James Fielding in a release. "As a consequence, pro forma loan-to-value ratios are expected to rise from an originally anticipated 46% to a revised 56% at Dec. 31, 2004. Additionally, initial amortization is slowed as excess cash flow available to repay principal is reduced by higher interest expense."

Proceeds from this extra $100 million will be used to increase the dividend being paid to equity holders. A small portion of the facility will also be used to refinance the company's existing credit facility.

Credit Suisse First Boston is the lead bank on the Henderson, Nev., residential, golf and resort community's credit facility.

Arinc holds lender call

Arinc Inc. was rumored to have held a lender call on Tuesday morning regarding changes to its credit agreement, according to a fund manager, who speculated that the company was looking to "change their pricing grid around."

However, specific details on the proposal and whether the call actually took place was unconfirmed by day's end, as the company did not return calls and the lead bank - Wachovia - declined to comment.

Arinc is an Annapolis, Md., provider of transportation communications and systems engineering solutions for aviation, airports, defense, government and transportation.

CBD Media closes

CBD Media LLC closed on its $153 million term loan D on Tuesday, according to a market source. Lehman and Bank of America were the lead banks on the loan, with Lehman listed on the left.

The term loan is priced at Libor plus 250 basis points, with stepdowns to Libor plus 225 basis points and Libor plus 200 basis points based on leverage.

Originally, the deal was launched at Libor plus 225 basis points with a stepdown to Libor plus 200 basis points based on leverage, but, once the company opted to come to market with a $100 million eight-year senior note offering, pricing was increased by 25 basis points because of increased leverage. Essentially, with the flex up, the syndicate just added another notch to the pricing grid.

As a result of the increased leverage multiples, Moody's lowered the existing ratings for CBD Media, including the senior secured facilities to B1 from Ba3, concluding the review for possible downgrade that began on Oct. 13, and S&P lowered its corporate credit rating on CBD Media LLC to B from B+, removing the ratings from CreditWatch, where they were placed on Oct. 14.

Proceeds from the loan will be used to refinance the company's term loan C. The $23 million of extra liquidity gained through this term loan D will be used in combination with the bond proceeds and cash on hand to pay a dividend to equity holders.

CBD Media is a Cincinnati multimedia publisher of Yellow and White Pages directories.

Sanmina-SCI closes

Sanmina-SCI Corp. was scheduled to close on its $500 million revolver (Ba1/BB) on Tuesday, according to a company news release. Citigroup and Bank of America acted as joint lead arrangers on the deal, with Citigroup listed on the left.

The revolver, which is priced at Libor plus 150 basis points, is available for general corporate purposes.

Sanmina-SCI is a San Jose, Calif., provider of customized, integrated electronics manufacturing services.

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