Vertex Aerospace launches, Moore comes to market with higher-than-expected interest rate

By Sara Rosenberg

New York, July 9 - The primary bank loan market picked up on Tuesday with the launch of two new deals - Vertex Aerospace's $175 million credit facility and Moore Corp. Ltd.'s $400 million credit facility. Interest rates on Vertex may be seen as slightly aggressive, according to some, while Moore Corp. had to flex up from original price talk due to the market viewing the spread as "too light", sources said. The recent demand for more desirable interest rates may stem from the back up in the bond market, which is trickling down into the bank loan market.

Vertex Aerospace LLC held a bank meeting Tuesday for a new $175 million credit facility, which would be guaranteed by Vertex Aerospace Inc., according to market sources. The loan consists of a $40 million five-year revolver with an interest rate of Libor plus 250 basis points and a $135 million six-year term loan B with an interest rate of Libor plus 275 basis points, an investment banker told Prospect News. CIBC World Markets is the lead bank on the deal.

"It seems to be in the sweet spot, which is the high 200 to low 300 [basis points spread] range," the banker said. However, the deal could be viewed as "a little light", he added, compared to the company's current loan which has interest rates of Libor plus 350 to 400 basis points.

Presently, the company's senior secured credit facility consists of a $50 million term A expiring June 30, 2006 with an interest rate of Libor plus 350 basis points, a $50 million term B expiring June 29, 2007 with an interest rate of Libor plus 400 basis points and a $25 million revolver with an interest rate of Libor plus 350 basis points and a commitment fee of 50 basis points, according to a filing with the Securities and Exchange Commission.

Working in the company's favor, though, is that the new loan is coming in tandem with an initial public offering, the banker explained.

Also, "the market is hungry for a decent deal and [Vertex is] in an industry with stable cash flows," the banker concluded. Vertex is a Madison, Miss. provider of aerospace and other technical services to the U.S. Department of Defense and other government agencies.

The new loan is anticipated to close concurrently with the closing of the company's initial public offering, which is being run by Credit Suisse First Boston, Goldman Sachs & Co., Lehman Brothers and CIBC World Markets.

Another new deal launched was Moore Corp. Ltd.'s $400 million credit facility with Citibank as lead bank and CIBC World Markets and Fleet Securities as documentation agents, according to market sources. The loan consists of a $125 million five-year revolver with an interest rate of Libor plus 200 basis points, a $75 million five-year delayed-draw term loan A with an interest rate of Libor plus 200 basis points and a $200 million six-year term loan B with an interest rate of Libor plus 250 basis points.

Initial price talk had the Toronto, Ont. commercial printer's term loan B priced with an interest rate of Libor plus 225 basis points, but the syndicate flexed the rate upwards to 250 basis points, according to a market professional.

"For a first-time issuer, 225 was a bit light so they bumped it up," the professional said. "It's not a hard-asset company but it does have decent revenues."

Moore Corp. is not the only deal to have to flex up recently, according to the market professional. At the end of last week Giant Eagle Inc. changed the spread on its $300 million seven-year term loan B to 250 basis points from 225 basis points, the professional said. The Pittsburgh, Pa. supermarket chain's $250 million five-year revolver remained at Libor plus 200 basis points.

"This is another one that was just a little tight," the professional explained. "The bond market is backing up so it stands to reason that it would happen on the bank side."

In other news, Mail-Well Inc. closed on a new $300 million three-year revolver that is being used to refinance the existing bank loan, according to a company press release. Bank of America was the administrative agent for the deal. Currently, the Englewood, Colo. printing company's revolver has an interest rate of about 6%, according to a filing with the Securities and Exchange Commission.

Bowne & Co., a New York, N.Y. financial printer, closed on its new $175 million three-year revolving credit facility that is replacing the previous $300 million loan, according to a company press release. Fleet National Bank was agent, Wachovia Bank was syndicate agent and JP Morgan Chase & Co. was documentation agent. Other banks involved in the revolver include Royal Bank of Scotland PLC, HSBC Bank USA, Firstar Bank and The Bank of New York.

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