Manitowoc breaks; Foamex, LyondellBasell heavier on downgrades; Brocade timing emerges

By Sara Rosenberg

New York, Aug. 21 - Manitowoc Co. Inc.'s credit facility allocated and freed up for trading on Thursday, with the term loan B quoted well above its original issue discount price, Foamex LP's first-lien term loan was weaker on news of a downgrade and LyondellBasell Industries' term loan B-2 was quoted lower by some as it, too, saw a drop in ratings.

In other news, timing on Brocade Communications Systems Inc.'s proposed credit facility surfaced on Thursday as the company scheduled a bank meeting for early September to launch the deal into general syndication.

Manitowoc's credit facility hit the secondary market during the trading session, with the $1.2 billion six-year term loan B seen atop the original issue discount price at which it was sold during syndication, according to traders.

One trader said that the term loan B was quoted at 99¾ bid, par¼ offered on the break, moved up to par bid at one point, and then settled in at 99¾ bid, par offered by the close. A second trader, had the term loan B quoted at 99 7/8 bid, par 1/8 offered.

The term loan B is priced at Libor plus 350 basis points with a step down to Libor plus 325 bps when leverage is below 2.0 times, there is a 3% Libor floor, and the debt was sold to investors at an original issue discount of 98.

During syndication, the term loan B was downsized from $1.325 billion and the pricing step-down was added.

Manitowoc's $2.925 billion credit facility (Ba2/BB+) also includes a $400 million five-year revolver, a $1.025 billion five-year term loan A and a $300 million 18-month term loan X, with all of these tranches priced in line with initial talk at Libor plus 325 bps.

The term loan A was quoted at par bid, par½ offered on Thursday and the term loan X was quoted at 99¾ bid, par¼ offered, one trader remarked, adding that "judging from the screens, the term loan B is the only one really trading."

During syndication, the term loan A was upsized from $900 million to account for the term loan B downsizing.

Upfront fees on the revolver, term loan A and term loan X were based on commitment level.

JPMorgan, Deutsche Bank, Morgan Stanley and BNP Paribas are the joint lead arrangers and joint bookrunners on the deal, with JPMorgan the administrative agent, Deutsche and Morgan Stanley the syndication agents, and BNP the documentation agent.

Proceeds will be used to help fund the acquisition of Enodis plc for 328 pence per Enodis share, resulting in a transaction valued at about $2.7 billion, including the assumption of Enodis' net debt, which was about $249 million/£125 million as of March 29.

In April, Manitowoc agreed to buy Enodis for 258 pence per share, but then in early May, Illinois Tool Works Inc. offered to buy the company for 280 pence in cash per share, plus a 2 pence per share dividend. Following the first Illinois Tool Works offer, Manitowoc increased its bid to 294 pence per share, plus a 2 pence per share dividend, and then the offer was increased again during an auction process.

As a result of Manitowoc increasing its purchase price for Enodis, the term loan B was upsized twice before the deal even came to market, first moving to $1.075 billion from $800 million, and then to $1.325 billion from $1.075 billion.

Furthermore, pricing on the deal is different than what the company had originally outlined in filings with the Securities and Exchange Commission. According to those filings, all the tranches were expected to carry initial pricing of Libor plus 300 bps.

The transaction is expected to close in the fourth quarter and it will be structured as a court-sanctioned scheme of arrangement under the laws of the United Kingdom.

Earlier this month, the company announced that it plans to pay down debt that it is incurring for the Enodis transaction using proceeds from the sale of its Marine segment.

The Marine segment, which is a full-service shipbuilding, ship repair and ship conversion organization, is being sold to Fincantieri Marine Group Holdings Inc. and Lockheed Martin Corp. in a transaction valued at $120 million.

Remaining proceeds from the sale, which is expected to close at the end of the year, will be used for general corporate purposes.

Manitowoc is a Manitowoc, Wis.-based provider of lifting equipment for the construction industry, manufacturer of cold-side equipment for the foodservice industry, and provider of shipbuilding, ship repair and conversion services. Enodis is a Tampa, Fla.-based food and beverage equipment manufacturer.

Foamex off with downgrade

Foamex's first-lien term loan lost some ground during market hours following a ratings downgrade by Standard & Poor's, according to a trader.

The first-lien term loan was quoted at 76 bid, 78 offered, down from previous levels of 77 bid, 79 offered, the trader said.

S&P announced in the early afternoon that it cut Foamex's corporate credit rating to CCC+ from B-, first-lien bank loan rating to CCC+ from B and second-lien loan rating to CCC- from CCC. The ratings were removed from CreditWatch, but the outlook is negative.

The downgrade was a result of ongoing concerns related to financial performance in an increasingly difficult operating environment, and the increased likelihood that Foamex will have to seek covenant relief from its lenders within the next several quarters, the rating agency said.

"Today's actions acknowledge the company's significant reduction in debt through completion of a rights offering in the second quarter and the additional reduction of $20.4 million completed on Aug. 15, 2008," said Henry Fukuchi, S&P credit analyst, in the release.

However, the rating agency explained that although the completion of the rights offering was a meaningful step, business conditions have deteriorated and Foamex could face challenges in preserving sufficient access to liquidity because of tightening financial covenants.

Foamex is a Linwood, Pa.-based manufacturer of flexible polyurethane and advanced polymer foam products.

LyondellBasell seen softer by some

Also downgraded by S&P on Thursday was LyondellBasell, and on the heels of that news, the company's term loan B-2 was being quoted lower by some traders and unchanged by others in very light volume.

One trader said that the B-2 was at 82 bid, 83 offered, down on the bid side when compared to Wednesday's levels of 82½ bid, 83 offered.

However, a second trader had the term loan B-2 quoted at 82 1/8 bid, 83 1/8 offered, in line with previous levels.

On Thursday, S&P lowered its long-term corporate credit rating on LyondellBasell to B from B+ and senior secured debt to BB- from BB. The outlook is negative.

The downgrade follows the company's weaker-than-expected earnings for the second quarter and a more challenging business outlook for the coming quarters.

S&P said that the downgrade reflects an increase in financial leverage on the company's balance sheet, due primarily to significantly higher raw material costs in the second quarter and weakening demand for polymers.

The negative outlook reflects the increased risk of a further downgrade if LyondellBasell's headroom under its financial covenants continues to decline rapidly over the coming quarters, the agency added.

LyondellBasell is a Netherlands-based polymers, petrochemicals and fuels company.

Burger King steady with numbers

Burger King Holdings Inc.'s term loan B held firm on Thursday after the company announced fiscal fourth quarter and full year earnings results, according to a trader.

The term loan B was quoted at 99 bid, 99¾ offered, unchanged from previous levels, the trader said.

For the fourth quarter ended June 30, the company reported net income of $51 million, or $0.37 per diluted share, compared to net income of $36 million, or $0.26 per diluted share, in the same period last year.

Adjusted net income for the quarter was $51 million, or $0.37 per diluted share, up 28% from $40 million, or $0.29 per diluted share, in 2007.

Fourth-quarter fiscal 2007 adjusted net income excludes a $7 million pre-tax unusual item related to the termination of the company's lease for a new headquarters facility, which the company had proposed to build in Coral Gables, Fla.

Revenues for the quarter were $646 million, up 9% from $590 million in last year's fourth quarter.

And, fourth quarter average restaurant sales increased by 9% to $338,000, compared to $311,000 in the same quarter last year.

For the 12 months ended June 30, the company's net income was $190 million, or $1.38 per diluted share, compared to $148 million, or $1.08 per diluted share, in the comparable 2007 period.

Adjusted net income for the year, which also excludes the $7 million pre-tax unusual item related to the proposed new headquarters, was $190 million, up 25% from $152 million last year. Adjusted earnings per diluted share were $1.38 in 2008 versus $1.11 in 2007, up 24%.

Revenues for the 12 months were $2.455 billion, up 10% from $2.234 billion in full year 2007.

In addition, worldwide trailing 12-month average restaurant sales reached a record high, increasing by 9% to $1.3 million compared to $1.19 million in the same period last year.

"Our strong quarterly and annual performance confirms the strength and the momentum of our worldwide business," said John Chidsey, chairman and chief executive officer, in a news release.

"This past fiscal year, the team delivered record sales and earnings in spite of a challenging macro-economic environment. We experienced our best traffic performance in more than 10 years as guests sought our convenience and affordable quality products. We remain focused on progressive improvement across all our strategic global growth pillars - marketing, products, operations and development - and in our reimaging and portfolio management initiatives.

"I am confident in our ability to carry our strong momentum into the 2009 fiscal year. We remain committed to delivering top of the industry financial performance and expect full year fiscal 2009 earnings per share of $1.54 to $1.59," Chidsey added in the release.

Burger King is Miami-based fast food hamburger chain.

Brocade launch revealed

Over in the primary, Brocade Communications has firmed up timing on the launch of its proposed $1.125 billion senior secured credit facility with the scheduling of a bank meeting for Sept. 4, a market source told Prospect News on Thursday.

Tranching on the deal is comprised of a $125 million five-year revolver and a $1 billion five-year term loan.

Pricing on the revolver and the term loan is expected to be Libor plus 350 bps if the corporate family rating is Ba2/BB and Libor plus 400 bps if the corporate rating is lower than Ba2/BB, a commitment letter said that was previously filed with the SEC.

According to the market source, the corporate rating is currently expected at Ba1/BB-, which would mean that, based on the commitment letter, price talk for both tranches would be Libor plus 400 bps.

The credit facility rating is currently expected at Ba2/BB, the source added.

The commitment letter also said that both the revolver and the term loan will have a 3% Libor floor for 30 months.

The revolver has an initial commitment fee of 50 bps. After delivery of the companies' financial statements for the first full fiscal quarter ending after the closing, the commitment fee on the revolver can range from 25 bps to 50 bps.

Financial covenants include a maximum consolidated leverage ratio with an initial level of 4.25 times and with step-downs to be agreed upon, a maximum consolidated senior secured leverage ratio with an initial level of 2.3 times and with step-downs to be agreed, and a minimum consolidated fixed-charge coverage ratio with an initial level of 1.25 times and with step-ups to be agreed.

Bank of America and Morgan Stanley are the joint lead arrangers and joint bookrunners on the credit facility, with Bank of America the administrative agent and Morgan Stanley the syndication agent.

Proceeds from the credit facility will be used to help fund the acquisition of Foundry Networks Inc.

Brocade is purchasing the company for a combination of $18.50 of cash plus 0.0907 shares of common stock in exchange for each share of Foundry common stock. The transaction has an aggregate purchase price of about $3 billion on a fully diluted basis.

Other financing for the transaction will come from $500 million senior unsecured notes and $1.4 billion in cash from the combined company.

The notes are backed by a commitment for a $500 million 12-month senior unsecured bridge loan for which Bank of America and Morgan Stanley are the joint lead arrangers and bookrunners.

Pricing on the bridge loan will be Libor plus 700 bps with a 3% Libor floor for 30 months, and will increase by an additional 50 bps at the end of each subsequent three-month period up until a pricing cap of 12.75%.

Debt to EBITDA at the end of fiscal year 2009 is estimated by the company to be in the range of 2.4 to 2.5 times.

The acquisition is expected to close in the fourth quarter, subject to approval by Foundry's stockholders, regulatory approval and certain other conditions.

Brocade is a San Jose, Calif., provider of data center networking services that help organizations connect, share and manage their information in the most efficient manner. Foundry is a Santa Clara, Calif., provider of high-performance enterprise and service provider switching, routing, security and web traffic management services.

Saxon Energy oversubscribed

Saxon Energy Services Inc. has wrapped syndication on its oversubscribed $350 million senior secured credit facility, and the target is to close the transaction sometime next week, according to a market source.

The facility consists of a $65 million five-year revolver and a $285 million six-year term loan, with both tranches priced in line with talk at Libor plus 400 bps with tiered upfront fees.

RBC Capital Markets and HSBC are the lead banks on the deal that will be used to help fund the buyout of the company by Schlumberger Oilfield Holdings Ltd. and First Reserve Corp. for C$7.00 per share in cash.

Saxon is a Calgary, Alberta-based oilfield services company.

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