Babcock & Wilcox tweaks tranche sizes, cut LoC pricing; UAL firms structure; HealthSouth gains persist

By Sara Rosenberg

New York, Jan. 9 - The Babcock & Wilcox Co. finalized changes to its credit facility, shifting some funds from its revolver to its pre-funded letter-of-credit facility, while at the same time lowering pricing on the upsized letter-of-credit tranche.

In other primary news, UAL Corp. firmed up tranching on its $3 billion exit financing credit facility as the deal was launched with a bank meeting Monday at previously expected price talk levels.

Meanwhile, in secondary happenings, levels on HealthSouth Corp.'s unsecured term loan felt stronger, once again, as investor interest in the name continues to build and more buyers are surfacing.

Babcock & Wilcox upsized its six-year pre-funded letter-of-credit tranche to $200 million from $150 million and downsized its five-year revolver tranche to $200 million from $250 million, as the letter-of-credit facility was four times oversubscribed, according to a market source.

Furthermore, pricing on the pre-funded letter-of-credit facility was reverse flexed to Libor plus 275 basis points from original price talk of Libor plus 300 basis points, the source said.

Pricing on the revolver was left unchanged at Libor plus 300 basis points. The tranche contains a 50 basis point commitment fee.

It was speculated over the past few weeks that this upsizing and spread cut could be in the works for the letter-of-credit facility, but the syndicate held off on making any official changes until Monday since it was giving a few commercial banks time last week to finish work on the deal.

The company's $250 million six-year delayed-draw term loan remained unchanged in terms of size and pricing, which is set at Libor plus 300 basis points.

Now that the structure has been finalized, allocations are anticipated to go out on Thursday and closing is targeted for mid-February.

Credit Suisse First Boston is leading the $650 million exit financing credit facility (B1/B+), and JPMorgan, Wachovia and Scotia signed on as agents.

Babcock & Wilcox is the Barberton, Ohio-based subsidiary of McDermott International that designs, supplies and services power generation systems and equipment.

UAL sets structure

UAL came out with a structure that includes a $300 million revolver and a $2.7 billion term loan on its $3 billion six-year exit facility (B1/B+) as syndication officially kicked off Monday with a bank meeting, according to a market source.

Furthermore, the facility - meaning both the revolver and the term loan - were launched with opening price talk levels of Libor plus 450 basis points, the source said, in line with where the company said spreads would fall out in an October news release.

The revolver has a 50 basis point commitment fee.

Of the total $2.7 billion term loan amount, $2.35 billion will be available at the time of closing and the remaining $350 million will be available once the company acquires unencumbered title to some or all of the airframes and engines that are currently subject to the 1997 EETC transaction, according to an 8-K filed Monday with the Securities and Exchange Commission.

Amortization on the term loan B is 1% annually, to be paid in equal semi-annual payments, with the balance due at maturity.

Financial covenants under the credit facility include a maximum fixed charge coverage ratio of 0.90:1.00 for the 12-month period ending December 2006 that gradually increases all the way up to 1.20:1.00 for the 12-month period ending December 2009 and thereafter.

In addition, there's a covenant that requires the company to maintain at least $1.2 billion of unrestricted cash, which then reduces to $1 billion after Dec. 31 if the company is in compliance with the fixed charge coverage ratio.

JPMorgan and Citigroup are the joint lead arrangers and joint bookrunners on the deal, with JPMorgan the left lead. General Electric Capital Corp. is the syndication agent.

Proceeds will be used to repay the company's debtor-in-possession facility, to make other required payments, to finance the working capital needs and for other general corporate purposes.

The Elk Grove Township, Ill., airline carrier anticipates exiting from Chapter 11 in February.

HealthSouth ticks up

HealthSouth's unsecured term loan has now moved into the upper-101 region as more and more investors are viewing this loan as an attractive piece of paper when compared to the company's bonds, according to a trader.

"People are really starting to look at it," the trader said. "There are definitely more buyers out there. [The loan] is 200 basis points cheaper than the bonds. The bonds are up another point over the last three days, so the loan has pushed higher."

The unsecured term loan is currently being quoted at 101 3/8 bid, 101 7/8 offered, according to the trader. Around mid-last week, the paper was being quoted in the 101 bid, 101½ offered context.

The bank debt started last week quoted around par ¼ bid, par ¾ offered but has been gliding higher primarily driven by improved performance in the company's bonds, which was sparked by the expectation that current financials will be filed shortly.

The anticipation of a near-term filing was created by the company as, during its 2005 annual meeting of stockholders, HealthSouth said that it expects being in the position to file its 2005 form 10-K in a timely manner in the first quarter of 2006 and intends to hold its 2006 annual meeting of stockholders during the second quarter of 2006.

And, as was reported last week, there is also a whisper out in the market that the company may attempt some sort of a global refinancing after the financials are completed, which would push the call protected bank debt to premium levels.

The term loan currently carries call protection of 102, which will later on drop to 101 and then par, and contains pricing of Libor plus 500 basis points.

HealthSouth is a Birmingham, Ala.-based provider of outpatient surgery, diagnostic imaging and rehabilitative health care services.

Secondary tone stays positive

Continuing from last week, the overall secondary loan market tone was a positive one on Monday with levels in general ticking up by another 1/16 to maybe an 1/8 of a point amidst good trading flow, according to a trader.

"It was another solid day of two way flows. [There were] no large movers on the day but it felt better again," the trader said.

Talk on Monday was that General Motors Corp.'s proposed sale of GMAC is moving at a faster-than-expected pace, which of course would be good for the company and would help to put at ease any bankruptcy fears that may be in the markets.

The trader explained that these positive rumors regarding GM's sale of GMAC helped to inflate the high-yield market, and the loan market simply followed suit.

GM is a Detroit-based designer, manufacturer and marketer of cars and light trucks worldwide.

Network Solutions closes

Network Solutions Inc. was able to close on its new $100 million credit facility on Monday after the deal underwent a final round of changes this past Friday, according to a market source.

The final facility structure consists of a $90 million six-year term loan B with an interest rate of Libor plus 500 basis points and call protection of 102 in year one and 101 in year two, and a $10 million five-year revolver with an interest rate of Libor plus 500 basis points and a 50 basis point commitment fee.

On Friday the term loan B had been downsized by $10 million from $100 million and the call protection was increased from a 101 premium for one year to the 102, 101 structure.

The most recent changes were not the first tweaks to be made to this deal since it first launched into syndication. In December, the term loan was reduced by $40 million from the originally planned size of $140 million and pricing on both the revolver and the term loan was increased by 100 basis points from original price talk at launch of Libor plus 400 basis points.

Credit Suisse First Boston is the lead bank on the deal that is being used for acquisition financing.

Network Solutions is a Herndon, Va., seller of internet domain names and provider of related services.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.