Peabody Energy's new loan hits secondary, immediately trades higher

By Sara Rosenberg

New York, March 20 - Peabody Energy's new bank loan broke for trading in the secondary market Thursday and almost instantly moved up from its issue price of par, according to a trader. The loan was quoted at par 3/8 bid, par ½ offered by the end of the day.

However, there have been some new deals recently that have immediately shot up just to edge back down on market technicals, as was seen with El Paso Corp.'s new loan not too long ago. Asked whether the market may expect the same results from Peabody, the trader responded: "They downsized the overall deal. It's got good collateral. Do I think it climbs from here? Probably not. Do I think it will fall? Maybe an 1/8, if anything."

Just last week, Peabody Energy reduced the size of its seven-year term loan B to $450 million from $600 million as the company upsized to $650 million from $500 million its offering of 6 7/8% senior notes due 2013.

The company's credit facility also contains a $600 million five-year revolver with an interest rate of Libor plus 200 basis points.

Lehman Brothers and Wachovia are syndication agents, Fleet is the administrative agent and Morgan Stanley documentation agent on the credit facility.

Part of the proceeds from the new credit facility and the senior notes offering will be used to fund the repurchase of Peabody's existing 8 7/8% senior notes and 9 5/8% senior subordinated notes, which the St. Louis coal company is seeking to acquire through a tender offer commenced on Feb. 27.

El Paso Corp.'s new bank debt was quoted about half a point higher on Thursday at 99 1/8 bid and 99½ offered, according to a trader. The improvement was attributed to various news reports proclaiming that the company reached a preliminary $1.7 billion settlement of allegations it manipulated markets in California. According to these media stories, the settlement money will be paid over 20 years.

"We do not have a settlement and therefore it would be inappropriate to comment at this time," a company spokesman told Prospect News.

El Paso closed earlier this month on its new $1.2 billion two-year term loan priced at Libor plus 625 basis points. The loan was issued at 98½ and underwent some ups and downs after breaking for trading in the secondary due to oversaturation in the market.

The Houston provider of natural gas services used proceeds from the new loan to retire the approximately $825 million net balance of its Trinity River financing.

Credit Suisse First Boston and Salomon Smith Barney were the lead banks on the deal.

One of the biggest movers on Thursday, according to data from LoanX, was DeCrane Aircraft Holdings Inc. The company's term loan A was quoted at 81.913 bid, up from 77.413. The term loan C was quoted at 84 bid, up from 79.5 bid. And the revolver was quoted at 79.913 bid, up from 75.413 bid.

Earlier this week, the company announced plans use proceeds from the sale of its Specialty Avionics Group to pay down loans under its existing senior credit facility. Odyssey Investment Partners LLC is buying the Avionics Group for $140 million in cash.

The transaction is expected to close within 30 to 45 days, subject to customary closing conditions, including financing and the receipt of regulatory and other third-party approvals.

DeCrane is an El Segundo, Calif. supplier of products and services, focusing on the corporate, VIP and head-of-state aircraft market.

Metris Companies Inc.'s term loan B bid was also reported higher by LoanX, at 89, compared to 82.

On Wednesday, the Minnetonka, Minn. provider of financial products and services announced that it terminated its $170 million revolver and its wholly owned subsidiary, Metris Receivables Inc., obtained $850 million of 364-day warehouse financing facilities from its bank groups.

Furthermore, the company announced that Metris and its subsidiary, Direct Merchants Credit Card Bank entered into an operating agreement with the Office of the Comptroller of the Currency that includes liquidity and capital maintenance provisions for the bank. Under the agreement, Metris will receive a dividend from its bank in the amount of $155 million. Direct Merchants Credit Card Bank's existing formal agreement with the OCC, signed in April 2002, has been terminated.

Overall, the bank loan market was pretty quiet as most people turned their attention to war with Iraq that began late Wednesday night.

"Everybody is focused on the war today," a trader said. "Nothing is going on. People are at their desks but they're sitting and watching CNN."

As for new deals, "I don't think anybody is going to be launching any deals until things are more settled," a market professional said.

In follow up news, Bresnan Broadband Holdings, LLC completed its acquisition of certain cable television systems from Comcast Corp. To help fund this acquisition, Bresnan obtained a new $400 million credit facility, consisting of a $100 million seven-year revolver with an interest rate of Libor plus 350 basis points, a $75 million seven-year delayed draw term loan A with an interest rate of Libor plus 350 basis points and a $225 million 71/2-year term loan B with an interest rate of Libor plus 425 basis points.

JPMorgan Chase, TD Securities and Wachovia were the lead banks on the White Plains, N.Y. broadband communications provider's loan.

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