Inquiries still flying on Interstate Bakeries' bank debt with some bids surfacing in the 96 to 97 areas

By Sara Rosenberg

New York, Aug. 31 - Trading desks continued to receive inquiries on Interstate Bakeries Corp., with some people trying to make a market on the paper, but it proved to be a difficult feat as not enough secondary players were present to create trading activity.

"I saw it as low as 96 bid and I hear some guys are making it 97 to a half. Ninety six sounds too low to me. I think to have to trade, it would have to move a little higher," a trader said.

"I don't think this thing will dip too much. They have some name brands. But, [then again] diets, like Atkins and the South Beach diet, are not making it any easier. Once everyone's back, you'll see some trades and then we'll be able to see where the market is," the trader added.

Interest in the name was first ignited on Monday after the company announced that it missed its Friday deadline, for a second time, for filing its 10-K annual report for the fiscal year ended May 29 with the Securities and Exchange Commission. Talks are taking place with representatives of the agent bank under its senior secured credit facility regarding the situation.

Furthermore, the company - a Kansas City, Mo., wholesale baker, known for such famous brand names as Wonder Bread, Hostess Twinkies and Drake's Cakes - revealed that it hired Alvarez & Marsal to pursue an effective going forward business strategy.

Prior to these announcements, the company's bank debt was quoted in the low 98s.

The delays resulted from initial data entry and training deficiencies in Interstate Bakeries' newly implemented financial reporting systems, uncertainty regarding anticipated fiscal 2005 first quarter results, uncertainty as to whether the company will be in compliance with covenants in its senior secured credit facility agreement during fiscal 2005 and the possibility that the report of its independent auditors with respect to the fiscal 2004 financial statements might contain a going concern paragraph, the company explained in a news release.

The company had previously received an extension to Friday for the filing because of delays in finalizing its audited financial statements arising from the previously announced investigation of the manner for setting workers' compensation reserves and other reserves.

United Rentals weaker

It appeared as if some people were making the market on United Rentals Inc.'s bank debt a little lower on Tuesday on the heels of a one point drop in the previous session with quotes of par bid, par ½ offered, according to a trader.

Late day Monday, the paper was quoted at par 3/8 bid, 101 offered and some continued to keep that market through close, one trader said. However, according to a second trader, at some point in Monday's market the bank debt headed to par ¼ bid, par ½ offered and then settled at par bid, par ½ offered.

The fall began when news surfaced that the Securities and Exchange Commission is conducting a non-public, fact-finding inquiry into the Greenwich, Conn., equipment rental company.

Subpoenas for certain accounting records were issued, but the requests did not specify the purpose of the inquiry.

Not too long after the announcement on Monday, Standard & Poor's placed United Rentals' BB corporate credit rating and other ratings, including the BB secured bank loan rating, on CreditWatch with negative implications.

Collins & Aikman Products around 101

Collins & Aikman Products Co.'s $675 million credit facility (B1/B+) allocated and broke for trading around 5 p.m. ET Monday with the term loan B opening wrapped around 101 and remaining there throughout trading Tuesday.

The $400 million seven-year term loan B was quoted at par 7/8 bid, 101 1/8 offered late day Tuesday, according to traders. However, earlier in the Tuesday session, one trader said he had seen bids reach the 101 level before settling down slightly.

The term loan is priced with an interest rate of Libor plus 400 basis points. Originally, the tranche was launched at Libor plus 325 basis points but it was flexed higher following wider-than-expected pricing on the company's $415 million senior subordinated notes offering.

Collins & Aikman's facility also contains a $125 million supplemental revolver for institutional investors with an interest rate of Libor plus 325 basis points and a $150 million five-year revolver with an interest rate of Libor plus 300 basis points. Pricing on the tranches was left unchanged throughout syndication.

JPMorgan and Deutsche are the lead banks on the Troy, Mich., automotive interior components company's refinancing deal, with JPMorgan listed on the left.

OSI also wraps 101

OSI Group's $450 million term loan, which also hit the secondary on Monday, was quoted "on either side of 101" during Tuesday's session, pretty much unchanged from previous opening levels, according to a trader.

The term loan is part of a $700 million credit facility that also contains a $250 million revolver.

Bank of America is the lead bank on the Aurora, Ill., food processor and distributor's dividend recap deal.

Pinnacle Entertainment closes

Pinnacle Entertainment Inc. closed on its $400 million amended credit facility (B1/B+) consisting of a $275 million term loan with an interest rate of Libor plus 300 basis points and a $125 million revolver.

Originally, the term loan was sized at $250 million with half delayed draw and half funded, but the delayed-draw portion was increased by $25 million during syndication. Pricing on both parts of the term loan remained at Libor plus 300 basis points since launch. The delayed draw is for 12 months and contains an unfunded fee of 100 basis points.

As for the revolver, through this amendment deal the company increased the size from $75 million and left pricing unchanged. Initially though, the company was only planning on increasing the revolver to $100 million. At the time of the term loan upsizing, the syndicate opted to upsize the revolver as well.

"Originally targeted at $350 million, the size of the amended facility was increased by $50 million due to its substantial oversubscription in the loan market," a company news release said.

Proceeds from the amended credit facility were used to reprice and replace the existing term loan, which carries an interest rate of Libor plus 350 basis points, and help fund the increased scope and budget of the company's Lake Charles project. The existing facility that was amended through this deal was sized at $272 million.

Lehman Brothers and Bear Stearns were the lead banks on the deal, with Lehman listed on the left.

"We are pleased to announce these amendments to our credit facility. The amended facility significantly improves our cash management by reducing the funded portion of our term loan and extending the maximum delayed draw period from September 2004 to September 2005," said Daniel R. Lee, chairman and chief executive officer, in the release.

"The larger facility size also improves the company's liquidity, providing us the resources necessary to complete L'Auberge, fully finance our proposed St. Louis City casino and, when combined with anticipated future free cash flow, fund much of our proposed St. Louis County casino as well."

Pinnacle is a Las Vegas owner and operator of gaming entertainment facilities.

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