Ozburn-Hessey, Patriot Media free up for trading; Delphi skids on downgrades, revolver use

By Sara Rosenberg

New York, Aug. 5 - Ozburn-Hessey Logistics LLC and Patriot Media & Communications CNJ LLC allocated and broke for trading, with both companies' first-lien term loans quoted atop 101. Also in secondary doings, Delphi Corp.'s bank debt was driven lower as the company was plagued with ratings downgrades upon news of a considerable revolver draw.

Ozburn-Hessey's credit facility freed up for trading during market hours Friday, with the $140 million seven-year term loan B quoted at 101½ bid, 101¾ offered on the break and remaining at those levels through close, according to a trader.

The term loan is priced with an interest rate of Libor plus 250 basis points. Pricing was reverse flexed twice during syndication - the first time coming down to Libor plus 275 bps from Libor plus 300 bps with a step down added to Libor plus 250 bps at 2.5x leverage, and the second time coming to the final pricing level, with the removal of the step down.

Ozburn-Hessey's $180 million credit facility (B2/B+) also contains a $40 million five-year revolver with an interest rate of Libor plus 250 bps. This tranche was also reverse flexed twice during syndication going to Libor plus 275 bps from Libor plus 300 bps and then ending up with a spread of 250 bps.

The term loan was originally issued to investors at par and a $10 million revolver commitment got an upfront fee of 75 bps.

Morgan Stanley and Bear Stearns are joint lead arrangers and joint bookrunners on the deal, with Morgan Stanley the left lead.

Proceeds from the term loan will be used to help fund a leveraged buyout of the company by Welsh, Carson, Anderson & Stowe.

The revolver will be undrawn at closing and will be available for general corporate purposes.

Welsh, Carson, Anderson & Stowe is putting in 63% of the money for the LBO consisting of $80 million of holding company mezzanine debt and $157 million of equity.

Following the transaction, senior leverage will be 31/2x and total leverage through the holding company will be 51/2x.

Ozburn-Hessey is a Nashville-based third-party logistics provider.

Patriot Media breaks

Patriot Media's credit facility also freed up for trading on Friday, with the $210 million 71/2-year first-lien term loan B (B1) quoted on the break and through close at 101¼ bid, 101 5/8 offered and the $47 million eight-year second-lien term loan (B3) quoted on the break and through close at 101 5/8 bid, 102 1/8, according to a trader.

The first-lien term loan is priced with an interest rate of Libor plus 225 bps with a step down to Libor plus 200 bps based on total leverage and contains 101 soft call protection for one year. The tranche was upsized from $160 million during syndication, while pricing was decreased from Libor plus 275 bps with the addition of the step down and the soft call. The upsizing of the first-lien term loan B was done in connection with the syndicate's decision to remove the originally contemplated $50 million term loan A from the credit structure.

The second-lien term loan is priced with an interest rate of Libor plus 500 bps and contains 101 one-year hard call protection. Pricing was reverse flexed during syndication from Libor plus 550 bps.

Patriot Media's $282 million credit facility also contains a $25 million seven-year revolver (B1) with an interest rate of Libor plus 225 bps. Pricing on this tranche was reverse flexed during syndication from Libor plus 250 bps.

Bank of New York is the sole lead bank on the Greenwich, Conn.-based cable operator's deal that will be used for a dividend recapitalization and to refinance existing debt.

Delphi drops off

Delphi's term loan and revolver both gave up ground during Friday's session as Moody's Investors Service, Standard & Poor's and Fitch Ratings lowered ratings on the company immediately following news of a substantial revolver draw.

The revolver was quoted at 94½ bid, 95 offered late in the day compared to morning levels of 96 bid, 96½ offered, according to a trader. Meanwhile, the term loan was quoted at 101½ bid, 102 offered compared to morning levels of 102½ bid, 103 offered. On Thursday, Delphi's term loan traded as low as 101 and as high as 1021/2, the trader added.

On Friday morning, Delphi announced that it initiated a draw down of $1.5 billion under its $1.8 billion revolving credit facility this past Wednesday.

The draw was in connection with financing operations regarding Delphi's discussions with its principal unions and General Motors about a consensual restructuring of the company's U.S. operations.

In reaction to the announcement, Moody's downgraded Delphi's senior secured credit facility to B3 from B1 and corporate credit rating to Caa1 from B2, with the outlook remaining negative.

"By drawing down under its credit facility the company has placed liquidity on its balance sheet to address what will likely be a period of increased operating and financial risk as it seeks to negotiate a consensual restructuring of its operations in the United States," Moody's said.

"The rating actions reflect the increasing potential that a comprehensive financial restructuring may be necessary if negotiations are not successful in resolving the company's cost issues in the near term," Moody's added.

As for S&P, the rating agency downgraded Delphi's senior secured credit facility to B- from BB- and corporate credit rating to CCC+ from B+, with a developing outlook.

"The rating actions reflect increased concerns about a potential bankruptcy filing by Delphi, in light of recent public comments by its top executives, and the initiation of a $1.5 billion drawdown of its revolving credit facility," said S&P credit analyst Martin King, in the ratings release.

"The drawdown of the credit facility, in light of the current discussions Delphi is having with GM and the UAW, could mean that the company is securing its liquidity position should a bankruptcy filing become necessary. We believe the company has sufficient liquidity to meet near-term obligations, but the media attention surrounding the company's difficulties could disrupt Delphi's vendor relations and weaken its liquidity cushion," S&P added.

Lastly, Fitch downgraded Delphi's credit facility to B from BB-, with the company remaining on Rating Watch negative.

Fitch said the downgrade reflects the implied heightened bankruptcy risk as the company enters a critical stage in its discussions with the UAW.

Delphi is a Troy, Mich., supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology to vehicle manufacturers.

National Bedding sets price talk

Price talk on National Bedding Co.'s $570 million credit facility surfaced with both the $50 million five-year revolver and the $320 million six-year first-lien term loan talked at Libor plus 225 bps, and the $200 million seven-year second-lien term loan talked at Libor plus 600 bps, according to a buyside source.

Prior to Thursday's bank meeting, investors had estimated that given expected ratings of B1/B+ on the first-lien debt and B3/B- on the second-lien debt, the syndicate would try to price the first lien around Libor plus 250 bps and would try to price the second lien around Libor plus 550 to 600 bps.

Goldman Sachs is the lead bank on the deal, with Merrill Lynch and GE Capital involved as well.

Proceeds from the credit facility will be used to help fund the leveraged buyout of National Bedding by The Ares Corporate Opportunities Fund LP and Teachers' Private Capital.

National Bedding is a Hoffman Estates, Ill., manufacturer of bedding products and is the maker of Serta mattresses.

IPC closes

IPC Acquisition Corp. closed on its new $485 million senior credit facility consisting of a $50 million revolver due Dec. 31, 2010 (B2/B+) with an interest rate of Libor plus 275 bps, a $310 million six-year first-lien term loan (B2/B+) with an interest rate of Libor plus 275 bps and a $125 million seven-year second-lien term loan (B3/B-) with an interest rate of Libor plus 725 bps.

The second-lien term loan contains call protection of 103 in year one, 102 in year two and 101 in year three.

During syndication, IPC upsized its six-year first-lien term loan to $310 million, while keeping pricing at Libor plus 275 bps but adding a step down to Libor plus 250 bps if leverage is less than 41/2x.

IPC also downsized its seven-year second-lien term loan to $125 million during syndication, while increasing pricing from original talk at launch of Libor plus 650 to 700 bps and sweetening call protection from 102 in year one, 101 in year two.

Goldman Sachs Credit Partners LP and Lehman Brothers Inc. acted as joint lead arrangers, joint bookrunners and co-syndication agents for the new deal. General Electric Capital Corp. acted as administrative agent and collateral agent and CIT Lending Services Corp. acted as documentation agent for the first-lien facilities. Heritage Bank, SSB acted as administrative agent and collateral agent for the second-lien term loan.

Proceeds from the term loans are being used to repay IPC's existing credit facility, to purchase tendered 11.5% senior subordinated notes due 2009, to discharge the $5.475 million in principal amount of untendered notes and to finance the repurchase of some equity securities.

Revolver borrowings are available for general corporate purposes.

IPC is a New York-based provider of mission-critical communications solutions to global enterprises.

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