Sanmina-SCI bank meeting set for Thursday, Hughes closes $1.9 billion

By Paul A. Harris

St. Louis, Dec. 4 - Sanmina-SCI Corp. is set to hold the bank meeting for its new deal on Thursday, according to a market source.

And Wednesday's leveraged loan market also saw Hughes Electronics Corp. complete the refinancing and extension of its $1.9 billion of senior credit facilities.

According to sources, San Jose, Calif. electronics manufacturing company Sanmina-SCI is seeking to obtain a new $250 million senior secured credit facility, expected to close in December.

Sanmina-SCI is also in the market with a Rule 144A junk bond deal for $450 million of seven-year senior secured notes via a syndicate of banks that includes Goldman Sachs, JP Morgan, Salomon Smith Barney, Banc of America Securities and Scotia Capital. The junk bonds are set to price Dec. 18 or 19.

Hughes Electronics of El Segundo, Calif. announced Wednesday that it has refinanced and extended $1.9 billion of senior credit facilities. The amended credit facilities mature on Aug. 31, 2003 and include a $1.28 billion revolving credit facility and a $650 million term loan, the company announced.

According to information developed by Prospect News, the company had originally been planning $1.3 billion plus a further $500 million from GMAC. The revolver was at Libor plus 400 basis points and the term B at Libor pus 450 basis points.

"We are very pleased with the successful completion of this transaction," said Michael J. Gaines, Hughes' chief financial officer. "Our lead arrangers structured a flexible financing solution that was well received in the market, and both credit facilities were oversubscribed. We appreciate the continuing support of these investors."

Bank of America Securities and Salomon Smith Barney were joint book-running lead arrangers.

One official who spoke Wednesday with Prospect News commented upon a convergence of the leveraged loan and high yield markets.

"The loan market is quite good," the source offered. "Everything's up reasonably well. The market has a good tone to it. Coupons are trying to tighten a little bit.

"The bank loan market and the bond market have kind of come together," the source added. "When the bond is a blow-out it seems like the next thing you know is that the bank loan is going to be a blow-out. And a lot of the institutional money sits on the sidelines while the bonds recede, and they kind of do the relative value versus the bond to see if they like the bank loan or not."

This source pointed to the bank loan and junk bond refinancing in the market from Boston-based technology firm PerkinElmer, Inc.

In addition to $225 million of senior notes the company is bringing a $545 million credit facility comprised of a $100 million revolver and a $445 million term loan B, via Merrill Lynch.

The official said that pricing on the pro rata is Libor plus 350 basis points while the term B pricing is Libor plus 400. For a BB+ credit, the source said, such pricing should make for "a fabulous piece of paper.

"The junk bond is trying to price fairly tight," the source added. "I heard that it might get done inside of 9%. People are amazed at that level of execution.

The source remarked upon a present tightness in spreads that seems to defy logic until and unless you factor in the entire structure of a deal.

"PMD quotes single-B spreads as Libor+400, while double-B spreads are Libor+393," the source said. "You look at that and wonder 'What's going on here?'

"The answer is that a lot of single-Bs have structural enhancements that add value and don't show up in the coupon - like Libor floors and call protections. And maybe both.

"So is that Libor+400 really Libor+400? Or does it come with some bells and whistles that are really worth something?

"In single-B land you're seeing a lot of bells and whistles come into play."

Another source attributed the PerkinElmer pricing to the present level of supply.

"The two Dex deals were 400 with a discount," the source said. "I think that's the state of the market to a certain extent because of the supply.

"A couple of big deals just got done and Del Monte's being done. God knows if Burger King will ever get done.

"When things were at plus 200 in the spring-summer there were absolutely no deals. Now there are all these mega-deals rolling through."

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