Genesis Health, FMC flex up; FMC bank deal loses $50 million to high yield offering

By Sara Rosenberg and Paul A. Harris

New York, Oct. 9 - Genesis Health Ventures Inc. and FMC Corp. have both restructured their recently launched credit facilities. In each case, pricing on the term loan B was increased to Libor plus 375 basis points, despite the variation in ratings - Ba3/B+ for Genesis and Ba1/BBB- for FMC. Furthermore, FMC's loan was downsized so that the concurrent bond deal could be upsized in response to strong interest in the high yield market.

Genesis Health Ventures' $200 million add-on five-year term loan B was flexed up to Libor plus 375 basis points from Libor plus 350 basis points, according to a syndicate source.

Market talk is that the change in pricing may prompt a ratings downgrade, one sell-side source said. "My guess is the additional coupon payment could strain their capital," he explained.

The syndicate however said that they "know nothing about a downgrade."

Goldman Sachs and Wachovia are the lead banks on the deal, which will be used to help fund the acquisition of NCS Healthcare Inc.

Genesis Health is a Kennett Square, Pa. owner and manager of geriatric care facilities.

FMC's loan also underwent some changes as the institutional tranche was reduced by $50 million and pricing was flexed up by 50 basis points.

"They took $50 million out of the B and put it into the bonds," a buy-side source told Prospect News. "The term B is now $250 million and they flexed up to 375 basis points."

Initially, when the credit facility was launched, the five-year term loan B was $300 million and had an interest rate of Libor plus 325 basis points. The three-year revolver portion of the loan remained at $250 million.

The company had planned to sell $300 million of notes but increased the deal to $355 million ($350 million proceeds) at pricing on Wednesday. The 10¼% senior secured notes due Nov. 1, 2009 were priced at 98.772 to yield 10½%. Price talk was for a yield in the 10½% area.

Salomon Smith Barney and Banc of America Securities were joint bookrunners for the notes. Wachovia Securities, ABN Amro, RBS and NatCity Investments were co-managers.

The notes contain a second priority lien on certain domestic fixed assets and a second priority lien on shares of FMC Wyoming. The offering is expected to close on Monday, Oct. 21, 2002 and is subject to certain closing conditions including execution of the new $500 million credit facility.

Proceeds from the loan and the Rule 144A notes will be used to: repay upcoming debt maturities, including FMC's $99.5 million of 7.125% medium-term notes due Nov. 2002 and $160.5 million of 6.375% debentures due Sept. 2003; repay all borrowings and terminate the existing revolver and accounts receivable securitization facility; replace with cash collateral certain standby letters of credit and surety bonds; and pay fees and expenses, the news release said.

"The strength of interest in the bond market" prompted the company's decision to increase the bond deal and decrease the bank deal, according to a company spokesman.

Citigroup and Bank of America are the lead banks on the Philadelphia, Pa. diversified chemical company's deal.

More details have emerged on QwestDex's $1.49 billion credit facility. On Tuesday, Prospect News Bank Loan Daily reported, "at least half a dozen banks are in as of the meeting". These six banks that have committed to the loan as senior managing agents have been identified as Bank of Nova Scotia, Bear Stearns, Credit Lyonnais, Commerz Bank, Royal Bank of Scotland and ING, a syndicate source said.

The directory services company's loan consists of a $100 million revolver with an interest rate of Libor plus 300 basis points, a $690 million term loan A with an interest rate of Libor plus 300 basis points and a $700 million term loan B with an interest rate of Libor plus 350 basis points.

Tentative upfront fees for the pro rata portion are 125 basis points for a $20 million commitment and 100 basis points for a $15 million commitment, the syndicate source said.

JPMorgan, Bank of America, Deutsche Bank, Lehman Brothers and Wachovia Securities are the lead banks on the deal.

Proceeds will be used to help fund the leveraged buyout of QwestDex by The Carlyle Group and Welsh, Carson, Anderson & Stowe.

AT&T Corp. closed on its $4 billion 364-day syndicated bank loan on Wednesday. JP Morgan, Citibank, Credit Suisse First Boston and Goldman Sachs acted as lead arrangers on the deal.

The facility is intended as a backstop for the company's commercial paper or other short-term debt maturing over the course of the next year, a news release said. It is replacing AT&T's undrawn $8 billion bank loan.

AT&T is a New York, N.Y. provider of communications services.

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