Goodyear $1.3 billion loan seen attracting asset-based lenders due to good collateral package

By Sara Rosenberg

New York, March 7 - Goodyear Tire & Rubber's newly launched $1.3 billion asset-based credit facility due 2006 is anticipated to syndicate successfully, primarily due to the expectation that the high quality inventory and receivables that are securing the loan will attract a large number of asset-based lenders.

"Never underestimate the depth and appetite of asset-based lenders," a market professional said. "You'll find a number of asset-based lenders coming in to suck this up."

Furthermore, "the term loan B guys will play" too, the professional added.

The new facility consists of an $800 million term loan and a $500 million revolver, both priced at Libor plus 350 basis points, according to sources. JPMorgan and Citigroup are the lead banks on the deal.

Previously, a market source told Prospect News that the deal was aggressively priced for a company that has not been able to execute on, for example, competitor problems.

Upon mentioning this opinion, the market professional responded: "At the end of the day, I think it will be a blow out. Maybe it'll flex by 25 basis points, but that's it."

However, he did agree with the criticism on the company's recent performance, stating: "I am amazed at how badly the company screwed up. It's a great brand name in theory. Kind of a basic industry. They weren't able to execute on Ford and Firestone problems. This management team is the issue."

Proceeds from the new facility will be used by the Akron, Ohio tire company to provide additional liquidity and funds to repay certain facilities

However, in order to get the new credit facility, the company must all successfully amend and restructure its existing credit agreements, including extending the maturities. Under the proposal, the 364-day $575 million facility and the $800 million term loan will be restructured into a €250 million revolver, a €400 million term loan and a $600 million term loan. The $750 million five-year facility will stay in place but will conform to the other tranches, meaning, among other things, the interest rate will be changed, according to the market professional.

To restructure the existing facilities, the company needs to get 100% lender approval.

"The new money is going to get inventory and receivables. It takes all the good collateral. What collateral is the old lender getting? Last I heard they were getting factories, which is good but not great. [The old lenders] have to agree to extend and give the new lenders great collateral," the market professional said, adding that it's not all bad for the old lenders since they will get an increase in coupon and security on a previously unsecured credit facility.

"The old guys are locked in. Either they vote for the amendment or bankruptcy," the professional continued.

Goodyear's bank debt traded at 88 on Friday, according to a trader.

El Paso Corp.'s new $1.2 billion two-year term loan traded on Friday in the low-to-mid 99's, with one trader saying that he saw a Street trade at 991/4. The loan was issued at 981/2.

The term loan, which launched on Feb. 24, was priced at Libor plus 625 basis points and carries a 3.5% Libor floor, according to market sources. Credit Suisse First Boston and Salomon Smith Barney are the lead banks on the deal.

Amortization requirements of the term loan are $250 million in June 2004, $250 million in September 2004 and the $500 million balance in March 2005.

Security is a portion of the production properties currently supporting the Trinity River financing.

Proceeds will be used by the Houston provider of natural gas services to retire the projected $825 million net balance of the Trinity River debt.

Nextel Communications Corp. was a little better bid on Friday after dropping off by about ¼ to 3/8 on Thursday. The term loan B and term loan C were quoted with a 96 bid and a 97 offer, according to a trader.

Asked what may have caused the minor drop in the company's bank debt, which has basically been moving up on a daily basis in recent sessions, the trader explained that investors were a tad concerned over Thursday's news that Craig O. McCaw is expected to sell some of his stake in the company.

"I think people needed to figure out that he just needed to diversify a little," the trader said in explanation of Nextel's bounce back on Friday.

Sears Roebuck and Co.'s bank debt, which has received some attention from leveraged loan players due to trades taking place in the mid-90s, traded on Friday at 95, The bank debt moved into the lower 95 region earlier in the week, up from quotes in the mid-94 area.

The loan first broke a few weeks ago at 99.9, but did not perform very well since the deal was not fully subscribed and not well sold, according to a trader. Also pushing the bank debt down was a corporate credit rating downgrade by Standard & Poor's to BBB+ from A-.

Sears is a Hoffman Estates, Ill. North American retailer.

In follow-up news, Serologicals Corp.'s bank meeting on Thursday in New York was well attended as most people who were expected to be there showed up, despite the terrible weather conditions, a company spokesman told Prospect News. Furthermore, there were a number of potential investors participating via teleconference. All in all, about 30 to 35 different banks and institutions participated in the launch, the spokesman said. UBS Warburg is the lead bank on the deal.

Commitments from investors are due in about two weeks.

The company's $125 million credit facility (B1/BB-) consists of a $100 million five-year term loan with an interest rate of Libor plus 425 basis points and a $25 million revolver with an interest rate of Libor plus 375 basis points.

"There's a chance we're going to be able to get that reduced somewhat before we finalize," the spokesman said in regards to the interest rates that the loan was launched with.

A preliminary commitment fee on the revolver has been set at 75 to 100 basis points, however, that number is subject to change, according to the spokesman.

Proceeds from the term loan will be used to help fund the acquisition of Chemicon International Inc. The revolver is expected to be undrawn at closing.

The company spokesman explained that after going over various financing alternatives for the acquisition with UBS Warburg, it was decided that given the size of the company and its current profile obtaining a new credit facility was the financing alternative that made the most sense.

Serologicals is an Atlanta provider of biological products.

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