Leap dips on restatement; WCI slide progresses; Sequa, APP set talk; Alltel getting mixed reaction

By Sara Rosenberg

New York, Nov. 9 - Leap Wireless International Inc.'s term loan was a little weaker on Friday as news of a restatement and waiver hit the market, and WCI Communities Inc.'s term loan continued to head down still in reaction to recent financial results.

In other news, Sequa Corp. and APP Pharmaceuticals Inc. (Abraxis Pharmaceuticals) came out with price talk on their credit facilities as both deals were launched with bank meetings during market hours.

Also, Alltel Communications Inc.'s term loan B-2 is getting mixed feedback from accounts as some seem to be OK with the currently proposed original issue discount while others seem to be looking for more.

Leap Wireless' term loan headed lower during the shortened trading session after the company announced that it will be restating financial results and it will be looking for a credit facility waiver, according to a trader.

The term loan ended the day at 96¼ bid, 97¼ offered, down from Thursday's levels of 96½ bid, 97¾ offered, the trader said.

On Friday morning, Leap announced that it is restating financial results for fiscal years 2004, 2005 and 2006 and for the first and second quarters of 2007 to correct for errors in previously reported service revenues, equipment revenues and operating expenses.

Over these periods, the restatements are expected to result in a net cumulative reduction of approximately $20 million in service revenues and approximately $20 million in operating income.

The San Diego-based provider of wireless services went on to say that it is seeking a waiver under its credit facility to correct any default that may arise out of the restatement.

Leap is also seeking an amendment that would provide that entry into an agreement leading to a change of control will no longer constitute an event of default, unless and until the change of control occurs.

Bank of America is the lead bank on the credit facility.

WCI heads down

WCI Communities' term loan dropped in trading again as investors continued to react to the third-quarter numbers that were recently released and as an unbalance in supply and demand for the paper has emerged, according to a trader.

The term loan was quoted at 92½ bid, 93½ offered in light trading, down from previous levels of 94 bid, 95 offered, the trader said.

On Thursday, WCI announced third-quarter results that included a net loss of $69.7 million, or $1.66 per share, compared with net income of $10.7 million, or $0.24 per share, in the third quarter of 2006, and revenues decreased 61% to $166 million, compared with $425.6 million last year.

For the nine-month period ended Sept. 30, the company reported a net loss of $118.8 million, or $3.17 per share, compared with net income of $73.6 million, or $1.64 per share, during the first nine months of 2006, and revenues decreased 51% to $746.5 million from $1.52 billion last year.

WCI also said on Thursday that, following the filing of its quarterly report, it expects to submit an amendment to loan lenders that would provide financial flexibility, including suspension of the fixed charge coverage covenant.

The company was unable to comply with the fixed charge coverage covenant for the quarter ended Sept. 30. This problem was fixed for the short term by a limited waiver that was obtained on Nov. 7 and is effective through Dec. 7.

The company went on to say that the amendment would be expensive and that there is no assurance that it will able to comply with the amended covenants and other requirements.

WCI is a Bonita Springs, Fla.-based builder of traditional and tower residences in highly amenitized lifestyle communities.

Sequa price talk

Sequa released price talk on its $1.35 billion senior secured credit facility (B1/BB-) as the deal was presented to lenders via a bank meeting that took place on Friday morning, according to a market source.

The $1.2 billion seven-year term loan and the $150 million six-year revolver are both being talked at Libor plus 325 basis points, the source said.

The term loan is being offered to investors with an original issue discount in the 98 area.

The revolver has a 50 bps commitment fee.

There is a maximum senior secured leverage ratio covenant contained in the credit facility but details are still to be determined.

As for the actual bank meeting, that was described as well attended with about 150 people present. "Lots of people from banks and hedge funds," the source added.

Lehman Brothers, Citigroup and JPMorgan are the lead banks on the deal, which will be used to help fund the leveraged buyout of the company by the Carlyle Group for $175.00 per share in cash. The total transaction value is $2.7 billion.

Other buyout financing will come from $700 million of high-yield bonds and, according to filings with the Securities and Exchange Commission, about $967.6 million in equity.

Total pro forma debt to pro forma adjusted EBITDA is around 6.7 times and pro forma adjusted EBITDA to pro forma interest expense is around 1.6 times.

The buyout was approved by Sequa shareholders in September.

Sequa is a New York-based diversified industrial company.

APP Pharmaceuticals talk surfaces

APP Pharmaceuticals also held a bank meeting on Friday to kick off syndication on its $1.15 billion credit facility (Ba3/BB+), and it too announced price talk in connection with the launch, according to a market source.

The $150 million revolver and the $500 million term loan A were both presented to lenders with opening price talk of Libor plus 225 bps, and the $500 million term loan B was presented with talk of Libor plus 250 bps, the source said.

The term loan B is being offered to investors with an original issue discount that is in the 99 area, the source added.

Deutsche Bank and Wachovia are the lead banks on the deal, with Deutsche the left lead.

Proceeds will be used to help fund the company's spinoff from Abraxis BioScience, Inc.

Pro forma, for the last 12 months ended Sept. 30, the company is estimated to generate revenue of $652 million and adjusted EBITDA of $263 million.

Total leverage is 3.8 times based on last-12-months adjusted EBITDA.

APP Pharmaceuticals is a manufacturer and marketer of oncology, anti-infective and critical care hospital-based generic injectable products and proprietary anesthetic/analgesic products.

Alltel gets mixed feedback

Alltel's $6 billion 71/2-year term loan B-2 is getting various reactions from accounts as some are hoping that the discount will increase while others appear to find the current discount guidance suitable, according to a market source.

The term loan B-2 is currently talked at Libor plus 275 bps, with an original issue discount in the 97 to 97½ area and soft call protection of 103 in year one, 102 in year two and 101 in year three.

"Some accounts are telling the leads that no way it gets down with a 97 handle. Want a bigger discount. Putting in orders in the 96 area," the source said.

"But, we have heard of some people putting in sizeable orders at 971/2. We'll have to see how this shakes out," the source added.

The entire B-2 is not being syndicated because Barclays, one of the lead banks on the deal, has opted to hold on to its piece rather than sell it at the discount level.

The term loan B-2 is part of a $16.25 billion senior secured credit facility (Ba3/BB-/BB) that also includes a $1.5 billion six-year revolver, a $4 billion 71/2-year term loan B-1, a $4 billion 71/2-year term loan B-3 and a $750 million one-year delayed-draw, with 71/2-year final maturity, term loan, with all of these tranches priced at Libor plus 275 bps as well.

The term loan B-1 carries no call protection, and the term loan B-3 is non-callable for three years.

The revolver, term loan B-1, term loan B-3 and delayed-draw term loan are not officially being syndicated at this time.

Goldman Sachs, Citigroup, Barclays and RBS Securities are the joint bookrunners on the credit facility, with Goldman and Citi the joint lead arrangers.

The facility has a consolidated net senior secured debt to consolidated EBITDA covenant beginning June 30, 2008 based on consolidated EBITDA for the relevant rolling four-quarter measurement period ended as of such date.

Proceeds from the credit facility will be used to help fund the leveraged buyout of the company by TPG Capital and GS Capital Partners for $71.50 per share in cash. The transaction is valued at $27.5 billion.

Other financing will come from $4.6 billion in equity and $5.2 billion in senior unsecured cash-pay notes and $2.5 billion in senior unsecured payment-in-kind option debt - all or a portion of which may take the form of a senior unsecured PIK option bridge loan.

The bonds/bridge loans were revised from their original structure, which called for $4.7 billion in senior unsecured cash-pay notes and $3 billion senior unsecured PIK notes.

The delayed-draw term loan will be available to purchase or otherwise acquire licenses and rights in the 700 MHz auction to be conducted by the Federal Communications Commission.

Pro forma for the transaction, Alltel Communications' senior secured debt to adjusted EBITDA will be 4.6 times and net debt to adjusted EBITDA will be 7.0 times. Total consolidated Alltel Corp. (the holding company) net debt to adjusted EBITDA will be 7.7 times and adjusted EBITDA to Alltel Corp. consolidated cash interest expense will be 1.5 times.

Alltel is a Little Rock, Ark., provider of wireless voice and data communications services.

FHC flexes up

FHC Health Systems Inc. increased price talk on its $175 million six-year first-lien term loan (B1/B+) to Libor plus 400 bps to 450 bps from original guidance at launch of Libor plus 350 bps, according to a market source.

The first-lien term loan is still being offered with an original issue discount of 99 and carries 101 soft call protection for one year, the source added.

The company's $290 million credit facility also includes a $20 million five-year asset-based revolver that is being held by Merrill Lynch, a $10 million five-year cash flow revolver (B+) and an $85 million 61/2-year second-lien term loan (B3/CCC+).

As was previously reported, the second-lien term loan is talked at Libor plus 750 bps, is offered with an original issue discount of 99 and carries call protection of 102 in year one and 101 in year two.

Covenants include total leverage, interest coverage and capital expenditures.

Goldman Sachs is the lead bank on the deal, which will be used to help back the buyout of the company by Crestview Partners.

Leverage through the first-lien debt is 2.3 times, and leverage through the second-lien debt is 3.4 times.

FHC Health Systems is a Norfolk, Va., provider of behavioral health-care services.

Semco/Cap Rock closes

Cap Rock Holding Corp. completed its acquisition of Semco Energy Inc., according to a company news release.

To help fund the transaction, Semco Energy got a new $130 million five-year revolver and $360 million seven-year term loan, with both tranches priced at Libor plus 125 bps, and Cap Rock got a new $145 million seven-year term loan that is priced at Libor plus 200 bps.

RBC Capital and Union Bank of California acted as the lead banks on the $635 million in credit facilities, with RBC the left lead.

Semco Energy is a Port Huron, Mich., distributor of natural gas to customers in Michigan and Alaska. Cap Rock is a Midland, Texas, utility holding company with electric utility transmission and distribution assets serving 28 counties in Texas.

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