Reader's Digest holds bank meeting for $950 million; Adelphia continues nosedive

By Sara Rosenberg

New York, April 23 - Reader's Digest Inc. grabbed market attention Tuesday with a bank meeting for its new $950 million senior secured credit facility, according to market sources. JPMorgan Chase and Goldman Sachs are the lead banks on the deal. In secondary news, Adelphia Communications continued to drop, as the company's direction is still uncertain.

Reader's Digest's loan consists of a $250 million five-year term A tranche and a $700 million six-year term B tranche. Interest rates on the loan are calculated through a ratings based grid, a financial professional said. Both terms have an initial interest rate of Libor plus 250 basis points. The maximum interest rate on the terms is Libor plus 300 basis points. The minimum interest rate on the term A is Libor plus 150 basis points, while the minimum interest rate on the term B is Libor plus 250 basis points. The term A paper is being offered at a tier of $15 million and more for 25 basis points, a syndicate source said. Term B paper is being offered at par. Expected ratings for the loan are Baa3 from Moody's Investors Service and BB+ from Standard & Poor's.

In addition to the new term loans, the company's $192.5 million revolver is being rolled over via amendment, the syndicate source added.

Proceeds from the new credit facility will be used towards the Pleasantville, N.Y. global publisher's acquisition of Reiman Publications, a Greendale, Wis. publisher of cooking, gardening, country lifestyle and nostalgia magazines and books. According to a company press release, Reiman will contribute revenues to Reader's Digest in excess of $300 million and EBITDA in excess of $70 million.

"There were some tough questions at the meeting today," the professional said. "People sounded skeptical about the synergies of putting the two companies together."

However, despite the tentativeness surrounding the acquisition, the new credit facility offering is expected to go well for a number of reasons. According to the professional, the loan is well rated and the publishing sector tends to perform well in the loan market since companies have "separable and soluble assets." In addition, with a name like Reader's Digest, if something goes wrong with the company, chances are an investor will be able to sell the paper easily, he explained.

In secondary activity, Adelphia Communications Corp.'s bank loan paper continued its slide downwards, according to market professionals. The Adelphia Olympus term loan B - which is used as the benchmark paper among the large number of tranches issued by the company - was offered at a price that was just above 95 on Tuesday, compared to Monday's offered price of approximately 97, a professional said. The paper traded below 95 during Tuesday's market hours.

The drop in Adelphia's levels has been caused by a combination of recent company problems. On Monday, Standard & Poor's downgraded the company by two notches to CCC+ from BB- due to the company's delay in filing its annual report. Within the past week, the company has revealed that the Securities and Exchange Commission had opened a formal investigation into its accounting practices and Nasdaq has threated to delist Adelphia's due to the late filing of its 10-K annual report although that action has been suspended pending a hearing.

On the flip side, some possibly attractive paper in the secondary currently, according to one fund manager, belongs to SpectraSite Holdings Inc. and American Tower Corp.

"Even though telecom has been weak," the fund manager said, "we think these look like a good place to pick up high yield."

SpectraSite is a Cary, N.C. wireless tower operator and provider of outsourced network services to the wireless communications and broadcast industries. The bank loan paper has been trading in the 90s range, according to the fund manager. He added that the company does not have a lot of senior secured debt in respect to total debt. As of Dec. 31, 2001, the company had $695 million outstanding under its credit facility and an undrawn amount of $605 million, according to a filing with the Securities and Exchange Commission.

American Tower Corp. is a Boston, Mass. Wireless and communications infrastructure company with outstanding credit facilities totaling $1.45 billion at Dec. 31, 2001, according to a filing with the Securities and Exchange Commission.

Coming up this week in primary activity, Silgan Holdings Inc., a Stamford, Conn. manufacturer of metal and plastic consumer goods packaging products, is expected to launch its new $800 million senior secured credit facility (Ba2/BB-) Thursday to top tier agents. Deutsche Bank and Bank of America are co-lead arrangers on the deal. Salomon Smith Barney and Morgan Stanley are top tier agents in the syndicate.

The loan consists of a $400 million six-year revolver with an interest rate of Libor plus 200 basis points, a $100 million six-year term A with an interest rate of Libor plus 200 basis points and a $300 million 61/2-year term B with an interest rate of Libor plus 250 basis points, according to the syndicate. Proceeds from the new loan and from an issuance of $200 million 9% senior subordinated debentures due 2009 - priced Tuesday - will be used to refinance in full its existing U.S. senior secured credit facility, according to a company press release.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.