FairPoint talk surfaces; Delphi financing could stall exit; Dayton to wrap at high end; Herbst bid comes up

By Sara Rosenberg

New York, Feb. 29 - FairPoint Communications Inc. came out with price talk on its credit as the deal was launched to senior managing agents during Friday's market hours, and Delphi Corp.'s so far unsuccessful syndication of its exit financing credit facility has caused the company to request more time to complete its emergence from bankruptcy protection.

Also, Dayton Superior Corp. is currently anticipating closing its term loan at the wide end of original price talk.

Moving to the secondary, Herbst Gaming Inc.'s term loan saw the bid side come up a couple of points now that investors have had a day to digest the news of the hiring of a financial advisor.

FairPoint held a well attended senior managing agent bank meeting on Friday morning to kick start syndication on its $2.03 billion senior secured credit facility (Ba3/BB+), and in conjunction with the launch, price talk was announced, according to a market source.

The company's $200 million six-year revolver, $200 million one-year delayed-draw term loan B, with seven-year final maturity, and $1.13 billion seven-year term loan B are all being presented to lenders with price talk of Libor plus 275 basis points, the source said.

As for the $500 million six-year term loan A, that is being talked at Libor plus 250 bps, the source continued.

There are two tiers of upfront fees towards the revolver, term loan A and delayed-draw term loan. Senior managing agents committing $60 million will get an upfront fee of 5%, while managing agents committing $40 million will get 4%.

The revolver has a 37.5 bps unused fee and the delayed-draw term loan has a 75 bps unused for six months, stepping up to 125 bps thereafter.

There is call protection against optional repayments on the delayed-draw and funded term loan B debt of 102 in year one and 101 in year two.

Financial covenants include a minimum cash interest coverage ratio of 2.50 to 1.00 and a maximum total leverage ratio of 5.50 to 1.00.

Lehman Brothers, Morgan Stanley, Bank of America, Deutsche Bank, Wachovia, Merrill Lynch and CoBank are the lead banks on the deal, with Lehman the left lead.

A retail bank meeting for the credit facility will take place this coming Thursday.

"Attendance was good," the source said regarding Friday's senior managing agent meeting. "It was [a] full room and I don't know how many people were on the phone."

The structure that the deal launched with is slightly different than what the company had previously outlined in filings with the Securities and Exchange Commission. Those filings had the deal comprised of a $200 million revolver, an up to $200 million delayed-draw term loan and an up to $1.68 billion term loan B.

Proceeds from the credit facility will be used to help fund the merger with Verizon Communications Inc.'s wireline operations in Maine, New Hampshire and Vermont.

In the merger, FairPoint will issue about 53.8 million of its common shares to be distributed in a tax-free Reverse Morris Trust transaction to the shareholders of Verizon as well as assume roughly $1.7 billion of debt. The transaction will give FairPoint's shareholders 40% ownership and Verizon's shareholders 60% ownership of the combined company.

This past Tuesday, FairPoint announced that the New Hampshire Public Utilities Commission issued a written order approving the acquisition of Verizon's wireline business in New Hampshire. With this approval, FairPoint has now received written orders from all three states approving the transaction, and the necessary approvals from the Federal Communications Commission have already been obtained as well.

FairPoint is a Charlotte, N.C., provider of communications services to rural communities.

Delphi exit may be delayed by financing

Delphi's exit financing credit facility has fallen victim to the currently volatile primary market conditions, causing the company to ask for an extension to emerge from Chapter 11 to May 31 from March 31, according to court documents.

"This is not unexpected as they had hinted at it for a while [given] the way the market is," a market source told Prospect News.

The source went on to say that he thinks General Motors Corp. "will do something" to help remedy the situation. When asked what that fix might be, he said he wasn't sure, but General Motors "probably will take some sort of note."

In early January, the company launched its $6.125 billion exit facility consisting of a $1.6 billion ABL revolver talked at Libor plus 250 bps, a $3.7 billion first-lien term loan (Ba3/B+) talked at Libor plus 450 bps and an $825 million second-lien term loan (B3/B-).

The first-lien term loan was launched with an original issue discount of 96 and call protection of 102 in year one and 101 in year two.

For weeks now, market sources have been saying that revisions to the Delphi deal are being contemplated and would be necessary in order for syndication to be successful; however, nothing official has been announced as of yet.

Of the total second-lien term loan amount, $750 million is expected to be issued to General Motors in connection with plan of reorganization distributions.

Originally, the second-lien loan was going to be sized at $1.5 billion, but it was downsized prior to launch as a result of a permanent improvement in liquidity as the company generated cash flow during the second half of 2007 in excess of the amount projected in its revised business plan.

JPMorgan and Citigroup are the lead banks on the deal that will be used to repay the company's debtor-in-possession financing facility, to fund other payments required upon emergence from Chapter 11 and to conduct post-reorganization operations.

In the recently filed documents, Delphi said that it must "still procure fully committed exit financing that will support implementation of the plan."

Delphi is a Troy, Mich.-based automotive electronics manufacturer.

Dayton expected at wide end

Dayton Superior's $100 million six-year term loan (B1/BB-) is currently anticipated to wrap up with pricing of Libor plus 450 bps, the high end of original guidance of Libor plus 425 bps to 450 bps, according to a market source.

The original issue discount on the loan is expected to remain at 98, the source added.

Dayton Superior's $250 million credit facility also includes a $150 million asset-based revolver that is priced at Libor plus 225 bps, with a 37.5 bps undrawn fee.

Financial covenants include a maximum leverage ratio and a minimum interest coverage ratio.

GE Capital is the lead bank on the deal that will be used to refinance the company's existing $130 million revolver and retire its 10¾% senior second secured notes due in September 2008.

Upon completion of the refinancing, drawdowns against the new revolver are expected to be about $65 million.

Dayton Superior is a Dayton, Ohio-based provider of specialized products for the non-residential concrete construction market.

Herbst better bid

Herbst Gaming's term loan was bid stronger on Friday after a significant drop during the previous session on news that the company engaged a financial advisor to assist with an evaluation of strategic alternatives, according to a trader.

The term loan was quoted at 78 bid, 79 offered, compared to Thursday's levels of 75 bid, 79 offered, the trader said. Prior to the advisor announcement, the debt was quoted at 81 bid, 83 offered.

"Some guys were bottom fishing and trying to figure out how bad things were," the trader explained. "Nothing happening down sub-78. Guys are buying paper in the 78-79 context."

On Thursday afternoon, Herbst said that it hired Goldman, Sachs & Co. to help evaluate various alternatives, including a recapitalization, refinancing, restructuring or reorganization of its obligations or a sale of some or all of its businesses.

The company said that the move was a result of the recent impact from Question 5, the Nevada smoking ban and general economic weakness.

Herbst Gaming is a Las Vegas-based casino and slot route operator.

Solutia tightens

Levels on Solutia Inc.'s term loan B tightened on Friday as it saw some activity during its second day in the secondary, according to a trader.

The term loan B was quoted at 93 3/8 bid, 93 7/8 offered, compared to Thursday's closing levels of 93¼ bid, 94¼ offered, the trader said.

The term loan B is priced at Libor plus 500 bps, with a 3.5% Libor floor for four years, and was sold to investors at an original issue discount of 91.

Solutia is a St. Louis-based manufacturer and provider of performance films, specialty chemicals and an integrated family of nylon products.

Warner Chilcott softens

Warner Chilcott Ltd.'s term loan was a bit weaker on Friday, despite its release of positive earnings, as the debt just followed the rest of the cash market down, according to a trader.

The term loan was quoted at 93 bid, 94 offered, down from 93¼ bid, 94¼ offered, the trader said.

"The rest of the market felt down about a quarter so it's probably [lower] with the market," the trader added.

Warner Chilcott reported results for the quarter and year ended Dec. 31 on Friday morning.

For the quarter, revenue was $227.7 million, an increase of $21.3 million, or 10.3%, over the prior year quarter, net income was $19.7 million, or $0.08 per share, compared with a net loss of $8.5 million, or $0.03 per diluted share, last year, and cash net income was $73.9 million, or $0.30 per share.

For the year, revenue totaled $899.6 million, an increase of 19.2% over 2006, and reported net income was $28.9 million, or $0.12 per diluted share, versus a net loss of $153.5 million, or $1.63 per share, last year.

Warner Chilcott is a Rockaway, N.J.-based specialty pharmaceutical company focused on the women's healthcare and dermatology segments.

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