Federal-Mogul DIP breaks; Kodak grinds higher; Calpine slide continues; Recycled Paper tweaks loan

By Sara Rosenberg

New York, Nov. 23 - Federal-Mogul Corp. allocated its debtor-in-possession financing facility on Wednesday, with the term loan quoted atop 101. Also in trading, Eastman Kodak Co.'s bank debt continued to edge its way into stronger territory as some players are feeling more favorably about the loan's investment potential. And, Calpine Corp.'s second-lien term loan slid even lower as investors continued to react negatively to the company's recent loss of the use-of-proceeds court case.

In primary happenings, Recycled Paper Greeting Inc. made a number of changes to its credit facility, including increasing pricing on every tranche, cutting the size of the second-lien term loan and adding a mezzanine junior term loan piece.

Federal-Mogul's debtor-in-possession facility freed for trading during Wednesday's somewhat quiet pre-holiday market, with the $275 million term loan tranche quoted at 101 1/8 bid, 101 5/8 offered, according to a trader.

The term loan is priced with an interest rate of Libor plus 200 basis points. According to the company's October court filing requesting the new DIP proposal, the term loan pricing was originally contemplated at Libor plus 250 basis points.

Federal-Mogul's $775 million DIP also contains a $500 million revolver with an interest rate of Libor plus 225 basis points and a 37.5 basis point unused fee. The revolver was not seen quoted in the secondary during market hours, the trader added.

The company announced that it obtained court approval for the transaction, which was essentially an amendment of its existing DIP, on Nov. 18. The amendment basically increased the size to $775 million from $500 million, extended the maturity and permitted the company to implement a U.K. settlement agreement.

The DIP's maturity was extended to the consummation of the company's plan of reorganization or Dec. 9, 2006, whichever occurs first, from its current Dec. 9 expiration date.

Citigroup acted as the lead bank on the deal for the Southfield, Mich.-based auto parts manufacturer.

Kodak trades up

Eastman Kodak's bank debt was up about an eighth of a point across the complex as the deal has continued to build momentum off of the bullish report from Barron's that was recently released, and market players have started viewing the paper as a relatively cheap investment, according to a trader.

The term loan was quoted at 99 3/8 bid, 99 5/8 offered, the delayed-draw term loan was quoted at 98¾ bid, 99 1/8 offered, and the term loan and delayed draw as a strip were being quoted at 99¼ bid, 99½ offered, the trader said. By comparison, on Tuesday, the strip of bank debt was being quoted at 99 1/8 bid, 99¼ offered.

"There was some traction after the story in Barron's came out. And, it's still cheap compared to where everything else [loan wise] trades based on the interest rate and that it's below par," the trader explained.

According to the recent Barron's report, Kodak's turnaround plan has shown some early signs of working and, if the plan does indeed prove to be a success, the company's stock could improve significantly over the next few years.

Kodak is a Rochester, N.Y.-based digital imaging products, services and solutions company.

Calpine fall continues

Calpine Corp.'s second-lien term loan dropped by about half a point in reaction to the company losing its court battle against certain noteholders over the use of asset sale proceeds.

The San Jose, Calif., power company's second-lien bank debt was quoted at 75½ bid, 76½ offered, down from 76 bid, 77 offered. Prior to the court ruling the bank debt was quoted at 77 bid, 79 offered.

On Tuesday, the Delaware Court of Chancery ruled that Calpine's use of about $313 million of proceeds from the sale of domestic gas assets to purchase gas storage inventory violated its second-lien notes indenture.

Furthermore, vice chancellor Leo E. Strine Jr. ruled that future use of the proceeds for similar contracts is impermissible.

Calpine has been fighting the use-of-proceeds issue with The Bank of New York, collateral trustee for the company's senior secured note holders, and Wilmington Trust Co., indenture trustee for the company's first- and second-lien notes since September.

About $400 million from the sale of Calpine's domestic gas assets remains in an account at the Bank of New York.

Recycled Paper reworks deal

Recycled Paper tweaked its $217 million credit facility, flexing pricing higher across the board, adding a mezzanine junior term loan tranche while reducing the size of the second-lien term loan, changing call protection and adding an original issue discount to the second-lien term loan, and modifying the excess cash flow sweep, according to a buyside source.

For starters, pricing on the $20 million five-year revolver (B2/B) and on the $110 million six-year term loan B (B2/B) was increased to Libor plus 350 basis points from original price talk at launch of Libor plus 300 basis points, the source said. The revolver has a 50 basis point commitment fee.

Then, the seven-year second-lien term loan (Caa1/CCC+) was reduced to a size of $72 million from $87 million, and a $15 million 7½ to eight-year (final maturity still fluid) mezzanine junior term loan with pricing still to be determined was added to the capital structure.

In addition, pricing on the downsized second-lien term loan was flexed up to Libor plus 750 basis points from original price talk at launch of Libor plus 700 basis points.

And, call protection on the second-lien term loan was changed to 103 in year one, 102 in year two and 101 in year three, from original call protection of 102 in year one and 101 in year two.

Furthermore, a 100 basis point original issue discount was added to the second-lien term loan as opposed to the original par offer price, the source continued.

Lastly, the cash flow sweep contained in the credit facility was increased to 75% from 50%, the source added.

Credit Suisse First Boston is the lead arranger on the LBO financing deal.

Recycled Paper Greetings is a Chicago-based greeting card company.

Autocam completes presentation

Autocam Corp. finished presenting on a one-on-one basis its proposed $75 million second-lien term loan and first-lien credit facility amendments to new and existing lenders and is hoping to be able to wrap up the transactions by mid-December, a company spokesman told Prospect News on Wednesday.

Proceeds from the $75 million second-lien term loan will be used to repay in full the approximately $26 million drawn under the company's existing revolver and to repay a "fair portion" of the balances of the company's existing U.S. and Euro term loan debt, the spokesman said.

As for the amendments proposed to the existing credit facility, they mainly focus around the company getting covenant relief, with leverage covenants being the primary targets, the spokesman explained. There are also some minor changes to the credit agreement being sought after such as increasing some of the baskets for investments in foreign instruments.

Goldman Sachs is the lead bank on the second-lien term loan.

Autocam is a Kentwood, Mich., designer and manufacturer of specialty metal alloy components for the transportation and medical device industries.

Polymer closes

Polymer Group Inc. closed on its new $455 million credit facility (B1/BB-) consisting of a $410 million seven-year term loan B and a $45 million five-year revolver, with both tranches priced at Libor plus 225 basis points.

Originally, the deal was launched as a $405 million term loan and a $50 million revolver, with price talk of Libor plus 200 basis points, but $5 million was shifted between the tranches and pricing was raised by 25 basis points during syndication.

Citigroup acted as the lead bank on the deal.

Proceeds were used to repay and refinance the company's previous credit facility that consisted of a $280 million term loan B with an interest rate of Libor plus 325 basis points, a $125 million second-lien term loan C with an interest rate of Libor plus 625 basis points and a $50 million revolver with an interest rate of Libor plus 250 basis points.

"This refinancing is expected to have a positive impact on our cash flow due to the significantly lower interest rate. Additionally, we view this as an affirmation from the financial markets of the improvements we have made in our business and confirmation of our sound strategies for future growth," said James L. Schaeffer, chief executive officer, in a company news release.

Polymer Group is a North Charleston, S.C., technology-driven developer, manufacturer and marketer of engineered materials.

SS&C closes

The Carlyle Group completed its acquisition of SS&C Technologies Inc. for about $942 million, according to a company news release.

To help fund the transaction SS&C got a new $350 million senior secured credit facility (B2/B) consisting of a $75 million six-year revolver and a $275 million seven-year term loan with an interest rate of Libor plus 275 basis points.

JPMorgan and Wachovia acted as joint lead arrangers and joint bookrunners on the deal, with JPMorgan the left lead and administrative agent, Wachovia the syndication agent and Bank of America the documentation agent.

SS&C is a Windsor, Conn., provider of investment and financial management software and related services.

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