Swift holds conference call; Fleming, Charter dip; Qwest bridge loan bid over par

By Sara Rosenberg

New York, Sept. 5 - Swift & Co. held a call on Thursday updating banks on the financing situation for its leveraged buyout of Conagra Foods Inc.'s beef and pork processing business by sponsors Hicks, Muse, Tate and Furst. The company had previously brought a credit facility to market, which was later tabled for a short while due to the postponement of its bond deal.

Meanwhile, in secondary activity, Fleming Cos. Inc. received a lower offer price, Qwest Communications International Inc. continued to stay strong and Charter Communications Inc. was quoted one point lower on both the bid and the offer sides.

The Swift & Co. call was held in order to gauge interest in the loan and to give the investment community an update on the bond and bank financing.

"They are bringing the bond deal back out," a fund manager said. The call that was hosted by Swift is to "give us an idea on the bonds' price talk and timing."

As far as the bank loan is concerned, "I think everyone will have to recommit or reaffirm his or her interest in the deal," the fund manager added.

Swift's loan is a $550 million credit facility (Ba2/BB), which consists of a $350 million revolver with an interest rate of Libor plus 325 basis points and a $200 million term loan B with an interest rate of Libor plus 325 basis points.

When the loan was initially launched, the term loan B was priced at Libor plus 325 basis points. As commitments began to flow in, the syndicate opted to reverse flex the tranche to Libor plus 300 basis points. On its second time around, however, the term B is once again being priced at Libor plus 325 basis points, according to a market professional.

It's a secured deal that is structured as an asset-based loan with borrowings tied to 85% of eligible accounts receivable and 70% of eligible inventory. Citibank and JPMorgan Chase are the lead banks on the facility.

Swift's bond deal, put on hold after a major beef recall by ConAgra, has been restructured as $250 million seven year senior notes plus $150 million 7.25 year senior subordinated notes that will be sold to ConAgra. Previously the full $400 million of senior notes was to be offered to investors.

In the secondary, Fleming was being offered around 98 on Thursday, down slightly from previous offers in the low 99's as investor worries over a lawsuit begin taking their toll on prices, according to a fund manager.

"I think this name will trade down more over the next week or two," the fund manager said. "That doesn't mean that there's any real bid out there though. It's tough to bid on any paper right that has this kind of controversy surrounding it."

Cauley Geller Bowman & Coates LLP filed a lawsuit against Fleming at the end of August in which allegations were made that the company inflated the price of common stock by issuing positive statements regarding its "price impact" retail supermarket division. According to the law firm, "the defendants capitalized on their false and misleading statements by: 1) lowering the interest rate and extending the maturity on $250 million of Fleming's debt; 2) raising over $155 million through the June 13, 2002 sale of 8 million shares of Fleming common stock at $19.40 per share; 3) raising an additional $200 million through the June 13, 2002 sale of Fleming Notes due 2010; and 4) using the proceeds of the June 13, 2002 securities sales to complete the purchase of Core-Mark International, Inc. and Head Distributing for $330 million in cash."

Fleming, in response to the allegations, called the lawsuit "baseless" and emphasized that the company has always acted in compliance with the federal securities laws.

Adding to the controversy about the company was a Wall Street Journal story describing Fleming's relationships with suppliers and claiming the company takes bigger deductions than others in the industry.

The Lewisville, Tenn. food distributor and supermarket operator hosted a conference call on Thursday to discuss the situation. One buy-side source that listened in to the conference call found the overall tone to be "slightly annoyed on the part of Fleming. They were being asked a lot of questions."

Qwest Communications International Inc.'s loan performed well on Thursday, as the company's revolver, which has been trading up for a couple of weeks, is being quoted with a bid around 88 and an offer around 90. The Denver, Colo. telecommunications company's new $750 million bridge loan "just allocated" and is "doing pretty well" with a bid of around 1011/4, according to a fund manager.

Moody's Investors Service downgraded the company's senior unsecured debt ratings on Thursday, however, this had little affect on investor sentiment towards the bank debt. Qwest Communications and Qwest Capital Funding debt ratings were changed to Caa1 from B2 due to "structural and effective subordination of those obligations to the two bank loans, which are now secured obligations of intermediate holding companies, Qwest Services Corporation and QwestDex, Inc." and concern that "Qwest may still face difficulty generating sufficient cash flow to service the debt load that remains at QCI and QCF in 2004 and beyond." Moody's left Qwest Corp.'s ratings unchanged.

"People trading Qwest right now don't really care what the rating agencies have to say about it," the fund manager concluded.

Charter Communications Inc., a St. Louis, Mo. cable company, fell slightly in secondary trading to a bid of 85½ and an offer of 86½ from a bid of 86½ and an offer of 87½ on Wednesday, according to a trader. When asked what may have caused this one point drop, the trader responded that he had no idea since there was no major company news released on Thursday and that the rest of the cable sector basically remained at previous levels.

This weakening comes on the heels of Wednesday's strengthening, which was attributed to company officials announcing plans to reduce debt during a conference call.

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