Auction of $100 million Adelphia loans dominates session

By Paul A. Harris

St. Louis, Mo., Sept. 12 - Traces of Wednesday's one-year commemoration of the events of Sept. 11, 2001 lingered into Thursday's session, according to one official in the leveraged loan market, who characterized it as generally quiet - with the marked exception of a big auction of Adelphia Communications Corp. bank debt.

"Some people left early Wednesday and came in a little late on Thursday," the source added, specifying that memories of friends and acquaintances who fell in the attacks seemed to take on added poignance with Wednesday's ceremonies and official and unofficial observances.

However when the market reconvened Thursday one event seemed to capture everyone's attention: an auction of $100 million of Adelphia Communications loans.

One source identified the seller as "a single institutional lender." Another was more specific, saying the firm involved was Mellon Financial Corp. (that institution did not return a telephone call seeking comment made by Prospect News).

"That's a pretty good-sized auction for somebody to run - especially on Sept. 12," one official commented.

Two sources told Prospect News that the paper of three of Adelphia's subsidiaries went on the block Thursday: TCI went for "around 85," one source said, adding that Century Communications went for 68-69 and FrontierVision went in the mid-80s.

Other than Adelphia is was a pretty quiet day," one source said adding that the $100 million auction "was the highlight."

One source said that a deal that engenders considerable interest around his institution these days is the Swift & Co. LBO, to help fund acquisition of 54% of ConAgra's US and Australian beef, pork and lamb operations by Hicks, Muse, Tate & Furst and Booth Creek Management.

The Swift & Co. $550 million secured credit facility (Ba2/BB) via Citibank and JPMorgan Chase is structured as an asset-based loan with borrowings tied to 85% of eligible accounts receivable and 70% of eligible inventory, and is comprised of a $350 million revolver at Libor plus 325 basis points and a $200 million term B at Libor plus 325 basis points.

"People love the loan," this official said, but added that what piqued the interest of market observers at his institution is the re-jigged junk bond deal that Swift is bringing in the wake of ConAgra's massive mid-July recall of E. coli-tainted ground beef.

Notwithstanding the fact that the recall involved in excess of 18 million pounds of ground beef, this official contended, Swift is being unduly hauled over the coals - an opinion which several sources in the high-yield bond market have also shared recently with Prospect News.

Initially launched as $400 million of seven-year senior notes, Swift pulled the deal off its roadshow shortly after the scope of the recall became known in mid-July.

Swift returned post-Labor Day with $250 million of seven-year senior notes (B1 /expected: B+) and $150 million of 7.25-year senior subordinated notes. ConAgra will take down all the senior subordinated notes, which come with a six-month lock-up provision.

The bond deal, via Salomon Smith Barney and JP Morgan, is being talked at 11½%-11¾%, with pricing expected Friday.

And it is the price talk that raised this leveraged loan official's eyebrows.

"It struck us as being high," the official said. "All this meat recall occurred while ConAgra was watching the store, and that was months ago.

"Hicks Muse definitely had a right to go back to ConAgra and squeeze them - for indemnities and a lot of other stuff. And apparently they've done a lot in terms of consultant reports and upgrading the inspection and cleanliness and so forth.

"But it's hard to be in the meat business without having that issue pop up every once in a while."

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