Rite Aid breaks for trading in plus par territory; Allied Waste down on guidance revision, rating warnings

By Sara Rosenberg

New York, Sept. 14 - Rite Aid Corp.'s $1.4 billion amended and restated credit facility allocated Tuesday morning and broke for trading with opening levels on the term loan wrapping around par ½ before the bid started to creep up a bit in afternoon trading. Meanwhile, quotes on Allied Waste Industries Inc.'s bank debt headed lower as the company was plagued by an onslaught of bad news including revised guidance and potential rating ramifications.

On the break, Rite Aid's $450 million term loan was quoted at par ¼ bid, par ¾ offered, but by early afternoon bids got stronger and the paper was quoted at par 3/8 bid, par ¾ offered - where it basically stayed through close, according to market sources.

The Camp Hill, Pa., drugstore chain's term loan is priced with an interest rate of Libor plus 175 basis points.

The new facility also contains a $950 million revolver, upsized from $850 million during syndication, with an interest rate of Libor plus 175 basis points.

Citigroup and JPMorgan are the lead banks on the deal, with Citigroup listed on the left.

Essentially, through this deal, the company is leaving the institutional market and heading toward the pro rata market by increasing its existing $700 million revolver by $250 million and decreasing its $1.15 billion term loan by $700 million. The existing revolver is priced at Libor plus 350 basis points, and the existing term loan is priced at Libor plus 300 basis points.

Originally, the deal was anticipated to close during the week of Aug. 23, however, the closing has been delayed to around Sept. 20, not because of any syndication problems since the deal was oversubscribed and therefore obviously well received by the investment community, but rather because of a new securitization facility that will be used to help repay some of the existing term loan debt, the source explained.

Allied Waste lower

Allied Waste's bank debt was quoted lower by about half a point on both the term loan B and the revolver, and although trading in the name was basically non-existent on Tuesday trading desks definitely saw a lot of inquiry from investors, according to traders.

The term loan B was quoted on the wide side at 101 bid, 102 offered, by one trader, and slightly tighter than that by a second trader at 101½ bid, 101¾ offered. The revolver was quoted at 98½ bid, 99 offered.

"At one point [the revolver was] low 98 bid but I didn't see any real offers coming in," the second trader added. "Bids backed up but nothing really came out. The bonds were off. Equity [was] off about 7%."

On Tuesday, Scottsdale, Ariz.-based Allied Waste revealed that for a second time this year it was reducing its operating income before depreciation and amortization outlook for 2004 by about 3% to 4% from previous guidance.

This time around the waste services company attributed the downward revision to maintenance improvement programs driving maintenance cost increases in the short term, according to an 8-K filed with the Securities and Exchange Commission.

In reaction to the downward guidance revision, weaker operating earnings and cash generation, and higher leverage than anticipated over the last 12 months ended June 30, Moody's Investors Service placed Allied Waste's ratings on review for possible downgrade, including the Ba2 bank debt rating.

"The rating review will focus on, among other things, the reasons behind the company's lackluster performance in the last two quarters vis a vis its peers; the impact of current and expected operating performance on cash flow generation, funding of capital expenditures, and debt reduction; and the impact of the revised 2004 EBITDA on financial covenant tests," the rating agency said.

Meanwhile, Fitch Ratings revised its outlook on Allied Waste to negative from stable.

"Margin pressure has resulted from weaker pricing and higher costs than originally anticipated. Weak revenue performance has occurred despite improving economic conditions, and AW appears to be under-performing its competitors in this area. AW has also indicated higher repair and maintenance expenses and other corporate expenditures. Higher fleet expenditures should improve maintenance costs over the intermediate term but will pressure free cash flow in the short term," Fitch said.

"Further reduction in the company's positive free cash flow buffer could result in a review of the current ratings," Fitch added.

Borgata should be blowout

Borgata Hotel Casino and Spa's $650 million senior secured credit facility, which just launched via a "well attended" bank meeting on Tuesday, has already attracted "a number of early commitments" and is expected to be a "blowout" deal, according to a market source.

The facility consists of a $450 million five-year revolver with price talk of Libor plus 200 basis points and a $200 million seven-year term loan B with price talk of Libor plus 200 basis points. Pricing on the revolver is subject to a leverage grid.

CIBC, Bank of America and Wells Fargo are the lead arrangers on the deal, with CIBC left lead. CIBC is the administrative agent, Bank of America and Wells Fargo are co-syndication agents, and the Bank of Nova Scotia and Deutsche Bank are co-documentation agents.

Proceeds will be used to refinance the company's existing senior credit facility and fund expansion plans that will cost about $200 million.

The expansion project requires various government and regulatory approvals, and construction is expected to begin in December with completion to occur in the second quarter 2006.

The expansion includes 600 additional slot machines, 36 additional gaming tables, 56 additional poker tables, 46 additional race book positions, two more fine dining restaurants, an additional casual dining restaurant, a large, multi-concept, quick-service restaurant, two additional nightclubs, nine more spa treatment rooms and six additional retail shops.

Borgata, a joint venture between Boyd Gaming Corp. and MGM Mirage, is an Atlantic City, N.J., entertainment resort.

Syniverse appears to have support

Syniverse Technologies Inc.'s recently launched $244.2 million six-year term loan, which basically reprices the existing term loan, extends the maturity and provides for some acquisition financing, seems to have support from existing lenders as, so far, there has been no indication of investors trying to sell off their positions in the secondary market, according to a market source.

The deal launched via a conference call on Monday, at which time the syndicate really only approached existing lenders asking them to roll over their positions and possibly upsize some of their exposure to eat up the incremental term debt, the source explained.

The existing term loan that will be taken out through this new transaction has about $200 million outstanding and carries an interest rate of Libor plus 350 basis points.

Pricing on the new term loan went out at Libor plus 300 basis points.

Lehman is the sole lead bank on the Tampa, Fla.-based communications technology company's deal.

In addition to refinancing the existing term loan, proceeds will also be used to help finance the acquisition of EDS Interoperator Services North America for about $57 million in cash.

Intelsat probably October business

Timing on a bank meeting for Intelsat Ltd.'s approximately $750 million credit facility is starting to take a bit more shape with the deal now expected to be October business, according to a market source. Previously, the launch was anticipated for the end of the third quarter or early fourth quarter.

Although a structure on the facility has not yet emerged, it is expected that a large chunk of the total amount will be term loan debt.

Deutsche Bank, Credit Suisse First Boston and Lehman Brothers are the lead banks on the deal, with Deutsche listed on the left.

Proceeds, combined with proceeds from a proposed bond offering, will be used to help fund Zeus Holdings Ltd.'s leveraged buyout of Intelsat.

Zeus, a company formed by a consortium of funds advised by Apax Partners, Apollo Management, Madison Dearborn Partners and Permira, will acquire Intelsat, a Pembroke, Bermuda-based satellite communications company, in a transaction valued at about $5 billion, including about $2 billion of existing net debt.

Required approval of shareholders holding 60% of Intelsat's outstanding shares will be sought in a general meeting of shareholders expected to be held later this year. The closing of the transaction is subject to the satisfaction or waiver of several conditions, including the receipt of shareholder and regulatory approvals. Intelsat expects that required approvals could be obtained and closing could occur as early as the end of 2004.

General Growth syndication

Syndication of General Growth Properties Inc.'s proposed $9.75 billion credit facility will probably occur through two steps - a managing agent tier level meeting that's expected to take place in early-October and a retail/general syndication meeting that is expected to take place in mid-October, according to a market source.

Previously a bank meeting was expected to take place sometime in the late September to early October timeframe.

Lehman Brothers, Credit Suisse First Boston, Wachovia and Bank of America are joint lead arrangers and joint bookrunners on the deal.

Of the total amount, $3.6 billion will come in the form of a bridge loan that is hoped to later be taken out by a commercial mortgage-backed securities deal.

The average interest rate of the new debt will be in the Libor plus 225 to 275 basis point range, the majority of debt having a term of three years, with some four-year debt.

Proceeds, along with $500 million of new equity, will be used to help fund the acquisition of The Rouse Co. for $7.2 billion, including the assumption of about $5.4 billion of Rouse debt, and to redo $2 billion of General Growth's unsecured credit.

The transaction is expected to close in the fourth quarter of 2004.

Post closing, General Growth, a Chicago-based shopping mall owner, will have about $23 billion of debt, or about 71% of total pro forma capitalization of $32.5 billion based upon the current stock price. Estimated interest coverage is about 1.6x for the first full year after closing, assuming the transaction closes in the fourth quarter.

Wynn Macau closes

Wynn Macau closed on its $397 million senior credit facility consisting of a $382 million seven-year term loan, which will be borrowed in a combination of Hong Kong and US dollars, and a HK$117 million (approximately US$15 million) three-year revolving working capital facility, which may be borrowed in either Macau patacas or Hong Kong dollars, according to an 8-K filed with the Securities and Exchange Commission on Tuesday.

Deutsche Bank AG, Hong Kong, and Société Générale Asia Ltd., were global coordinating lead arrangers on the deal.

The term loan carries an interest rate of Libor plus 350 basis points, and the revolver carries an interest rate of Hibor plus 250 basis points.

Amortization on the term loan begins on Sept. 14, 2007, with 3.75% of the principal due that year, 10% of the principal due the following year, 27% of the principal due in the fifth year, 29% due in the sixth year, 30.25% due in the seventh year.

Proceeds from the facility are being used to finance the development and construction of Wynn Resort's first hotel/casino project in Macau, China which is expected to have a total project budget of about $705 million.

Wynn Resorts is a Las Vegas-based casino/hotel company.

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