Xerox gains on expectation market pressure will cause holdout to sign amendment

By Sara Rosenberg

New York, June 18 - Xerox Corp. firmed up in secondary trading Tuesday due to market talk that only one bank is holding out on signing the amendment to the company's credit agreement. The bid moved up to 92 from 91, while the offer on the Stamford, Conn. document company's loan remained at 93, a trader said.

"UBS is the lone holdout," a trader said. "This news came out and UBS won't be too happy about this kind of press. It will put pressure on them so I think the deal will get done."

UBS couldn't be reached for comment.

On Monday, Xerox felt softer with a bid of 91 and an offer of 93 due to news that four or five banks were holding out on signing the latest amendment to the company's credit facility. The company has a June 30 deadline to refinance and extend its $7 billion revolver. At its peak on Friday, Xerox was bid at 94 and offered at 95.

Tesoro Petroleum Corp. also traded slightly firmer in the mid-to-high 98 level, according to a trader. Over the last few days, Tesoro's bank loan was trading in the high 97's, he added.

On Tuesday, the San Antonio, Tex. independent marketer and refiner announced plans to reduce its debt by $500 million by the end of 2003. First, the company plans to reduce working capital requirements by $50 million by the end of 2002, mostly though the rationalization of feedstock and finished product inventories, according to a company press release. Second, through a cost reduction program, the company intends on achieving $10 million in permanent improvements by the end of 2002 and $65 million of improvements for 2003. Third, assets will be divested with the hopes of obtaining net proceeds of $200 million in 2002. Some assets under review are Tesoro's Marine Services operations, the crude and product pipeline systems around the North Dakota refinery and selected retail sites including the recently acquired Beacon stations in California, the release said. Fourth, the company's capital program is being reduced by more than $200 million from the original budget to $250 million for both 2002 and 2003. Lastly, the company anticipates $10 million in synergies in 2002 from the Golden Eagle acquisition and $25 million in 2003.

Tyco International Ltd.'s loan "traded north of 93," according to a trader, up almost a point from a trading level of 92 on Monday. "There's generally stronger interest in Tyco due to the CIT situation," he added.

Last week, the Pembroke, Bermuda manufacturing and service company was given the green light to go ahead with its planned CIT initial public offering. Some proceeds from the IPO are expected to go towards the reduction of Tyco's debt.

In other news, Fleming Cos., Inc. closed on its new $975 million credit facility consisting of a $550 million revolver with an initial interest rate of Libor plus 200 basis points and a $425 million term B with an interest rate of Libor plus 225 basis points, according to a syndicate source. The revolver's interest rate is based on a usage grid and can range from Libor plus 175 basis points to Libor plus 225 basis points. Deutsche Bank was the lead bank on the deal.

Initially, the Lewisville, Tex. supplier of consumer package goods planned to obtain a $600 million revolver and a $350 million term B. The change in size of both the revolver and the term B occurred late last week, the syndicate source said, and was due in part to high demand for the B loan.

Proceeds from the loan are being used to refinance existing debt and help finance the acquisition of Core-Mark and Head Distributing. The Core-Mark acquisition was completed Tuesday, according to a company press release.

Southern Wine & Spirits of America Inc. "broke" in the secondary Tuesday, according to a trader, with the B loan trading at 101. These days, it's fairly usual for new issues to start trading at a premium, the trader added.

The deal is said to consist of a $570 million revolver and a $250 million term B, which was upsized from $150 million, according to market sources. The B loan is said to have an interest rate of Libor plus 250 basis points. Bank of America was the lead bank on the deal and declined to comment on any details of the offering.

Southern Wine & Spirits is a Miami, Fla. distributor of wine and spirits.

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