Lyondell, PQ break; Hawaiian Telcom up as debt denied; Calpine rallies on potential merger

By Sara Rosenberg

New York, May 22 - LyondellBasell Industries finalized the original issue discounts on its U.S. and euro term loan B-2 pieces and then freed the U.S. tranche up for trading, and PQ Corp.'s credit facility hit the secondary as well.

Also in trading, Hawaiian Telcom Communications Inc.'s term loan traded higher after news emerged that the company won't be upsizing its revolving credit facility, Calpine Corp.'s term loan was better on a possible merger with NRG Energy Inc., while NRG's institutional bank debt saw a slight pop in the bid, but the offer stayed the same, and Residential Capital LLC (ResCap) saw its term loan gain ground on early tender offer results.

In addition, the communications sector got a pick me up as debenture holders won a ruling against BCE Inc.'s proposed buyout, and airlines once again came under pressure.

LyondellBasell came out with firm original issue discount levels on its term loan B-2 U.S. and euro tranches and then proceeded to allocate and break the U.S. debt for trading, according to a market source.

The original issue discount on the U.S. term loan B-2 debt that launched into syndication on May 6 finalized at 91 and at that price, the loan was oversubscribed, the source remarked.

At launch, the discount was officially being guided in the low-to-mid 90s context. During syndication, buyside sources said that the original focus was in the 92 to 94 area, and then that focus was later revised to the 91 to 93 area.

In fact, earlier this week, after the company held a conference call to discuss its earnings, one buyside source told Prospect News that because of the response on the call the discount was lowered and more investors started to come in to the deal because they felt okay at 92, with potential to be 91.

LyondellBasell's earnings call was necessary because the numbers were a bit confusing since the company doesn't have pro forma numbers for the past year.

Goldman Sachs, Merrill Lynch, ABN Amro and UBS are the joint lead arrangers and joint bookrunners on the already funded loan, with Goldman the left lead.

The U.S. term loan B-2 piece is sized at roughly $2.5 billion, although less than $2 billion was being syndicated during this process since Citigroup, the original left lead bank on the deal, had already sold off its 20% share, plus there was already some amortization on the loan.

Pricing on the U.S. term loan B-2 is Libor plus 375 basis points, with a 3.25% Libor floor, and the paper carries call protection of 103 in year one and 101½ in year two. Pricing can step down to Libor plus 350 bps if first-lien senior secured leverage is less than or equal to 1.625:1.

On the break, the U.S. term loan B-2 was quoted at 91 bid, 91½ offered and it then traded up to 91 1/8 bid, 91 3/8 offered, where it closed out the day, a trader said.

As for the roughly €433 million term loan B-2 tranche, of which all but Citi's piece was syndicated now, the original issue discount firmed at 90, the source remarked.

Allocations on the euro tranche will go out on Friday, the source added.

Like the U.S. tranche, pricing on the euro term loan B-2 is Libor plus 375 bps, with a 3.25% Libor floor, and the paper carries call protection of 103 in year one and 101½ in year two. Pricing can step down to Libor plus 350 bps if first-lien senior secured leverage is less than or equal to 1.625:1.

LyondellBasell's term loan B-2 is part of about $9.5 billion in total term loan B debt that the company obtained in December to help fund Basell AF SCA's acquisition of Lyondell Chemical Co. for $48 per common share in an all-cash transaction with a total enterprise value of about $19 billion, including the assumption of debt.

The rest of the term loan B debt is divided between a term loan B-1 with no call protection and a term loan B-3 that is non-callable for two years, with each of these tranches also sized at roughly $2.5 billion plus €433 million and carrying pricing of Libor plus 375 bps, with a step down to Libor plus 350 bps if first-lien senior secured leverage is less than or equal to 1.625:1, and a 3.25% Libor floor.

The term loan B-1 and term loan B-3 have yet to be launched into syndication. The assumption is that Citi's 20% was taken equally out of each B loan tranche.

Also included in the company's senior secured credit facility is a cash flow revolver, a term loan A, an ABL receivables purchase program facility and an ABL inventory-based facility.

When the term loan B first funded, it was sized at $9.45 billion and was priced at Libor plus 325 bps.

In order for the term loan B debt to have a Libor floor, a B-1, B-2, B-3 structure and a 50 bps increase in pricing from when it funded, the company agreed to amend and restate the credit agreement, effective April 30.

The amendment and restatement also modified certain debt covenants - including increasing the debt basket, eliminating an interest rate hedging requirement and adding a covenant prohibiting any reduction of aggregate commitments under the $750 million access group revolver before its initial maturity - upsized the company's ABL inventory-based facility to $1.6 billion from $1 billion by using the accordion feature and increased that accordion feature to $1.1 billion from $600 million, and raised pricing on the term loan A and cash flow revolver to Libor plus 350 bps.

LyondellBasell is a Netherlands-based polymers, petrochemicals and fuels company.

PQ frees to trade

PQ's credit facility broke for trading on Thursday, with the first-lien term loan quoted bid above its original issue discount price, according to a trader.

The $1.1 billion first-lien term loan (B2/B+) was quoted at 93 bid, but no offers were seen, the trader said.

Pricing on the first-lien loan is Libor plus 325 bps and the paper was sold at an original issue discount of 91.

PQ's $1.76 billion credit facility also includes a $200 million revolver (B2/B+) priced at Libor plus 325 bps and a $460 million second-lien term loan (B3/B-) priced at Libor plus 650 bps that was sold at an original issue discount of 87.

The second-lien term loan has call protection of 102 in year one and 101 in year two.

UBS, Goldman Sachs and Lehman Brothers acted as the lead banks on the deal.

Proceeds from the credit facility, which funded last year but didn't syndicate until now, were used to help finance the acquisition of the company by Carlyle Group in a transaction valued at $1.5 billion.

Following the buyout, PQ was combined with Ineos' silicas business so that Carlyle owns about 60% of the company and Ineos owns about 40%.

PQ is a Malvern, Pa., producer of specialty inorganic chemicals, catalysts and engineered glass products.

Hawaiian Telcom gains ground

Hawaiian Telcom's term loan was stronger in trading on Thursday after the company announced that its request to increase the borrowing capacity under its revolver to $150 million from $90 million was denied by the Public Utilities Commission of the State of Hawaii, according to a trader.

The term loan was quoted at 80½ bid, 82½ offered, up from 79 bid, 80½ offered on Wednesday, the trader said.

The trader explained that the inability by the company to upsize its revolver is actually a good thing for the term loan because it means less senior secured debt will be borrowed by the company, which gives the term loan better recovery prospects.

The company's right to elect to increase the revolver borrowing capacity expires on June 1.

Last week, Hawaiian Telcom revealed that it drew down its $90 million revolver in full due to uncertain conditions in the financial markets.

Based on this draw, lenders seemed to believe that if a revolver increase was obtained, the company would draw down those funds as well, the trader added.

Hawaiian Telcom is a Honolulu-based telecommunications provider.

Calpine up on merger buzz

Calpine's term loan was noticeably higher during the session as investors reacted to news that NRG is proposing a combination of the two companies, but NRG's institutional bank debt was only slightly up on the bid side, according to traders.

Calpine's term loan was quoted by one trader at 96¾ bid, 97¼ offered, up from around the 93½ bid, 95 offered area, and by a second trader at 96 7/8 bid, 97 5/8 offered, up from around the 95 bid, 96 offered context. According to the second trader, the term loan was quoted at 93 bid on Wednesday afternoon, but after chatter of an NRG merger proposal hit the market late in the day, levels inched a little higher.

Meanwhile, NRG's strip of institutional bank debt was quoted at 96¼ bid, 96¾ offered, compared to Wednesday's levels of 96 bid, 96¾ offered, the first trader added.

Under the NRG proposal, NRG would purchase all of Houston-based Calpine's outstanding capital stock in an all stock transaction. The proposed fixed exchange ratio would be 0.534 NRG shares, which represents about $23 per Calpine share as of May 14.

The combined company would be a more than 45,000 MW, $38 billion enterprise value, $20 billion market cap company with four highly coherent regions of at least 8 GW each.

In addition, Princeton, N.J.-based NRG said that it reduces the leverage of the combined company, significantly enhancing consolidated credit metrics. NRG also will contribute $2.5 billion in current liquidity and more than 10 major counterparties in its first-lien structure.

ResCap rises on tender progress

ResCap's term loan inched its way higher on Thursday after the company revealed that about three quarters of its bonds had already been tendered by the early delivery time on Wednesday, according to a trader.

The term loan was quoted at 97½ bid, 98½ offered, up from 97 bid, 98 offered, the trader said.

By 5 p.m. ET Wednesday, $2.6 billion of ResCap's notes that mature in 2008 to 2009 had been validly tendered, about dollar equivalent $6 billion of notes that mature in 2010 to 2015 had been validly tendered, and about $853.4 million of floating rate notes due June 9 were tendered for cash.

All in all, the company is tendering for about $14 billion in notes. The note offers will expire on June 3.

In the offers, ResCap is offering to issue new 8½% senior secured guaranteed notes due 2010 in exchange for existing 2008 and 2009 notes, and new 9 5/8% junior secured guaranteed notes due 2015 in exchange for existing 2010 through 2015 notes. The company is also tendering for any and all of its outstanding $1.199 billion of floating-rate notes due June 9.

Holders participating in the exchange offers are able to elect to receive cash in place of the new notes that they would otherwise receive under a modified Dutch auction process.

The offers are conditioned on ResCap entering into a new first-lien senior secured credit facility, providing for at least $3.5 billion of commitments on terms acceptable to the company.

To this end, ResCap has been negotiating a new $3.5 billion first-lien revolver with GMAC LLC as the lender.

Pricing on the revolver is expected to be Libor plus 275 bps and the company is expected to pay an upfront fee of 50 bps, according to previous filings with the Securities and Exchange Commission.

Covenants include a minimum cash balance and a minimum consolidated tangible net worth.

The revolver will mature on the earlier of May 1, 2010 if the offers are completed in a manner satisfactory to the lender, otherwise March 31, 2009, and the date on which the maturity of the new notes issued in connection with the previously announced tender offers is accelerated due to an event of default.

Proceeds from the revolver will be used to fund the cash required for the note offers, to repay the company's term loan maturing in July, to replace its $875 million 364-day revolver and to replace its $875 million three-year revolver.

ResCap, an indirect wholly owned subsidiary of GMAC Financial Services, is a Minneapolis-based real estate finance company focused primarily on the residential market.

Communications sector better as BCE hits snag

Names that operate in the communications sector, like Alltel Communications Inc., MetroPCS Communications Inc., Alaska Communications Systems Group Inc. and Iowa Telecommunications Services Inc., all saw levels rise as the BCE buyout is potentially going away, according to a trader.

Alltel, a Little Rock, Ark., provider of wireless voice and data communications services, saw its term loan B-2 quoted at 92 5/8 bid, 93 1/8 offered, up from 92 3/8 bid, 92¾ offered and its term loan B-3 quoted at 92 5/8 bid, 93 3/8 offered, up from 92½ bid, 92 5/8 offered, the trader said.

MetroPCS, a Dallas-based provider of wireless communications service, saw its term loan quoted at 95 3/8 bid, 96 1/8 offered, up from 95 1/8 bid, 95 5/8 offered.

Alaska Communications, an Anchorage, Alaska, provider of broadband and other wireline and wireless services, saw its term loan quoted at 95¼ bid, 96 offered, up from 95 bid, 95¾ offered.

And, Iowa Telecommunications, a Newton, Iowa, provider of wireline local exchange telecommunications services, saw its term loan quoted at 97 bid, 98 offered, up from 96 5/8 bid, 97 5/8 offered, the trader continued.

"Things in BCE sector were better because there's less paper. You would think something like that would have a general positive affect on the market but overall things were down today by about a quarter," the trader added.

On Wednesday night, news came out that BCE's proposed plan of arrangement was suspended as the Quebec Court of Appeal found in favor of Bell Canada debenture holders, who claimed that the BCE board had failed to consider the interests of the debenture holders and instead had acted on the assumption that they had an overriding duty to shareholders, which was wrong in law.

The proposed plan would have forced Bell Canada to guarantee $34 billion in loans that the purchaser would have incurred to purchase the shares of BCE, which debenture holders thought would have been unfair.

They also thought it was wrong that the directors of Bell would have allowed Bell to guarantee the debt without considering the issue from the perspective of Bell and its bondholders.

In response to the ruling, BCE and the funds planning to buy the company said they will seek leave to appeal to the Supreme Court of Canada.

Last summer, BCE agreed to be acquired by Teachers Private Capital, Providence Equity Partners Inc. and Madison Dearborn Partners, LLC for an offer price of C$42.75 per common share and all preferred shares at various prices ranging from C$25.25 to C$25.87.

The all-cash deal is valued at C$51.7 billion, including C$16.9 billion of debt, preferred equity and minority interests.

Funding for the transaction was expected to come from Citigroup, Deutsche Bank, RBS Securities and TD Securities in the form of a C$23.05 billion credit facility and a C$11.3 billion bridge loan to back high-yield offerings.

The credit facility, as outlined under the original commitment letter, consisted of a C$2 billion six-year revolver, a C$4.2 billion six-year term loan A, a C$16.5 billion seven-year term loan B and a C$350 million one-year delayed-draw term loan.

BCE is a Montreal-based communications company that provides telephone, internet, television and information services.

Airlines still falling

In more secondary news, the softening in the airline sector continued into Thursday's market as Delta Air Lines Inc., Northwest Airlines Corp., UAL Corp. and American Airlines Inc. all traded down again, according to a trader.

Atlanta-based Delta Air Lines saw its first-lien term loan quoted at 86 bid, 87 offered, down from 86¼ bid, 87¼ offered, the trader said.

Eagan, Minn.-based Northwest Airlines saw its term loan quoted at 78 bid, 80 offered, down from 80½ bid, 82 offered.

Chicago-based UAL saw its term loan quoted at 77 bid, 79 offered, down from 79 bid, 80½ offered, the trader continued.

And, Fort Worth, Texas-based American Airlines saw its term loan quoted at 92¼ bid, 93¼ offered, down from 92½ bid, 93½ offered, the trader added.

The sector has been moving lower and lower as a result of oil prices reaching record highs this week.

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