Level 3 ups term loan spread; Datatel boosts spreads; General Motors softens on amendment

By Sara Rosenberg

New York, June 20 - In primary news, Level 3 Financing Inc. flexed pricing higher on its amended and restated term loan and Datatel Inc. increased pricing on both its first- and second-lien term loan debt.

Meanwhile, in the secondary, General Motors Corp.'s revolver ended up lower on the day after news of an amendment hit the market, triggering some selling pressure.

Level 3 Financing increased pricing on its $730 million amended and restated term loan (B-) by 25 basis points, and with that change in place, the anticipation is that allocations will go out later this week, according to a market source.

The term loan is now priced with an interest rate of Libor plus 300 basis points compared to original talk at launch of Libor plus 275 basis points, the source said.

Even with the change to pricing on the new the deal, the company is still dramatically improving its interest rate expense being that the existing $730 million term loan, which is being refinanced with this transaction, carries an interest rate of Libor plus 700 basis points.

In addition to significantly lowering the spread, the company is looking to modify the prepayment provisions and make other specified changes through this amendment and restatement.

Merrill Lynch is the lead bank on the deal.

The company expects to complete the amendment and restatement by the end of this month.

Level 3 Financing is a wholly owned subsidiary of Level 3 Communications, Inc., a Broomfield, Colo., international communications and information services company.

Datatel ups pricing

Datatel flexed spreads higher on both its first- and second-lien term loan debt by 25 basis points, with the book now said to be filling out at the new levels, according to a market source.

The $120 million first-lien term loan (B1/B+) is now priced at Libor plus 250 basis points, up from original talk at launch of Libor plus 225 basis points, and the $100 million second-lien term loan (B3/CCC+) is now priced at Libor plus 550 basis points, up from original talk at launch of Libor plus 525 basis points, the source said.

Credit Suisse is the lead bank on the deal that will be used for a dividend recapitalization.

Basically, the company is getting about $120 million in additional term loan debt through this transaction and refinancing about $100 million of existing first- and second-lien term loan debt.

Pricing on the existing first-lien term loan debt is currently set at Libor plus 225 basis points and pricing on the existing second-lien term loan debt is currently set at Libor plus 525 basis points, meaning that this new deal will now result in a pricing change as opposed to the original plans of keeping spreads at existing levels.

Datatel is a Fairfax, Va., provider of information management software for higher education institutions.

GM heads lower

Switching to trading news, levels on General Motors' revolver bounced around during the session, first widening out immediately following the amendment announcement and then falling lower as sellers emerged, according to traders.

The revolver closed the day quoted at 95 bid, 95¾ offered, down about half a point from Monday's closing levels of 95½ bid, 96½ offered, traders said, pointing to the company's amendment announcement as the impetus for the downturn.

However, quotes did not drop off all that quickly after the news was released. First, levels were seen really wide at 95½ bid, 97½ offered as traders were trying to find the market, traders explained. Then trades went off at various levels, with some happening at 96, some happening below 96 and so on, until the bank debt finally settled in the 95 bid, 95¾ offered range.

"We're just seeing a lot of sellers here," one trader remarked. "People aren't in love with the new secured deal."

"The market doesn't feel great. Everything felt weaker by an eighth to a quarter today on market technicals. And, [GM] bonds are off," another trader said in explanation of the GM revolver performance.

Late in the morning Tuesday, General Motors revealed plans for an amendment to its existing $5.6 billion unsecured revolving credit facility, under which all existing lenders will receive a 20% reduction in their commitments and have the opportunity to extend to 2011 in return for collateral, pricing and structural enhancements.

Pricing on the amended facility (B2/B+/BB) is expected to fall out in the range of Libor plus 200 to 225 basis points, depending on ratings.

Collateral will consist of certain North American accounts receivable and inventory of General Motors Corp., Saturn Corp. and GM of Canada Ltd., certain plants, property and equipment of GM of Canada Ltd. and a pledge of 65% of the stock of the holding company for GM's indirect subsidiary GM de Mexico.

With this amendment, any existing uncertainty as to whether the bank syndicate will be required to honor a borrowing request would be removed.

The amendment, which is anticipated to be completed by the end of July, must be approved by lenders with greater than 50% of the loan commitment.

The Detroit-based automaker has already received formal indications that the majority of its lending bank syndicate agreed to the amendment and extension.

USG closes

USG Corp.'s plan of reorganization became effective on Tuesday, formally concluding its Chapter 11 proceedings and allowing the company to exit from bankruptcy, according to a news release.

To support its exit, the company got a new $2.8 billion credit facility consisting of a $1 billion five-year term loan, a $650 million five-year revolver and a $1.15 billion 21/2-year tax bridge term loan, all priced at Libor plus 75 basis points.

The draw period expiration date for the term loan is Jan. 31, 2007 and can be extended six months depending on the passage of asbestos litigation.

JPMorgan and Goldman Sachs acted as the lead banks on the deal.

Revolver proceeds are being used to repay the company's debtor-in-possession facility, to pay unsecured and administrative claims and for working capital and general corporate purposes.

Term loan proceeds are being used to fund payments on a contingent note payable to the company's asbestos personal injury trust.

And, tax bridge loan proceeds are being used for prepayments of the asbestos personal injury contingent note.

USG is a Chicago-based building materials company.

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