Icahn starts tender for XO's bank debt; adequate demand expected for Domino's

By Sara Rosenberg

New York, July 10 - In what some call a highly unusual move, High River LP, an affiliate of Carl Icahn, announced a tender offer to purchase up to $331 million of XO Communications Inc.'s term A loans, term B loans and revolving loan.

If Icahn succeeds with the tender offer, a fund manager said that any of XO's bank debt not tendered could drop in the secondary because he likely has different goals than traditional bank loan investors. However, currently, trading is not taking place on the company's loans due to the 51% approval condition that was added to the credit facility agreement in June.

Meanwhile, primary activity on Wednesday included a conference call held by Domino's Inc. regarding a refinancing of its $465 million credit facility, according to market sources. The deal is expected to go well.

Under the tender offer for XO Communications bank debt, High River is offering to pay 40 cents on the dollar for the senior secured loans.

Any lenders who tender will have to agree to rescind the amendment that requires approval by 51% of the bank group for anyone to sell, assign or transfer an interests in loans. If the offer is fully subscribed, then High River will own enough of the senior secured facility to remove the 51% approval condition in the agreement, the company said.

"This is very rare, but Carl Icahn is pretty unique," the fund manager said. "In seven years, I've never seen a tender offer for bank debt."

"No one wants him to be a part of the bank group because he's an equity investor," the fund manager said. "He wants equity, while traditional bank holders would want to help restructure the company and keep the bank debt in place. You don't want to own bank debt if Icahn owns it because you may end up owning equity."

Domino's Inc., an Ann Arbor, Mich. pizza company, refinancing $465 million credit facility consists of a $365 million six-year term loan B with an interest rate of Libor plus 250 basis points and a $100 million five-year revolver with an interest rate of Libor plus 225 basis points, according to market sources. JPMorgan Chase is the lead bank on the deal.

"[The refinancing] addresses maturity issues and gives the company more flexibility," a fund manager said. "We are not an existing lender and we're not going to do it because there's no equity sweep - meaning, if they issue equity it doesn't have to be used to pay down the loan. But, it will be well received. The demand is there because the company has performed well."

Petco Animal Supplies Inc. is said to be launching a repricing of its credit facility within the next few days, according to market sources. The $195 million term loan B is expected to be priced with a new interest rate of Libor plus 275 basis points, a market professional said.

Banks on the credit agreement dated Oct. 26, 2001 included Goldman Sachs Credit Partners LP as joint lead arranger, joint bookrunner and sole syndication agent and Wells Fargo Bank NA as joint lead arranger, joint bookrunner and sole administrative agent, according to a filing with the Securities and Exchange Commission.

"It's a B1 credit, which was originally priced about seven months ago at Libor plus 350 basis points," market professional said. "I believe it was syndicated at 97. Now it's being refinanced at par and priced at 275 basis points."

The company also has a $75 million revolver, which according to the professional, may also be repriced with lower interest rates. Currently, the revolver has an interest rate of Libor plus 325 basis points, according to a filing with the Securities and Exchange Commission.

Since, people don't want to lose the credit, the market professional explained, the refinancing will probably get done.

Petco is a San Diego, Calif. pet food and supplies specialty retailer.

In other news, Silgan Holdings Inc., Stamford, Conn. consumer good packaging company, closed on its new refinancing $850 million senior secured credit facility, according to a company press release. Deutsche Bank Securities Inc. and Banc of America Securities LLC were joint lead arrangers and Deutsche Bank Trust Company Americas, Bank of America, Citicorp USA Inc., Morgan Stanley Senior Funding Inc. and Fleet National Bank are the agents.

The new loan consists of a $100 million term loan A due June 28. 2008, a $350 million term loan B due Nov. 30, 2008 and a $400 million revolver due June 28, 2008. The agreement also provides the company with an incremental uncommitted term loan of up to $275 million, which may be used for acquisitions. Initially, all loans have an interest rate of Libor plus 200 basis points, according to the press release. Beginning in 2003, interest rates are subject to change depending on financial ratios.

WCI Communities Inc., a Bonita Springs, Fla. homebuilding and real estate services company, finished syndicating its new $350 million senior unsecured revolving credit facility, with an option to extend by $75 million, according to a company press release. The revolver is due in June 2005 and has an option to extend the maturity by one year.

Fourteen lending institutions participated in the syndicate. Fleet National Bank served as lead agent, Wachovia Bank served as syndication agent and Fleet Securities, Inc. and Wachovia Bank served as co-lead arrangers. Other banks involved in the transaction include Guaranty Bank, UBS AG, AmSouth Bank, Sovereign Bank, SunTrust Bank, BankUnited, F.S.B., Comerica Bank, Fifth Third Bank, Deutsche Bank Trust Company Americas, Credit Suisse First Boston, Compass Bank and Colonial Bank, the release said.

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