Willbros heard to scrub $250 million bonds, eye return to loan market

By Paul Deckelman

New York, June 11 - Willbros Group, Inc. was heard by high yield syndicate sources on Friday to have decided to drop plans for a $250 million offering of six-year secured notes (B3/B+) and do all of its needed financing for an acquisition in the bank loan market, in line with the Houston-based company's original plan back in March.

The bonds were marketed to potential investors via a road show weeks ago but then languished after that on the junk market's forward calendar.

A high yield syndicate source, queried about bank loan market speculation that the company would follow such a course, flatly declared: "The bonds are gone; it's going back to a loan."

Company officials were unavailable for comment late Friday on any changes in its plans for financing the previously announced acquisition of InfrastruX Group Inc.

Willbros, which provides engineering, procurement and construction services to the oil and gas, refinery, petrochemical and power industries, announced on March 11 that it had agreed to acquire InfrastruX, a privately held, Seattle-based provider of electric power and natural gas transmission and distribution infrastructure services, in a $480 million transaction. Willbros is paying $360 million in cash and 7.9 million issued shares to the InfrastruX holders, who would also be eligible for contingent earn-out payments of up to $125 million in the event that EBITDA for the InfrastruX business exceeded $69.8 million this year and $80 million in 2011.

Willbros then lined up a $475 million senior credit facility to fund the cash portion of the acquisition, and in early April launched a $300 million four-year term loan B deal via joint book runners Crédit Agricole Corporate and Investment Bank - the former Calyon - and UBS Securities, and a $175 million three-year revolving credit facility via book runner Credit Agricole, with Scotia Bank and Natixis Bleichroeder joining the deal at the agent level.

When the bank deal was launched, the term loan portion was talked at Libor plus 450 bps to 500 bps with a 2% Libor floor and an original issue discount of 98 to 981/2. Pricing could step down by 50 bps after an interim period. But by early May loan market sources said Willbros was floating the idea of a bond financing instead of the term loan.

Sure enough, it announced on May 19 that it would sell $250 million six-year senior secured second-lien notes in a Rule 144A/Regulation S deal, with the term loan downsized to $50 million. UBS Investment Bank was the bookrunner on the bond deal, with Credit Agricole and Credit Suisse as joint bookrunners.

Primary market sources heard the bonds, carrying three years of call protection, being shopped around via a short road show that began on May 20, and which was scheduled to wrap up during the following week, with pricing expected to take place shortly after. Price talk of 12% was heard to have emerged on the deal on May 27, and the order books were closed at that time, according to market sources. One source expected pricing to occur the following day, May 28 - but it did not happen on that day, or on any other, with the deal staying parked on the forward calendar and eventually, being described as day to day.

There was no news out on the company at the time that might explain its inability to get the deal done - but the overall high yield primary market, which even in early May had begun staggering and stuttering as it fell off the strong pace seen in April and the previous months, continued to deteriorate in the face of worsening market conditions.

Making a presentation this past Tuesday at an engineering and construction conference in New York sponsored by one of its bond deal's joint bookrunners, Credit Suisse, Willbros' vice president of investor relations, Michael Collier, told conference attendees that that the company still had its financing commitment from its banks "and the ability to get the project done."

However, he acknowledged that "the market hasn't been our friend the last couple of weeks," and admitted that Willbros likely was looking at increased borrowing costs to get its financing done.

While it seemed fairly apparent on Friday that the $250 million bond deal was not going to be done, there was no official word yet that the company would revert back to its original plan and do a $300 million term loan B alongside its revolver.

A loan market source cautioned that in the event that Willbros' term loan B does end up being remarketed at its original size of $300 million, the chances are that pricing on the loan will have to be flexed up from the current talk as a result of the change in market conditions over the past few weeks.

-Sara Rosenberg contributed to this report

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