WorldCom bank debt drops to low teens on Chapter 11; Hollinger launches $350 million

By Sara Rosenberg

New York, July 22 - WorldCom Inc.'s secondary bank loan paper softened to around 13 from around 17 at the end of last week on news of the company's bankruptcy filing despite the fact that people expected this course of action, according to market sources. The Clinton, Miss. telecommunications company expects it may take nine to 12 months before emergence from Chapter 11 is possible.

As part of the reorganization process, WorldCom obtained an agreement to arrange up to $2 billion in debtor-in-possession financing with a $250 million letter of credit sublimit and has already secured a commitment of $750 million from Citibank, JPMorgan Chase Bank and General Electric Capital Corp.

Meanwhile, in the primary, Hollinger International Inc. held a bank meeting for its new $350 million senior secured credit facility (Ba2). TD Securities, Barclays and Wachovia are the lead banks on the deal.

The loan consists of a $50 million six-year revolver with an interest rate of Libor plus 275 basis points, a $50 million six-year term loan A with an interest rate of Libor plus 275 basis points and a $250 million seven-year term loan B with an interest rate of Libor plus 300 basis points, according to market sources. Upfront fees for the revolver are 62.5 basis points for a commitment of $15 million.

The Chicago, Ill. publishing company will use the proceeds to refinance outstanding debt.

"We've liked it in the past," a fund manager said. "It's a proven leveraged name. We'll probably like it again."

Otherwise, it was a pretty quiet day in the bank loan market. "It's a summer Monday," the fund manager explained. "People are slow to get started, especially in a down market."

Coming up this week, URS Corp. is scheduled to hold a bank meeting Wednesday regarding a new $650 million credit facility (Ba3), according to market sources. Credit Suisse First Boston is the lead bank on the deal.

The loan consists of a $200 million five-year revolver with an interest rate of Libor plus 300 basis points, a $100 million five-year term loan A with an interest rate of Libor plus 300 basis points and a $350 million six-year term loan B with an interest rate of Libor plus 350 basis points, a market source said.

Basically all assets secure the San Francisco, Calif. engineering and design services provider's loan.

Proceeds will be used to refinance outstanding debt and to back the acquisition of EG&G Technical Services from the Carlyle Group for $500 million.

"It's a service business so the company does not have a lot of assets," a fund manager said. "We probably won't take part in it."

Also Wednesday, Otis Spunkmeyer Inc. is scheduled to launch a new $140 million senior secured credit facility, according to market sources. Merrill Lynch and JPMorgan Chase are the lead banks on the deal.

The San Leandro, Calif. cookie company's loan consists of a $20 million six-year revolver with an interest rate of Libor plus 300 basis points and a $120 million 6½ year term loan B with an interest rate of Libor plus 350 basis points, according to market sources.

Proceeds will be used to help fund the leveraged buyout by Code Hennessy & Simmons.

The company' senior leverage if 3.4 times and total leverage is 4.5 times, according to a market professional. "They could be pushing the envelope in this market," he said. "But, the deal has the right structure with a small revolver and term debt." Furthermore, "it's a decent sponsor group", which most likely has a bank group and investor following, he added.

In other news, Berry Plastics Corp. closed on a $480 million secured credit facility (B1/B+) Monday, according to a syndicate source. The loan consists of $100 million six-year revolver with an interest rate of Libor plus 275 basis points and a commitment fee of 50 basis points, a $50 million six-year delayed draw term loan with an interest rate of Libor plus 275 basis points and a commitment fee of 75 basis points and a $330 million eight-year term loan B with an interest rate of Libor plus 300 basis points. Proceeds are being used to fund the company's purchase by GS Capital Partners 2000 LP and repay outstanding debt. Goldman Sachs and JPMorgan Chase were the lead banks on the deal.

Berry Plastics is an Evansville, Ind. injection-molded plastic products company.

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