Smaller deals may take longer to get done as investors focus on upcoming large LBO deals

By Sara Rosenberg

New York, May 10 - Maax Inc.'s $110 million term loan B (B1 expected/B+), which is priced with an interest rate of Libor plus 275 basis points and launched on Monday, is not expected to immediately fly off the shelf as many investors seem to be preoccupied with thoughts of upcoming large leveraged buyout/acquisition financing deals that would result in relatively generous allocations as opposed to small positions that come from the lesser-sized deals, such as Maax.

"It was essentially a term loan B meeting. Those guys usually don't show so there weren't a lot of people there [but] there were supposed to be a lot of guys on the phone," a market source said. "I don't think it's a deal that will be five times oversubscribed before the meeting. It will take some time for people to do their credit work. It's small so it's a little harder to get the investor base to focus.

"When people start thinking there's big deal coming and they might get some large pieces of paper - [like] PanAmSat, Iasis and Rockwood Specialties - it's hard to get them focused on the smaller deals where they'll only get $2 to $3 million."

PanAmSat Corp.'s proposed leveraged-buyout-related credit facility is probably not going to hit the bank loan market until this summer, and although details are still to be determined, the size of the facility is expected to be pretty large as the deal has previously been described by one market source as "a whopper".

Credit Suisse First Boston and Citigroup are the joint lead arrangers and joint bookrunners on the PanAmSat deal. Bear Stearns and Lehman Brothers have signed on to the deal as co-documentation agents.

Proceeds from the credit facility, combined with proceeds from a proposed bond offering, will be used to help fund the leveraged buyout of PanAmSat by affiliates of Kohlberg Kravis Roberts & Co. from The DirecTV Group Inc. in a transaction valued at about $4.3 billion, including the assumption of about $750 million of net debt.

PanAmSat is a Wilton, Conn., satellite operator.

Details on Iasis Healthcare Corp.'s proposed credit facility that will be obtained in connection with the company's LBO probably will not be available for a few weeks, however there is unconfirmed market speculation that all four financial advisers - Banc of America Securities LLC, Goldman, Sachs & Co., Lehman Brothers Inc. and Merrill Lynch & Co. will be involved in the financing somehow. Some have even gone so far to guess that Bank of America will be leading the bank financing, or if not leading, definitely involved, but this too is pure rumor at this point as members of the supposed syndicate have declined to comment.

Iasis entered into a definitive agreement with an investor group led by Texas Pacific Group under which TPG will acquire Iasis from JLL Partners in a transaction valued at about $1.4 billion. The transaction is subject to regulatory approvals, financing and other customary closing conditions and is expected to close by June 30.

In connection with the LBO, Iasis began a cash tender offer and consent solicitation on Friday for any and all of its $230 million principal amount of 13% senior subordinated notes due 2009 and its $100 million principal amount of 8½% senior subordinated notes due 2009. The offer is scheduled to expire at midnight ET on June 3.

The refinancing of Iasis' credit facility and the receipt of financing are all conditions to the company's newly announced tender offer.

Iasis is a Franklin, Tenn., owner and operator of medium-sized acute care hospitals.

Rockwood syndication ahead

General syndication on Rockwood Specialties Group Inc.'s acquisition financing credit facility is not expected to take place until after Memorial Day but the company is expected to get a total of $2.7 billion in senior bank and bond financing that will consist of both euro- and U.S.-denominated debt to fund the acquisition of four chemical businesses of German-based Dynamit Nobel.

However, a different source broke the debt financing structure down a little bit more by saying that the company is expected to bring €400-€500 million of high-yield bonds to market sometime during the third quarter of 2004.

UBS and Credit Suisse First Boston are the joint lead arrangers and joint bookrunners on the Rockwood credit facility. Goldman Sachs will be acting as a non-bookrunning joint lead arranger on the financing.

The equity for the transaction will be provided by Rockwood's internal resources, its existing majority shareholder Kohlberg Kravis Roberts & Co. LP and by CSFB Private Equity. The sponsors bid €2.25 billion for the four business units.

Maax details

Rockwood is a Princeton, N.J., specialty chemicals and advanced materials company.

Getting back to Maax, Goldman Sachs, Merrill Lynch and Royal Bank of Canada are the lead banks on the deal, with Goldman listed on the left.

The credit facility also contains a C$50 million revolver with an interest rate of Libor plus 250 basis points and a C$130 million term loan A with an interest rate of Libor plus 250 basis points.

A bank meeting took place in Montreal the other week and two commitments had already come into the books on the Canadian side shortly after the meeting.

Proceeds will be used to support Maax's leveraged buyout by J.W. Childs Associates LP, Borealis Private Equity LP and Ontario Municipal Employees Retirement System. Under the terms of the acquisition, which was announced in March, Maax shareholders will receive $22.50 per common share in cash and the sponsor group will indirectly acquire all the issued and outstanding shares for a purchase price of about $640 million, including the assumption of existing debt.

The company will also be launching a $160 million high-yield bond offering later this month and will receive $131 million as an equity contribution to help fund the leveraged buyout.

The merger is subject to certain conditions including, shareholder approvals, funding under the existing debt commitments and receipt of all necessary consents and regulatory approvals, including approvals under the Competition Act, Hart-Scott-Rodino Antitrust Improvements Act and Investment Canada Act. Closing is expected to occur on or about June 1.

Maax is a Sainte-Marie de Beauce, Quebec-based manufacturer of bathroom products and accessories, spas and kitchen cabinets.

Dynegy launches

Dynegy Inc. held a bank meeting on Monday to launch its previously announced $1.3 billion credit facility, according to a market source. Banc of America Securities LLC, Citigroup Global Markets Inc., Credit Suisse First Boston, J.P. Morgan Securities Inc. and Lehman Brothers Inc. are the lead arrangers on the deal.

The facility consists of a $700 million three-year revolver with an interest rate of Libor plus 300 basis points and a $600 million six-year term loan B with an interest rate of Libor plus 300 basis points, the source said.

As was previously reported, the lead arrangers have committed $625 million toward the revolver.

The new facility is intended to replace the company's $1.1 billion revolver, which is scheduled to mature in February 2005. The increased size of the new facility will be used to repay existing higher-cost debt and for general corporate purposes.

Dynegy is a Houston energy company.

Qwest down on rate hike worries

Qwest Communications International Inc.'s bank debt was all over the place, with some traders estimating that the paper is around the mid-90 level, but with no quotes in the Street on Monday it was hard to pinpoint just where to place the debt, according to a trader.

"It's been down a lot lately. A couple of points since last week," the trader said, explaining that since the bank debt is tied to a fixed-rate component, valuations have slipped on rising interest rate fears. And, until people figure out valuations, exact levels on the bank debt are hard to determine, the trader continued.

"If you're stuck with fixed-coupon paper it doesn't bode well," the trader added.

Qwest is a Denver telecommunications company.

Charter down on earnings

Charter Communications Inc.'s term loan A and term loan B bank debt were down about a quarter to three eighths of a point on Monday following the release of first quarter numbers and down about half a point over the past couple of days basically in reaction to market heaviness, according to a trader.

The term loan A was quoted at 98 3/8 bid, 98 5/8 offered and the term loan B was quoted at 99¼ bid, 99¾ offered, the trader said.

Pro forma, for the three months ended March 31, Charter reported revenues of $1.185 billion, an increase of $55 million or 5% over pro forma first quarter 2003 revenues of $1.13 billion. Pro forma operating costs and expenses rose $40 million or 6% compared to the year ago pro forma period, primarily due to increased programming and marketing costs. And, pro forma adjusted EBITDA totaled $450 million for, an increase of $15 million or 3% compared to the year-ago period.

Actual results for the quarter were revenues of $1.214 billion, an increase of 3% over last year's first quarter revenues of $1.178 billion, operating costs and expenses of $751 million, up 4% compared to the year-ago quarter, net loss applicable to common stock was $294 million and net loss per common share was $1.00, compared to net loss applicable to common stock of $182 million and net loss per common share of 62 cents in the same period last year, and adjusted EBITDA totaled $463 million, an increase of $5 million or 1% compared to the year-ago period, according to a company news release.

Pro forma net cash flows from operating activities for the three months ended March 31, 2004 were $112 million, a decrease of 27% from $154 million for the year-ago quarter, primarily a result of increases in cash interest expense, special charges, loss on debt to equity conversion and changes in operating assets and liabilities.

At March 31, the St. Louis cable company had $18.108 billion of outstanding debt and $153 million cash on hand. Unused availability as of the closing of the amendment and restatement on April 27 of the Charter Communications Operating LLC credit facility was about $1 billion.

CalGen lower

As the whole bank loan market in general felt off and lower on Monday, Calpine Generating Co. LLC's first lien and second lien term loans were once again said to be softer, with both tranches down by about a quarter of a point, according to a trader.

The second lien term loan was quoted at 91¾ bid, 92¾ offered, while the first lien term loan was quoted at 98 7/8 bid, 99 3/8 offered, the trader added.

CalGen is a wholly owned subsidiary of Calpine Corp., a San Jose, Calif., power company.

Emmis closes

Emmis Operating Co. closed on its $1.025 billion (Ba2/B+) senior secured credit facility on Monday consisting of a $675 million term loan B with an interest rate of Libor plus 175 basis points and a $350 million revolver.

The term loan B was reverse flexed to Libor plus 175 basis points from Libor plus 200 basis points during syndication and increased by $25 million. The upping in size was a result of higher-than-expected participation in the tender offer for the 12½% senior discount notes due 2011. To this end, the company also increased its 6 7/8% senior subordinated notes offering by $25 million to $375 million.

Besides funding the tender offer, proceeds from the credit facility and the bond deal were used to repay all debt under the existing credit facility of Emmis Operating and to repurchase or redeem all of the outstanding 8 1/8% senior subordinated notes of Emmis Operating.

Bank of America, Goldman Sachs, Deutsche Bank and Credit Suisse First Boston are the lead banks on the deal.

Emmis is an Indianapolis-based diversified media firm with radio broadcasting, television broadcasting and magazine publishing operations.

Koch Cellulose closes

Koch Cellulose LLC and its subsidiaries finalized the acquisition of two pulp mills, a short line railroad and assets of two international sales offices from Georgia-Pacific Corp.

To help fund the acquisitions, Koch Cellulose got a new $424 million credit facility (B1/BB). Citigroup and Deutsche Bank were the lead banks on the deal, with Citi listed on the left.

The facility consists of a $50 million revolver with an interest rate of Libor plus 225 basis points, a $300 million term loan with an interest rate of Libor plus 250 basis points and a $74 million prefunded letter-of-credit facility with an interest rate of Libor plus 250 basis points.

Koch Cellulose is a Brunswick, Ga., manufacturer and seller of wood pulp.

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