Charter term loan B trades actively at 90½ to 91 on Tuesday as more buyers come forward

By Sara Rosenberg

New York, April 22 - While some traders reported having a busy day in the secondary bank loan market and others reported that the session was pretty quiet, most seemed to agree that Charter Communications Inc.'s term loan B was quite active on Tuesday. The tranche traded between 90½ and 91 throughout the day.

"It's a touch softer but it looks like it gained some footing," one trader said, explaining that although some of the paper traded on Monday it wasn't as active as it was on Tuesday. "There are more buyers coming in today," the trader added.

On Monday, the St. Louis cable company's loan was quoted at 90 1/8 bid, 91¾ offer, according to a trader, who stated that he anticipated levels to remain in the low 90s area for now.

Interstate Bakeries Co.'s bank debt was a touch softer on Tuesday following a rating downgrade by Moody's Investors Service, according to a trader.

The paper was quoted around 98½ bid, 99½ offer. "I think the bid side dropped about ¼ of a point to ½ a point," the trader said. "It doesn't trade that much though."

Moody's downgraded the company's senior implied rating to Ba2 from Ba1and senior unsecured issuer rating to Ba3 from Ba2. Furthermore, Moody's downgraded Interstate Brands Corp.'s and Interstate Brands West Corp.'s $300 million senior secured revolver, $375 million senior secured term loan A and $125 million senior secured term loan B to Ba2 from Ba1. The outlook remains negative.

"The rating downgrades reflect the sharp decline in IBC's operating results, which stem from pressures on both the company's single serve snack lines, as well as the bread business, leading to decreased margin, higher leverage, and weaker credit protection measures. The downgrade also reflects the unfavorable competitive and business environment in which IBC is operating, as well as the significant cost, time and implementation challenges of efforts to improve operating performance to historical levels," Moody's said.

"The negative outlook reflects the ongoing challenges to IBC's profitability, implementation risk relating to the company's investment program, and the near term increase in leverage as a result of the investment program," the rating agency added.

Interstate Bakeries is a Kansas City, Mo. baker and distributor of fresh bakery products.

Meanwhile, talk began circulating in the leveraged markets that Xerox Corp. is about to bring a sizable debt financing.

When pressed for details by Prospect News, sources would only state that details would not emerge until Xerox released its first quarter earnings, scheduled for 7 a.m. ET Wednesday, with a conference call to follow at 10 a.m. ET.

Also in primary activity, there has been some speculation about Rite Aid Corp.'s $2 billion credit facility (B1) ahead of the official launch on Wednesday. Some have said that the deal may encounter a bit of investor hesitancy during the syndication process because of its large size, fairly low rating and the "low end" price talk that is floating around the marketplace, according to market sources.

However, others are saying that the deal is already moving along, sparking interest in potential investors and receiving commitments prior to the bank meeting. Unconfirmed talk is that the credit facility may have already received $400 million in commitments probably from "early bird guys who have committed because they already knew the credit," a market professional said.

The company has a large existing lender base and chances are these lenders are going to want to get in on the deal, the source explained.

As for potential new lenders, "people are going to dig into the collateral and get comfortable with it," the source continued.

When asked whether the price talk may be a factor for concern, the source responded: "It may be modestly priced but they can adjust the pricing if need be. That doesn't mean the deal won't go well."

The loan is anticipated to consist of an $850 million revolver with price talk in the area of Libor plus 350 basis points and a $1.15 billion term loan with price talk of Libor plus 375 basis points. Both tranches are due in April 2008.

Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. are joint lead arrangers on the deal.

Proceeds will be used to repay the company's existing $1.37 billion senior secured credit facility due March 2005 and its $107 million synthetic lease due March 2005 and to replace the existing $500 million revolver, which is undrawn.

The Camp Hill, Pa. retail drugstore chain's loan is expected to close by the end of May.

Following up on some recent new issues, Amphenol Corp.'s term loan B is oversubscribed and commitments are continuing to come in on the pro rata, a source close to the deal told Prospect News.

The loan (Ba2/BB+) consists of a $125 million five-year revolver with an interest rate of Libor plus 200 basis points, a $125 million five-year term loan A with an interest rate of Libor plus 200 basis points and a $500 million seven-year term loan B with an interest rate of Libor plus 250 basis points.

Deutsche Bank and UBS Warburg are the lead banks on the deal that will be used to refinance the existing credit facility and to repay $144 million of 9 7/8% senior subordinated notes.

Amphenol is a Wallingford, Conn. producer of electronic and fiber optic connectors, cable and interconnect systems.

Central Garden & Pet's $200 million credit facility (Ba2/BB+) "is going fairly well but I don't think it's a blowout," a fund manager said, explaining that although it's a good credit, the deal is moving along at a slower pace because "the credit agreement is a little loose."

"The company can continue to borrow under its revolver for acquisitions," the fund manager said. "And the covenants allow for the company to go up to three times senior leverage, which is a little too much room.

"But we do think it's a good credit," the fund manager concluded.

The loan consists of a $100 million five-year revolver with an interest rate of Libor plus 225 basis points and a $100 million six-year term loan with an interest rate of Libor plus 300 basis points.

CIBC and SunTrust are the lead banks on the deal that will be used to refinance existing debt.

Central Garden & pet is a Lafayette, Calif. distributor of lawn and garden and pet supply products.

In follow up news Isle of Capri Black Hawk LLC said it closed on a $210.654 million senior secured credit facility via lead arranger and administrative agent CIBC World Markets. The facility was an amendment and restatement of its existing facility, adding $105 million to the term loan C due 2006 at Libor plus 400 basis points and $30 million to the revolver due 2005 at Libor plus 325 basis points to 400 basis points, based on leverage.

Proceeds were used to help fund the purchase of Colorado Central Station Casino and Colorado Grande Casino from International Game Technology, Inc.

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