US Airways falls with earnings; JBS drops term loan; Chaparral working on syndication

By Sara Rosenberg

New York, Oct. 23 - US Airways Group Inc.'s term loan nosedived during Thursday's trading session as the company reported financials and, now that investors received their paydown earlier in the week, people are looking to sell.

In other news, JBS USA eliminated the term loan tranche from its in-market credit facility as a result of a lawsuit by regulators trying to block one of the acquisitions that the deal was going to fund, and its ABL revolver was upsized.

Also on the new deal front, Chaparral Energy Inc. continues its syndication attempt of a proposed revolving credit facility, but with all the volatility in the markets, the company said that the process has become more complex.

US Airways plummets

US Airways' term loan tumbled in trading after the company came out with third quarter numbers, and there's also some selling pressure because investors are less inclined to hold on to the paper since they already received the benefits from consenting to a recent amendment, according to a trader.

The term loan was quoted at 46 bid, 51 offered, down from Wednesday's levels of 52 bid, 55 offered, the trader said.

On Thursday morning, US Airways reported a net loss for its third quarter of $242 million, or $2.35 per share, excluding special charges that totaled $623 million. On a GAAP basis, the net loss was $865 million, or $8.45 per share, compared to a net profit of $177 million, or $1.87 per diluted share, for the same period last year.

"Our third-quarter loss reflects the crippling fuel price environment that US Airways and other airlines faced this summer. Fortunately, oil prices have recently fallen to levels well below those experienced in the third quarter, but at the same time, concerns have increased about the impact the global economic crisis may place on demand for air travel," said Doug Parker, chairman and chief executive officer, in a news release.

Investors selling following paydown

Also pressuring US Airways' term loan on Thursday was that some people are looking to sell the paper now that they received a par paydown at the start of the week and fees for passing an amendment, the trader explained.

The company prepaid $400 million of its credit facility on Monday, reducing the principal amount outstanding to $1.184 billion, and in exchange, the unrestricted cash covenant contained in the loan agreement was reduced to $850 million from $1.25 billion.

The unrestricted cash requirement can further be reduced to $750 million before Sept. 30, 2009 if another $100 million of bank debt is prepaid.

The amendment also provides that the company may sell, finance or otherwise pledge assets that were pledged as collateral under the credit facility, so long as it prepays the debt in an amount equal to 75% of the appraised value of the collateral sold or assigned or 75% of the collateral value of eligible accounts sold or financed in such transaction.

In addition, the amendment provides that the company may issue debt in the future with a silent second-lien on the assets pledged as collateral under the credit facility.

Funds for the paydown came from the company raising about $950 million of financing and near-term liquidity commitments. Of this financing, $800 million closed on Monday and the remaining $150 million of liquidity commitments are expected to close during the fourth quarter.

US Airways is a Tempe, Ariz.-based airline company.

Cash quiet, LCDX relatively steady

The cash market in general was pretty slow with light trading volume on Thursday, according to traders, and LCDX 10 ended the day quoted wider than the previous session but around the same type of context.

"Things feel like people are just trying to figure out what they should do. Think people want to wait and see how earnings come out. It is earnings season," one trader remarked.

"In the near term, a lot of the forced selling is maybe done with. I think, for now, people just want to sit on the side and watch.

"Things were mixed [today]. Had some things up, some things down. Wouldn't say there was a general market tone one way or the other," the trader added.

As for LCDX 10, traders said that levels went out wide at around 85.50 bid, 86.25 offered, compared to Wednesday's levels of 85.80 bid, 86.15 offered.

Stocks were mixed with Nasdaq down 11.84 points, or 0.73%, Dow Jones Industrial Average up 172.04 points, or 2.02%, S&P 500 up 11.33 points, or 1.26%, and NYSE up 41.46 points, or 0.74%.

JBS term loan canceled

Switching to the primary market, JBS USA has decided not to go ahead with its in-market $500 million six-year term loan since regulators are fighting the company's proposed acquisition of National Beef Packing Co. LLC, which the debt was going to help fund, according to a market source.

The term loan had been launched to investors back in September with price talk of Libor plus 550 basis points, an original issue discount of 97 and a 3.25% Libor floor.

However, with the turmoil in the market, price talk on the loan was expected to go up from the initial levels. Most recently, chatter had been going around that the term loan was being guided in the area of Libor plus 750 bps with an original issue discount of 96, but nothing firm was ever announced.

JBS tweaks revolver size

Meanwhile, JBS' ABL revolving credit facility was increased to $415 million from a most recent size of $400 million, but still lower than its originally proposed amount of $750 million, the source said.

When the revolver was downsized to $400 million, it had been said that there would be a $100 million accordion feature.

Pricing on the revolver is Libor plus 325 bps. It had been flexed up to that level earlier this month from initial talk at launch of Libor plus 275 bps. Prior to launching, early guidance on the revolver had been in the Libor plus 250 bps to 275 bps area.

GE Capital and Credit Suisse are the lead banks on the revolver, with GE the left lead. Credit Suisse had been acting as the left lead on the term loan.

The revolver is being obtained in connection with parent JBS SA's acquisition of Smithfield Beef Group Inc. for $565 million in cash.

The now eliminated term loan was going to help fund the Smithfield acquisition, as well as the purchase of National Beef Packing Co. LLC for $465 million in cash and $95 million in common stock.

Suit filed against National Beef purchase

JBS SA's proposed acquisition of National Beef is being fought by the United States Department of Justice, which filed a civil antitrust suit in the U.S. District Court for the Northern District of Illinois to stop the transaction.

In response to the suit, JBS has said that it disagrees with the lawsuit, claiming the deal to be pro-competitive, and plans to defend the matter in court.

As for the Smithfield Beef acquisition, JBS completed that purchase using company funds on Thursday.

The Smithfield purchase includes 100% of Five Rivers Ranch Cattle Feeding LLC, which was previously a 50/50 joint venture with Continental Grain Co.

JBS USA is a meat processing and packaging company.

Chaparral revolver syndication still in process

Chaparral is still working on syndicating its proposed $1.2 billion five-year secured revolving credit facility, but the company said that the effort has been complicated by recent market turmoil and related developments worldwide, according to an 8-K filed with the Securities and Exchange Commission Thursday.

The revolver is being obtained in connection with the acquisition of Edge Petroleum Corp. and will be used to refinance debt.

Under the acquisition agreement, Edge common stockholders will receive 0.2511 shares of Chaparral common stock for each share of Edge common stock they own.

In addition, holders of Edge's 5.75% cumulative convertible perpetual preferred stock will receive one share of Chaparral 5.75% series A cumulative convertible perpetual preferred stock for each share of Edge preferred stock they own.

Following the close, Chaparral stockholders will own about 86% of the outstanding common stock of the combined company and Edge stockholders will own about 14% of the outstanding common stock.

Closing is expected to occur in the fourth quarter, subject to Edge stockholder approval - which will be sought at a Dec. 4 meeting - and other customary conditions.

Chaparral stock sale affected by revolver terms

Chaparral's proposed sale of series B preferred stock for the Edge acquisition is subject to the revolver meeting certain criteria, and the company said in the filing that the failure to meet those conditions could jeopardize the closing of the equity deal and the revolver.

The revolver conditions include that there be an initial borrowing base of $1 billion, that availability be at least $325 million as of the closing date, and that pricing is not more than 125 bps above those presented in the pricing grid of the financing commitment term sheet.

The commitment letter outlined pricing as being to able to range from Libor plus 150 bps to 325 bps depending on use, and the commitment fee to be able to range from 37.5 bps to 50 bps.

JPMorgan, RBS Securities and SunTrust are the lead banks on the revolver.

Covenants include a current ratio and a senior total debt to EBITDAX ratio.

Chaparral is an Oklahoma City-based oil and natural gas production and exploitation company. Edge is a Houston-based energy company.

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