Collins & Aikman private lender call alleviates some investor concerns, pushing the debt higher

By Sara Rosenberg

New York, Oct. 7 - Collins & Aikman Corp.'s term loan B headed higher on Tuesday following a private lender call, which people walked away from feeling more positive about the potential to eventually get par back on the bank loan, according to market sources.

"The gist of it is that Chrysler needs Collins & Aikman at least for the short-term. You can't just yank $1 billion of contracts. It takes years to roll over that kind of business," a market source told Prospect News regarding the call during which David Stockman, chairman and chief executive officer of Collins & Aikman, apparently addressed lender concerns.

Although the possibility of Chrysler sending its business elsewhere is a worthy concern, it affects equity and long-term bond guys more than bank lenders due to the relatively near-term maturity of the bank debt with the term loan B due in 2005, the source added.

The B tranche was quoted at 99, according to one trader. A second trader quoted the paper at 98 bid, 99 offered. Both traders agreed that the tranche was quoted at 97½ on Monday.

Collins & Aikman has been a big focus in the secondary since this past Friday as investors reacted to a report in The Detroit Free Press reporting that DaimlerChrysler AG's Chrysler Group is rebidding nearly all of the current and future business it does with Collins & Aikman. Chrysler work makes up about 30% of all Collins & Aikman business, or $1.2 billion a year, according to the news story.

On the heels of that news report, the paper traded at 97½ to 97¾ and then bounced back to 98¼ bid, 98¾ offered by Friday's close, down from 98½ bid, 99½ offered the previous day.

Collins & Aikman is a Troy, Mich. designer engineer and manufacturer of automotive interior components.

Charter Communications Inc.'s bank debt also took a nice leap up on Tuesday with the term loan B quoted at 97 bid, compared to opening market levels of 95¾ bid, 96½ offered, according to a trader.

The St. Louis cable company's bonds were also up on the day with quotes higher by about a point to a point and a half.

Centerpoint Energy Inc.'s $925 million term loan B once again traded around 101, pretty much in line with Monday's levels when the paper was seen at 101 bid, according to a trader.

The tranche is priced at Libor plus 350 basis points and was offered to investors at par. The paper also contains call protection of 102 in year one and 101 in year two.

The Houston public utility holding company's $2.275 billion credit facility also contains a $1.35 billion revolver with an interest rate of Libor plus 300 basis points.

JPMorgan and Citigroup are the lead banks on the refinancing deal.

Meanwhile, IESI Corp.'s $350 million credit facility, which launched in the second half of September, may break for trading on Wednesday, according to a trader.

The facility consists of a $175 million five-year revolver with an interest rate of Libor plus 325 basis points and a $175 million seven-year term loan B with an interest rate of Libor plus 350 basis points. The term loan B is being offering to investors at par.

Fleet is the sole lead arranger and administrative agent. LaSalle is the syndication agent.

Proceeds will be used by the Fort Worth, Tex. non-hazardous solid waste management company for acquisition and refinancing purposes.

Overall, it was a quiet day in the secondary market, according to a trader, who pointed out that Deutsche Bank's "big outing" this week - its high yield conference in Scottsdale, Ariz. - is probably taking away some market players. This combined with a lack of new paper has slowed things down on trading desks, he added.

In agreement with this sentiment of demand outweighing supply, a Banc of America Securities report stated: "The story remains the same for the high yield loan secondary market. Volume is light, as cash-rich investors remain reluctant to surrender paper because there is a dearth of new activity on the forward calendar. Despite the low level of trading volume, the market is still very well bid."

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