Rayovac, US Airways test waters with deals; Global Crossing trades; Charter firmer

By Sara Rosenberg

New York, Sept. 4 - The increase in activity expected after Labor Day has officially begun as both Rayovac Corp. and US Airways launched their new bank loans on Wednesday. Investors seem to be studying the loans with a bit of timidity as they enter the basically untested market place following a quiet August and a recent history of postponed offerings.

Names that stood out in the secondary bank loan market Wednesday included Global Crossing Ltd., which traded for the first time in a while, and Charter Communications Inc., which felt stronger even though levels didn't really change.

Rayovac held a bank meeting Wednesday regarding its new $675 million credit facility, which will be used to help fund the acquisition of Varta AG's consumer battery business, to retire existing bank debt and provide for expanded working capital needs of the larger company, according to market sources. Bank of America and Citigroup are the lead banks on the deal.

The Madison, Wis. battery and lighting device company's loan consists of a $150 million six-year revolver with an interest rate of Libor plus 275 basis points, a $50 million six-year euro 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, a $50 million seven-year euro term loan B with an interest rate of Libor plus 325 basis points and a $375 million seven-year term loan B with an interest rate of Libor plus 325 basis points, according to a buy-side source.

"I am favorably impressed with management," the buy-side source said. "But I'm not sure if there's enough pricing in this structure."

"I don't expect the deal to blow off the shelves today but theoretically it should go okay," a sell-side source said. "You never know. The market is finicky right now. We're getting some stabilization in equities. Hopefully that will transfer over into high yield and bank debt.

"We're facing deals that got yanked," the sell-side source explained. "That taste is still out there. Some of the new stuff will be priced to move and then if deals are wildly oversubscribed maybe they'll flex in.

"Also, we saw what happened with deals that were priced in June," he continued. "A lot of that stuff is trading below par because people don't think it's worth holding onto since it's low coupon paper." When asked for an example of this fairly new issue material that investors would like to get rid of, the sell-side source responded that Terex Corp. falls into that category since the term loan was sold at Libor plus 200 basis points.

"Syndicate managers want to price the deal where they'll get successful syndication and subscription. Rayovac's pricing is basically where the market is. Levels are probably around where it can clear," he concluded.

US Airways, an Arlington, Va. airline, held a meeting Wednesday regarding its $500 million debtor-in possession financing facility, according to a fund manager who participated in the call. The loan consists of a $250 million revolver with an interest rate of Libor plus 350 basis points and a $250 million term loan with an interest rate of Libor plus 350 basis points, both due on earlier of Sept. 30, 2003 or completion of reorganization. Credit Suisse First Boston is the lead bank on the deal.

"It was a long call so I kind of tuned in and out," the fund manager said. "I need to study it more carefully and get some more information. Until I get some questions resolved, I'm up in the air on this one."

When asked if the deal is expected to get a good reception in the bank loan market, the fund manager explained that the DIP may be "kind of tough" to get done because of the airline industry's problems and setbacks in this economy.

Furthermore, interest rates on the loan are not particularly enticing, according to the fund manager. "Spreads could be better, especially for an airline that has had quite a few problems," he said, adding that there are quite a few loans out there from companies with fewer problems that have better prices.

In secondary activity, "a big piece" of Global Crossing Ltd. traded at 151/2, according to a trader. "It's the first time it traded in quite a while," he said.

On Aug. 31, the Madison, N.J. telecommunications company released operating results for July 2002, reporting $231 million in service revenue, $6 million above the service revenue target in the operating plan. Service EBITDA was reported at a loss of $12 million, $6 million greater than the target in the operating plan.

"In July 2002, our team continued to work towards the goals we have outlined for ourselves and our creditors in the operating plan," said John Legere, chief executive officer, in a news release. "Now that our future has been defined with our new investors, Hutchison Telecommunications and Singapore Technologies Telemedia, we can turn our complete attention to emerging from Chapter 11 as a strong, healthy competitor - one that attracts new customers in addition to retaining its current customer base."

Charter Communications Inc. felt stronger following a conference call in which company officials said that they planned to reduce debt "and everyone kept asking how", a trader said. The St. Louis, Mo. cable company is currently being bid around 86½ and offered around 871/2, according to the trader.

Meanwhile, Veridian Corp. is expected to launch its new $340 million credit facility on Friday, according to market sources. The structure of the loan has been sent out to existing lenders, according to a fund manager, in order for the syndicate to ascertain whether the lenders are interested in committing. "I'm hearing they got favorable interest," the fund manager added.

The new facility will be used to refinance the company's existing $200 million senior secured loan (Ba3/BB-) as part of the acquisition of Signal Corp. Wachovia is the lead bank on the deal.

Veridian is an Arlington, Va. information technology and information security products provider.

In other news, Del Monte Foods Co. pushed off the launch of its new $1.6 billion credit facility to October from September as the company awaits certain regulatory and shareholder approval for the acquisition of some H.J. Heinz Co. businesses, according to a market professional.

"They probably didn't want to solicit commitments just for those to fall away due to a timing issue," the professional told Prospect News. The loan is underwritten, but retail commitments are not being asked for just yet, he added.

The proposed merger is expected to close at the end of calendar year 2002 or early 2003, and is subject, among other things, to approval by the Company's stockholders, receipt of a private letter ruling from the Internal Revenue Service, receipt of applicable governmental approvals and the satisfaction of other customary closing conditions, according to a news release.

The San Francisco, Calif. processed food company's loan consists of a $450 million six-year revolver with an interest rate of Libor plus 250 basis points, a $250 million six-year term loan A with an interest rate of Libor plus 250 basis points and a $900 eight-year term loan B with an interest rate of Libor plus 275 basis points.

Bank of America, JPMorgan Chase, UBS Warburg and Morgan Stanley are the lead banks on the deal.

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