Kerr-McGee increases term loan B price talk; Hawaiian Telcom upsizes B loan

By Sara Rosenberg

New York, April 27 - Kerr-McGee Corp. revised price talk higher on its in-market term loan B, giving the tranche the potential to price 25 to 50 basis points wider of previous talk. Hawaiian Telcom upsized its term loan B after downsizing its three-tranche bond offering as price talk on the notes widened out.

Kerr-McGee changed price talk on its $2 billion senior secured six-year term loan B to Libor plus 225 to 250 basis points on Wednesday, up from price talk of Libor plus 200 basis points that they syndicate opened with at the April 19 bank meeting, according to a sellside source.

"It caught some people by surprise," a second source said about the price change. "I heard it's going pretty well. In this market, they just had some trouble getting past some hurdles especially given its size. Pricing has consistently been widened out on these bigger deals. Investors seem to have more leverage."

"Before the launch [the term loan B] was talked at Libor plus 175. So it's a big flex when you look back at original price talk. I heard they flexed it up to clear the deal," another source added.

Price talk of Libor plus 175 basis points on the $2 billion senior secured two-year term loan X and the $1 billion senior secured five-year revolver remained unchanged.

Security for the credit facility is basically a perfected first priority interest in all tangible and intangible U.S. assets and all of the capital stock of direct and indirect subsidiaries.

Proceeds will be used to refinance debt, finance a $4 billion modified "Dutch" auction self tender offer for shares of the company's common stock that was announced last Thursday and for general corporate purposes.

As a result of the company's self tender offer and financing needs all three agencies downgraded Kerr-McGee's secured debt ratings - Moody's Investors Service to Ba3, Standard & Poor's to BB+ and Fitch Ratings to BB.

Under the tender offer, the company will buy back up to $4 billion of its common stock, at a price not less than $85 per share or more than $92 per share. The tender offer is expected to begin on or about April 18.

Following the tender, the company expects to reduce debt by $3.5 billion to $4.5 billion over a two-year period with net proceeds from the separation of its chemical business and divestiture of certain oil and gas properties, along with cash flow from operations which has been underpinned by an expanded hedging program for 2005 through 2007, a company news release said.

JPMorgan and Lehman Brothers are the lead banks on the $5 billion senior secured credit facility, with JPMorgan the left lead.

The company has also received a commitment for a $1 billion unsecured interim facility from the same two banks.

Kerr-McGee is an Oklahoma City-based energy and inorganic chemical company.

Hawaiian Telcom upsizes

Hawaiian Telcom increased the size of its term loan B by $50 million to $450 million after decreasing the size of its proposed bond offering by $50 million to $500 million, according to a market source.

Price talk on the term loan B remained at Libor plus 225 basis points, the source added.

Hawaiian Telcom's now $925 million credit facility (B1/B+) also contains a $175 million revolver and a $300 million term loan A, with both of the tranches talked at Libor plus 225 basis points as well.

JPMorgan, Goldman Sachs and Lehman Brothers are the lead banks on the credit facility, with JPMorgan the left lead.

Proceeds from the loan and the bonds will be used to help fund The Carlyle Group's $1.65 billion acquisition of Verizon Hawaii from Verizon Communications Inc.

The $500 million bond offering is comprised of $200 million eight-year senior fixed-rated notes priced at par to yield 9¾%, in line with price talk that had been revised upward from 9% to 9¼%; $150 million eight-year senior floating-rate notes priced at par to yield six-month Libor plus 550 basis points, in line with price talk that had been revised upward from 475 to 500 basis points; and $150 million 10-year senior subordinated fixed-rate notes priced at par to yield 12½%, the wide end of the 12¼% to 12½% price talk that had been revised upward from initial talk of 150 basis points behind the senior fixed-rate notes.

Under the LBO agreement, which was announced around mid-year 2004, Carlyle will acquire Verizon's Hawaii-based local telephone operations as well as the print directory, long distance and internet service provider operations; Verizon Wireless is not included in the transaction.

The closing of the transaction is contingent on approvals from the Hawaii Public Utilities Commission, the Federal Communications Commission and the U.S. Department of Justice, and on successfully obtaining financing.

Charter bounces around

Charter Communications Inc.'s bank debt had a turbulent day as the paper fell by about three quarters to a full point during trading before regaining some ground so as to end the day only down about half a point, according to a trader.

The term loan A paper closed out the session at 99 bid, 99 3/8 offered, and the term loan B paper closed out the session at 99 1/8 bid, 99 3/8 offered, but both tranches traded as low as just under 99 earlier in the day, the trader said.

St. Louis-based cable company Charter was said to be roller coasting around in the loan market because of "general weakness in the high-yield market" pushing its bonds lower, the trader added.

Movie Gallery closes

Movie Gallery Inc. closed on its new $870 million senior secured credit facility (B1/B+) consisting of a $700 million six-year term loan B with an interest rate of Libor plus 300 basis points, a $95 million five-year term loan A with an interest rate of Libor plus 275 basis points and a $75 million five-year revolver with an interest rate of Libor plus 275 basis points.

The term loan B was upsized during syndication from $550 million after the company's bond offering was downsized by $150 million to $325 million.

Wachovia Capital Markets LLC was sole lead arranger, sole bookrunner and administrative agent on the credit facility, and Merrill Lynch was involved in the loan as well.

Proceeds from the term loans and the $325 million seven-year fixed-rate senior notes offering were used to fund the $1.25 billion acquisition of Hollywood Entertainment Corp., including $862.1 million for Hollywood's outstanding common stock and the assumption of $384.7 million of Hollywood's existing debt.

Revolver borrowings will be available for working capital and general corporate purposes.

The revolver contains an accordion feature allowing for the expansion of the tranche by $25 million under certain circumstances.

Movie Gallery is a Dothan, Ala.-based owner and operator of video specialty stores. Hollywood is a Wilsonville, Ore.-based (and will remain based there following completion of the acquisition) video chain.

Dade Behring closes

Dade Behring Holdings Inc. closed on its new $600 million revolving credit facility (Ba1) due 2010 with an initial interest rate of Libor plus 62.5 basis points, according to a company news release.

Bank of America and Citigroup acted as joint lead arrangers and joint bookrunners on the deal.

The new revolver replaces the Deerfield, Ill., clinical diagnostics company's previous facility.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.