AES heads higher on news of expected $475 million bank debt repayment

By Sara Rosenberg

New York, April 4 - AES Corp.'s bank debt, excluding the revolver, moved up about a point on Friday following news that the company intends to repay $475 million of borrowings under its senior secured credit facility with proceeds from an estimated $1 billion offering of new second priority senior secured notes, according to a trader.

The Arlington, Va. power company's credit facility is made up several tranches including a term loan A, term loan B and term loan C. According to the trader, all of AES' tranches, excluding the revolver, are being quoted in the 99 to par ½ range.

Tesoro Petroleum Corp.'s bank debt is now being quoted with a 99½ bid, par offer, according to a trader, who added that "no one will sell it because it's being taken out". Before news of the company's plans to refinance its entire credit facility emerged, the loan was being quoted at 97 bid, 98 offer, the trader said.

The company is working on a number of financing transactions in order to refinance its existing bank debt. A $650 million asset-based senior secured revolver (Ba3) due 2006 is anticipated to launch this month via Bank One with Goldman Sachs as syndication agent. Already in the market is a $150 million term loan (Ba3) due 2008 via Goldman Sachs. And, pricing Monday is $400 million of senior secured notes (see story on page one of this issue for further details).

Price talk on the term loan is 25 basis points wide of the swap equivalent of the bonds, according to a syndicate source.

One market professional hypothesized that the interesting pricing structure on the term loan could be for a couple of reasons. First, since the deal is pari passu with the bonds, that may have caused the two transactions to be priced similarly, the professional said, adding that the 25 basis point differential may be due to market technicals. Second, "Tesoro sort of disappointed the bank community since it had problems buying the [Golden Eagle] refinery. Once you disappoint bankers they want to take their pound of flesh. That may be another reason why it's not priced so reasonably and maybe why it's so small."

Tesoro is a San Antonio, Tex. refiner and marketer of petroleum products.

Charter Communications Inc.'s term loan B was quoted with a 90 bid, 91 offer, according to a trader. The loan has progressively been moving up since the company disclosed in its earnings announcement on Tuesday that in February it received a proposal from Paul Allen, chairman of the board, offering to provide a backup credit facility of up to $300 million to the St. Louis cable company and certain of its subsidiaries.

Prior to the announcement the St. Louis cable company's term loan B was quoted with an 88 bid, 89 offer.

Nextel's term loan B and C were quoted at 98¾ on Friday, according to a trader who said that the loan "has been slowly creeping up" due to market technicals. The Reston, Va. wireless company's debt traded at 97 5/8 on Monday.

In primary news, International Steel Group's $1 billion senior credit facility (Ba2/BB+) has already sparked some interest in potential investors ahead of Wednesday's bank meeting in New York, a source close to the deal told Prospect News.

"There was an early meeting and there's been a lot of demand already," the source said. "We've only gone out with the revolver but that's already oversubscribed. We have multiple commitments on the deal already."

The facility consists of a $300 million two-year term loan A, a $400 million four-year term loan B and a $300 million three-year revolver. Price talk on the tranches is Libor plus 275 to 300 basis points on the revolver, in the area of Libor plus 325 basis points on the term loan A and in the area of Libor plus 350 basis points on the term loan B, the source said.

When asked what may be drawing people to the new deal, the source explained that the revolver has a very strict borrowing base so there's virtually no risk involved, the facility got very high ratings of Ba2/BB+ with a positive outlook from Standard & Poor's so its quasi investment grade and "it's an LBO pricing," meaning that pricing is expensive, since it is in the steel industry, "which people don't like".

UBS Warburg, Goldman Sachs and CIT are the lead banks on the deal that will be used by the Cleveland steel company to help fund the acquisition of certain Bethlehem Steel Corp. assets and for working capital.

Allied Waste Industries Inc. is also expected to hit the market on Wednesday, according to market sources. JPMorgan and Citibank are the lead banks on the deal with Credit Suisse First Boston, Deutsche and UBS Warburg participating as well.

The $3 billion credit facility (Ba3/BB/BB) consists of a $1.5 billion five-year revolver and a $1.5 billion seven-year term loan B. Price talk on the revolver is Libor plus 300 basis points and price talk on the term loan is Libor plus 350 basis points, according to sources.

Although the company priced an upsized bond deal on Friday, increased to $450 million from $300 million, the credit facility is still expected to remain sized at $3 billion, sources said.

The company has already received commitments for the entire $1.5 billion revolver. And the term loan B is expected to syndicate successfully since the company currently has a large lender group. Essentially with the new financing, the company is taking two institutional tranches and consolidating them into one large institutional tranche with a more attractive interest rate for investors. Based on these facts alone, the company should be able to get a lender group together.

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