Securitization People and Markets

Too much debt and weak cash flows could cook up into loan defaults for quick-service and family restaurant companies, according to sector analysts. "The entire industry, whether fast food, family-style, or casual, has been hurt by the economy [and] unemployment," said Jerry Hirschberg, a Standard & Poor's analyst. "Fast food and family dining has been hurt more than anyone else," he added.

Wachovia Securities is scheduled to launch syndication today of a $250 million refinancing credit for Tredegar Corp. The deal includes a five-year, $175 million revolver and a $75 million "A" loan, both priced at LIBOR plus 11/4%. In April, the Richmond, Va.-based company extended its $100 million, 364-day credit for one more year, but the company said in a filing that this extension was only an interim step taken until longer term financing was put in place by Sept. 30. This credit, also led by Wachovia, is priced in the LIBOR plus 11/4-15/8% range. Additionally, the company has a term loan with $225 million outstanding as of last June. This loan is priced in the LIBOR plus 1/2- 1% range.

Credit Suisse First Boston and Lehman Brothers are getting the ball rolling on a $2.3 billion exit and recapitalization financing package for bankrupt NRG Energy. A banker said the deal would most likely emerge at the end of this year or in the first quarter of 2004, depending on when reorganization approvals materialize. The financing commitment from CSFB and Lehman will expire at the end of the year, but can be extended through March 2004 if the company pays an extension fee. The company hopes to emerge on or before Dec.15.

Citigroup relaunched syndication of the $390 million credit for Quintiles Transnational Corp. last week, increasing pricing and lengthening the tenor of the originally proposed deal, according to a banker. The credit, which was originally pitched in June and met cold investor reception, backs the company's $1.7 billion buyout by Pharma Services Holding (LMW, 6/23). Pricing on the seven-year, $315 million "B" loan is at LIBOR plus 33/4%, 50 basis points higher than when the deal launched in June, the banker explained. One year has also been added to the tenor. The deal's five-year, $75 million revolver is now priced at LIBOR plus 31/4%. It was originally shopped at LIBOR plus 3% with a four-year tenor, he said. The facility is still being offered at par, the banker noted. A Citi banker did not return calls.

CIBC World Markets and Bank of America allocated the term loan "B" for Jarden Corp. last week that backs the $155 million acquisition of Lehigh Consumer Products Corp. The branded consumer products manufacturer and distributor decided to delay a further acquisition, which led to a downsizing of the loan, explained Ian Ashken, Jarden's cfo. The $215 million delayed-draw "B" loan was converted into a $150 million fully-funded loan. "We originally were going to do a two-stage, but as part of the loan document, there is a [green] shoe that will allow us to go back and do another acquisition within six months," Ashken added.

Merrill Lynch has fully underwritten a debt financing package of more than $700 million, backing the $880 million buyout of Bombardier's recreational products business by Bain Capital, the Bombardier family and the Caisse de depot et placement du Quebec. A banker said Merrill will syndicate a revolver, term debt and a bond deal after Labor Day, but the structure, pricing and leverage have not yet been decided. The revolver will be Canadian dollar denominated, but the senior and sub debt will be U.S. dollar denominated, the banker added. Merrill acted as an advisor to the investor group, explained the banker.

Patterson Dental Co. has tapped Bank One and Bank of America to lead the debt financing to back the $575 million acquisition of AbilityOne Products Corp., according to Stephen Armstrong, cfo of Patterson. He said Patterson will likely use a bridge loan to close the transaction, and that he expects to have the permanent structure of the financing in place within six to 10 weeks after the close. AbilityOne is a rehabilitative supplies distributor to the physical therapy market.

Rayovac Corp. is planning a $50 million add-on to an existing $300 million "B" loan to fund the acquisition of electric shaver and personal care company Remington Products Co., according to Randall Steward, Rayovac cfo. The Madison, Wis.-based battery producer will also issue $300 million in senior subordinated notes to fund the balance of the $322 million acquisition. Steward declined to comment further on the financing, saying that the additional credit has not yet been finalized.

US Unwired, a Sprint-affiliated wireless telephone provider that has been trying to renegotiate credit covenants since last fall, could breach the covenants by the end of this month if an agreement on a new package is not reached. Ed Moise, US Unwired's treasurer, said if the company does not breach the covenants by the end of this quarter, it expects it will in the fourth quarter. Blowing a covenant would result in loss of access to a $64 million credit. "We're talking to banks about putting a new covenant package in place," Moise said. "It's been a long process. It's coming slowly." The company's bank debt is currently quoted in the 88-91 range, according to a trader.