Securitization People and Markets

Kmart's $2 billion exit financing credit will be launching to retail investors on April 3, keeping with the company's "fast-track" plans to emerge from Chapter 11 on or before April 30. The deal includes a $1.8 billion revolver and a $200 million "B" piece-- both priced at LIBOR plus 31/2%. A banker familiar with the GE Commercial Finance, Bank of America and Fleet Retail Finance-led facility said that the managing agent round, which began March 13, had exceeded expectations in commitment levels. Reportedly, agent commitment levels are near $1 billion. The asset-based deal is secured by inventory and will be used for ongoing capital needs after emergence. Calls to Fleet were not returned, while a B of A official and a GE spokesman declined to comment.

J.P. Morgan and Deutsche Bank are preparing to market a $1.6 billion bank deal that will consolidate and refinance the combined debt of Riverwood Holdings and Graphic Packaging, which are set to merge. The overall debt of the two packaging companies will be $2.2 billion, and investors are expecting a hefty "B" loan to liven up the market.

PNC Bank and National City Bank kicked off syndication of a $175 million refinancing credit last Thursday for carbon compound and forest products producer Koppers. The deal includes a four-year, $100 million borrowing-base revolver and a four-year, $75 million "A" loan. Donald Davis, v.p. and cfo of Koppers, said the meeting was well attended, declining to discuss specific pricing details. But, he noted that the rates are comparable to Koppers' existing facility.

Credit Suisse First Boston was set to cut off commitments on a drive by $580 million facility for utility company Aquila last Friday after it oversubscribed more than three times one day after launch. The proceeds are for certain obligations and will refinance the company's debt maturing on April 11. The deal includes two "B" loans-- a one-year, $150 million piece and a three-year, $430 million loan. The one-year loan is callable at par and starts pricing at LIBOR plus 4%. The rate steps up 200 basis points every 90 days, according to a banker familiar with the deal. The three-year piece is priced at LIBOR plus 53/4% and is secured by first mortgage bonds against the Michigan and Nebraska utilities with a first lien on the Canadian utilities. The larger loan also has a second lien on IPP assets and it must, in best efforts, further collateralize with first mortgage bonds on the U.S. assets, the banker added. Once this is completed to a predetermined ratio, the rate will step down to LIBOR plus 5% on the piece. He said the company did not collateralize with the U.S. first mortgage bonds right away because of delays in regulatory approval. "This is a mechanism for collateral substitution," he explained. The three-year piece may be called at Treasuries plus 50. There is also a 3% LIBOR floor on both loans.

Credit Suisse First Boston and Deutsche Bank closed out AmeriPath's $290 million credit last week. A banker familiar with the situation said no further changes were made to the deal after some tweaks to the bond and bank debt occurred earlier this month (LMW, 3/17). The deal includes a $225 million "B" loan priced at LIBOR plus 41/2% with an original issue discount of 1%. There is also a $65 million revolver priced at LIBOR plus 31/2%. The credit backs plans by Amy Acquisition Corp., a Welsh, Carson, Anderson & Stowe company, to acquire the cancer diagnostics provider for $839.4 million, which includes AmeriPath's 2002 debt and about $65.1 million in contingent obligations. The B+/B1-rated credit accompanies a $275 million bond deal that also backs the transaction.

Credit Suisse First Boston and UBS Warburg will be pitching a $165 million refinancing deal for Ethyl Corp. this Wednesday. The credit includes a six-year, $115 million "B" loan with pricing that has yet to be determined. There is also a five-year, $50 million revolver. The facility will refinance the petroleum-additive company's existing credit that is currently priced in the LIBOR plus 3% range. The Richmond, Va.-based company received a one-year extension earlier this month on a $205 million loan originally scheduled to mature today. Bank of America leads the existing deal. CSFB and UBS bankers did not return calls.

Deutsche Bank and BNP Paribas dropped a $50 million "B" loan for Town Sports International last week. The initial $100 million facility now only comprises a $50 million revolver priced at LIBOR plus 4%, which was also the pitched rate on the "B" loan. Town Sports, an owner and operator of 130 health clubs in cities from Washington to New England, decided it would get better execution in the bond market, a banker familiar with the situation said, declining to discuss details of the impending bond deal. The loan was almost fully distributed before it was pulled, she noted. A Deutsche Bank official declined to comment, while a BNP banker did not return calls.

London-based Gartmore Investment Management is preparing two fixed-income hedge funds and has hired three senior bond professionals to run them, says Roger Bartley, global cio, fixed income. The first fund, which is slated to debut at the end of the second quarter, will be a global credit hedge fund run by Varkki Chacko and Mark Wauton.

HSBC Securities plans to make several additional hires for its fixed-income sales division to build on two recent high-profile additions. Pat McDonald, managing director and head of fixed-income sales for North America, says some of the new hires will replace people who left the firm last year, though some will be new positions. HSBC is shifting to a client-based strategy, in contrast to its earlier proprietary trading focus, he says.