The $825 million exit financing for Laidlaw was juiced up last week to jump start its syndication. The credit backs the transportation company's exit from Chapter 11, which was delayed for the third time after Laidlaw blew through its May 30 target date. Many market players see the company's sluggish bank deal as one of the roadblocks in the way. After launching syndication to retail investors last month, Citigroup and Credit Suisse First Boston had only rounded up $150 million in commitments coming into last week. To get things rolling, pricing was increased for the third time, call protection and a LIBOR floor were introduced and the agents offered an original issue discount.
Initial price talk on the $625 million, six-year "B" piece was increased from LIBOR plus 31/2% to LIBOR plus 41/4% and then to LIBOR plus 41/2%. Late last week the loan was flexed up again to LIBOR plus 5%, with an added 2% LIBOR floor. There was also a call premium of 102 added in the first year and an added original issue discount of 2%. There is a $200 million revolver priced at LIBOR plus 3% with a 50 basis point commitment fee. A banker familiar with the deal said the most recent changes should entice investors that were holding out.
"Our new lenders are likely to take more time than we originally anticipated to ensure they understand our excitement [about bankruptcy emergence] and to get comfortable that the issues that led to the bankruptcy have been properly addressed," acknowledged Kevin Benson, president and ceo of Laidlaw, in a recent earnings report. Douglas Carty, Laidlaw's senior v.p. and cfo, did not return calls before press time.
"[It was] just an aggressive structure," said a banker, referring to the original pricing on the credit. A buysider added investors are not as comfortable with the credit because of such issues as new management at Laidlaw, insurance liabilities and also concerns about subsidiary Greyhound Lines facing the threat of bankruptcy itself. Still, market players said Laidlaw is a solid company and the credit should get done. "People are waiting for the proof; [it's] the waiting game that's being played," said I-Wen Lim, research associate at brokerage boutique The Seaport Group. "They had a bad [last] quarter and it's time to play catch-up," she added, explaining that the company has bottomed-out and the only way is up. "There isn't much wiggle room for leftover cash," Lim also stated, regarding the company's ability to support the debt package. "[But] you know in definite time they will be able to support that type of debt," she added.
The credit is part of a debt package totaling about $1.2 billion that will go toward paying out creditors under the company's plan of reorganization. Emergence is now set for June 30. Parent of Laidlaw upon emergence, Laidlaw International, also completed a $406 million senior notes offering in late May to back the exit financing. Laidlaw declared bankruptcy in June of 2001. A CSFB official declined to comment, while calls to Citi bankers were not returned.