Search results for

Armstrong World Industries has reduced the borrowing capacity under its debtor-in-possession facility for the third time in two years. The facility, which started as a $400 million revolver, is now down to a $75 million letter of credit facility. Because the new agreement eliminates the company's ability to borrow under the line, Armstrong will save substantially on fees, dropping its annual payments from $174,000 to $59,000 after paying $125,000 in fees for the changes. "This reduced facility is more than sufficient, and we are pleased with the resulting savings in related fees," said Leonard Campanaro, cfo.

Even though the first-loss tranches of collateralized loan obligations have been responsible for keeping some deals from coming to market all year, the double-B and triple-B tranches of deals that have gotten off the ground are being touted as some of the best picks for the final quarter of 2002. According to Lang Gibson, director of structured credit research at Banc of America Securities, there is real value in these tranches of CLOs, which offer high risk-adjusted returns.

Bank of America, Key Bank, Merrill Lynch and Morgan Stanley are set to lead a $875 million credit for The Timken Company backing its $840 million acquisition of Ingersoll-Rand's Torrington subsidiary. Glenn Eisenberg, cfo, said the facility will comprise a five-year, $500 million revolver and a one-year, $375 million term loan. A bank meeting could be held by the end of this week to discuss terms of the facility, a banker familiar with the deal noted. Officials at the lead banks either declined to comment or did not return calls by press time.

Bank of America, Deutsche Bank, BANK ONE and Lehman Brothers have pegged this Thursday as the date for the senior managing agent meeting for the credit backing Ball Corp.'s $900 million acquisition of Schmalbach-Lubeca. The bank deal totals approximately $1.45 billion, including a $500 million multi-currency revolver that will have between $100 million and $150 million drawn at closing, according to a banker familiar with the transaction. The bank debt also will include a $250 million "A" term loan denominated in either euros or British pounds, a US$500 million "B" tranche and a E200 million "B" piece. An approximately $300 million senior note offering denominated in euros and U.S. dollars will accompany the bank debt.

Barclays Capital Asset Management reportedly is warehousing assets for its second CDO composed of U.S. leveraged loans. The vehicle, called Venture CDO II, is slated to total $300 million and will consist of at least 90% loans and a maximum 10% bucket of high-yield bonds. A spokeswoman for Barclays declined to comment on the firm's plans, and bankers at Credit Suisse First Boston, which has been tapped to underwrite the notes, did not return calls for comment.

The recent downgrade of British Energy, which in turn prompted downgrades for three static collateralized obligations, has some CDO bankers even more wary of static style deals. These same types of deals have been hit before by events surrounding Enron, WorldCom, Tyco, Qwest and the like, says one CDO expert of the recent CDO downgrades.

Canyon Capital Advisors, a Beverly Hills-based asset manager, is readying Canyon Capital CBO, a $375 million deal that will be its first collateralized debt obligation of the year, and its second overall, says a CDO market official. J.P. Morgan Securities is underwriting the notes, which are set to price at the end of the month or early November. A mix of 75% high-yield bonds and 25% leveraged loans back the notes. The collateral pool has a single-B weighted rating average. No price talk levels were available at press time last Thursday. This deal comes at a time when high-yield CDO issuance has slowed down significantly, due to investors' skittishness on high-yield bonds; but with wider high-yield spreads, those deals are attractive from a structurer's standpoint as they offer cheap collateral and good arbitrage, notes a CDO analyst (BW, 9/9).

Standard & Poor's has lowered Lucent Technologies' corporate credit rating from B to B- and placed the company on watch with negative implications, following the announcements of a $1 billion restructuring charge, a cancelled $1.5 billion revolver and downsizing plans. The downgrade also reflects S&P's concern over the Murray Hill, N.J., communications supplier's ability to raise positive cash flow over the coming year due to the continued industry slump. "The [communications] industry is extremely challenged," said S&P analystBruce Hyman, adding that he doesn't foresee any significant revival for Lucent until 2004.

With credit deteriorating, collateral managers of collateralized debt obligations are pushing for extended ramp-up times for their deals. Scott Roberts, president of Deerfield Capital Management in Chicago, a collateral manager that has originated 13 CDOs totaling $6.5 billion, says that, "having the flexibility to have the longest ramp-up as possible is crucial" because the manager needs to buy the best possible bonds for the deal. He adds that, "If we are not comfortable with the ramp-up period, we won't do a deal with a dealer."

European collateralized debt obligation bankers are laboring to wrap up deals before year-end, as market experts warn only a finite number of deals in the bulging pipeline will get done. Market participants attribute the difficult market to several factors: banks having to sell down large secondary positions, monoline wrap providers curtailing policy writing activities and investors becoming even more risk averse.

There are at least 12 European commercial mortgage-backed securitizations in the pipeline that issuers hope to complete by year-end, say various market participants. The pipeline has grown, because CMBS are becoming easier to execute on the Continent, the market is maturing and investors are looking for diversification. The upcoming deals include a few synthetic deals from German issuers, including one first-time issuer, a few more European Loan Conduit deals from Morgan Stanley, a deal securitizing non-performing commercial mortgages from Italy and at least two single building transactions, say CMBS bankers and analysts.

Four Corners Capital Management, the asset management company headed by loan veteran Michael McAdams, is preparing to price the notes for its debut $400 million collateralized loan obligation, called Mondrian CDO I, after a lengthy period in the pipeline. "We started warehousing in March, and we expect to price in the next 10 days," McAdams told Loan Market Week late last week. Four Corners has purchased about $150 million in assets for the vehicle, which will consist completely of leveraged loans, and is set to buy the balance once the notes are priced.