Trading of the second lien loans for Buckeye Check Cashing and AGY Holdings was slow last week when both credits broke. Traders said investors were content with their allocations and reluctant to sell.The first liens of both companies traded more actively. Buckeye's first lien broke at 100 3/4, while the second lien debuted at 101. Bear Stearns leads the deal, which backs the leveraged buyout of the company by Diamond Castle Holdings, a New York private equity firm. AGY's $45 million second-lien was bid at 101 1/2. Its first lien broke at 101. UBS leads the deal, which also consists of a $30 million revolver.
As part of the Buckeye LBO, Diamond Castle will acquire a majority stake in Buckeye, a provider of payday lending loans and check cashing services. Buckeye management will retain a large ownership stake, according to Moody's Investors Service. About 46% of the deal will be funded by the first-lien term loan, while 14% will be funded by the second lien. Management and sponsor equity will finance the rest. Moody's assigned a B3 rating to the first lien and a Caa2 rating to the second lien. In a report, Moody's says the company has strong cash flow and experienced management, but adds that it has high leverage and a large debt service burden. It said that the company has virtually no assets backing the second lien if it defaults. A call to Ted Saunders, cfo, was not returned.
The AGY credit backs Kohlberg & Co's $268 million acquisition of the company, a maker of specialty glass products. The first lien is priced at LIBOR plus 2 3/4%, while the second lien is priced at LIBOR plus 7%. Standard & Poor's assigned a B rating and 3 recovery rating to the first lien and a CCC+ rating and 5 recovery rating to the second lien. The ratings reflect the company's narrow business focus. Its revenue and operating profits are concentrated in a few customers and products, says S&P in a release. AGY emerged from bankruptcy in April 2004. Officials at the company did not return calls.