Pegasus plunges to low 90 territory as company opts to cancel proposed term loan

By Sara Rosenberg

New York, Aug. 25 - Pegasus Media & Communications Inc.'s bank debt plummeted by approximately six points during market hours following the company's announcement that it pulled its in-market term loan due to a reevaluation of "the attractiveness of this financing at this time."

The paper was quoted at 91 bid, 92 offered compared to previous levels of 97 bid, 98 offered, according to a trader. This downturn is not surprising since the new credit facility was going to be used to repay existing debt, as well as to support letters of credit and for working capital.

Bank of America was the lead bank on the pulled deal, which was originally anticipated to consist of a $400 million six-year term loan B with an interest rate of Libor plus 500 basis points and a $40 million revolver. The facility was also expected to contain call protection of 102 in the first year and 101 in the second year, and a 2% Libor floor.

Pegasus Media, an indirect subsidiary of Pegasus Communications Corp., is a Bala Cynwyd, Pa. direct broadcast satellite provider and broadcast television company.

In the primary, it is now expected that Precision Castparts Corp.'s approximately $850 million credit facility will launch in early October, according to market sources. Bank of America and Goldman Sachs are the lead banks on the deal.

Specific details on the credit facility were not available but the company previously announced that it received commitments for a $200 million incremental term loan, and that it intends to terminate and replace the existing credit facility with a new five-year revolver and term loan.

Furthermore, Precision Castparts has received commitments for a $300 million bridge facility, which will be taken out by a senior notes capital markets transaction.

The incremental term loan and $300 million bridge/high yield financing will be used to help fund the acquisition of SPS Technologies Inc. for $575 million.

Under the acquisition agreement, SPS shareholders may elect to receive either cash or Precision Castparts stock as: $43.00 in cash per share, with the total cash consideration fixed at approximately $278 million, or at a fixed exchange ratio of 1.36 shares of Precision Castparts common stock, with a total stock consideration of approximately 8.8 million shares of Precision Castparts common stock, subject to pro-ration to achieve an aggregate split of half cash and half stock.

The transaction, which has been approved by the boards of directors of both companies, is expected to close during the fourth quarter.

In response to this announcement, Standard & Poor's placed its ratings on Precision Castparts, including the BBB-/A-3 corporate credit ratings, on CreditWatch with negative implications, reflecting the company's weaker financial profile due to the increased debt from the acquisition and general integration risks.

Precision Castparts is a Portland, Ore. manufacturer of complex metal components and products. SPS Technologies is a Jenkintown, Pa. producer of high-strength fasteners and precision components for the aerospace, automotive and industrial markets, superalloys and specialty metals in ingot and powder form, waxes, metalworking tools and magnetic products.

Meanwhile, a specific date of Sept. 16 has been nailed down for the launch of Magellan Health Services Inc.'s $230 million five-year exit financing facility, according to a syndicate source.

The facility consists of a $100 million term loan B, which will be used to repay existing bank debt, a $50 million revolver and an $80 million letter of credit facility.

Deutsche Bank is sole lead on the Columbia, Md. managed behavioral healthcare company's deal.

Allied Waste Industries Inc. closed on its $250 million term loan C (BB) with an interest rate of Libor plus 300 basis points. JPMorgan was the lead bank on the tranche, which was sold to investors at par.

Originally, the loan was expected to carry an interest rate of Libor plus 325 basis points, in line with pricing on the company's existing institutional tranche.

Towards the end of April, Allied Waste obtained its $2.7 billion credit facility consisting of a $1.5 billion five-year revolver with an interest rate of Libor plus 300 basis points and a $1.2 billion seven-year term loan with an interest rate of Libor plus 325 basis points. There is also a $200 million institutional letter of credit facility.

Pricing on all tranches contain grid-based pricing improvements based on decreases in the company's leverage ratio. More specifically, on the institutional tranches, if leverage falls below 4.25 to 1.00, interest on the term loan B will step down to Libor plus 300 basis points and interest on the term loan C will step down to Libor plus 275 basis points.

Proceeds will be used by the Scottsdale, Ariz. solid waste management company to retire the outstanding senior subordinated indebtedness of Allied Waste North America through optional redemption, public tender offer or open market repurchases.

In addition to obtaining the add-on, Allied Waste also successfully completed an amendment to its credit facility that permits the previously announced exchange of the Allied Waste Series A convertible preferred stock for shares of Allied Waste common stock and will provide increased financial flexibility to the company over the term of its credit facility.

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