AES' restructured bank debt moves up on strong bid; Greif stays firm on earnings news

By Sara Rosenberg

New York, Dec. 12 - AES Corp.'s restructured bank debt was up Thursday in the secondary loan market and received strong bid-side interest, according to traders. Greif Bros. Corp.'s bank debt was firm, trading just over par, following the release of earnings news that was basically in line with previous projections.

AES' restructured term loan B was quoted with an 84 bid and an 86 offer. The revolver and term loan A were quoted with an 88 bid and a 90 offer, a trader told Prospect News, adding that the paper is up but it is hard to calculate the difference since the restructured loan has a different coupon and terms.

Asked why the Arlington, Va. power company's debt was up, a second trader simply responded: "Because the deal is done."

In October, AES hit the primary market with a $1.6125 billion credit facility (B2/BB) led by Citibank. The loan consists of a $500 million revolver, a $75 million letter of credit facility, a $350 million term loan A, a $425 million term loan B and a $262.5 million term loan C, all due July 2005.

Proceeds will be used to replace some existing facilities.

The company is also currently involved in an exchange offer for its outstanding $300 million 8.75% senior notes due 2002 and $200 million 7.375% remarketable or redeemable securities due 2013, which are putable in 2003. As of Wednesday, about $240.013 million of the 2002 notes and $173.889 million of the ROARs had been tendered, which means that the minimum condition of the exchange offer has been satisfied - although AES has repeatedly extended the exchange since it passed the 80% threshold on Monday and most recently it was scheduled to end Thursday.

Completion of the loan is subject to completion of the exchange offer.

AES had previously described the refinancing as "critical" to the company.

Greif Bros.' earnings were basically in line with estimates, leaving the paper firm on the day. For the three months ended Oct. 31, 2002, net sales were $435.5 million compared with $444.8 million for the same period last year, gross profit margin improved to 22% of net sales for the quarter compared with 21.3% for the fourth quarter 2001 and EBITDA were $61.8 million versus $59.7 million last year.

Total debt outstanding was $653 million at Oct. 31 versus $714.0 million on the same date last year and total debt to total capitalization was 53% compared with 55% a year ago.

For fiscal year 2002, capital expenditures, excluding timberland transactions, were $45.7 million compared with $43 million in 2001 and EBITDA was $203.5.

Guidance for fiscal year 2003 EBITDA is $210 million to $215 million before timberland gains and special charges.

"Similar to the outlook for fiscal 2002, the company anticipates a slow start for fiscal 2003 followed by improvement during the second half of the year. Weak economic conditions that prevailed throughout fiscal 2002 are expected to continue into fiscal 2003. Results for the first quarter, which is historically a slower period due to fewer shipping days, extended downtime at customers' operations and the seasonal downturn in retail markets following the holidays, are anticipated to be comparable with the first quarter of fiscal 2002," a news release said.

Asked whether this bleak outlook for the beginning of 2003 had bank debt investors worried, the trader responded: "A lot of companies are like that. Let's put it this way, I haven't had anyone come in and try to sell it off today."

Greif Bros. is a Delaware, Ohio manufacturer of industrial shipping containers and containerboard and corrugated products.

In primary news, Ball Corp.'s multi-currency revolver was reduced by $50 million in size to a new total size of $450 million, according to a syndicate source. This action, which was anticipated by debt market participants due to the upsizing of the bond deal, comes despite last week's statement by both the company and the syndicate that the a reduction of the credit facility size was not likely.

The high yield note offering was increased to $300 million from $200 million at pricing. The 10-year senior notes priced with a yield of 6 7/8%, claimed to be an all-time low for a junk issuer.

The loan currently consists of a $450 million multi-currency revolver with an interest rate of Libor plus 200 basis points, a 250 million euro/sterling term loan A with an interest rate of Libor plus 200 basis points, a 300 million euro term loan B with an interest rate of Libor plus 250 basis points and a $350 million term loan B with an interest rate of Libor plus 225 basis points (recently flexed down from Libor plus 250 basis points).

Deutsche Bank and Bank of America are the lead banks on the credit facility.

The company hopes to close both the bank deal and the acquisition of Schmalbach-Lubeca AG later this month.

Ball is a Broomfield, Colo. supplier of metal and plastic packaging to beverage and food industries.

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