Xerox's drops on rating downgrade and upcoming June 30 refinancing deadline

By Sara Rosenberg

New York, June 12 - Xerox Corp.'s secondary bank loan paper was slightly softer on Wednesday due to the recent Standard & Poor's rating downgrade and the pending refinancing of the company's bank deal, according to a trader. Xerox was bid at 90 and offered at 92, "however, the bid may be slipping into the high 80's," the trader said. On Tuesday, Xerox was bid at 91 and offered at 93.

"Everyone is waiting for the bank deal to get done," the trader added.

On Tuesday, Standard & Poor's downgraded Xerox Corp.'s revolving credit facility to BB- from BB and kept it on CreditWatch with negative implications. S&P said it lowered the Stamford, Conn. document company because of significant debt maturities, limited access to capital markets and its expectation that free operating cash flow levels after restructuring payments will be weak in the near term despite recent profitability improvements. S&P added that the ratings remain on CreditWatch pending Xerox's receipt of commitments for new bank facilities, which will replace the existing $7 billion revolving credit facility maturing in October 2002.

Meanwhile Wyndham International Inc.'s bank paper has been moving "sideways", according to the trader. On Wednesday, the B loan was bid at 90 and offered at 92. The increasing rate loans were bid at 91 and offered at 93.

"[Wyndham] settled into this trading range" after people adapted to news that the bond deal wasn't going to get done, the trader said.

Wyndham's B loan had been bid as high as 94½ last week when it looked like the bond deal was going to be successfully completed.

The Dallas, Tex. lodging company's highly watched bond deal was shelved Friday following a week of restructuring and scrutiny by both the bond and bank loan markets. Proceeds from the notes were going to be used to pay down bank debt.

"Not much has traded today. It's been kind of quiet across the board," the trader said. "The entire market feels softer though."

He explained that there has been a lack of participation in the bank loan market because people have focused most of their attention on problem companies, such as Adelphia Communications Corp.

On Monday, Century Communications Corp., a subsidiary of Adelphia, filed for bankruptcy protection under Chapter 11.

Furthermore, in its Form 8-K filing Monday, the company revised consolidated revenues downwards to $2.548 billion for 2000 from the previously reported $2.608 billion for 2000 and $3.51 billion for 2001 from $3.58 billion. Consolidated EBIDTA was preliminarily revised to $1.042 billion for 2000 from $1.202 billion and $1.199 billion for 2001 from $1.409 billion. For 2002, EBIDTA is anticipated at approximately $1.3 billion, the filing said. Lastly, the company's basic cable subscriber number was revised to 5.763 million at Dec. 31, 2001 from the original number of 5.810 million.

In other news, Alliance Imaging, an Anaheim, Calif. provider of outsourced diagnostic imaging services, closed on its new $286 million tranche C on Tuesday, according to a company press release. Deutsche Bank Securities was the lead bank on the deal.

Proceeds from the new term C were used to retire $145.5 million owed under the company's existing term B loan and $140.5 million owed under its existing term C loan. Previously, the company had an interest rate of Libor plus 275 basis points on the term B and Libor plus 300 basis points on the term C. By retiring these tranches, the company has lowered its interest rate to Libor plus 237.5 basis points on the new term C.

Amortization of the facility is $1.5 million due in each of the years 2004, 2005, and 2006, with the remaining balance of $281.5 million due on Nov. 2, 2008, the maturity date of the loan.

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