Hollywood Entertainment to get $475 million loan, $600 million notes to support buyout

By Sara Rosenberg

New York, March 29 - Hollywood Entertainment Corp. has received a commitment for a $475 million credit facility from UBS AG and plans to issue $400 million of unsecured senior notes and $200 million of unsecured senior subordinated notes to help fund its merger with an affiliate of Leonard Green & Partners LP, according to an 8-K filed with the Securities and Exchange Commission on Monday.

The credit facility consists of a $400 million six-year term loan and a $75 million five-year revolver with a 50 basis points commitment fee. If the facility is rated B1/B+ or higher, then the two tranches will carry an initial interest rate of Libor plus 300 basis points. If the deal is rated below B1/B+, then the tranches will bear interest at Libor plus 350 basis points, the filing said. Pricing on the revolver can range from Libor plus 250 to 300 basis points depending on leverage assuming the B1/B+ rating and Libor plus 300 to 350 basis points assuming the lower than B1/B+ rating.

To back up the bond offering, the company has received a commitment for $600 million in bridge financing from UBS, consisting of a $400 million senior unsecured bridge loan and a $200 million senior subordinated unsecured bridge loan, both with a term of one year and both bearing interest at the greater of 10.2% or Libor plus 925 basis points.

Security for the credit facility is a perfected first priority pledge of all equity interests and mortgages on substantially all material tangible and intangible assets.

The term loan and the bonds (or bridge loan) will be used to help fund the acquisition and refinancings, and the revolver will be available for general corporate purposes.

Equity financing necessary for the transaction has been fully committed by Leonard Green & Partners LP through Green Equity Investors IV LP.

Under the terms of the merger agreement, Hollywood's shareholders will receive $14.00 per share in cash. The company entered into the merger agreement following the unanimous recommendation by a special committee comprised of the independent directors of the company's board of directors.

Closing of the merger, which is anticipated to take place in the third calendar quarter of 2004, is subject to various terms and conditions including shareholder approval, receipt of antitrust clearance and the completion of financing.

Hollywood Entertainment is a Wilsonville, Ore., video chain.

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