Dex up on refi; Yankee Candle dips; Education Media selling second-lien; Manitowoc may be scrapped

By Sara Rosenberg

New York, May 8 - Dex Media West's term loan was stronger on Thursday as news of a refinancing came out, while Dex Media East's term loan softened with the rest of the cash market, and parent company R.H Donnelley Corp.'s term loan rose.

Also in trading, Yankee Candle Co. Inc. weakened after disappointing earnings results were announced, Cablevision Systems Corp. also fell on the heels of earnings, the auto sector got pummeled and Delphi Corp.'s debtor-in-possession second-lien term loan seesawed.

In other news, two of the three lead banks on the Education Media & Publishing credit facility are currently working on selling down their portions of the second-lien term loan that was funded late last year, and Manitowoc Co. Inc. has been out bid for Enodis plc, meaning that its recently announced multi-billion credit facility is likely going away.

Dex Media West's term loan headed higher in trading as investors are expecting to be taken out now that a refinancing deal has been announced, according to a trader.

The term loan was quoted at 99 bid, 99½ offered, up from around 97½ bid, 98½ offered, the trader said.

On Thursday, Dex Media West revealed that it will be getting a new $1.19 billion credit facility to replace its existing credit facility.

The facility consists of a $100 million revolver due October 2013, a $140 million term loan A due October 2013 and a $950 million term loan B due October 2014.

The new deal is scheduled to launch with a bank meeting on Tuesday and is being led by JPMorgan and Bank of America.

Meanwhile, Dex Media East's term loan fell off in trading, with traders attributing the drop to weakness in the overall cash market, which was lower by a quarter to a half a point, or maybe even more depending on the name. LCDX 10 was down to 98.55 bid, 98.65 offered from 98.90 bid, 99 offered on Wednesday.

The Dex Media East term loan was quoted by traders at 91 bid, 92 offered, down about a half to three quarters of a point on the day.

As for, R.H. Donnelley, parent company to Dex Media, it saw its term loan move up to 95 bid, 97 offered from 94½ bid, 95½ offered during the session.

On Thursday, R.H. Donnelley released first-quarter earnings that included revenues of $675 million, up 2% from $661 million in the first quarter of 2007, and net loss of $1.6 billion, or $23.60 per share, compared to net gain of $16 million, or $0.23 per share, last year.

The net loss for the quarter reflects a goodwill impairment charge of $2.5 billion. Excluding the effect of goodwill impairment recorded in the quarter, net income would have been $15 million.

Adjusted EBITDA for the quarter was $357 million and adjusted EBITDA margin was 52.9%.

Adjusted free cash flow was $92 million based on cash flow from operations of $100 million, capital expenditures of $10 million and $2 million of adjustments related to other compensation expense at Business.com.

R.H. Donnelley also said that it is looking to amend its credit facility to provide additional covenant flexibility as well as extend the revolver maturity date.

R.H. Donnelly is a Cary, N.C.-based yellow pages and online local commercial search company.

Yankee Candle down with earnings

Yankee Candle's term loan traded off by more than a point after the company released earnings that "were kind of bad," according to a trader.

The term loan was quoted at 90 bid, 91 offered, down from 91½ bid, 92½ offered, the trader said.

For the quarter, Yankee Candle reported total revenue of $140.9 million, a 1.5% decrease from the prior year quarter.

The company said that the decrease in total revenue was primarily driven by decreased sales to existing domestic wholesale customers, who continue to be cautious regarding their inventory positions and decreased comparable store sales in its retail business, offset in part by revenue generated in new stores, increased revenue in European operations and increased revenue attributable to the consumer direct business.

Net loss for the quarter was $7.9 million, compared with a net loss of $22.6 million in the first quarter of 2007.

EBITDA for the quarter was $21.5 million compared to negative $10.1 million for the prior year, and adjusted EBITDA for the quarter was $24 million, or 17% of sales, compared to $29.1 million, or 20.4% of sales for the prior year.

"The weakening macro-economic environment that we experienced in Q4 2007 continued to negatively impact our business in the first quarter of 2008. Both retail and wholesale performed below our internal projections, and similar to other retailers and consumer facing companies, we were adversely impacted by overall mall traffic, a tightening of open to buy inventory dollars within our wholesale channel, commodity inflationary pressures and reduced consumer spending," said Craig Rydin, chairman and chief executive officer, in a news release.

Yankee Candle is a South Deerfield, Mass., designer, manufacturer, wholesaler and retailer of premium scented candles.

Cablevision drops after results come out

Cablevision's term loan was yet another piece of debt that slid lower in trading Thursday after the company announced first-quarter numbers, according to a trader.

The term loan was quoted at 95¾ bid, 96¾ offered, down from 96 1/8 bid, 97 1/8 offered, the trader said.

For the first quarter, the company reported net revenue of 1.721 billion, up 10.1% from $1.563 billion in the same period last year, consolidated adjusted operating cash flow was $515.9 million, up 8.9% from $473.7 last year, and consolidated operating income was $245.5 million, up 44.2% from $170.3 million last year.

Net loss for the quarter was $31.606 million, or $0.11 per share, compared to a net loss of $26.276 million, or $0.09 per share in the first quarter of 2007.

"Cablevision had a very solid start to 2008 with strong gains in net revenue and AOCF, fueled largely by continuing growth in the company's core cable business," said James L. Dolan, president and chief executive officer, in a news release.

"For the first quarter, we added customers across all of our consumer services, including basic video, and became the first cable company to achieve a 50% penetration rate for high speed internet. These results extended Cablevision's industry-leading penetration rates for yet another quarter while Rainbow and MSG generated strong revenue growth of their own," Dolan added in the release.

Cablevision is a Bethpage, N.Y.-based entertainment and telecommunications company.

Autos get beaten down

The auto sector got hit hard on Thursday, with names like Ford Motor Co., General Motors Corp. and Accuride Corp. showing some noticeable losses, according to a trader.

Dearborn, Mich.-based automotive company Ford saw its term loan quoted at 90¾ bid, 91¼ offered, down from 92½ bid, 93 offered, the trader said.

Detroit-based automotive company General Motors saw its term loan quoted at 92 bid, 93 offered, down from 93¼ bid, 94¼ offered, the trader continued.

And, Evansville, Ind.-based manufacturer and supplier of commercial vehicle components Accuride saw its term loan quoted at 96¼ bid, 97¼ offered, down from 97¾ bid, 98¾ offered.

"Entire auto sector today got slugged. Combination of earnings, market was down and people taking profits," the trader remarked.

The trader said that there was a rumor that a size seller emerged on Thursday in a bunch of very liquid names that included Ford, which may be one of the reasons Ford was weaker. Other names that were heard to be a part of this included Univision Communications Inc.'s term loan, which was down to 84¼ bid, 85 offered from 85 bid, 85¾ offered, and Aramark Corp.'s term loan, which was down to 94 bid, 94½ offered form 95 1/8 bid, 95 5/8 offered.

Meanwhile, on General Motors, news emerged that the company recently agreed with American Axle that it would provide upfront financial support capped at $200 million to help fund employee buyouts, early retirements and buydowns to facilitate a settlement of the work stoppage.

And, Accuride announced first-quarter earnings on Thursday that included a net loss of $11.7 million, or $0.33 per diluted share, compared to a net loss of $1.9 million, or $0.05 per diluted share, for the first quarter of 2007.

The net loss included unfavorable special items totaling $8.2 million, or $0.23 per diluted share, which was $12.6 million on a pre-tax basis.

Net sales for the quarter were $238.2 million, compared to $325.4 million last year, a decrease of 26.8%. This decline reflects a 33% decline in North American Class 8 production and a $24 million reduction due to products re-sourced by a light vehicle customer during 2007.

Adjusted EBITDA was $18.5 million for the quarter, compared to adjusted EBITDA of $49.2 million for the first quarter of 2007.

Lastly, cash from operating activities for the quarter was a negative $28.4 million and capital expenditures totaled $10.4 million, resulting in negative free cash flow of $38.8 million, compared to negative free cash flow of $7.6 million last year.

Delphi bounces around

Delphi's debtor-in-possession second-lien term loan was all over the place during its second day of trading, as levels moved higher and then came back in before the close, according to a trader.

The $2.75 billion second-lien term loan C ended the day at 99 bid, 99½ offered, down from Wednesday's breaking levels of 99¼ bid, 99¾ offered, the trader said. However, during the session, levels did reach a high of 99½ bid, par offered.

The second-lien loan is priced at Libor plus 525 bps with a 3.25% Libor floor. Lenders got a 200 bps amendment fee with this tranche.

Delphi is a Troy, Mich.-based automotive electronics manufacturer.

DirecTV falls with market

DirecTV Holdings LLC's existing term loan was weaker during the session, but traders said that the debt's performance had more to do with the cash market softening than with the incremental debt news that affected the loan on Wednesday.

The existing term loan was quoted at 97½ bid, 98 offered, down from Wednesday's levels of 98 bid, 98½ offered, and from Tuesday's levels of 99 bid, 99½ offered on Tuesday, traders said.

On Wednesday, the company launched a new $1 billion five-year incremental term loan C (Baa3/BBB-) talked at Libor plus 200 bps to 225 bps with a 3% Libor floor, and an original issue discount guided in the 99 to 99¼ context.

Commitments from lenders are due on Friday.

Bank of America and JPMorgan are the lead banks on the deal.

The company also priced $1.35 billion of eight-year senior notes due 2016 on Wednesday at par to yield 7 5/8%.

Proceeds from the term loan and the bonds will be used for general corporate purposes, including to pay a dividend to its parent, DirecTV Group Inc.

DirecTV Group will then be able to use those funds to purchase stock under its share repurchase program, which was just increased to $3 billion.

DirecTV is an El Segundo, Calif., provider of digital multichannel television entertainment.

Education Media sell down

Moving to the primary, Credit Suisse and Lehman Brothers, two of the three lead banks on Education Media, started talking to accounts this week in an attempt to sell of their positions in the company's $1.7 billion second-lien term loan, according to a market source.

The other lead bank on the deal, Citigroup, is not involved in this syndication process, the source said.

Investors are being offered the second-lien loan at an original issue discount of 85, the source continued.

Pricing on the loan is Libor plus 950 basis points, of which 400 bps is cash pay and 550 bps is PIK, and the tranche carries call protection of non-callable for 18 months, then at 104 for one year and at 102 for one year.

"There seems to be money looking for yieldy investments and this is certainly yieldy at 85," the source remarked.

The loan funded in December to help fund Houghton Mifflin Co.'s acquisition of the Harcourt Education, Harcourt Trade and Greenwood-Heinemann divisions of Reed Elsevier for $4 billion, consisting of $3.7 billion in cash and $300 million of common stock of Houghton Mifflin Riverdeep Group plc, Houghton Mifflin's parent company. In connection with the acquisition, Boston-based Houghton Mifflin was renamed Education Media & Publishing.

Upon closing the acquisition, the company also got a $500 million revolver priced at Libor plus 400 bps, a $4.35 billion first-lien term loan priced at Libor plus 400 bps and a $600 million 18-month asset-sale bridge loan that will be taken out with proceeds from the pending sale of the company's college division.

Call protection on the first-lien term loan is 103 in year one, 102 in year two and 101 in year three.

The first-lien term loan has been sold down for a while. "Sold some in December, a lot in the first quarter and a few more in April that kind of cleaned this out. First-lien is virtually done," the source added.

Education Media's credit facility was first launched to investors in November of last year, but it was then pulled in December as a result of market conditions.

During the first attempt at syndication, pricing on the revolver and first-lien term loan was talked at Libor plus 375 bps, and pricing on the second-lien was talked at Libor plus 850 bps.

Plus, the first-lien term loan was sized at $4.95 billion and there was no $600 million asset-sale bridge loan.

In an attempt to get the deal done last year, the original issue discount on the first-lien term loan had been increased to 96 from the 99 area and on the second-lien term loan to 96 from 98, and the banks reduced the amount of first- and second-lien term loan debt that they were selling off, so that they were only offering $1.5 billion of the first-lien and $850 million of the second-lien.

However, these changes were not enough to counteract the state of the primary market at that time, which is why the deal ended up getting pulled.

Manitowoc may not happen

Manitowoc's acquisition proposal for Enodis has been trumped by a new proposal from Illinois Tool Works Inc., making it likely that Manitowoc's $2.4 billion credit facility will not be happening.

Manitowoc had offered to buy Enodis for 258 pence per share.

Now, Illinois Tool is offering Enodis shareholders 280 pence in cash per share, plus Enodis will pay a dividend of 2 pence per share in lieu of an interim dividend in respect of the financial year ending Sept. 30. The offer values Enodis' existing issued share capital at £1,029 million.

As a result of this new offer, the directors of Enodis have withdrawn their recommendation of the Manitowoc offer and will unanimously recommend that shareholders vote for the Illinois Tool transaction at a special meeting on June 18.

In response to the Illinois Tool offer, Manitowoc said in a news release that it "is considering its position and will make a further announcement in due course."

Manitowoc's proposed credit facility was going to consist of a $400 million five-year revolver, a $900 million five-year term loan A, a $300 million 18-month term loan X and an $800 million six-year term loan Y, with initial pricing on the deal expected at Libor plus 300 bps.

JPMorgan, Deutsche Bank, Morgan Stanley and BNP Paribas were going to act as the joint lead arrangers and joint bookrunners on the deal, with JPMorgan the administrative agent, Deutsche and Morgan Stanley as syndication agents, and BNP the documentation agent.

Manitowoc is a Manitowoc, Wis.-based provider of lifting equipment for the construction industry, manufacturer of cold-side equipment for the foodservice industry, and provider of shipbuilding, ship repair and conversion services. Enodis is a Tampa, Fla.-based food and beverage equipment manufacturer. And, Illinois Tool is a Glenview, Ill.-based manufacturer of a diversified range of value-added industrial products and equipment.

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