Dollar General rises with earnings; Clear Channel rallies; Ford gains on sales; Lear retreats

By Sara Rosenberg

New York, June 2 - Dollar General Corp.'s term loan B bank debt strengthened during the Tuesday trading session as the company came out with earnings that showed a year-over-year improvement in net income, profit, sales and EBITDA.

Also in the secondary, Clear Channel Communications Inc.'s term loan B jumped up by a couple of points with news that an intercompany note that is owed to the company may be refinanced, and Ford Motor Co.'s term loan was better after May sales results were announced.

And, Lear Corp.'s term loan pretty much gave up all of the gains it experienced during the previous session when the company revealed plans to forgo bond interest payments.

Moving to the primary market, BRSP LLC started floating price talk on its proposed term loan as the deal is gearing up for its launch on Wednesday.

Dollar General up on numbers

Dollar General's term loan B-1 and term loan B-2 were both higher in trading following the release of positive first-quarter results, according to traders.

The Goodlettsville, Tenn.-based discount retailer's term loan B-1 was quoted by one trader at 94¾ bid, 95¾ offered, up from 93¼ bid, 94¼ offered, and by a second trader at 95½ bid, 96½ offered, up from 94½ bid, 95½ offered.

And, the term loan B-2 was quoted by one trader at 93½ bid, 94½ offered, up from 92¼ bid, 93¼ offered, and by a second trader at 94 bid, 95 offered, up from 93¼ bid, 94¼ offered.

For the first quarter ended May 1, Dollar General reported net income of $83 million, up from $5.9 million in the comparable period last year.

Operating profit increased 102.8% in the quarter to $224.9 million, or 8.1% of sales, compared to $110.9 million, or 4.6% of sales, in the 2008 first quarter.

And, sales for the quarter were $2.78 billion, up 15.7% from $2.4 billion in the prior year.

Dollar General EBITDA improves

Dollar General also said on Tuesday that its adjusted EBITDA increased 59% to $291 million in the 2009 first quarter from $182.7 million in the 2008 first quarter.

At May 1, the company had outstanding long-term obligations, including the current portion of $4.14 billion, with no borrowings outstanding under its asset-based revolving credit facility.

The ratio of long-term obligations to adjusted EBITDA decreased to 4.0 to 1 as of May 1 from 5.8 to 1 as of May 2, 2008.

In addition, at May 1, the ratio of long-term obligations, net of cash, to adjusted EBITDA was 3.6 to 1 and, the senior secured incurrence test was 1.8 to 1.

"We are very pleased that the momentum that began in 2008 has continued to build in 2009, enabling us to report a very strong start to the year, with strong same-store sales growth, gross margin expansion, and SG&A leverage," said Rick Dreiling, chairman and chief executive officer, in a news release.

"Customers are responding positively to the changes we are making in our stores as well as to our continued commitment to providing convenience and great value. Importantly, our loyal customers are shopping with us more often, and we believe that we are also attracting new customers," Dreiling added.

Clear Channel skyrockets

Clear Channel's term loan B posted a pretty significant gain on Tuesday as an intercompany note it has made to a subsidiary is coming due and that subsidiary is looking into ways to pay off the note, according to a trader.

The term loan B was at 66 bid, 69 offered, up from 61¼ bid, 63¼ offered, the trader remarked.

On Tuesday morning, Clear Channel Outdoor Holdings Inc. said that it is actively pursuing alternatives to address the maturity of the intercompany note payable to its parent, Clear Channel Communications.

These alternatives may include an offering of new senior or senior subordinated notes for cash or an exchange of new senior or subordinated notes for outstanding debt.

Timing and structure of any transaction will depend on market conditions, the company said in a news release.

Clear Channel is a San Antonio-based media and entertainment company. Clear Channel Outdoor is an outdoor advertising company.

Ford rises with sales

Ford's term loan was higher in the secondary market following the release of May sales numbers, according to a trader.

The Dearborn, Mich.-based automaker's term loan was quoted at 72¾ bid, 73¾ offered, up from 71¾ bid, 72¾ offered, the trader said.

For the month of May, total Ford sales were 161,531, down 24.2% from 213,238 in the same period last year.

Ford, Lincoln and Mercury sales totaled 155,954, up 20% versus April and the highest sales for any month since July 2008. Compared to May 2008, Ford, Lincoln and Mercury sales were down 24.3% from 206,000.

Total car sales for the month were 63,697, down 25.5% from 85,542 in the prior year.

And, total truck sales were 92,257, down 23.4% 120,458 from May 2008.

At the end of May, vehicle inventories totaled 350,000. This level was 41,000 vehicles lower than at the end of April and 210,000 vehicles lower than a year ago.

Lear winds down after run-up

Lear's term loan dropped back to where it basically was prior to the emergence of news that the company is skipping interest payments on its notes that were recently due, according to a trader.

The term loan was quoted at 65 bid, 67 offered, compared to around 70 bid, 72 offered at the close on Monday. Last Friday, the loan was around 65½ bid, 67 offered.

On Monday, Lear was supposed to make about $38 million of semiannual interest payments with respect to its 8.5% senior notes due in 2013 and 8.75% senior notes due in 2016, but instead, decided to utilize a 30-day grace period.

The company said that during the grace period, it will continue discussions regarding a capital restructuring with its lenders and others.

By not making the interest payments, the company was able to keep in place a loan amendment of financial covenants and waiver of existing defaults that was entered into on May 13.

Lear downgraded

Lear's senior secured debt rating was downgraded on Tuesday by Standard & Poor's to CC from B and its corporate rating was lowered to D from CCC+ as a result of the missed interest payments.

S&P explained that it is not confident that Lear will make the payments within the grace period and said that, among other outcomes, the company might pursue a distressed exchange or file for bankruptcy under Chapter 11.

Lear is a Southfield, Mich.-based supplier of automotive seating systems, electrical distribution systems and electronic products.

BRSP price talk

Switching to new deal happenings, price talk on BRSP's proposed $275 million five-year senior secured term loan emerged as the deal is getting ready to launch into syndication with a bank meeting on Wednesday at 9:30 a.m. ET, according to a market source.

The term loan is talked at Libor plus 450 basis points with a 3% floor and an original issue discount in the 92 to 93 context, the source said.

Call protection on the loan is 104 in year one, 102 in year two and 101 in year three and covenants include a debt service coverage ratio.

Barclays Capital is the lead bank on the deal that will be used to refinance an existing term loan put in place in 2006.

BRSP is a special purpose entity covering two gas-fired power plants - Broad River and South Point - that are operated by Calpine Corp.

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