Western Wireless bid jumps to 99-plus levels as third quarter earnings entice investors

By Sara Rosenberg

New York, Oct. 24 - Western Wireless Corp.'s term loan B bank debt headed into the 99 region on the bidside on Friday as the market reacted favorably to the company's third quarter earnings numbers, which were released late in the day Thursday.

The term B was quoted at 99¼ bid, 99½ offered at the end of the day, compared to opening levels of 98¾ bid, 99¼ offered, according to a trader.

For the quarter, the company reported record domestic adjusted EBITDA of $112.6 million, a 20% increase from the same period last year. Plus it was the first quarter of positive adjusted EBITDA for Western Wireless International, with $16.8 million in adjusted EBITDA. All in all, consolidated adjusted EBITDA was $129.4 million, an increase of 53% over the third quarter of 2002.

Consolidated total revenue was $401 million for the third quarter, a 31% increase over the third quarter of 2002 and consolidated net loss for the quarter was $18.5 million or $0.23 per basic and diluted share.

Other results included an increase in domestic subscriber revenue by 20% over the third quarter of 2002 to $187.1 million, an increase in domestic roamer revenue of 12% over the second quarter of 2003 to $61.1 million and an increase in domestic free cash flow for the nine months ending Sept. 30 of 30% compared to the same period last year.

"Western Wireless had a fantastic third quarter," said John W. Stanton, chairman and chief executive officer, in a news release. "We posted outstanding financial results for the quarter, highlighted by solid revenue growth, record domestic adjusted EBITDA, and our first quarter of positive adjusted EBITDA in our international segment. We took a number of important steps that have allowed us to reduce debt and improve our capital structure, and we now support GSM services in selected markets as we continue our GSM overlay. We are well positioned to meet our financial goals for 2003."

During the quarter, the Bellevue, Wash. wireless communications provider prepaid $400 million of its senior credit facility and redeemed all its 10½% senior subordinated notes due 2006 and 2007 with proceeds from a $600 million senior notes offering, the sale of the company's interest in its Croatian wireless business and the offering of $115 million in convertible subordinated notes.

In the primary, Scientific Games Corp.'s $532.825 million credit facility, which launched this past Thursday, appears to be moving along as some existing lenders have already expressed an interest in increasing their positions, according to a source close to the deal.

"So far so good," the source said regarding the deal's progress. "I haven't heard from everybody, [but] everybody I've heard from is very enthusiastic and has asked to be upsized on the term C."

The proposed facility (BB-) consists of a $70 million revolver and a $462.825 term loan C talked at Libor plus 275 basis points.

The term loan C will be used to refinance the company's existing term loan B, which is currently sized at approximately $287 million and carries an interest rate of Libor plus 350 basis points, and to help fund the previously announced acquisition of IGT OnLine Entertainment Systems Inc. from International Game Technology for $143 million in cash.

The revolver will be used for general corporate purposes.

Bear Stearns is the sole lead arranger, sole bookrunner and syndication agent. Bank of New York is the administrative agent. Credit Suisse First Boston and Deutsche Bank have signed on as co-arrangers and co-documentation agents.

Commitments for the deal are due on Tuesday and closing on the facility is tentatively scheduled to take place on Nov. 4.

Scientific Games is a New York provider of services, systems and products to both the instant ticket lottery industry and the pari-mutuel wagering industry.

Meanwhile, talk is that Goodman Manufacturing Co. LP may be launching an approximately $400 million credit facility next week to refinance existing debt, according to a market source. JPMorgan is said to be the lead bank on the deal.

Although specific structure was not immediately available, talk is that the institutional tranche will be priced at Libor plus 250 basis points.

The syndicate was not able to confirm, this information.

Goodman is a Houston producer of air conditioning and heating equipment.

Cinram International Inc. completed its acquisition of Timer Warner Inc.'s DVD and CD manufacturing and physical distribution businesses for approximately $1.05 billion in cash.

To fund the acquisition, Cinram obtained a $1.175 billion credit facility consisting of a $675 million six-year term loan B (Ba3/BB) with an interest rate of Libor plus 375 basis points, a $250 million four-year term loan A (Ba3/BB) with an interest rate of Libor plus 300 basis points, a $100 million second-lien term loan C (B1/B+) with an interest rate of Libor plus 575 basis points and a $150 million undrawn four-year revolver (Ba3/BB) with an interest rate of Libor plus 300 basis points.

Initially, the deal had been launched as a $150 million revolver, a $150 million term loan A and a $900 million term loan B. The term loan B was priced at Libor plus 325 basis points but was flexed up to Libor plus 375 basis points during syndication and investors were offered 50 basis points upfront as opposed to the original offer price of par.

Then the tranches of the deal were reworked to basically the final structure, except the B loan was sized at $700 million and then downsized to $675 million before closing.

Citigroup and Merrill Lynch were the joint lead arrangers on the deal, with Citigroup also acting as administrative agent and Merrill acting as syndication agent. Bank One, SG Cowen and GE Capital signed on to the deal as documentation agents.

"This is truly a landmark transaction for our company," said Isidore Philosophe, chief executive officer, in a news release. "With our combined strengths, Cinram is now uniquely positioned to capitalize on the phenomenal growth in the worldwide DVD market - securing our position as a global leader in the optical disc industry."

Cinram is a Toronto-based provider of pre-recorded multimedia products and logistic services.

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