Revlon bank debt down, bonds bounce; Salton seen improved levels after slide

By Paul Deckelman and Sara Rosenberg

New York, May 14 - Revlon Inc.'s bank debt was said to be back down to the low-to- mid 90s context in which the paper had been quoted prior to the New York-based cosmetics company's refinancing plan being set in motion, now that Revlon has decided to pull its financing deals from market. However, the various bank loan traders queried Friday admitted that they hadn't seen the paper trade very much.

Prior to the decision to table the refinancing, Revlon's bank debt had been around par, since investors had been anticipating being paid down at that level.

Revlon's junk bonds meanwhile retreated in early Friday dealings on the news, but then were seen having pushed upward later on a burst of short-covering.

Late Thursday night, Revlon announced that it had abandoned its planned refinancing, which included getting a new $680 million credit facility, selling $400 million of senior notes and a tender offer for three series of existing bonds, citing "current unfavorable market conditions."

The refinancing was to have been conducted through the parent company's Revlon Consumer Products Corp. subsidiary.

Revlon said it will continue to monitor market conditions and continue to execute its growth plan.

The refinancing had been intended to lower interest costs and extend debt maturities.

Revlon had been expected to close in mid-May on a new $680 million credit facility (B2/B) via JPMorgan and Citigroup. The facility included a $530 million six-year term B at Libor plus 425 basis points and a $150 million five-year revolver at Libor plus 325 basis points with a 50 basis points undrawn fee.

Syndication of the term loan B was not going so well as of earlier this week, even though the company increased pricing on the tranche by 100 basis points and added soft call protection after price talk on the proposed bond offering headed higher.

More specifically, the term loan B, which was being offered at par, was flexed up to Libor plus 425 basis points from Libor plus 325 bps and 101 soft call protection was added as a result of price talk on the company's $400 million offering of seven-year senior unsecured notes coming in at 10.25% to 10.50%.

The tender offer was for the company's outstanding 8 1/8% senior notes due 2006, the 9% senior notes due 2006 and the 12% senior secured notes due 2005, as well as the related consent solicitation for the 2005 notes.

The tender offer had been set to expire at 5 p.m. ET on May 21 after being extended from May 14.

The bonds which were to have been taken out via the tender had previously risen to around their anticipated takeout levels when the tender offer was first announced some weeks ago, but they had been coming down ever since, and on Thursday had fallen several points on signs that the new bond deal was in trouble, including indications that the new issue, were it to have been done, would have carried a coupon of at least 11%, or possibly even above that - factors which caused the company to scuttle the deal Thursday, citing deteriorating market conditions.

Revlon bonds start lower...

On Friday, a market source said, the existing Revlon bonds continued to move down early in the session, with the 8 5/8s dropping to 83 bid from prior levels at 86, while the 9% notes dipped to 96, off a point. He also saw Revlon Consumer Products' 12% notes due 2005, which were not being tendered for, really take a hit, dropping to 108 bid from prior levels around 113. A trader in distressed credits saw the 12% notes down even further, pegging them as low as 103 bid during the session.

At a distressed-debt shop, a trader saw the early action as "a big drop," pegging the company's bonds down anywhere from two to five points.

...then rise on short covering

But at another desk, a trader saw the Revlon bonds having pushed off their lows, on what he termed "a lot of short-covering.

"Guys were short [in the existing Revlon issues] ahead of the deal - and then, when the deal didn't materialize, they had to scramble around to cover the shorts."

He saw Revlon's 8 5/8% notes as having moved up to 87 bid from lows of around 83-84, and quoted the 9% notes closing at 97 bid, 98 offered, up from lows at 94 bid, 95 offered.

Yet another trader said that the 8 5/8s were closing at 85 bid, 86 offered, "well off from they were at the beginning of the week," before the new deal ran into such trouble, while the 8 1/8s were at 95 bid, 97 offered and the 12% notes in the 110-111 area, with "no real movement" day-to-day.

Adelphia little moved on Cox, Liberty plan

Apart from Revlon, distressed-debt traders were noting a pronouncement by an executive of Liberty Media to the effect that Liberty might team up with Cox Communications to buy some - or possibly even all - of Adelphia Communications Corp.'s assets. Each media company would be able to choose the assets that best complement their own existing footprints that way.

Greenwood Village, Colo.-based cabler Adelphia's management would prefer to emerge from the Chapter 11 process as a much debt-reduced stand-alone company but bondholders have recently pressured the company into at least considering selling some of its assets - or even the whole company - if that would bring a greater return for the bondholders and other creditors.

"We saw that story," a trader said, "but it didn't do very much for Adelphia's bonds."

Adelphia's notes were even being quoted lower at another desk, with its 8 3/8% notes due 2007 and its 9½% notes due 2005 down two points at 106.5 bid and its 8¾% notes due 2007 off a point, also to the 106.5 level.

Salton recovers somewhat

Salton Inc.'s bonds were seen trading around on Friday - but for the first time, after three sessions of sharp declines that brought its 10¾% notes due 2005 down to the lower 50s from the mid-90s at the start of the week, and dropped its 12¼% notes due 2008 as low as the upper 40s from the upper 80s, the Salton bonds seemed to be trying to get off the canvas Friday, with the 103/4s pushing as high as 61 bid from 53 bid, 54 offered Thursday while the 121/4s were five points better at 55 bid, 56 offered, a trader said.

The bonds had been swooning all week following the release Tuesday of poor earnings numbers by the Lake Forest, Ill.-based maker of the George Foreman hamburger grills and other small appliances.

The trader cited the fact that the bonds had just gotten so oversold over the past several sessions, as well as the announcement that Leonard Dreimann, Salton's chairman and chief executive officer, had given the company a vote of confidence by buying 50,000 shares.

Besides lifting the bonds that also gave the company's battered shares a boost of 63 cents (22.74%) to $3.40 a share, on New York Stock Exchange volume of 2.1 million shares, about nine times the norm. Still, just as the bonds are still well below where they were before the earnings news, the stock remains well below its pre-earnings level at $6.69 at last Monday's close.

Bond and stock investors alike apparently ignored Moody's Investors Service's announcement that it had cut Salton's senior implied rating to Caa1 from B2 and had lowered the company's senior unsecured issuer rating to Caa2 from Caa1, keeping a negative outlook for both, in the wake of the wider loss the company reported and its admission that it was in covenant violation.

Air Canada lower

News that Canadian pension regulators have offered to give Air Canada more time to pay off its pension obligations as part of any reorganization - 10 years as opposed to the customary five - did not seem to give the bonds of the insolvent Canadian air carrier much lift.

A distressed-debt trader quoted the bonds at 29 bid, 31 offered post news, down from prior levels at 30 bid, 32 offered.

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