Movie Gallery bonds continue to slide, loans firmer; Dura better; Linens n'Things dips

By Stephanie N. Rotondo

Portland, Ore., July 5 - Traders reported little activity in the post-holiday distressed bond market Thursday, noting that only Movie Gallery Inc. seemed to be moving.

The company's bonds lost a few more points Thursday, bringing their cumulative decline for the week to more than 60 points.

Movie Gallery bonds began their nosedive earlier in the week on news that the company had failed to meet certain financial obligations under its Goldman Sachs-led credit facility. The news was announced late Monday after the closing bell, after which the bonds toppled a whopping 25 points. On Tuesday, the bonds continued their downward spiral.

The company's bank debt, however, was seen a bit stronger on the day after also facing two days of weakness. Bond traders said Tuesday that a conference call was held with holders of the second-lien paper Tuesday morning, but there has been no word as to what was said in that call.

Aside from the Movie bonds, traders saw Dura Automotive Systems Inc.'s bonds a little better, though there was not a lot of activity in the notes.

Linens n'Things Inc.'s bonds were also seen slightly active during the quiet day. A trader called the company's floating-rate notes down a bit from Tuesday's levels.

Movie Gallery mixed

Movie Gallery's bonds continued to see heavy activity despite an otherwise quiet post-holiday market.

The Dothan, Ala.-based movie rental chain's 11% notes due 2012 were said to be trading around the 22 area, about 3 points softer from Tuesday's closing levels.

Meanwhile, the company's bank debt was a touch stronger now that lenders have had a few days to mull over the covenant non-compliance and evaluation of alternatives news that emerged at the start of this week, according to a trader.

The first-lien term loan B was quoted at 90 bid, 92 offered, up from previous levels of 87 bid, 89 offered, the trader said.

In addition, the second-lien term loan was quoted at 56 bid, 61 offered, up from previous level of 50 bid, 60 offered, the trader continued.

Late Monday, Movie Gallery announced that it was not able to meet the financial covenants contained in its senior facility for the fiscal quarter ended July 1 due to significantly softer-than-expected second-quarter results.

The company is talking to its lenders about a way to remedy the defaults, including possibly seeking a waiver, amendment, forbearance or similar agreement.

Movie Gallery has fully drawn the remaining availability under its revolver and currently has liquidity consisting of about $50 million of cash on hand.

The company also said that it is considering a number of strategic alternatives, including asset divestitures, recapitalizations, alliances with strategic partners and a sale to or merger with a third party.

In reaction to the news, Standard & Poor's cut the company's corporate credit rating to CCC+ from B- on Thursday, the second agency to lower Movie Gallery this week.

On Tuesday, Moody's Investors Service downgraded the company's corporate family rating to Caa3 from Caa1, revolver to B2 from B1, synthetic letter-of-credit facility and first-lien term loan to Caa2 from B2, and second-lien term loan to Caa3 from Caa1.

Moody's said that the ratings are on review for possible further downgrade due to the fluid nature of the current situation and the high likelihood of a distressed exchange, restructuring or bankruptcy filing.

Dura better

Dura Automotive Systems' 8 5/8% senior notes due 2012 were called "up a little - although it's tough to say that things are up on so little volume. I wouldn't make a big thing of it - it was just a couple of quotes," according to one trader.

He pegged the bonds at 67.5 bid, 68.5 offered, up 1.5 points, he estimated.

Another source, however, had seen several large-block trades above 68 - up a good 4 or 5 points from prior levels, although later in the day, there was some smaller-sized trading back in a 64-ish context.

The activity followed the announcement by the bankrupt Rochester Hills, Mich.-based automotive components company that it had agreed to sell its Atwood Mobile Products Inc. division, which makes systems and components for recreational vehicles and mobile homes, for $160.2 million. The buyer is Atwood Acquisition LLC, an affiliate of private equity firm Insight Equity.

The U.S. Bankruptcy Court in Wilmington, Del., which is overseeing Dura's restructuring, must approve the sale. It is subject to auction should competing bids emerge.

The sale of Atwood, which Dura acquired in 1999, is seen as a key step in the company's efforts to focus on its core automotive systems business, as it restructures in hopes of coming out of Chapter 11 - which it entered last year - by this year's fourth quarter.

Linens n'Things dips

A trader said that there had been some activity in Linens n'Things Inc.'s floating-rate notes due 2014, which he saw down about a point at 71.25 bid, 72 offered, although he'd seen no news out about the troubled Clifton, N.J.-based Number-Two U.S. specialty retailer of bedding, housewares and home decor items.

Sara Rosenberg and Paul Deckelman contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.