FairPoint sets OID; Autos fall; Univision dips; Blockbuster, Travelport, Rite Aid up with numbers

By Sara Rosenberg

New York, March 6 - FairPoint Communications Inc. came out with the original issue discount on its term loan B as the deal was launched to retail investors during Thursday's market hours.

Meanwhile, over in trading, General Motors Corp. was weaker on the heels of the news that it will help bail out Delphi Corp., and Chrysler Financial Services LLC and Ford Motor Co. seemed to fall in sympathy.

Also, Univision Communications Inc. dropped following a rating downgrade, Blockbuster Inc. and Travelport Ltd. rose on their earnings results, Rite Aid Corp. was stronger on February sales numbers and LCDX 9 was weaker.

FairPoint held a retail bank meeting on Thursday morning to kick off syndication on its $1.13 billion seven-year term loan B, and in connection with the launch, the original issue discount on the debt was revealed, according to a market source.

The term loan B is being offered to investors at a discount price of 93, the source said. As was previously reported, price talk on the loan is Libor plus 275 basis points and the tranche carries call protection of 102 in year one and 101 in year two against optional prepayments.

The retail launch was well attended, with the room described as "packed," the source remarked. In addition, management was said to have presented well.

Commitments from lenders are due on Feb. 18.

FairPoint's $2.03 billion senior secured credit facility (Ba3/BB+) also includes a $200 million six-year revolver talked at Libor plus 275 bps, a $500 million six-year term loan A talked at Libor plus 250 bps and a $200 million one-year delayed-draw term loan, with seven-year final maturity, talked at Libor plus 275 bps.

The revolver, term loan A and delayed-draw term loan were already launched to potential lenders through a senior managing agent bank meeting that took place on Feb. 29.

These tranches have "received positive responses so far," the source added.

There are two tiers of upfront fees towards the revolver, term loan A and delayed-draw term loan. Senior managing agents committing $60 million will get an upfront fee of 5%, while managing agents committing $40 million will get an upfront fee of 4%.

The revolver has a 37.5 bps unused fee and the delayed-draw term loan has a 75 bps unused for six months, stepping up to 125 bps thereafter.

The delayed-draw term loan carries call protection of 102 in year one and 101 in year two against optional prepayments.

FairPoint currently expects that it will borrow at least $150 million under the delayed-draw term loan during the one-year delayed-draw period to fund certain capital expenditures and other expenses associated with the merger, according to an 8-K filed with the Securities and Exchange Commission Thursday. This is a change from what the company previously disclosed. In the past, it was said that expected borrowings under this loan would be at least $110 million.

Financial covenants include a minimum cash interest coverage ratio of 2.50 to 1.00 and a maximum total leverage ratio of 5.50 to 1.00.

Lehman Brothers, Morgan Stanley, Bank of America, Deutsche Bank, Wachovia, Merrill Lynch and CoBank are the lead banks on the deal, with Lehman the left lead.

The structure that the deal launched with is slightly different than what the company had previously outlined in filings with the SEC. Those filings had the deal comprised of a $200 million revolver, an up to $200 million delayed-draw term loan and an up to $1.68 billion term loan B.

Proceeds will be used to help fund the merger with Verizon Communications Inc.'s wireline operations in Maine, New Hampshire and Vermont.

In the merger, FairPoint will issue about 53.8 million of its common shares to be distributed in a tax-free Reverse Morris Trust transaction to the shareholders of Verizon as well as assume roughly $1.7 billion of debt. The transaction will give FairPoint's shareholders 40% ownership and Verizon's shareholders 60% ownership of the combined company.

Other financing will come from $540 million of senior unsecured notes.

Pro forma as of Dec. 31, the combined company's senior secured debt to EBITDA is 2.5 times, total debt to EBITDA is 3.4 times, net debt to EBITDA is 3.3 times, EBITDA to interest expense is 3.6 times and EBITDA minus capital expenditures to interest expense is 2.5 times.

FairPoint is a Charlotte, N.C., provider of communications services to rural communities.

GM pushes auto sector down

Moving to trading news, General Motors bank debt took a hit on Thursday in reaction to the company's announcement that it will help Delphi with its exit financing, and Chrysler Financial and Ford followed suit, according to a trader.

General Motors, a Detroit-based automaker, saw its term loan quoted at 88 bid, 89 offered, down from 89¼ bid, 90¼ offered, the trader said.

Chrysler Financial, a provider of financial services for vehicles in the NAFTA region, saw its first-lien term loan quoted at 86 bid, 87 offered, down from 86¾ bid, 87¾ offered, and its second-lien term loan quoted at 73¼ bid, 75¼ offered, down from 75¼ bid, 77¼ offered. "Seconds don't trade as often, so they are more volatile," the trader remarked.

And, Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted at 84 bid, 85 offered, down from 84½ bid, 85½ offered, the trader continued.

"GM participation in Delphi exit is not the best for the GM debt - GM dumping all that cash in Delphi. News shouldn't affect Ford and Chrysler, but for whatever reason, autos tend to follow each other," the trader added.

Late Wednesday, General Motors said that it is willing to take a $2 billion first-lien term loan note from Delphi and as much of the $825 million second-lien term loan necessary so that Delphi can complete its exit financing credit facility.

Delphi's $6.125 billion facility would also include a $1.6 billion ABL revolver and a $1.7 billion first-lien term loan.

The term loan issued to General Motors would be junior to the $1.7 billion term loan.

Under the previous exit facility structure, Delphi was trying to syndicate a $1.6 billion ABL revolver talked at Libor plus 250 bps, a $3.7 billion first-lien term loan (Ba3/B+) talked at Libor plus 450 bps, with an original issue discount of 96 and call protection of 102 in year one and 101 in year two, and an $825 million second-lien term loan (B3/B-), of which General Motors was going to take $750 million.

JPMorgan and Citigroup are the lead banks on the Delphi deal that will be used to repay the company's debtor-in-possession financing facility, to fund other payments required upon emergence from Chapter 11 and to conduct post-reorganization operations.

According to Delphi, General Motors's increased participation in the exit facility is necessary to successfully syndicate the financing, and the increased participation complies with the company's first amended plan of reorganization and related investment agreement.

However, Delphi said some of its plan investors do not agree that the proposed exit financing with increased General Motors participation would comply with the investment agreement.

In order to clarify that General Motors's increased participation complies with the plan and the investment agreement, Delphi is asking the U.S. Bankruptcy Court for limited relief under a bankruptcy code provision that allows courts to order parties to take any act necessary for the consummation of a confirmed plan of reorganization.

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

Univision off on downgrade

Univision Communications's term loan lost some ground during the session after Standard & Poor's downgraded the company, according to a trader.

The term loan was quoted at 82 5/8 bid, 83 5/8 offered, down from 83 1/8 bid, 84 1/8 offered, the trader said.

On Thursday, S&P cut the corporate credit rating on Univision to B- from B.

The rating agency said that the downgrade reflects the significantly lower-than-expected asset sale proceeds from the sale of the company's music division and an increasing challenge to cover its $500 million second-lien asset sale bridge loan that matures in March 2009.

On Wednesday afternoon, Univision came out with earnings results for the fourth quarter and full year ended Dec. 31.

For the fourth quarter, net revenue increased 6.1% to $544.3 million from $512.8 million in 2006, and adjusted operating income before depreciation and amortization increased 10.9% to $248 million from $223.7 million in 2006.

For the full year 2007, net revenue increased 8.4% to $2.0728 billion from $1.912 billion in 2006, excluding 2006 FIFA World Cup estimated incremental net revenues of $113.6 million. Including World Cup incremental revenue in 2006, net revenue increased 2.3% and adjusted operating income before depreciation and amortization increased 7.8% to $863.2 million from $800.6 million in 2006.

Univision is a Los Angeles-based Spanish-language media company.

Blockbuster heads higher

Blockbuster's term loan saw positive momentum on Thursday following the release of financial results for the fourth quarter and full-year ended Jan. 6, according to a trader.

The term loan was quoted at 89¾ bid, 91¼ offered, up from 88¾ bid, 90¾ offered, the trader said.

For the fourth quarter, total revenues increased 3.6% to $1.57 billion from $1.51 billion for the fourth quarter of 2006, net income was $38.1 million, or $0.18 per diluted share, up from net income of $8.3 million, or $0.04 per diluted share, for the fourth quarter of 2006, and adjusted net income totaled $54.9 million, or $0.26 per share, up from adjusted net income of $21.1 million, or $0.11 per share, in the previous year year.

For the full year, revenues increased 0.3% to $5.54 billion from $5.52 billion for 2006, operating income totaled $39.1 million, as compared to operating income of $73.6 million for 2006, net loss totaled $85.1 million, or $0.45 per share, as compared with net income of $39.2 million, or $0.21 per diluted share, in the previous year, and adjusted net loss totaled $135.6 million, or $0.71 per share, compared with adjusted net loss of $1.6 million, or $0.01 per share, in 2006.

"The year 2007 was one of transition for Blockbuster. During the last half of the year, we established financial stability and took decisive steps to grow our rental business, diversify revenue streams and broaden channels of distribution," said Jim Keyes, chairman and chief executive officer, in a news release.

"Most notably, through aggressive cost reductions, the repositioning of our subscription programs, and a renewed focus on store merchandising, we gained momentum in both sales and earnings. Building on our fourth quarter growth in year-over-year revenues and improvement in operating income, we are well positioned to return the company to profitability in 2008," Keyes added in the release.

For full-year 2008, the company estimates adjusted EBITDA in the range of $290 million to $310 million, operating income in the range of $113 million to $133 million and net income in the range of $5 million to $25 million.

Blockbuster is a Dallas-based provider of in-home movie and game entertainment.

Travelport stronger

Travelport's term loan traded up Thursday as the company also released fourth quarter and full-year 2007 results, according to a trader.

The term loan was trading in the 87½ bid, 88½ offered context, up about a half to a three quarters of a point on the day, the trader said.

For the quarter, the company reported net revenue of $645 million, up 11% from 2006, EBITDA loss was $153 million, adjusted net revenue was $581 million, down 1% from the prior year, and adjusted EBITDA was $132 million, representing growth of 8% over the same period last year.

For the full year, net revenue was $2.8 billion, EBITDA was $234 million, adjusted net revenue, excluding Worldspan and Orbitz Worldwide, was $1.9 billion, representing 4% growth from 2006, and adjusted EBITDA, excluding Worldspan and Orbitz Worldwide, was $496 million, representing 25% growth from last year.

Travelport is a Parsippany, N.J.-based travel conglomerate that operates a distribution system business, an IT services and software business and a group travel and wholesale hotel business.

Rite Aid better on sales results

Rite Aid's term loan traded stronger during market hours as the company released sales results for February, according to a trader.

The term loan was quoted at 90½ bid, 91½ offered, up from 90 bid, 91 offered, the trader said.

For February, same store sales increased 2.2% over the prior-year period, pharmacy same store sales increased 2.1% and front-end same store sales were up 2.5%.

Total drugstore sales for the five-week period increased 50.8% to $2.613 billion as compared to $1.733 billion for the same period last year.

For the 13-week quarter ended March 1, same store sales for the increased 1.3% over the like period last year, and total drugstore sales for this 13-week fourth quarter increased 50% to $6.81 billion, compared to $4.54 billion in last year's like period.

For the 52-week year ended March 1, same store sales increased 1.3% over the like 52-week period last year, and total drugstore sales increased 39.6% to $24.319 billion, compared to $17.422 billion in last year's like period.

Rite Aid is a Camp Hill, Pa.-based drugstore chain.

LCDX softens

LCDX 9 was lower on Thursday as guys may have been resetting shorts and stocks were off, according to traders.

The index was quoted at 91.35 bid, 91.50 offered, down from around 92.30 bid, 92.40 offered, traders said.

"When it breaches a certain level (like 92) guys start resetting shorts," one trader added.

As for equities, Nasdaq was down 52.31 points, or 2.3%, Dow Jones Industrial Average was down 214.60 points, or 1.75%, S&P 500 was down 29.36 points, or 2.2%, and NYSE was down 197.01 points, or 2.2%.

© 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.