Lender Processing breaks; Rite Aid falls with earnings; Autos drop; Cash, LCDX under pressure

By Sara Rosenberg

New York, June 26 - Lender Processing Services Inc.'s credit facility freed up for trading on Thursday, with the term loan B quoted above its original issue discount price, and Rite Aid Corp.'s existing term loan headed lower after the company released financial results.

Also in trading, autos continue to take the lead downwards, with General Motors Corp., Ford Motor Co., Chrysler Financial Services LLC and Chrysler LLC (Auto) posting losses, and the cash market in general and LCDX 10 fell as well.

Lender Processing's credit facility hit the secondary during Thursday's market hours, with the $510 million six-year term loan B trading atop the discount price at which it was originally sold to investors, according to traders.

The term loan B was quoted by one trader at 99½ bid, par¼ offered on the break and by another trader at 99¾ bid, par½ offered on the break. By the end of the day, the second trader was quoting the loan at par bid, par½ offered.

Pricing on the well oversubscribed term loan B is Libor plus 250 basis points and it was sold at an original issue discount of 99. The tranche carries 101 soft call protection for one year.

During syndication, the term loan B was upsized by $25 million from $485 million after the company downsized its bond offering to $375 million from $400 million, pricing on the loan was reverse flexed from initial guidance of Libor plus 275 bps to 300 bps, and the original issue discount tightened from initial talk of 981/2.

Lender Processing's $1.35 billion senior secured credit facility (Baa3/BBB) also includes a $140 million five-year revolver and a $700 million five-year term loan A, with both of these tranches priced at Libor plus 250 bps as well.

During syndication, pricing on the revolver and the term loan A firmed at the low end of original talk of Libor plus 250 bps to 275 bps.

JPMorgan, Bank of America and Wachovia are the lead banks on the deal that will be used, along with the bond proceeds, to help fund the tax-free spinoff of the company from Fidelity National Information Services Inc.

Lender Processing Services is a provider of integrated data, servicing and technology services to large-scale mortgage lenders.

Rite Aid slides

Rite Aid's existing term loan dropped by a couple of points as the company announced results for the quarter ended May 31 and the market in general was soft, according to a trader.

The term loan was quoted at 87 bid, 89 offered, down from 91 bid, 92 offered on Wednesday, the trader said.

For the first quarter, Rite Aid reported a net loss of $156.6 million, or $0.20 per diluted share, compared to last year's first-quarter net income of $27.6 million, or $0.04 per diluted share. The loss was attributed in part to increased expenses as a result of last year's Brooks Eckerd acquisition such as higher depreciation and amortization expense, higher interest expense and higher integration expense.

Revenues for quarter were $6.61 billion, up 49.3% from revenues of $4.43 billion in the prior year first quarter. This increase was primarily a result of the acquisition of the Brooks Eckerd stores.

Adjusted EBITDA for the quarter was $236.4 million or 3.6% of revenues, compared to $192.8 million or 4.4% of revenues last year.

During the quarter, the company completed the conversion of all of the acquired Brooks and Eckerd store systems and remains on schedule to finish the minor remodels and complete the integration by October.

"While the business environment remains challenging, we expect that completing the minor remodels, sales turning positive in the acquired stores and new pharmacy and front end initiatives will contribute significantly to strong results in the second half of the fiscal year," said Mary Sammons, chairman, president and chief executive officer, in a news release.

Also on Thursday, Rite Aid confirmed its fiscal 2009 guidance for sales, same store sales, net loss, adjusted EBITDA and capital expenditures.

Sales for fiscal 2009 are expected to be between $26.7 billion and $27.2 billion with same-store sales expected to improve 2% to 4% over fiscal 2008.

Net loss for fiscal 2009 is expected to be between $260 million and $375 million or a loss per diluted share of $0.34 to $0.48.

Adjusted EBITDA for fiscal 2009 is expected to be between $1 billion and $1.1 billion.

And, capital expenditures for fiscal 2009, excluding proceeds from sale and leaseback transactions, are expected to be approximately $600 million. Proceeds from sale and leaseback transaction are expected to be approximately $150 million.

In addition, the company announced on Thursday that it plans to offer $425 million of senior secured notes due 2016.

Proceeds from the notes, along with the $350 million senior secured tranche 3 term loan due June 4, 2014 that was launched to investors on June 12, will be used to fund the previously announced tender offers and consent solicitations related to the company's $360 million of 8 1/8% senior secured notes due 2010, $200 million of 7½% senior secured notes due 2015 and $150 million of 9¼% senior notes due 2013 - which currently restrict the company's ability to borrow the full availability of its $1.75 billion revolver.

The tender offers are scheduled to expire on July 1. Rite Aid said the majority of holders of these issues have agreed to tender the securities.

The new term loan, being led by Citigroup and Bank of America, is talked at Libor plus 225 bps with a 3% Libor floor and an original issue discount of 94.

Obtaining the term loan is permitted under the accordion feature in the company's existing senior secured credit facility.

"This refinancing gives us greater flexibility to support our business plans in an environment that includes worries about a lengthy recession and continued uncertainty of the capital markets." Sammons added in the release.

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

Autos still plummeting

The auto sector in general was once again a magnet for losses as oil topped $140 a barrel and the stock market softened, according to traders.

For example, General Motors, a Detroit-based automotive company, saw its term loan quoted by one trader at 83 bid, 85 offered, down from 85 bid, 87 offered, and by a second trader at 82 bid, 84 offered, down from 86½ bid, 87½ offered.

On Thursday, Goldman Sachs cut its rating on General Motors to sell from neutral pointing to liquidity concerns as a primary issue.

Also lower was Ford, a Dearborn, Mich.-based automotive company, who saw its term loan quoted by traders at 80½ bid, 81½ offered, down from 82¼ bid, 83 offered.

Chrysler Financial, a provider of financial services for vehicles in the NAFTA region, saw its first-lien term loan weaken as well, with one trader quoting it at 82 bid, 84 offered, down from 85 bid, 87 offered, and a second trader quoting it at 82 bid, 83 offered, down from 84 bid, 85 offered.

Lastly, Chrysler Auto, a producer and seller of Chrysler, Dodge and Jeep vehicles, saw its term loan drop to 50 bid, 53 offered from around 53 bid, 56 offered, one trader said.

During the session, there were some rumors floating around of a possible bankruptcy at Chrysler Auto but "most people discounted it" after the company came out and denied the allegation, the trader added.

As for the stock market, Nasdaq was down 79.89 points, or 3.33%, Dow Jones Industrial Average was down 358.41 points, or 3.03%, S&P 500 was down 38.82 points, or 2.94%, and NYSE was down 225.06 points, or 2.54%.

Cash, LCDX lose ground

The cash market as a whole was also pushed down by stocks, and LCDX 10 felt the sting too, according to traders.

The cash market in general was said to be down about one or two points and the index was quoted at 97.30 bid, 97.40 offered, down from 97.65 bid, 97.75 offered, traders said. At one point during the session, the index traded as low as 97.

"Even a name like GP [Georgia-Pacific Corp.] that trades really well came under some pressure. Across the board everything is under pressure even a high quality name like this. Nothing feels good," one trader remarked.

Georgia-Pacific, an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals, saw its term loan B quoted at 94 bid, 95 offered, down from 94¼ bid, 95¼ offered, the trader said, adding that about a week ago this paper was trading at 95½ bid, 96 offered.

The trader said that he saw a decent amount of volume in the secondary market on Thursday, however, a second trader said that the Street was "very thinly staffed".

"Backdrop with equities is pretty ugly. I don't think there's a lot of trading taking place. I do think there's a lot of smoke and mirrors," the second trader added.

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