Regal Cinemas rises; Merrill brought into focus on amendment news; Masonite inches up

By Sara Rosenberg

New York, Jan. 21 - Regal Cinemas Corp.'s term loan gained some ground during Wednesday's trading session as the company completed an amendment to its credit facility that resulted in increased pricing as well as looser covenants.

Also in trading, Merrill Corp.'s term loan received more attention in the secondary on talk that the company is seeking an amendment and Masonite International Inc.'s term loan was a touch higher on market technicals.

Meanwhile, UAL Corp. and AMR Corp. both came out with earnings on Wednesday, but the news did little to affect bank debt levels.

Regal trades up with amendment

Regal Cinemas, a wholly owned subsidiary of Regal Entertainment Group, saw its term loan move higher during market hours as the company announced that it successfully amended its credit facility, according to a trader.

The term loan was quoted at 90 bid, 90½ offered, up from Tuesday's levels of 89 bid, 90 offered, the trader said.

Under the amendment, pricing on the company's revolver and the term loan was increased by 200 basis points, so that revolver pricing is now Libor plus 475 bps and term loan pricing is now Libor plus 375 bps.

The amendment also allows the company to repurchase up to $300 million in outstanding loans through a Dutch auction at a price below par within 270 days from the amendment date.

Regal gets covenant flexibility

Regal Cinemas also got more room under its covenants as a result of the amendment, as both the maximum consolidated adjusted leverage ratio and the maximum consolidated leverage ratio were modified.

The maximum consolidated adjusted leverage ratio is 5.75:1.00 until the second fiscal quarter of 2011, 5.50:1.00 from the third fiscal quarter of 2011 through the fourth fiscal quarter of 2011, and 5.25:1.00 from the first fiscal quarter of 2012 and thereafter.

The maximum consolidated leverage ratio is 3.75:1.00 until the second fiscal quarter of 2011, 3.50:1.00 from the third fiscal quarter of 2011 through the fourth fiscal quarter of 2011, and 3.25:1.00 from the first fiscal quarter of 2012 and thereafter.

In addition, the company may exclude a minimum of $100 million, but not more than $200 million, of subordinated debt that is used to repay amounts outstanding under the term loan from certain financial covenant calculations.

Regal reduces dividend

Regal Cinemas' parent, Regal Entertainment, also announced on Wednesday that it lowered its quarterly dividend.

The cash dividend that is payable on March 17 is now $0.18 per class A and class B common share, down from $0.30 per share in the prior quarter.

"Regal is not under stress from debt commitments or loan maturities, our balance sheet is strong, and we are optimistic regarding the 2009 film slate," said Mike Campbell, chief executive officer, in a news release.

"But we believe that the current environment requires a more conservative capital strategy and that these combined actions allow the company to retain more capital for de-leveraging its balance sheet and other opportunities," Campbell added in the release.

Regal is a Knoxville, Tenn.-based motion picture exhibitor.

Merrill catches interest

Merrill Corp.'s first-lien term loan attracted some attention from secondary players as news surfaced that the company is looking for an amendment, according to a trader.

The term loan was quoted at 65 bid, 70 offered, the trader said, compared to levels in December of 59 bid, 62 offered.

"Term loan doesn't trade very much," the trader added.

Under the proposed amendment, the company is looking to get permission to repurchase up to $125 million of its first-lien term loan.

Merrill is a St. Paul, Minn.-based provider of outsourced soervices for complex business communication and information management.

Masonite better

Masonite's term loan was a little stronger on Wednesday, with the improvement attributed to market technicals, according to a trader.

"Some guys have done the work and are starting to create a position," the trader remarked.

The term loan was quoted at 37 bid, 39 offered, up from Tuesday's levels of 35 bid, 38 offered, the trader added.

Masonite is a Mississauga, Ont.-based manufacturer of residential and commercial doors.

UAL steady with numbers

UAL's term loan held firm during the trading session as the company came out with fourth-quarter results, according to a trader.

The term loan was quoted at 51½ bid, 53 offered, unchanged from previous levels, the trader said.

For the fourth quarter, UAL reported a pre-tax loss of $1.3 billion, compared to a pre-tax loss of $98 million in 2007. Excluding non-cash, net mark-to- market hedge losses and certain accounting charges, the pre-tax loss was $547 million versus $105 million last year.

Basic and diluted loss per share for the quarter was $9.91, compared to a loss of $0.47 in the comparable 2007 period. Excluding non-cash, net mark-to-market hedge losses, loss per share was $4.22.

During the quarter, the company generated negative $989 million of operating cash flow and negative $1.1 billion of free cash flow.

The company ended the quarter with an unrestricted cash balance of $2 billion, a restricted cash balance of $272 million and $965 million in cash deposits held by its fuel hedge counterparties.

"United, like many airlines across the industry, experienced significant cash pressures associated with fuel hedge positions in 2008 as oil prices declined more than $100 a barrel," said Kathryn Mikells, senior vice president and chief financial officer, in a news release.

"The cash impact, while significant, is now behind us, and we are well positioned to manage through a challenging 2009 with good expected cost performance building on our momentum from this past year," Mikells added in the release.

UAL looking to reduce costs

For 2009, UAL is planning on taking additional steps to lower overhead costs, including cutting back on the number of salaried and management employees by about 1,000 positions.

The company is also limiting its non-aircraft capital budget to $450 million for 2009 and has no capital requirements for new aircraft for the year.

UAL has scheduled debt and capital lease payment obligations of $900 million in 2009.

Also, the Chicago-based airline company is on track to complete the previously announced removal of 100 aircraft from its fleet by the end the year.

AMR term loan holds firm

AMR also announced its fourth-quarter numbers early on in the day, and its term loan was also unchanged on the news, with levels quoted at 78 bid, 81 offered, according to a trader.

For the quarter, the company reported a net loss of $340 million, or $1.22 per share, compared to a net loss of $69 million for the fourth quarter of 2007, or $0.28 per share. Excluding special charges, the company lost $214 million, or $0.77 per share, compared to $184 million, or $0.74 per share, last year.

Consolidated revenues for the quarter were $5.5 billion, a decrease of 3.1% from the same period in 2007.

"Our fourth-quarter and full-year 2008 results reflect the difficulties all airlines faced last year, but we believe our steps to reduce capacity, bolster liquidity, and improve revenue helped us better manage the challenges of record fuel prices and a weak economy," said Gerard Arpey, chairman and chief executive officer, in a news release.

"We believe these actions and our fleet renewal efforts have put us on sounder footing as we face continued economic uncertainty, slower travel demand, and fuel price volatility in 2009. We intend to continue managing our business - from capacity and fleet planning to balance sheet repair, fuel hedging and revenue initiatives - conservatively and with discipline. While significant hurdles remain, I am guardedly optimistic we can regain momentum in 2009," Arpey added in the release.

AMR debt reduced

AMR ended the fourth quarter with total debt of $15.1 billion, compared to $15.6 billion a year earlier. Total debt includes long-term debt, capital lease obligations, the principal amount of airport facility tax-exempt bonds, and the present value of aircraft operating lease obligations.

The Fort Worth, Texas-based scheduled passenger airline's net debt at the end of the quarter was $12 billion, compared to $11 billion last year. Net debt includes total debt less unrestricted cash and short-term investments.

At the end of the quarter, the company had $3.6 billion in cash and short-term investments, including a restricted balance of $459 million, compared to a balance of $5 billion in cash and short-term investments, including a restricted balance of $428 million, at the end of last year.

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