KB Home to redeem 9 5/8% '06 notes with bond sale proceeds

KB Home (Ba3/BB-) said on Friday (Jan. 17) that it will redeem in full its $125 million principal amount of 9 5/8% senior subordinated notes due 2006.

KB, a Los Angeles-based homebuilder, said the notes would be redeemed on Feb. 16 at a redemption price equal to 103.2125% of the principal amount of the notes (i.e. $1,032.125 per $1,000 principal amount), together with accrued and unpaid interest up to the date of redemption.

KB will fund the redemption with a portion of the proceeds from its sale of $250 million of new debt. High yield syndicate sources said Friday that the company had sold $250 million 7¾% senior subordinated notes due 2010 via lead manager UBS Warburg LLC, with Banc One Capital Markets, Inc. and Credit Lyonnais Securities (USA) Inc. as co-managers. The remainder of the net proceeds will be used for general corporate purposes.

The paying agent for the redemption of the 9 5/8% notes is SunTrust Bank. The company said that all registered holders of the notes would receive a notice of redemption that includes details on submitting their notes for payment.

Remington Arms to refinance 9½% '03 notes with bond sale proceeds

Remington Arms Co. Inc. (B2/B-) was heard by high-yield syndicate sources to have sold an upsized $200 million issue of new 10 ½% senior notes due 2011 Friday (Jan. 17) via bookrunning manager Credit Suisse First Boston, with co-managers Goldman Sachs & Co. and Wachovia Securities, Inc. Proceeds of the bond sale were slated to be used to refinance the company's existing 9½% senior subordinated notes due 2003, replace the company's existing credit facility with a new asset-backed facility, and repurchase a portion of its outstanding shares.

AS PREVIOUSLY ANNOUNCED: Remington Arms, a Madison, N.C.-based gunmaker wholly owned by RACI Holding, Inc., which in turn is 87% owned by Clayton, Dubilier & Rice, Inc., announced plans for its recapitalization on Jan. 7. It said the transaction would include a $30 million equity investment in RACI from a fund managed by Bruckmann, Rosser, Sherrill & Co. LLC, the refinancing by Remington of approximately $100 million of debt and the issuance by Remington of an expected $175 million in unsecured, interest-bearing senior notes.

The plan envisions Clayton Dubilier's CD&R Fund IV, which actually owns RACI, and other current shareholders, including Remington's management, retaining a significant percentage of RACI's common stock and receiving a combination of cash and senior notes issued by RACI. Specific terms were not disclosed.

Hollywood Entertainment redeems most 10 5/8% '04 notes, calls the rest

Hollywood Entertainment Corp. (Caa1/B-) said on Friday (Jan. 17) that it had completed the previously announced redemption of $203.9 million of its outstanding 10 5/8% senior subordinated notes due 2004 (out of the $250 million total).

The company also said that it had successfully completed the closing of its previously announced new senior secured credit facilities, with a portion of the proceeds to be used to redeem the remaining $46.1 million of the 10 5/8% notes still outstanding. Hollywood said that notice of redemption of those notes has been delivered to the trustee. The company expects to complete the redemption on Feb 18.

AS PREVIOUSLY ANNOUNCED: Hollywood Entertainment, a Portland, Ore.-based video rental store chain operator (No. 2 in the U.S. behind Blockbuster) was heard by syndicate sources on April 18 to be readying an off-the-shelf placement of $275 million of eight-year senior subordinated notes, with the proceeds slated to be used to redeem the $250 million of outstanding 10 5/8% notes. Earlier, it had filed a registration statement with the Securities Exchange Commission covering the issuance of up to $300 million of non-convertible debt securities, which became effective on Feb. 14.

On April 30, Hollywood said that it had postponed the planned issuance of the new notes, saying that although the response from prospective institutional investors in the new issue over the previous week had indicated that it could have completed the issuance of the new notes at a lower interest rate than the existing 10 5/8% notes, it felt that the lower interest rate would not be enough to compensate for the then-current call premium on the outstanding notes of 105.313% [of par value] and expenses, which Hollywood would have had to pay to redeem the existing notes. Hollywood pointed out that it was "under no pressure" to refinance the 10 5/8% notes in the near term, so it therefore decided to postpone the financing transaction "until such time as it believes it can accomplish its objectives at a lower net cost when considering the reduced interest of the new notes together with the call premium and expenses on the existing notes." Hollywood noted that the call premium on the 10 5/8% notes would be reduced from 105.313% to 102.656% on August 15, and would then remain there until August 15, 2003, at which time the notes would be redeemable at par.

On Dec. 4, Hollywood said that it would sell $200 million new senior subordinated notes due 2011 in an off-the-shelf offering, with substantially all of the net proceeds of the offering to be used to redeem a portion of its 10 5/8% notes.

On Dec. 5, Hollywood said that it had received a fully underwritten commitment from UBS Warburg LLC for a new senior credit facility consisting of a $200 million term loan and a $50 million revolving credit facility, each maturing in 2008. It said that the proceeds of the credit facility, along with the $200 million of planned new senior subordinated notes due 2011, which the company announced on Dec. 4, would ill be used to redeem the balance of the company's existing 10 5/8% notes, repay amounts outstanding under Hollywood's existing credit facilities, and would be used as well as for general corporate purposes.

On Dec. 13, Hollywood was heard by high yield market syndicate sources to have successfully sold an upsized $225 million issue of new 9 5/8% senior subordinated notes due 2011 via underwriters UBS Warburg LLC and Bear, Stearns & Co. Inc. The proceeds of the deal were slated to be used to redeem a portion of the 10 5/8% notes.

On Dec. 18, Hollywood announced the completion of the Dec. 13 note sale, and said that notice of redemption of $203.9 million of the 10 5/8% notes, or 81.6% of the outstanding amount, had been delivered to the notes' trustee and the funds required to redeem that amount, including the required call premium and accrued interest on the notes, had been deposited with the trustee to complete the redemption on Friday (Jan. 17).

Hollywood also said at that time that it would use a portion of the proceeds from its previously announced new senior credit facility to redeem the balance of the 10 5/8% notes still outstanding.

XM Satellite Radio gets additional funding, investor will tender 14% '10 notes

XM Satellite Radio Holdings Inc. said on Friday (Jan. 17) it had increased its financing commitments to $475 million (from the originally announced $450 million) with an additional $25 million commitment from investors spearheaded by Everest Capital Ltd. which has committed $15 million of the additional $25 million investment commitment. Everest also holds an investment position in XM's outstanding 14% senior secured notes due 2010 and has indicated its intent to participate in XM's previously announced offer to exchange new debt, cash and equity warrants for the outstanding notes.

Everest and the other additional investors will invest in XM's proposed 10% senior secured convertible discount notes due 2009.

Bank of New York is the depositary for the exchange offer. D.F. King Inc. is the information agent.

AS PREVIOUSLY ANNOUNCED, XM Satellite Radio, a Washington D.C.-based satellite radio broadcaster, said on Dec. 23, 2002, that it had agreed to enter into financing transactions totaling $450 million aimed at improving its liquidity. These would include a $200 million equity investment by a group on investors and $250 million of payment arrangements and credit facilities with General Motors. XM also said at that time that it planned to exchange new notes, cash and warrants for up to 90% of the existing 14% notes, but gave no further details of the proposed exchange offer at that time.

On Dec. 24, XM formally announced that it was beginning the previously announced exchange offer and consent solicitation under which the company would seek to exchange a package of new notes, cash and common stock warrants for at least 90% of its $325 million of outstanding 14% senior secured notes due March 15, 2010.

The company said the exchange offer would expire at 12 midnight ET on Jan. 23, subject to possible extension.

XM said it was offering up to $474.2 million (aggregate principal amount; $325 million accreted value) of its new 14% senior secured discount notes due Dec. 31, 2009, plus up to $22.75 million in cash and warrants to purchase up to 27.625 million shares of XM's Class A common stock at $3.18 per share.

On an individual basis, the consideration breaks down to a package consisting of $1,459 principal amount at maturity ($1,000 accreted value as of March 15, 2003) of XM's new 14% senior secured discount notes due Dec. 31, 2009, plus $70 in cash, and a warrant to purchase 85 shares of XM's Class A common stock at $3.18 per share, per $1,000 principal amount of existing notes tendered.

The company said the new notes would accrete interest until Dec. 31, 2005, after which time XM would make semi-annual cash interest payments beginning on June 30, 2006. The new notes would be secured by substantially all of the company's assets (excluding real property), in contrast to the security for the existing notes, which is limited to the capital stock of XM's FCC license subsidiary.

XM also said that it would solicit consents to amend the existing notes' indenture to, among other things, eliminate or substantially amend all of the restrictive covenants, other than covenants requiring payment of interest on the notes and principal, when due. It said that noteholders could not deliver consents without tendering existing notes in the exchange offer.

The company said that financing transactions concurrently announced with the exchange offer would be contingent upon, among other things, 90% participation by existing noteholders in the exchange offer, although XM reserved the right to waive that requirement with the consent of General Motors and 66 2/3% of the investors in the financing transaction (the minimum participation level was subsequently lowered and may be lowered yet again).

On Jan. 15, XM said that it had received the necessary consents from General Motors Corp. and from its investor group (which together are providing $450 million in new financial investment and support) to lowering the minimum participation threshold for its exchange offer for its 14% notes.

XM said that the investor group and GM had okayed lowering the minimum participation level to 75% from the originally announced 90%.

XM additionally said that it has amended the exchange offer to further reduce the minimum participation condition to 50.1%. However, as described above, the General Motors and investor group financing transactions are currently conditioned upon 75% participation by existing noteholders in the exchange offer, and XM said it will close on the exchange offer only if the minimum participation condition to the financing transactions is satisfied or waived, which would require agreement by GM and two-thirds of the investor group.

XM said that all other terms and conditions of the existing exchange offer and consent solicitation remain unaffected by the change.

Sun Media to redeem 9½% '07 notes with bond sale, credit facility proceeds

Sun Media Corp. (B2) said Thursday (Jan. 16) that it plans to privately offer approximately US$200 million aggregate principal amount of new senior notes. The offering is expected to be concurrent with, and is conditioned on, entering into new bank credit facilities of approximately C$385 million.

Sun Media, a Toronto-based diversified media company, said that the proceeds from the note sale and the new bank credit facilities will be used to redeem its two series of senior subordinated notes currently outstanding (Sun issued two tranches of $150 million and $90 million 9 ½% senior subordinated notes due 2007).

The combined proceeds will also be used to repay in full Sun Media's borrowings under its existing bank credit facilities and pay a dividend of approximately C$220 million to its parent Quebecor Media Inc. (of which C$150 million will ultimately be used to reduce Videotron Ltee's long-term debt).

Banco Santander-Chile completes exchange offer for 7% '07 notes

Banco Santander Chile said on Thursday (Jan.16) that its offer to exchange a package of new 7 3/8% subordinated notes due 2012 plus cash for any and all of its outstanding 7% subordinated notes due 2007 expired as scheduled at noon ET on Jan. 16 without further extension.

The company said that as of that deadline, a total of $221.961 million principal amount of the outstanding notes had been tendered and accepted by the bank, and were exchanged for a like amount of the new notes. The cash payment component of the offer ($45.13 per $1,000 principal amount of notes) will total approximately $10,017,100.

Banco Santander said that settlement of the exchange offer is expected to occur on Wednesday (Jan. 22). It added that $624,000 principal amount of the existing notes tendered and accepted have not yet been delivered to the bank. Any notes not delivered prior to settlement will not be exchanged for the new notes.

J.P, Morgan Securities was the lead dealer manager for the exchange offer, with Santander Central Hispano as co-dealer manager. D.F. King & Co. (bankers and brokers call collect at 212 269-5550, all others call toll-free at 800 949-2583) was the information agent.

AS PREVIOUSLY ANNOUNCED: Banco Santander, a Santiago, Chile-based financial institution, said in a preliminary prospectus filed with the Securities and Exchange Commission on Nov. 4 that it would offer to exchange a combination of $300 million new subordinated notes due 2012, plus cash for all of the existing $300 million of 7% subordinated notes due 2007, which had been issued by its corporate predecessor, Banco Santiago.

Banco Santander did not announce a coupon for the planned new notes; instead, it said the price and interest-rate determination for the new notes, based on the relevant benchmark treasury yields, would take place at 4 p.m. ET two business days before the scheduled expiration of the exchange offer. The bank also did not initially announce an expiration date for its offer. It said that it expected to deliver the new notes to the holders of the existing notes who participate in the exchange offer on the third business day following the expiration date.

Banco Santander said it would offer $1,000 principal amount of the new notes plus an as-yet unspecified sum of cash per $1,000 principal amount of the old notes. It said it was undertaking the exchange offer extend the maturity of the old notes from 2007 to 2012, thus allowing it to extend the time that the subordinated debt represented by the old notes will qualify under Chilean banking regulations as part of the company's required regulatory capital.

The company said that the exchange offer would not be conditioned upon a minimum number of old notes being tendered.

On Jan. 7, Banco Santander said that it had extended the exchange offer from 12 noon ET on Tuesday (Jan. 14) to noon ET on Thursday (Jan. 16), subject to possible further extension. All other terms of the exchange offer as originally announced would remain in effect.

Santander said that the extension of the expiration deadline would change the date on which the interest rate and cash price for the notes would be set to, tentatively, Monday (Jan. 13), the third business day prior to the expiration time (at which time these were in fact determined) , and would also change the day the exchange offer will settle to Jan. 23 (the third business day following the expiration time).

On Jan.13, Banco Santander said that it had set the pricing terms for its exchange offer. The company said that if it accepts any tendered 7% notes, it will pay to tendering holders a total consideration package (per $1,000 principal amount of the existing notes tendered and not subsequently withdrawn) consisting of $1,000 principal amount of new 7 3/8% subordinated notes due 2012 plus a cash payment of $45.13.

Banco Santander said it calculated the annual interest rate on the new notes and the amount of the cash payment in accordance with the methodology set forth in the official exchange offer prospectus dated Dec. 13.

Magnum Hunter redeeming some 10% '07 notes

Magnum Hunter Resources, Inc. has called for the redemption of $30 million of its $140 million of outstanding 10% senior notes due 2007.

Magnum Hunter, an Irving, Tex.-based energy exploration and production company, said in an announcement on Dec. 26 that the notes will be redeemed at 5 p.m. ET on Jan. 27, at a redemption of 105% of their face value (i.e. $1,050 per $1,000 principal amount), for a total expenditure by the company of $31.5 million. It will also pay the noteholders accrued and unpaid interest through the redemption date, totaling $475,000.

Magnum Hunter notified the notes' trustee, Wachovia Bank, NA that the $30 million of notes to be redeemed out of the $140 million outstanding total will be chosen by lot. It noted that approximately $10.5 million of the outstanding notes are already owned by an unrestricted subsidiary of Magnum Hunter.

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