Time Warner Telecom, NextMedia break; Blockbuster up; QTC tweaks loan; Pre-Paid Legal talk surfaces

By Sara Rosenberg

New York, Nov. 8 - Time Warner Telecom Inc. and NextMedia Operating Inc. freed for trading on Tuesday, and Blockbuster Inc.'s term loan traded up during the session as the company announced plans to issue new debt as was required under its recently completed amendment.

In primary happenings, QTC Management Inc. moved some funds out of its second-lien term loan and into its first-lien term loan, while at the same time increasing pricing on both term loan tranches. And, Pre-Paid Legal Services Inc. came out with price talk on its credit facility as the deal launched via a bank meeting on Tuesday.

Time Warner Telecom's $200 million five-year senior secured term loan B (B1/B) hit the secondary on Tuesday, with the bank debt trading in the 101 3/8 bid, 101 5/8 offered context throughout the day and closing the session at 101½ bid, 101 5/8 offered, according to a trader.

The term loan, which closed last week, is priced with an interest rate of Libor plus 250 basis points.

Wachovia, Morgan Stanley and Lehman Brothers led the deal, with Wachovia on the left.

Proceeds from the new term loan will be available for capital expenditures and to help fund the redemption of the company's 9¾% senior notes due 2008.

Time Warner Telecom is a Littleton, Colo., provider of managed network services.

NextMedia breaks

NextMedia's credit facility freed for trading on Tuesday, with the $260 million first-lien term loan B (B1/B) quoted at par 5/8 bid, par 7/8 offered and the $80 million second-lien term loan (B3/CCC+) quoted at par ¾ bid, 101 offered, according to a trader.

The first-lien term loan is priced with an interest rate of Libor plus 200 basis points. During syndication, the tranche was upsized from $240 million and pricing was reverse flexed from Libor plus 225 basis points.

The second-lien term loan is priced with an interest rate of Libor plus 450 basis points. During syndication, the tranche was downsized from $100 million and pricing was flexed higher from Libor plus 400 basis points.

NextMedia's $390 million credit facility also contains a $50 million revolver (B1/B).

Goldman Sachs & Co. and GE Capital Corp. are the lead banks on the deal, with Goldman the left lead.

Proceeds from the facility will be used to fund a tender offer for the company's $200 million of 10¾% senior subordinated notes due 2011, to refinance a revolver and to fund the purchase of undisclosed assets.

NextMedia is a Denver-based diversified out-of-home media company.

Blockbuster gains ground

Blockbuster's term loan B headed higher in trading as the company announced plans to issue a minimum of $100 million in a cumulative convertible perpetual preferred stock offering - a condition to the effectiveness of the company's Nov. 4 loan amendment.

The term loan B was quoted at 98¼ bid, 98½ offered, according to a buyside source, up from previous levels that were right around 97 7/8 bid, 98 offered.

Last Friday, Blockbuster amended its credit facility to get more leeway under financial covenants through 2007 and in return, pricing on the company's bank debt was increased by 50 basis points.

The interest rate on the term loan B was raised to Libor plus 400 basis points and the interest rate on the term loan A was raised to Libor plus 375 basis points, the buyside source said.

Although this amendment was approved, the company must still meet its requirement of raising a minimum of $100 million through a common stock or convertible preferred stock offering by Nov. 20 - an event that seems likely to occur as the company launched the new convertible Rule 144A offering on Tuesday.

A portion of the proceeds from the offering will be used to repay some of the company's outstanding revolver borrowings.

Remaining proceeds from the offering will be used for general corporate purposes.

Blockbuster also announced third-quarter financials on Tuesday that showed a decline in revenue and gross profit and a larger net loss when compared to last year's third-quarter numbers.

For the quarter, total revenue decreased 1.7% to $1.39 billion from $1.41 billion for the third quarter of 2004. Gross profit decreased 8.3% to $790.5 million from $861.8 million for the third quarter of 2004. Net loss was $491.4 million, or $2.67 per share. Excluding non-cash charges, and share-based compensation, adjusted net loss totaled $24.6 million, or $0.13 per share, for the quarter compared with adjusted net income of $5.2 million, or $0.03 per diluted share, for the third quarter of 2004.

In the company's 10-Q, there was mention of a potential bankruptcy filing if the equity offering is not completed, rendering the credit facility amendment ineffective, causing cross defaults under other debt arrangements and creating a situation where debt payments are accelerated.

However, even in a worse-case-scenario, bank debt players are well covered and so assumingly they should get repaid in full - making this bankruptcy warning a non-scary event for loan lenders, the buyside source explained.

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

Calpine lower

Calpine Corp.'s second-lien bank debt was down by about 1 or 2 points on the day, with levels quoted at 73 bid, 75 offered, according to a trader, who said that there was no particular news sparking the downturn.

On Tuesday morning, the company did announce that none of the noteholders of Calpine Construction Finance Co. LP's second-priority senior secured floating-rate notes due 2011 have elected to tender their notes under the purchase offer commenced on Oct. 6 in connection with the sale of its 550-megawatt Ontelaunee Energy Center.

The San Jose, Calif., power company was required to offer to purchase the notes with proceeds from the asset sale under the indenture.

There is $415 million of principal amount of the notes outstanding.

QTC shifts funds, ups spreads

QTC Management moved $10 million from its second-lien term loan into its first-lien term loan and then raised pricing on the first-lien term loan by 25 basis points and on the second-lien term loan by 50 basis points, according to a market source.

The seven-year first-lien term loan (B2/B) is now sized at $110 million, up from $100 million, and pricing was flexed up to Libor plus 275 basis points from original price talk at launch of Libor plus 250 basis points, the source said.

Meanwhile, the 71/2-year senior second-lien term loan is now sized at $45 million, down from $55 million, and pricing was flexed up to Libor plus 650 basis points from original price talk at launch of Libor plus 600 basis points, the source added.

QTC Management's $170 million credit facility also contains a $15 million six-year revolver (B2/B).

UBS and Bear Stearns are the lead banks on the deal that will be used to support Spectrum Equity Investors' acquisition of the company.

QTC is a Diamond Bar, Calif.-based outsourced provider of disability evaluations.

Pre-Paid Legal sets price talk

Pre-Paid Legal Services announced price talk of Libor plus 225 basis points on both tranches contained in its $160 million senior secured credit facility (B1/BB-) at its Tuesday bank meeting, according to a market source.

The facility is comprised of a $150 million seven-year term loan, which is being offered to investors at par, and a $10 million five-year revolver, which has a 50 basis point unused fee.

The Bank of Nova Scotia is the lead bank on the deal that will be used to refinance about $30 million in existing bank debt, fund further share repurchases, dividends and general working capital purposes.

As for the launch itself, the presentation was said to have gone very well, with management doing a nice job, the source added.

Pre-Paid Legal Services is an Ada, Okla., developer and marketer of legal service plans.

Rhodes downsizes again

Rhodes Homes cut the size of its credit facility by another $50 million through a reduction to the second-lien term loan, according to a market source.

The 51/2-year second-lien term loan (B1/B-) is now sized at $75 million, down from its most recent size of $125 million. At launch, the tranche was sized at $150 million. Pricing on the tranche is set at Libor plus 750 basis points after flexing up from Libor plus 600 basis points during syndication. Call protection on the second-lien term is, and has been since launch, 103 in year one, 102 in year two, 101 in year three and par thereafter.

The five-year first-lien term loan B (Ba3/B+) remained sized at $425 million, which is where it was reduced to earlier in the syndication process. Originally it was sized at $450 million. Pricing is set at Libor plus 325 basis points after flexing up during syndication from 275 basis points, and soft call protection was previously added of 102 in year one, 101 in year two and par thereafter.

Both the first- and the second-lien term loans are being offered to investors at an original issue discount of 99.5, which was also added at the start of this week, as opposed to par where they were originally being offered.

There have been some other changes as well to the credit agreement, such as speculative building of homes is limited to 5% of total value and acquisitions of un-entitled land not adjacent to entitled or developed land is capped at $25 million per year.

Also, the company will have to maintain a minimum of $25 million cash at all times and a $50 million interest reserve has been established (which would cover one year's interest expense).

Credit Suisse First Boston is the lead arranger on the now $500 million facility that will be used by the Las Vegas-based homebuilder to refinance existing debt, fund future development and land acquisition costs and fund an approximately $100 million dividend.

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