EB Brands sets OID; UAL falls on numbers; Freescale rollercoasters; Tribune rises

By Sara Rosenberg

New York, April 22 - EB Brands came out with the original issue discount on its credit facility as the deal was launched with a bank meeting and price talk on Macrovision Corp.'s term loan B has been narrowed to the high end of original guidance as the commitment deadline is fast approaching.

In other news, UAL Corp.'s term loan traded lower on Tuesday after the company released first quarter financials, Freescale Semiconductor Holdings I Ltd. bounced around on earnings as well, and Tribune Co.'s term loan debt was stronger on talk that the company is close to selling Newsday.

EB Brands held a bank meeting on Tuesday to kick off syndication on its $82 million credit facility, and in connection with the launch, the original issue discount on the deal was announced, according to a market source.

Both the $30 million revolver and the $52 million term loan are being offered to investors at a discount of 981/2, the source said.

As was previously reported, price talk on the two tranches is Libor plus 450 basis points.

GE Capital and National City are the co-arrangers on the deal, with GE the left lead.

Proceeds will be used to help fund Cortec's acquisition of the company.

EB Brands is a Yonkers, N.Y., designer and marketer of high-margin, high-impulse, niche accessories designed for the fitness, gift and travel markets.

Macrovision focuses on wide end of talk

Macrovision's $500 million five-year term loan B (Ba1/BB-) is now just being talked at Libor plus 375 bps, as opposed to at Libor plus 350 bps to 375 bps, according to a market source, who said that the original issue discount on the tranche is still guided at 97.

The term loan B has a 3.5% Libor floor and 101 soft call protection for one year.

Market chatter is that syndication of the deal is going well.

Covenants include a maximum leverage ratio that opens at 4.5 times and gradually moves to 2.25 times at July 1, 2010, and a fixed-charge coverage ratio that opens at 1.3 times, moves to 1.4 times at April 1, 2010 and then to 1.5 times at Oct. 1, 2010.

JPMorgan and Merrill Lynch are the joint lead arrangers and joint bookrunners on the deal, with JPMorgan the administrative agent.

In the event the company's leverage ratio is greater than 2.5 to 1.0 and more than $50 million of aggregate principal amount of its 2.625% convertible senior notes due 2011 remain outstanding 180 days prior to their scheduled maturity, the term loan B will become due on that 180th day.

Proceeds will be used to help fund the acquisition of Gemstar-TV Guide International, Inc. in a cash and stock transaction valued at $2.8 billion.

Other financing for the acquisition will come from $150 million of senior unsecured notes, which are backed by a bridge loan commitment, and by about $965 million in cash and cash equivalents.

Senior secured leverage is 2.5 times and total leverage is 4.3 times.

Commitments towards the credit facility are due on Wednesday and closing is targeted for May 2.

Under the acquisition agreement, each share of Gemstar-TV Guide will be converted into the right to receive, at the election of each individual stockholder and subject to proration, $6.35 in cash or 0.2548 of a share of common stock in a new holding company that will own both Gemstar-TV Guide and Macrovision.

Upon completion of the transaction, Macrovision stockholders will own about 53% of the combined company, and Gemstar-TV Guide stockholders will own about 47%.

A special meeting of Macrovision stockholders will be on April 29 regarding the acquisition.

At first, Macrovision planned on getting $800 million of debt for the Gemstar-TV Guide purchase, comprised of a $650 million term loan B and a $150 million bridge loan, but the amount of funds needed was reduced using proceeds from the recently completed roughly $200 million sale of its software business unit to Thoma Cressey Bravo.

Macrovision is a Santa Clara, Calif.-based provider of services that enable businesses to protect, enhance and distribute their digital goods to consumers across multiple channels. Gemstar-TV Guide is a Los Angeles-based media, entertainment and technology company.

UAL softens with earnings

Moving to the secondary, UAL's term loan lost some ground during the trading session as investors reacted to the company's first-quarter financial results, according to a trader.

The term loan was quoted at 85 bid, 86 offered, down from Monday's levels of 85¾ bid, 86¾ offered, the trader said.

For the quarter, UAL reported a pre-tax loss of $542 million, $305 million higher than the first quarter of 2007, operating loss was $441 million, versus a loss of $92 million in the year ago period, and net loss was $537 million, $385 million higher than the first quarter of 2007 when the company recognized an $84 million tax credit.

Basic and diluted loss per share was $4.45, compared to a loss of $1.32 in the same period last year.

The company said that it net, pre-tax and operating results were all significantly lower year over year primarily due to a $618 million increase in consolidated fuel expense.

"The path to sustainable profitability requires us to fundamentally overhaul every facet of our business," said Glenn Tilton, chairman, president and chief executive officer, in a news release.

"Consolidation is only one of many changes needed together with capacity discipline, new revenue streams and elimination of assets that do not earn a sufficient return, particularly in this environment. The pressure of high energy prices and a weakening economy are a wake-up call that the pace of change must accelerate."

To respond to the challenges of higher fuel prices and a weakening economic environment, the company is taking a number of aggressive actions, including further shrinking 2008 mainline domestic capacity so that it's down about 9% year over year, permanently removing 30 narrowbody aircraft from its operations, expanding its 2008 cost reduction program to $400 million, and reducing capital expenditures by about $200 million.

"We continue to focus on cash flow and, with a strong cash balance and more than $3 billion in unencumbered assets, we are well positioned to manage the challenges ahead," said Jake Brace, executive vice president and chief financial officer, in the release. "We are responsibly reducing our fleet, eliminating less efficient aircraft that are not profitable in this fuel environment."

Looking at liquidity, during the first quarter, the company generated negative operating cash flow of $80 million. Free cash flow declined to a negative $181 million. Off balance sheet debt was reduced by $195 million, ending the quarter with an unrestricted cash and short-term investments balance of $2.9 billion and a restricted cash balance of $728 million.

UAL is a Chicago-based provider of air transportation services.

Freescale seesaws

Freescale Semiconductor's term loan was all over the place in trading, moving lower prior to earnings being announced and then moving higher after the numbers came out, according to a trader.

Post earnings, the term loan was quoted at 87 bid, 88 offered, up from 86¾ bid, 87¾ offered on Monday, the trader said. However, pre-earnings on Tuesday, the loan traded as low as 85¼ bid, 86¼ offered.

The trader explained that people were expecting the numbers to be bad, so the term loan traded lower early on in the session on investor jitters, but once the actual results were announced, they weren't that bad and the term loan rebounded.

For the first quarter, Freescale reported net sales of $1.41 billion, up from $1.36 in the first quarter of 2007, but down from $1.54 billion in the fourth quarter.

Operating losses, including non-cash purchase accounting expenses, were $152 million and net losses, including non-cash purchase accounting expenses, were $245 million.

Excluding the expenses, first-quarter operating earnings were $206 million and EBITDA was $351 million. This compares to operating earnings of $149 million and EBITDA of $300 million in the first quarter of 2007.

In addition, adjusted EBITDA for the quarter was $374 million, compared to $351 million in the same period last year, and adjusted EBITDA for the latest 12 months ending March 28 was $1.55 billion.

Freescale is an Austin, Texas-based designer and manufacturer of embedded semiconductors for the automotive, consumer, industrial, networking and wireless markets.

Tribune heads higher

Tribune's term loan debt rallied on Tuesday as news reports emerged claiming that the company has reached an agreement in principle to sell its Newsday asset, according to traders.

The company's term loan B was quoted at 71½ bid, 72½ offered and its term loan X was quoted at 94½ bid, 95½ offered, with both tranches up about two points from previous levels, traders said.

"Everyone expected this thing to be sold, but I guess it's one thing when it actually happens," one trader remarked.

The term loan debt reacted favorably to the asset sale rumblings because investors are hoping for a paydown, traders added.

According to the buzz, Tribune will be selling a majority interest in its Newsday newspaper to News Corp. for about $580 million.

No official word from the companies regarding the transaction came out prior to press time.

Tribune is a Chicago-based media company.

LCDX dips

LCDX 10 was weaker during market hours, possibly following stocks lowering and/or possibly responding to various other technical incentives, a trader told Prospect News.

The index was quoted at 98.85 bid, 98.95 offered, down from 99.10 bid, 99.20 offered, the trader said.

According to the trader, stocks being down could have affected the index, but there could also have been a bit of profit taking and there were also some guys continuing to roll shorts, "which we didn't see when this thing first started trading."

On Tuesday, Nasdaq was down 31.10 points, or 1.29%, Dow Jones Industrial Average was down 104.79 points, or 0.82%, S&P 500 was down 12.23 points, or 0.88%, and NYSE was down 84.32 points, or 0.91%.

Meanwhile, the loan cash market continued to feel strong with levels in general maybe up an eighth, the trader added.

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