Ultimate Electronics receives final approval for $118.5 million DIP

By Ellen Chang

Houston, Feb. 16 - Ultimate Electronics received final approval of its $118.5 million debtor-in-possession financing from the U.S. Bankruptcy Court for the District of Delaware.

Wells Fargo Retail Finance LLC has agreed to provide a $113 million debtor-in-possession facility. Mark Wattles, an investor in Ultimate who will become its new chairman, has agreed to provide $5.6 million more.

The DIP will include a $100 million revolver, a $13 million tranche B term loan and Wattles's $5.6 million tranche C loan.

The facility will mature in 18 months or sooner if the company's reorganization or sale occurs. Interest on the revolver is Libor plus 200 basis points. Interest on the tranche B loan is Prime plus 600 basis points and interest rate on the Wattles loan is 20% payable in kind.

The revolver has a commitment closing fee of $375,000 and $200,000 for the tranche B loan. The closing fee for the tranche C loan is 150 basis points. Wells Fargo gets a $375,000 arrangement fee and a 25 basis point unused line fee for the revolver.

Ultimate Electronics also announced that its sales for the quarter ended Jan. 31 were $195.9 million, a decrease of 19.4% from $243.2 million for the same period in the previous year. Comparable store sales were down 19% for the quarter. The company had previously reported comparable store sales for the month of November as down 6% and December as down 18%.

Ultimate also said it made changes in its management, which included the departure of David Workman, chief executive officer and president, Neal Bobrick, senior vice president of sales and Gerry Demple, senior vice president of services.

The board of directors has appointed Wattles, the company's chairman of the board and the founder of Hollywood Entertainment Corp., to be the new CEO. Seven people who have previous experience working with Wattles will be joining the company's management team.

The additions include the following:

* Bill Besselman, who will be vice president of strategic planning and analysis, and recently was the vice president of strategic planning and analysis at Hollywood Video.

* Lon Weingart, who will be a consultant for approximately six months overseeing the operations of the business, and was the senior vice president of operations at Hollywood Video.

* Jim Marcum, a member of the board of directors, who has been asked by the board to take an active role in the company's financial operations and restructuring strategy. Marcum was CFO of Hollywood Video.

Ultimate said it does not know when the company will emerge from Chapter 11 or file a plan of reorganization.

Ultimate said that based upon testimony given at the DIP financing hearing on Monday by FTI Consulting, it appears unlikely that the outcome of the company's reorganization will result in any value for stock holders.

Ultimate, a Thornton, Colo.-based consumer electronic retailer, filed for Chapter 11 on Jan. 11. Its case number is 05-10104.

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