Carmike sweetens delayed-draw loan ticking fee; Delphi catches big audience on sector issues

By Sara Rosenberg

New York, May 16 - Carmike Cinemas Inc. revised the ticking fee on its delayed-draw term loan as investors needed a little extra push to fill out the book on a tranche that has, what some consider, a lengthy two-year draw time limit.

Meanwhile, being that the auto sector and its slew of problems has been of such primary focus lately, many eyes are turned to Delphi Corp.'s newly launched credit facility as some investors consider committing to the deal and others are curious about its progress in general.

Carmike Cinemas sweetened the ticking fee on its $185 million delayed-draw term loan to 75 basis points for six months, 100 basis points for the next 12 months and 150 basis points for the last six months, according to a market source. Originally the tranche was launched with a 50 basis point ticking fee for the full two-year delayed-draw period.

Market participants had been anticipating this move for a little while now as the tranche, although attracting some commitments, was just not getting enough interest to fully circle the deal, sources previously told Prospect News.

Carmike Cinemas' delayed-draw tranche, which has a final maturity of seven years, is still talked at Libor plus 250 basis points. Proceeds are only available for future acquisitions.

The company's $455 million credit facility (B1/B) also contains a $170 million seven-year term loan, which is said to be in good shape in terms of syndication, talked at Libor plus 250 basis points and a $100 million five-year revolver talked at Libor plus 225 basis points.

Both term loans are being offered to investors at par. Revolver commitments of $15 million or more get an upfront fee of 100 basis points, and revolver commitments of less than $15 million get an upfront fee of 75 basis points.

Bear Stearns is the lead bank on the deal. Wells Fargo Foothill signed on early as documentation agent committing $50 million to the deal.

Proceeds from the revolver and term loan will be used to refinance existing bank debt and help fund the previously announced acquisition of George Kerasotes Corp. for $66 million.

Pro forma for the George Kerasotes purchase, senior leverage will be 2.1x, total leverage will be 31/2x and EBITDA to interest coverage will be around 4.4x.

Columbus, Ga.-based Carmike is the second largest theater operator in the United States in terms of number of theaters, with operations in 36 states.

Delphi in spotlight

Delphi's newly launched $2.75 billion credit facility definitely has a large audience as the auto space in general has been a big focus since a bunch of troubling news has recently hit the airwaves, including Ford Motor Co. and General Motors Corp. being downgraded to junk status and Collins & Aikman Corp.'s rumored to be close to a Chapter 11 filing because of liquidity issues.

The Monday morning bank meeting for Delphi's proposed credit facility was described as "extensive" with the room said to be very full, according to a market source.

Delphi held the meeting to launch an amended and upsized $2 billion revolver with grid-based pricing and an initial interest rate talked at Libor plus 450 basis points, and a $750 million term loan talked at Libor plus 550 basis points that is being offered at an original issue discount of 991/2.

There has been some early indication from lenders in terms of commitments but specific details are being kept private at this time, the source added.

JPMorgan and Citigroup are joint lead arrangers on the credit facility, with JPMorgan the left lead.

The company's existing revolver that is being amended is currently sized at $1.5 billion. Delphi has said that it is seeking the new term loan for liquidity reasons.

These new facilities, which are expected to close in early June, will refinance the company's existing credit facility that totals $3 billion.

In addition to the new deal, Delphi had some other goings on Monday, as the company announced in an 8-K filed with the Securities and Exchange Commission that some lower and middle level executives in its finance staff will be resigning in connection with an almost completed review of certain transactions under investigation and a restatement of financials. The review began in 2004.

Delphi's audit committee initiated an internal investigation in response to an SEC inquiry regarding the accounting for certain transactions with suppliers of information technology services in 2001. The transactions under the internal review included rebates, credits or other lump sum payments received from suppliers or paid to customers. In the course of the investigation, the audit committee also examined the company's accounting for transactions involving the disposition of indirect material and inventory and certain other transactions.

The company is also dealing with class-action lawsuits that were filed after it announced the need to restate previously issued financial statements. The lawsuits fall into three categories - one group has been brought under the Employee Retirement Income Security Act of 1974 on behalf of participants in certain of the company's and its subsidiaries' defined contribution employee benefit pension plans who invested in the Delphi Corp. Common Stock Fund, the second group alleges that Delphi and certain of its current and former directors and officers made materially false and misleading statements in violation of federal securities laws and the third group of lawsuits pertains to a shareholder derivative case and a demand.

"Due to the preliminary nature of these cases, the company is not able to predict with certainty the outcome of this litigation or its potential exposure related thereto. Although Delphi believes that any loss that the company would suffer under such lawsuits should, after payment of an applicable deductible, be covered by its director and officer insurance policy, it cannot assure you that the impact of any loss not covered by insurance or applicable reserves would not be material," the 8-K said.

Delphi is a Troy, Mich., supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology to vehicle manufacturers.

Collins & Aikman softer

Collins & Aikman Corp.'s bank debt felt slightly weaker on Monday with levels of 88½ bid, 90 offered seen closing out the day as compared to levels of 89 bid, 91 offered on Friday, according to a trader.

The bank debt began its downward spiral last Thursday from previous levels of 96 bid, 98 offered after the company revealed that it is facing liquidity challenges, the resignation of its chief executive officer, as well as the need to seek loan waivers. And, downgrades by Standard & Poor's on Thursday and by Moody's Investors Service on Friday didn't help the situation either.

On Thursday, the company said that it would be seeking a waiver under its credit facility of the consolidated leverage ratio covenant because it anticipates being unable to comply with this requirement based on estimated first-quarter 2005 performance.

Collins & Aikman went on to say that it continues to face significant near-term liquidity challenges. Its credit facility is fully drawn so it must rely fully on timely access to its receivables facility, foreign receivables factoring arrangement and fast pay financing programs to fund ongoing operations.

The company said it is looking at ways to improve results and enhance liquidity. It is transitioning the General Motors fast pay program administered by GECC to one administered by GMAC that will provide a commitment to October. Also, it is continuing to work with its largest customers and suppliers to enhance commercial terms to improve operating results, cost recovery and liquidity.

As of May 11, Collins & Aikman had cash and availability under its financing arrangements of $13.4 million.

Last week, S&P lowered its corporate credit rating on Collins & Aikman to CCC- from CCC+ and downgraded Collins & Aikman Products Co.'s senior secured debt to CCC- from CCC+. Also, Moody's downgraded Collins & Aikman Products' senior secured credit facility to Caa2 from B3.

Collins & Aikman is a Troy, Mich., designer, engineer and manufacturer of automotive interior components.

Calpine weaker

In other secondary doings, Calpine Corp.'s second-lien term loan was also softer on Monday with levels closing out the session down about two to three points at 69 bid, 72 offered on no specific news, according to a trader.

However, Calpine's second-lien bank debt had a tumultuous time last week as the company issued a liquidity warning in its 10-Q filing and announced that it would be getting additional bank debt in the form of a new term loan for its Metcalf project.

Last Wednesday, Calpine said in a 10-Q filing that it faces several challenges in satisfying debt obligations and funding anticipated capital expenditures and working capital requirements over the next 12 months being that these cash requirements are expected to exceed unrestricted cash on hand and cash from operations.

The San Jose, Calif.-based energy company does have a liquidity-enhancing program in place, but this program depends heavily on possible sales or monetizations of certain assets - a prospect that is not entirely favorable to lenders.

Charter stronger

On the flip side, Charter Communications Inc.'s bank debt rallied by about half a point in trading Monday with the term loan B quoted at 97½ bid, 98½ offered, also on no specific news, according to a trader.

"Market [in general] sold off about a quarter of a point in the morning as hedge funds were selling and then when the hedge funds stopped selling, the market came back up and ended with a better tone," the trader said.

"I think Charter's bonds were up a little too," the trader added.

Charter is a St. Louis-based cable company.

24 Hour Fitness may see rollover

As for other primary talk, 24 Hour Fitness Worldwide Inc.'s proposed $700 million senior secured credit facility has the potential to see a lot of rollover commitments as the new deal is essentially only adding about $200 million of incremental bank debt when compared to the existing credit facility, according to a market source.

"It's certainly getting lots of looks. The existing term loan is $400 million and this is $600 million. And, the revolver is about the same size so there's a big theoretical roll component," the source said.

The new credit facility is now definitively scheduled to launch via a bank meeting on Tuesday (previously the Tuesday launch was labeled as tentative) via joint leads JPMorgan and Merrill Lynch, with JPMorgan on the left.

24 Hour Fitness' facility consists of a $600 million seven-year term loan B and a $100 million six-year revolver, with price talk on both tranches expected to emerge at the bank meeting.

The syndicate on the facility already held a pre-launch meeting last Tuesday to give a select group of potential investors an early look at the deal. The company did not attend last week's meeting but will be attending the retail meeting this week.

Proceeds from the credit facility will be used to help fund the leveraged buyout of 24 Hour Fitness by Forstmann Little & Co.

In addition to the new loan, Forstmann plans to finance the approximately $1.6 billion transaction with more than $900 million from its equity and subordinated debt funds.

The transaction, which is expected to close in June, is subject to regulatory approval. It is not subject to financing.

24 Hour Fitness is a San Ramon, Calif., fitness center company.

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