Rite Aid upsizes, firms call premiums; Ford heads higher; GM slides lower; Spectrum Brands rallies

By Sara Rosenberg

New York, Feb. 3 - Rite Aid Corp. increased the size of its second-lien accounts receivable securitization term loan as a result of the deal being oversubscribed and call protection provisions were finalized as well.

Over in the secondary market, Ford Motor Co.'s term loan gained some ground during Tuesday's session as the company drew down on its revolving credit facility, and despite poor January sales results, while General Motors Corp.'s term loan softened on its numbers.

In more trading news, Spectrum Brands Inc. traded up on its bankruptcy filing, Masonite International Inc.'s term loan was a little weaker on the day even though the company received an extension of its forbearance agreements, and LCDX 10 was a touch better.

Rite Aid ups loan size

Rite Aid upsized its second-lien accounts receivable securitization term loan due Sept. 14, 2010 to $225 million from $200 million being that the deal was nicely oversubscribed after a quiet marketing period, according to a market source.

The investor group for the deal, which never experienced a formal launch, includes high-yield mutual funds, loan accounts and distressed accounts.

As was announced at the end of last week, pricing on the term loan is Libor plus 1,200 basis points with a 3% Libor floor, and it was issued to investors at an original issue discount of 97.

The actual spread came out below original expectations that were based on an 8-K filed with the Securities and Exchange Commission.

In the filing the spread was outlined as Libor plus 1,400 bps. However, the original issue discount and the Libor floor basically made up for the lower spread.

Rite Aid sets call protection

Rite Aid also firmed up the call protection on its accounts receivable securitization term loan, the source remarked.

The loan is non-callable for six months, with a make-whole provision, and then it is callable at 101 for the following six months. Thereafter, it is callable at par, the source explained.

According to the previous 8-K filing, the original plan was for the loan to have 101 call protection against all optional and mandatory prepayments.

Citigroup is the lead arranger and bookrunner on the deal. Initially, the bank committed to provide $100 million of the loan, with the remaining $100 million to be syndicated on a best-efforts basis through the earlier of closing and Feb. 20.

Security for the loan is second-priority liens on eligible third-party pharmaceutical receivables securing an existing facility.

Proceeds will be used to provide funding for the acquisition of receivables and/or participation interests therein.

Rite Aid loan a result of downsized deal

On Jan. 22, Rite Aid amended its existing receivables financing agreement, which caused borrowing availability to be reduced by about $100 million, with an additional roughly $100 million step-down on Feb. 20.

The new second-lien accounts receivable securitization term loan is being obtained by the company to replace this loss of borrowing availability under the existing receivables deal.

The amendment to the existing receivables facility also extended the commitment for 364 days until Jan. 21, 2010.

Citi, JPMorgan and Wachovia are the investor agents on the existing deal.

Rite Aid is a Camp Hill, Pa.-based operator of a chain of retail drugstores.

Ford rises

Switching to trading happenings, Ford's term loan posted some gains during the session as the company completed its revolver draw, and even though January sales numbers were uninspiring, according to a trader.

The term loan was quoted at 37 bid, 37¾ offered, up from Monday's levels of 35 7/8 bid, 36 7/8 offered, the trader said.

"Maybe liquidity related to drawing down their revolver," the trader said in explanation of the bank debt's performance.

On Tuesday, Ford received $10.1 billion in funds that it borrowed under its available credit lines, the trader added.

According to the company, the draw was made as a result of the instability of the capital markets with the uncertain state of the global economy.

Ford sales drop by 40%

Also on Tuesday, Ford announced January results that included total sales of 93,506, down 40.2% from 156,391 in January 2008, total Ford, Lincoln and Mercury car sales of 28,707, down 35.1% from 44,259 last year, and total truck sales of 61,889, down 40.5% from 104,096.

"During the last four months, retail demand appears to have stabilized, and the strength of our new products is a key reason we're growing our share in these challenging market conditions," said Ken Czubay, vice president, sales and marketing, in a news release.

"We expect new, recent and future fiscal and monetary actions to help improve conditions in the second half of the year," Czubay added in the release.

Ford is a Dearborn, Mich.-based automotive company.

General Motors dips

Meanwhile, General Motors' term loan weakened in trading on Tuesday on the back of the release of its January results, which also weren't very good, according to a trader.

The term loan was quoted at 42½ bid, 44 offered, down from previous levels of 43½ bid, 45 offered, the trader said.

For the month of January, General Motors' total sales were 129,227, down 48.8% from 252,565 last year, total car sales were 43,943, down 57.9% from 104,374 last year, and total truck sales were 85,284, down 42.4% from 148,191 in January 2008.

"We're attacking this unprecedented market as aggressively as possible, while offering more vehicles than ever that provide great value and that Americans enjoy owning," said Mark LaNeve, vice president, GM North America vehicle sales, service and marketing, in a news release.

"Our retail market share is a bright spot, holding steady above 21% for the second month in a row. That's a full point above the trailing 12-month average. It's important to realize that we accomplished this retail performance as the overall market ran about 6 million vehicles behind where it was last January [on a seasonally-adjusted annual rate] and every manufacturer was deeply impacted," LaNeve added in the release.

General Motors is a Detroit-based automotive company.

Spectrum Brands gains a few points

Spectrum Brands' term loan jumped up by a couple of points on news that the company filed for Chapter 11, according to a trader.

The term loan was quoted at 66 bid, 68 offered, up from previous levels of 61 bid, 63 offered, the trader said.

Under the company's pre-negotiated plan of reorganization, existing bond obligations in a principal amount of $1.05 billion would be canceled and noteholders would be issued new bonds in an aggregate principal amount equal to 20% of the total unpaid principal and interest on existing bonds together with shares of new common stock.

The claims of existing secured and other general unsecured creditors would be reinstated or unimpaired, and, therefore, payment of the claims would be received on existing terms either in the ordinary course or upon consummation of the plan.

Existing common stock will be extinguished under the plan, and no distributions will be made to holders of the current equity.

Spectrum Brands plans $235 million DIP

In connection with the bankruptcy filing, Spectrum Brands has received commitments for $235 million in debtor-in-possession financing from certain of its existing asset-backed facility lenders, with a participating interest from certain existing noteholders.

As a result of the reorganization, the company expects to reduce its balance sheet debt by about $840 million, eliminate about $95 million in annual cash interest payments for at least each of the next two years, and free up additional cash.

"We are pleased to have the support of noteholders representing, in the aggregate, about 70% of the face value of the bonds outstanding to move forward with a restructuring that will put our company in a stronger financial position for the future," said Kent Hussey, chief executive officer, in a news release.

"Our businesses have attractive growth prospects that have been encumbered by the level of debt the parent company is carrying. After careful consideration, we decided that the approach announced today would be the most effective and expedient path for us to develop a more appropriate capital structure to support our long-term business objectives. We estimate that when this refinancing has been completed, the company will generate in excess of $100 million in annual free cash flow," Hussey added in the release.

Spectrum Brands is an Atlanta-based consumer products company.

Masonite trades down

Masonite's term loan headed lower during market hours, with sources unable to explain the downward move since the company did come out with a bit of positive news.

The term loan was quoted at 43 bid, 45 offered, down from previous levels of 43½ bid, 46½ offered, the trader said.

On Tuesday, Masonite announced that it extended the forbearance agreement with its bank lenders to Feb. 9 from Jan. 30. The agreement covers non-compliance with EBITDA metrics as of June 30, 2008 and Sept. 30.

In addition, the forbearance agreement with senior subordinated noteholders was extended to Feb. 13 from Jan. 31. This agreement covers the company's failure to make an Oct. 15 interest payment on the notes.

Masonite is a Mississauga, Ont.-based manufacturer of residential and commercial doors.

LCDX inches up

Also in trading, LCDX 10 was slightly stronger on Tuesday in sympathy with stocks, according to a trader.

The index was quoted at 76.65 bid, 76.90 offered, up from Monday's levels of around 76.35 bid, 76.55 offered, the trader said.

Nasdaq closed up 21.87 points, or 1.46%, NYSE closed up 101.55 points, or 1.97%, S&P 500 closed up 13.07 points, or 1.58%, and Dow Jones Industrial Average closed up 141.53 points, or 1.78%.

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