Hertz up with offerings; Warner Music levels disappear as lenders await repayment; LCDX rises

By Sara Rosenberg

New York, May 20 - Hertz Global Holdings Inc.'s strip of institutional bank debt headed higher on Wednesday followings news that the company would be repaying some debt in connection with common stock and convertible senior notes offerings.

In other happenings, Warner Music Group Corp.'s term loan was basically no longer being quoted in the secondary market after news surfaced that the loan will be fully repaid and terminated as a result of the company's upsized bond offering.

Also in trading, the LCDX 12 index was a little better, even though stocks were slightly lower, and the cash market in general had a stronger tone to it, especially in the morning, as some buyers seemed to step in.

Hertz trades stronger

Hertz's strip of term loan and letter-of-credit facility debt gained some ground following the company's announcement that it will sell common stock and convertibles, and use the proceeds from the offerings to repay some debt, according to a trader.

The Park Ridge, N.J.-based car rental brand's term loan and letter-of-credit facility strip was quoted at 89 bid, 91 offered, up from previous levels of 87 bid, 88 offered, the trader said.

Late Tuesday, Hertz said that it will offer about 40 million shares of its common stock in a public offering and that its existing stockholders, Clayton, Dubilier & Rice and the Carlyle Group, will purchase at least $150 million of common stock in a substantially concurrent transaction.

In addition, the company is offering about $250 million of convertible senior notes due June 1, 2014.

Hertz said that in addition to repaying consolidated debt, proceeds from the offerings will be used to increase its liquidity and for general corporate purposes.

Warner Music lenders holding positions

Warner Music's term loan is essentially no longer quoted in the secondary market now that investors are just holding on to their positions as they are awaiting full repayment at par, according to a trader.

The New York-based music content company's term loan was quoted at 98¾ bid, 99¾ offered first thing in the morning, but then traders stopped sending out runs once the repayment news emerged, the trader said.

In an 8-K filed with the Securities and Exchange Commission on Wednesday, Warner Music explained that the decision to terminate its entire existing credit facility, which includes a revolver as well, was a result of its bond offering being increased to $1.1 billion from $500 million.

The 9½% seven-year notes priced on Tuesday at 96.289 to yield 10¼% and the offering is expected to close on May 28.

When the bond deal was announced on Tuesday and investors were expecting a $500 million paydown, the term loan had traded up a little over two points to 98¾ bid, 99¼ offered from 96½ bid, 97½ offered.

Warner also using cash for paydown

Warner Music is funding the repayment of its entire senior secured credit facility with proceeds form the $1.1 billion bond deal and with about $335 million in existing cash, the 8-K said.

"It's good news. Everybody is happy with this," a bank loan source remarked regarding the company's decision to terminate the loan and repay investors at par.

The source added that with this decision, the company eliminated the upcoming term loan maturity that was a source of concern.

After giving effect to the refinancing, the company's interest expense for the 12 months ended March 31 would be about $180 million, as compared to actual interest expense of $148 million.

Warner Music no longer amending

Warner Music had been out to its credit facility lenders with an amendment proposal that would have extended the maturity date of the term loan to January 2014 from February 2011, and in return, pricing on the extended debt would have been increased with the addition of a Libor floor.

The amendment was also going to reduce the amount of revolving credit facility commitments to $150 million from $250 million and fix financial maintenance covenants at set levels.

In connection with the amendment, the company was going to voluntarily prepay $300 million of its term loan using cash on hand, which would have been in addition to any repayment made with the bond offering proceeds.

Now the company no longer needs to amend its facility since it has decided instead to take the whole deal out, the bank loan source added.

LCDX moves higher

The LCDX 12 index posted some gains during the trading session despite stocks coming in marginally on the day, according to a trader.

The index was quoted at 82.80 bid, 83.20 offered, up from 82.50 bid, 82.80 offered, the trader said.

As for equities, Nasdaq closed down 6.7 points, or 0.39%, Dow Jones Industrial Average closed down 52.81 points, or 0.62%, S&P 500 closed down 4.66 points, or 0.51%, and NYSE closed down 1.83 points, or 0.03%.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.