Chrysler Auto falls on leasing exit; Tribune, Alltel inch up; Weather Channel, FTD ready allocations

By Sara Rosenberg

New York, July 25 - Chrysler Corp. LLC (Chrysler Auto) saw its term loan plunge lower during trading hours after news surfaced that the company would stop leasing vehicles, Tribune Co.'s term loan B was stronger on the heels of reports that the possible sale of the Chicago Cubs is moving in the right direction, and Alltel Corp.'s term loan debt traded up as well.

Also in trading, during a pretty light summer Friday trading session, UAL Corp., Northwest Airlines Corp. and AMR Corp. all held firm despite downgrades from Standard & Poor's, and Federal-Mogul Corp.'s term loans were steady after the release of positive earnings results.

In other news, Weather Channel and FTD Group Inc. are both targeting to allocate their credit facilities during the week of July 28.

Chrysler Auto's term loan plummeted on Friday and was quoted extremely wide after reports came out that the company was exiting the vehicle leasing business, according to a trader.

"They don't have the funding to do leases. Going to focus more on loans for people buying cars," the trader said.

Following the news, the company's term loan was quoted at 37 bid, 47 offered, down from Thursday's levels of 47 bid, 49 offered, the trader added.

Chrysler Auto is a producer and seller of Chrysler, Dodge and Jeep vehicles.

Meanwhile, Chrysler Financial Services LLC, a provider of financial services for vehicles in the NAFTA region, saw its first-lien term loan quoted at 82 bid, 83 offered and its second-lien term loan quoted at 61 bid, 63 offered.

According to one trader, the first-lien term loan was up about a point on the day and the second-lien term loan was up about two points on the day. However, a second trader said that those levels on the first- and second-lien loans were unchanged from Thursday.

Tribune inches up

Tribune's term loan B was better on Friday as investors may still have been reacting to news that the company is moving closer to announcing the sale of the Chicago Cubs, according to a trader.

The term loan B was quoted at 71¼ bid, 72 offered, up from 71 bid, 71½ offered on Thursday, the trader said.

Recently, reports emerged that Tribune has narrowed down the list of bidders for the Cubs to three to five groups, with all of them having bids of $1 billion or higher.

Tribune is a Chicago-based media company.

Alltel gains ground

Alltel's term loan debt moved higher during market hours, with no particular news seen behind the momentum, according to a trader.

The company's term loan B-1 and B-2 were quoted at 98¾ bid, 99 offered, up from 98 5/8 bid, 98 7/8 offered, and its term loan B-3 was quoted at 99 5/8 bid, 99 7/8 offered, up from 99 3/8 bid, 99 5/8 offered, the trader said.

In June, it was announced that Verizon Wireless entered into an agreement to purchase Alltel from TPG Capital and GS Capital Partners for about $5.9 billion. Based on Alltel's projected net debt at closing of $22.2 billion, the aggregate value of the transaction is $28.1 billion.

The parties are targeting completion of the transaction by the end of the year, subject to obtaining regulatory approvals.

Earlier this past week, news reports surfaced that Verizon Wireless is offering to sell some of its assets in order to get the necessary regulatory approvals needed for the Alltel purchase.

Alltel is a Little Rock, Ark.-based provider of voice and advanced data services. Verizon Wireless is a Basking Ridge, N.J.-based wireless voice and data network.

Airlines shrug off downgrade

UAL, Northwest and AMR all held firm on Friday, unfazed by S&P's downgrading the ratings of each company, according to a trader.

Chicago-based UAL saw its term loan quoted at 73 bid, 75 offered, unchanged on the day, the trader said. UAL's corporate credit rating was lowered by S&P to B- from B and the rating was removed from CreditWatch.

Eagan, Minn.-based Northwest Airlines saw its term loan quoted at 77½ bid, 79½ offered, in line with Thursday's levels. Northwest's corporate credit rating was dropped by S&P to B from B+ and removed from CreditWatch.

And, Fort Worth, Texas-based AMR saw it term loan quoted at 90 bid, 92 offered, also unchanged, the trader remarked. AMR's corporate credit rating was lowered by Standard & Poor's to B- from B and removed from CreditWatch.

"I think everyone has priced it in at this point," the trader added regarding the downgrades.

The agency attributed all of the companies' downgrades to expected heavy losses and negative operating cash flow caused by record high fuel prices.

Federal-Mogul firm

In more trading news, Federal Mogul's term loan B and term loan C held steady after the company announced second-quarter results that showed growth on year-over-year basis, according to a trader.

The term loan B and the term loan C were both quoted at 78½ bid, 80½ offered, in line with Thursday's levels, the trader said.

"It's completely unchanged. Earnings were good. Not widely traded or quoted, so that's part of the problem," the trader said in explanation of why the loan didn't trade higher on the news.

For the second quarter, the company reported record sales of $$1.995 billion, an increase of 13%, compared to $1.763 billion for the same period a year ago.

Net income for the quarter was $90 million, or $0.90 per share, up from $4 million in second quarter 2007.

Gross margin for the quarter was $396 million or 19.8% of sales, compared to $322 million or 18.3% of sales.

And, operational EBITDA was $257 million or 12.9% of sales, compared to $212 million or 12% of sales during the same period in 2007.

"We experienced another record sales quarter with strong earnings performance. We have anticipated and reacted to changing market conditions, including a market downturn in mature automotive markets. We implemented numerous successful actions to offset macro-economic factors and benefited from our strong market, customer and product diversification," said Jose Maria Alapont, president and chief executive officer, in a news release.

Federal-Mogul is a Southfield, Mich.-based supplier of powertrain and safety technologies.

Weather Channel allocations near

Switching to the primary market, Weather Channel is currently anticipating allocating its $1.22 billion credit facility early during the week of July 28, according to a trader.

The facility consists of a $1.07 billion term loan and a $150 million revolver, with both tranches initially priced at Libor plus 400 bps. Pricing on the term loan can step down to Libor plus 375 bps when total leverage is 5¼ times.

The term loan has a 3.25% Libor floor and it was sold to investors at an original issue discount of 97.

During syndication, the term loan was upsized from $1.02 billion and pricing was reduced from Libor plus 425 bps on strong demand.

When initial guidance emerged on the term loan, it was said that the deal was being talked in the area of Libor plus 400 bps to 425 bps with an original issue discount in the range of 97 to 98; however, after a conference call with select investors was held, which was the only launch into syndication that the deal experienced, price talk was focused on Libor plus 425 bps at a discount of 97.

Deutsche Bank and GE Capital Markets are the co-lead arrangers on the credit facility, with Deutsche the left lead.

Proceeds will be used to help fund the acquisition of the company by NBC Universal, Bain Capital and Blackstone Group from Landmark Communications for about $3.5 billion.

Other financing for the buyout is coming from $610 million of mezzanine debt. The mezzanine was initially going to be sized at $660 million, but it was reduced as a result of the term loan upsizing.

Total leverage is 6.7 times. Senior secured leverage is 4.3 times, up from an original 4.1 times because of the additional term loan debt.

Following completion of the buyout, Weather Channel will be operated as a separate entity, based in Atlanta, with management services to be provided by NBC Universal.

The transaction includes The Weather Channel Networks, the third-most distributed cable network, The Weather Channel Interactive, which includes the web site weather.com, and Weather Services International, a weather forecasting provider.

FTD preps allocations

Also expecting to allocate its credit facility early on in the week of July 28 is FTD, according to a market source.

The company's $425 million credit facility includes a $50 million five-year revolver priced at Libor plus 350 bps, a $75 million five-year term loan A priced at Libor plus 350 bps and a $300 million six-year term loan B priced at Libor plus 450 bps, with a step down to Libor plus 425 bps at 2½ times total leverage.

The term loan B was sold to investors at an original issue discount of 98, and lenders were offered upfront fees on the revolver and the term loan A that ranges from 50 bps to 100 bps depending on the commitment level.

All tranches under the FTD credit facility have a 3% Libor floor.

During syndication, the term loan B was upsized from $200 million since it was well received by the market and the pricing step down was added, the term loan A was downsized from $175 million and the revolver was downsized from $75 million.

At launch, pricing guidance on the term loan B came out in the context of Libor plus 400 bps to 450 bps, with a 3% Libor floor and an original issue discount in the 98 to 99 range, but it was said that the actual talk would be dependent on credit ratings, and once those private ratings were obtained last month, the price talk became more focused.

Financial covenants under the FTD credit facility include a leverage ratio, a fixed-charge coverage ratio and a maximum capital expenditures requirement.

Wells Fargo is the lead arranger, bookrunner and administrative agent on the deal.

Total and senior leverage at FTD at close will be 3.6 times.

Proceeds will be used to help fund United Online Inc.'s acquisition of the company.

FTD stockholders will receive a total of $10.15 in cash and 0.4087 of a share of United Online stock per share. Based on United Online's closing stock price of $10.35 on July 16, total consideration to FTD stockholders is about $434 million, consisting of $307 million in cash and 12.35 million shares of United Online stock.

Originally, FTD shareholders were going to get $7.34 in cash, 0.4087 of a share of United Online common stock and $3.31 of 13% senior secured notes per share. Based on United Online's closing stock price of $10.83 on April 29, the total consideration to FTD stockholders would have been around $456 million, consisting of $222 million in cash, 12.35 million shares of United Online stock and $100 million aggregate principal amount of notes.

However, United Online opted to get a new a $60 million four-year senior secured term loan, thereby increasing the amount in cash that FTD stockholders receive and eliminating the $100 million of United Online notes due 2013.

The United Online term loan is committed by Silicon Valley Bank and will be priced at Libor plus 350 bps with a 3% Libor floor.

Financial covenants for the United Online term loan include a leverage ratio of 1.25:1.00, a fixed-charge coverage ratio of 1.50:1.00 and a minimum consolidated EBITDA requirement.

The acquisition is anticipated to be completed in mid-to-late September, subject to approval of FTD stockholders, a financing condition and customary closing conditions.

Upon closing of the transaction, the former FTD stockholders will own about 15% of United Online.

After the closing of the transaction, FTD will continue to operate as a wholly owned subsidiary of United Online from FTD's existing facilities, including its U.S. headquarters in Downers Grove, Ill., and its international headquarters in the United Kingdom.

Since the closing of the acquisition is still a ways off, FTD's term loan B lenders are being paid a 1% ticking fee.

FTD's credit facility is non-recourse to United Online.

United Online is a Woodland Hills, Calif., provider of consumer internet and media services. FTD is a provider of floral related products and services.

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