Rite Aid dips on more bank debt; SourceMedia up as amendment passes; Clear Channel firms timing

By Sara Rosenberg

New York, June 12 - Rite Aid Corp.'s existing term loan traded off during the Thursday session after news emerged that the company is attempting to get a few hundred million dollars in additional term loan debt, and SourceMedia Inc.'s term loan B rose following approval of the company's amendment.

Also in trading, Western Refining Inc.'s term loan B saw good flow with levels coming in slightly from the previous day's run up now that the initial buzz about the company's amendment changes has partially worn off, Claire's Stores Inc.'s term loan continued to slide on recent earnings results, and US Airways Group and UAL Corp. were softer.

Over in the primary, Clear Channel Communications Inc. nailed down timing on the retail launch of its credit facility with the scheduling of a bank meeting for early next week.

Rite Aid's existing term loan headed lower during the trading session after the company announced plans to try and syndicate a $350 million senior secured tranche 3 term loan (Ba3), according to a trader.

The existing term loan was quoted at 92 bid, 93 offered, down from 93 bid, 94 offered on Wednesday, the trader said.

The new term loan, due June 4, 2014, was presented to potential investors via a conference call on Thursday afternoon with price talk of Libor plus 225 basis points with a 3% Libor floor and an original issue discount of 94.

Citigroup and Bank of America are the lead banks on the deal, with Citigroup the left lead.

Rite Aid is getting the new bank debt under the accordion feature in its existing senior secured credit facility.

Proceeds will be used to help fund the previously announced offers to purchase and the consent solicitations related to the company's $360 million 8.125% senior secured notes due 2010, $200 million 7.5% senior secured notes due 2015 and $150 million 9.25% senior notes due 2013.

The remaining purchase price is expected to be funded with a new series of senior secured notes due 2016 that, assuming all notes are tendered, will be sized at $425 million.

Both the new term loan and the notes offering are subject to market and other conditions, and are expected to close concurrently upon completion of the tender offers.

Rite Aid is a Camp Hill, Pa.-based drugstore chain.

SourceMedia strengthens

SourceMedia's term loan was better in trading as the company's credit facility amendment was passed by lenders, according to a trader.

The term loan B was quoted at 91 bid, 93 offered, up from previous levels of 88 bid, 91 offered, the trader said.

Under the amendment, the company's leverage and interest coverage ratios were loosened, and in return, investors got a bump in pricing and a 50 bps consent fee.

Pricing on the company's revolver and term loan is now Libor plus 500 bps, up from pre-amendment pricing of Libor plus 350 bps. Initially, the company had only offered lenders pricing of Libor plus 450 bps but that was changed during the amendment process.

SourceMedia is a New York-based provider of market information.

Western Refining trades heavily, levels dip

Western Refining's term loan B saw a "ton" of trades on Thursday but at levels that were a touch weaker from Wednesday when investors first heard about the company's proposed amendment modifications, according to a trader.

The term loan B was quoted at 96½ bid, 96¾ offered, down from previous closing levels of 96 5/8 bid, 97 1/8 offered, the trader said.

On Wednesday, lenders found out that the company was revising its amendment to give even higher term loan B pricing than originally proposed and add a pricing grid that becomes effective on Oct. 1 and is based on the amount of principal reduction on the term loan B.

"It ran up [Wednesday] and now guys are taking some profits," the trader said regarding the debt's performance.

The trader also said that the amount of activity in the name was not only because of profit taking but also because some new guys are now getting involved as they're thinking that this loan has good potential in the future.

Under the amendment changes, pricing on the term loan B will go up to Libor plus 450 bps, compared to the Libor plus 375 bps that was initially offered. Currently, pricing on the loan is Libor plus 175 bps.

And, under the new pricing grid, term loan B pricing will be able to range from Libor plus 400 bps to Libor plus 600 bps.

As originally proposed, a 3.25% Libor floor is being added to the term loan B and commitments are being sought to increase the company's revolver to $1 billion from $800 million.

Lenders will still be getting a 100 bps consent fee, but the first 50 bps would be payable at the effectiveness of the amendment as opposed to at June 30. The remaining 50 bps would still be paid at the end of the third quarter, the source added.

The reason that the company is offering all these things is because it wants the leverage covenant to be waived for the second quarter and replaced by a minimum-EBITDA requirement in the third and fourth quarters, and loosened in 2009.

Consents from lenders are due at noon ET on Friday.

Western Refining is an El Paso, Texas-based independent crude oil refiner and marketer of refined products.

Claire's trades down again

Claire's term loan was once more lower in trading as investors continued to react to the company's recent release of financial results for the first quarter ended May 3, according to a trader.

The term loan was quoted at 75¼ bid, 76¼ offered, down from Wednesday's levels of 76¼ bid, 77 offered and from Tuesday's levels of 78 bid, 79 offered, the trader said.

Late Monday night, the company announced quarterly results that included a 4% drop in net sales to $327 million, adjusted EBITDA of $34.3 million compared to $60.6 million in the 2007 first quarter, and cash used by operating activities of $1.4 million, compared with cash provided by operating activities of $20.3 million last year.

Claire's is a Pembroke Pines, Fla.-based specialty retailer of value-priced jewelry and accessories.

US Airways, UAL fall

US Airways and UAL both saw their term loan levels head down as both companies came out with some new initiatives, according to a trader.

Tempe, Ariz.-based US Airways' term loan was quoted at 68¼ bid, 69¼ offered, down from 68½ bid, 69½ offered, the trader said.

And, Chicago-based UAL's term loan was quoted at 76¾ bid, 77¼ offered, down from 77 bid, 78 offered, the trader added.

On Thursday, US Airways announced that it is making additional domestic capacity reductions, reducing headcount and implementing several revenue proposals to help it return to sustained profitability.

Under the plan, fourth-quarter domestic mainline capacity will be reduced by 6% to 8% on a year-over-year basis, 10 mainline aircraft will be returned in 2008 and 2009, leases of two A330 aircraft that were scheduled for delivery in 2009 will be cancelled and aircraft will be reduced further in 2009 and 2010.

In addition, staffing levels will be decreased by about 1,700 employees, a first-checked-bag service fee of $15 is being introduced, and a new in-flight beverage purchase program is being started.

"Our industry is profoundly challenged by the dramatic increase in fuel prices, and we must write a new playbook for running a profitable airline in this new and challenging environment. We are taking every action to operate a strong and competitive airline, while ensuring that our customers have continued access to competitively-priced air travel," said Doug Parker, US Airways chairman and chief executive officer, in a news release.

The reason behind all these actions is the high cost of fuel. US Airways estimates that its total annual fuel expense will be $1.9 billion more in 2008 than it was in 2007 when the airline reported a net profit of $427 million.

Also on Thursday, UAL announced a $15 service fee to check one bag for domestic travel and an increase in the fee to check three or more bags, overweight bags or items that require special handling.

"With record-breaking fuel prices, we must pursue new revenue opportunities, while continuing to offer competitive fares, by tailoring our products and services around what our customers value most and are willing to pay for," said John Tague, UAL executive vice president and chief operating officer, in a news release.

Clear Channel launch surfaces

Switching to new deal happenings, Clear Channel firmed up timing on its proposed $16.77 billion senior secured credit facility as a bank meeting has been scheduled to take place on Tuesday morning in New York, according to a market source.

Previously, the deal had been labeled as summer business and then rumors began circulating that it could come next week.

Included in the facility is a $690 million six-year receivables-based revolver that is initially priced at Libor plus 240 bps, but pricing can range from Libor plus 215 bps to 240 bps, depending on leverage. This tranche has a 37.5 bps commitment fee.

There is also a $1.425 billion six-year term loan A and a $2 billion six-year revolver (split into $1.85 billion in U.S. dollars and $150 million available in alternate currencies), with both of these tranches initially priced at Libor plus 340 bps, but pricing can range from Libor plus 290 bps to 340 bps, depending on leverage. The revolver has a 50 bps commitment fee.

In addition, the facility includes a $10.7 billion 71/2-year term loan B, a $705.6 million 71/2-year asset sale term loan C and a $1.25 billion 71/2-year delayed-draw term loan, with all of these tranches priced at Libor plus 365 bps with a step down to Libor plus 340 bps at less than 7:1 total leverage. The delayed-draw term loan has a 182.5 bps commitment fee.

Based on filings with the Securities and Exchange Commission it was expected that the receivables-based revolver could be sized at $1 billion and that the term loan A could be sized at $1.115 billion. However, those filings did say that, if availability under the receivables-based revolver is less than $750 million due to borrowing base limitations, the term loan A would be increased by the amount of such shortfall and the maximum availability under the receivables facility will be reduced by a corresponding amount.

Covenants under the facility include a maximum consolidated senior secured net debt to adjusted EBITDA ratio requirement.

Citigroup, Deutsche Bank and Morgan Stanley are the joint lead arrangers and bookrunners on the deal, with Citi the administrative agent, Deutsche and Morgan Stanley the syndication agents, and Credit Suisse, RBS and Wachovia the co-documentation agents.

Proceeds from the debt will be used to help fund the buyout of Clear Channel by Bain Capital Partners LLC and Thomas H. Lee Partners LP for $36.00 in cash or stock per share, in a transaction valued at about $17.9 billion. The purchase price was lowered from $39.20 per share in connection with the settlement agreement.

Other financing is coming from $980 million of 10¾% senior unsecured notes, $1.33 billion of 11% cash pay/11¾% PIK senior unsecured toggle notes and equity.

The debt financing and the equity financing that will be used for the buyout have already been placed in escrow accounts.

Placement of financing into escrow accounts was part of a recent settlement agreement reached between the company, the equity sponsors and the banks in connection with lawsuits, under which Clear Channel accused the banks of refusing to execute necessary documents in an effort to cause the buyout to collapse.

Of the total delayed-draw funds, $750 million can be used to purchase or repay Clear Channel's outstanding 7.65% senior notes due 2010 and the remainder will be available to purchase or repay Clear Channel's outstanding 4.25% senior notes due 2009.

The buyout of Clear Channel is expected to close by the end of the third quarter, subject to shareholder approval, which will be sought at a meeting on July 24.

Clear Channel is a San Antonio media and entertainment company specializing in "gone from home" entertainment and information services.

Anchor Glass cuts Libor floor

Anchor Glass Container Corp. reduced the Libor floor on its $350 million term loan to 3.25% from 3.5%, according to sources.

Pricing on the term loan was left unchanged at Libor plus 450 bps with an original issue discount of 98.

Credit Suisse is the lead bank on the deal that will be used to fund a dividend to sponsors.

Anchor Glass is a Tampa, Fla., manufacturer of glass containers for the beer, food, beverage and liquor markets.

KapStone closes

KapStone Paper and Packaging Corp. entered into its new $555 million senior secured credit facility, according to a news release.

Bank of America acted as the lead bank on the deal that was successfully syndicated to over 15 other financial institutions.

Proceeds, along with cash on hand, will to be used to pay for the acquisition of the North Charleston Kraft Division from MeadWestvaco Corp., to repay KapStone's existing credit facility, and to provide for working capital requirements.

Funding under the credit facility is subject to certain closing conditions, including the simultaneous closing of the acquisition, which is expected to occur in the third quarter.

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