Levi Strauss bank debt edges higher on news of deleveraging commitment and CFO resignation

By Sara Rosenberg

New York, Dec. 1 - Levi Strauss & Co.'s bank debt was quoted slightly higher with bids moving up by about a quarter to a half a point, depending on the tranche, and offers moving up by about half a point on both tranches. The movement followed news that the company retained Alvarez & Marsal to look at deleveraging activities, although the resignation of the company's chief financial officer also was seen as a positive by some.

The fixed-rate and the floating-rate debt were quoted at 103¼ bid, 104 offered, according to a trader, who said that previously the floating-rate debt was quoted at 103 bid, 103½ offered and the fixed rate debt was quoted at 102¾ bid, 103½ offered.

On Monday afternoon, the San Francisco apparel company announced that it retained the management consulting firm Alvarez & Marsal to work with the leadership team in identifying additional actions to accelerate the company's financial turnaround. Furthermore, the company also announced that Chief Financial Officer Bill Chiasson would be leaving the company and Jim Fogarty of Alvarez & Marsal will be acting as interim chief financial officer.

"I have retained Tony Alvarez and his firm based on their solid record of assisting in successful financial and operational turnarounds, including substantial experience in retail and apparel," said Phil Marineau, chief executive officer, in a company news release. "I have asked Tony to advise me on additional strategies and actions to reduce debt and costs, while building our brands and returning the company to profitable growth.

"Even though our recent refinancing gives us ample liquidity, we need to continue to identify ways to be more nimble and cost competitive, and to grow revenue."

"In light of Bill Chiasson's departure from the company as chief financial officer, we are bringing Jim Fogarty on board to lead the finance function. I believe Jim is an excellent fit for the interim CFO role. He has extensive experience in advising companies on complex financial matters and in building and strengthening an organization's financial capabilities," Marineau added, in the release.

"Jim and I are enthusiastic about the opportunity to work with Phil and his management team to de-leverage the company, and help restore the value inherent in their portfolio of world-class brands," said Alvarez in the release. "There is no doubt that the company is undertaking this important effort in an unusually difficult apparel environment. The underlying strength and renown of the Levis, Dockers and Levi Strauss Signature brands give us confidence that we can help this great company succeed in these efforts."

"For the bank debt, it's all good news," the trader said, explaining that not only are lenders happy to hear that the company is continuing its efforts to delever the balance sheet but, the market was also happy to hear about the resignation of the chief financial officer.

"The bonds are down a little bit," the trader continued. "Probably because it's more of a short-term negative but it's a long-term positive."

Following up, Genesis Health Ventures Inc. completed the spinoff of its eldercare and rehabilitation businesses into a separate publicly traded company, Genesis HealthCare Corp. Furthermore, Genesis Health Ventures will be changing its name to NeighborCare Inc. effective Tuesday, according to a company news release.

To help support the spinoff, Genesis HealthCare Corp. (ElderCare) obtained a $260 million senior credit facility (Ba3/BB-) consisting of a $185 million seven-year term loan B with an interest rate of Libor plus 275 basis points and a $75 million five-year revolver with an interest rate of Libor plus 275 basis points.

NeighborCare obtained a $100 million five-year senior revolver (Ba1/BB+) with an interest rate of Libor plus 200 basis points.

Wachovia was the lead bank on both of the Genesis deals.

"The separation allows all of us at Genesis HealthCare to focus our attention and energies on building and strengthening our core operations," stated George V. Hager Jr., chairman and chief executive officer of Genesis HealthCare, in a news release.

"We are excited about NeighborCare's prospects and remain focused on setting a new standard of service within our industry," stated John J. Arlotta, chairman and chief executive officer of NeighborCare, in the release. "We are uniquely positioned as an established provider with a new vision and a renewed energy that will provide value for both customers and shareholders alike."

Genesis HealthCare is a Kennett Square, Pa., provider of healthcare services to the elderly. NeighborCare is a Baltimore provider of healthcare services to the elderly through a network of pharmacies.

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