Levi Strauss stronger on earnings news; Wyndham falls on CFO resignation but bounces back

By Sara Rosenberg

New York, Oct. 12 - Levi Strauss & Co.'s floating-rate bank debt headed higher by about half a point on Tuesday after the release of third quarter financial results that included positive earnings as opposed to last year's net loss. Meanwhile, Wyndham International Inc.'s term loan B dropped immediately following news that the chief financial officer resigned but recouped most, if not all of its losses, by day's end.

Levi's floating-rate debt was quoted at 111¼ bid, 112 offered, according to a trader.

For the quarter, net income was $46.6 million compared to a net loss of $4.3 million for the third quarter of 2003, gross profit was $456 million, or 45.9% of net sales, compared to $397 million, or 36.7% of net sales in the third quarter of 2003, operating income was $128.6 million, or 12.9% of revenue, compared to $191 million, or 17.6% of revenue, for the same period of 2003, and net sales were $995 million compared to $1.084 billion for the third quarter of 2003.

"We're doing what we said we'd do," said Phil Marineau, chief executive officer, in a company news release. "We set out to improve our profitability this year and that's what we've done so far. Our business is healthier and more competitive today than when we began the year. In addition to strengthening the financial performance of the company, we are increasing consumer demand for our products through new marketing and product innovation."

"Our results - improved gross profit, lower SG&A, improved cash flow and a stronger balance sheet - were consistent with our strategy to focus our brands and drive a more profitable business. Accordingly, we have rationalized our sales base and taken a rigorous look at reducing expenses by business and function across the entire company," added Jim Fogarty, chief financial officer, in the release.

Levi Strauss is a San Francisco brand name apparel marketer.

Wyndham falls, recovers

Wyndham's term loan B dipped to around 99 immediately following the company's announcement that its executive vice president and chief financial officer, Richard A. Smith, resigned effective Oct. 29.

However, the Dallas hotel and resort company's B loan managed to regain its footing, moving back up to 99 3/8 bid, 99 7/8 offered before the end of the session, maybe off a quarter of a point from previous mid-99 levels, according to a trader.

Smith is leaving Wyndham to pursue another executive opportunity, according to a company news release. Replacing him will be Elizabeth Schroeder, current senior vice president of finance, strategic planning and investor relations. It is anticipated that Schroeder's permanent appointment will be confirmed by Wyndham's board of directors in early 2005.

"Elizabeth is a skilled financial strategist and an instrumental member of the Wyndham executive management team. She will continue to aggressively lead Wyndham in a balanced direction that maximizes market conditions and reduces debt while maintaining brand integrity," said Fred J. Kleisner, chairman and chief executive officer, in the release.

Wyndham also announced a number of other executive changes, including the departure of Theodore Teng, president and chief operating officer, whose position will not be replaced, Joseph Champ, executive vice president of business development and chief investment officer, Patricia Smith, executive vice president of human resources, and Donna DeBerry, executive vice president of diversity and corporate affairs.

Timothy L. Fielding, former senior vice president and corporate controller, will be named executive vice president and chief accounting officer, Michael Higa will be named corporate treasurer, and Judy Hendrick, former senior vice president and treasurer, will be named executive vice president and chief investment officer in connection with the reorganization.

The executive changes reflect the company's transition into a hotel operating company with a more balanced portfolio of owned, managed and franchised properties, the release explained.

"As we view the company and its expected form at the conclusion of the asset disposition process, it is clear the way we manage the company can and must change. Making difficult decisions now will position Wyndham for greater success and growth as the hospitality industry continues to improve," said Kleisner, in the release.

Xerium upsizes

Xerium Technologies Inc. upsized its proposed senior secured credit facility to $535 million from $455 million, according to an S-1A filed with the Securities and Exchange Commission Friday. CIBC is the lead arranger and administrative agent on the deal.

The facility now consists of a $100 million revolver and a $435 million term loan, with both tranches still priced at Libor plus 250 basis points. Pricing on the revolver can step down to Libor plus 225 and 200 basis points, depending on senior leverage. The revolver has a 50 basis point commitment fee.

Previously, the facility consisted of a $100 million revolver and a $355 million term loan.

The facility will mature in 4½ years, except for the portion of the term loan that is allocated to Canadian investors, which will mature in five years.

Proceeds will be used to help repay existing debt.

The credit facility is being obtained in connection with an offering of Income Deposit Securities. This IDS offering was downsized on Friday to 28.1 million shares from 40.626 million. The price range remains at $15.20 to $16.80.

The company will also make a separate offering of $45.3 million (reduced from $52.4 million) of senior subordinated notes due 2019.

Xerium is a Westborough, Mass., supplier of consumables used in the manufacture of paper.

General Growth may launch next week

General Growth Properties may launch its $9.75 billion credit facility to retail investors next week, according to a market source, although nothing definitive has been decided as of yet. The deal already launched to senior managing agents and managing agents on Oct. 4.

The facility consists of a $250 million three-year revolver, a $3.9 billion three-year term loan A talked at Libor plus 225 to 250 basis points, a $2 billion four-year term loan B talked at Libor plus 250 to 275 basis points and a $3.6 billion bridge loan that will be taken out by a CMBS deal.

Lehman Brothers, Credit Suisse First Boston, Wachovia and Bank of America are joint lead arrangers and joint bookrunners on the deal, with Lehman listed on the left.

Proceeds, along with $500 million of new equity, will be used to help fund the acquisition of The Rouse Co. for $7.2 billion, including the assumption of about $5.4 billion of Rouse debt, and to redo $2 billion of General Growth's unsecured credit.

The transaction is expected to close in the fourth quarter of 2004.

Post closing, General Growth, a Chicago-based shopping mall owner, will have approximately $23 billion of debt, or about 71% of total pro forma capitalization of $32.5 billion based upon the current stock price. Estimated interest coverage is about 1.6x for the first full year after closing, assuming the transaction closes in the fourth quarter.

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