Movie Gallery amended B loan tops par; Delphi succumbs to selling pressure; Calpine stronger

By Sara Rosenberg

New York, Sept. 23 - Movie Gallery Inc.'s recently amended term loan B was stronger during Friday's session as trading levels moved atop par after breaking right around the par region late in the day Thursday.

Also in the secondary, Delphi Corp.'s revolving credit facility saw levels fall off a bit as a large chunk of the bank debt was up for sale, putting pressure on the name. Also, Calpine Corp.'s second-lien paper actually headed higher after having a particularly tumultuous week.

Move Gallery's $50 million term loan B add-on, as well as the rest of the amended term loan B tranche, was quoted at par bid for $2 million, par ½ offered for $2 million on Friday, up from the 99 7/8 bid, par ¼ offered levels that were seen on the break late-day Thursday, according to a fund manager.

Under the amendment, Movie Gallery increased pricing on its term loan B to Libor plus 375 basis points from Libor plus 300 basis points. The $50 million term loan B add-on is priced at Libor plus 375 basis points as well. Originally, when the amendment was first presented to lenders, the company was offering to increase pricing to Libor plus 325 basis points.

In addition, the upsized term loan B tranche now contains 101 call protection for one year against refinancings related to a repricing. The call protection was added to the amendment proposal after the initial launch in mid-September.

As for the revolver and term loan A tranches, the top tier on the pricing grid, which is in effect when leverage is more than 3.25x, was increased to Libor plus 350 basis points from Libor plus 275 basis points. Originally, it was hoped that the amendment would only increase the top tier to Libor plus 300 basis points.

Lastly, under the revised amendment, the company improved its excess cash flow sweep, shifting it to 100% if leverage is greater than 3x, 75% if leverage is greater than 2.5x and less than or equal to 3x, 50% if leverage is greater than 2x and less than or equal to 2.5x, and 0% if leverage is less than or equal to 2x, the fund manager said.

Lenders got the increased pricing and improved excess cash flow sweep, as well as a 25 basis point amendment fee, in return for granting Movie Gallery the term loan B add-on and four quarters of relief of its leverage, fixed charge coverage and interest coverage covenants.

The leverage ratio was increased to 4x for the third quarter of 2005 through and including second-quarter 2006. The fixed charge coverage ratio was changed to 1.05x instead of 1.10x for the third quarter of 2005 through and including second-quarter 2006. And, the interest coverage ratio was changed to 2.75x instead of 3.0x for fourth-quarter 2005 through and including second-quarter 2006.

The term loan B add-on will be used to purchase 20 Hollywood Video stores owned by an entity controlled by Mark Wattles, the founder and former chief executive officer of Hollywood Entertainment, pursuant to a "put" option contained in the license agreement for these stores.

Wachovia is the lead bank on the amendment.

The amendment is effective as of this past Wednesday, but the deal didn't actually rap up until Thursday because of a delay in posting the revised amendment documents, the fund manager added.

Movie Gallery is a Dothan, Ala.-based owner and operator of video specialty stores. The company purchased Hollywood Entertainment Corp. in an approximately $1.25 billion transaction earlier this year.

Delphi dips on big offer

Delphi's revolver dropped off about a quarter of a point on Friday as a huge piece of the paper was being offered in the secondary market, creating some heaviness in the name, according to a trader.

The revolver was quoted at 97 bid, 97½ offered, down from previous levels of 97¼ bid, 97¾ offered, according to a trader.

"There was a big block of it overhanging the market," the trader said.

Delphi's term loan levels remained unchanged during Friday's session with quotes going out at 101½ bid, 102 offered, the trader added.

Delphi is looking to former corporate parent General Motors Corp. for some sort of financial bailout and has warned that it could be forced into Chapter 11 if it does not get concessions from the United Auto Workers union and help from GM.

The company has also said that a filing would come before Oct. 17 when federal bankruptcy laws will change, becoming less friendly to debtor companies as they will be given less time to come up with a reorganization plan.

Investors have been swaying in the wind on the bankruptcy issue, with one week bringing stronger expectations that a Chapter 11 filing would emerge and the next week bringing expectations that a deal with GM will be worked out. Currently, it appears as if more people are leaning toward the possibility of an out-of-court restructuring.

Delphi is a Troy, Mich., supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology to vehicle manufacturers.

Calpine trades up

Calpine Corp.'s second-lien bank debt headed higher Friday on no particular news, with the bank debt quoted at 79 bid, 82 offered, compared to Thursday's levels of 78¼ bid, 79¼ offered, according to a trader.

The San Jose, Calif.-based power company's bank debt had a pretty volatile week as news surfaced that the Bank of New York, the collateral trustee for senior secured noteholders, will be holding proceeds from the July sale of domestic gas assets because of a dispute over how these proceeds were used.

Calpine is evaluating its options in response to Bank of New York's letter and has said that it intends to pursue all of its legal rights and remedies to resolve the dispute as soon as possible.

The company claims that the proceeds from the sale were offered to first-lien noteholders, and that of the $785 million of outstanding notes, about $139 million were tendered in response to the offer.

Calpine also says that under the indentures, it is permitted to use the proceeds from the sale of its gas assets to acquire eligible natural gas and/or geothermal energy assets. Calpine has used about $360 million of the proceeds to acquire eligible natural gas assets.

Following these acquisitions, about $400 million remains in the gas sale proceeds account with the Trustee.

On Thursday, after Calpine officially released a response to the Bank of New York letter, the second-lien bank debt had plummeted to the 74 bid, 76 offered context, but it was reenergized later in the day as some investors had sent the low levels as a good buying opportunity.

Aspect Software closes

The merger of Concerto Software and Aspect Communications Corp. into a newly formed company called Aspect Software that is privately held by Golden Gate Capital, Oak Investment Partners, company management and others, was completed, according to a company news release.

To help fund this transaction, Aspect Software got a new $725 million credit facility consisting of a $475 million five-year term B (B2/B) with an interest rate of Libor plus 250 basis points, a $50 million five-year revolver (B2/B) with an interest rate of Libor plus 250 basis points and a $200 million 51/2-year second-lien term loan with an interest rate of Libor plus 775 basis points.

During syndication, the first-lien term loan B was upsized from $425 million and reverse flexed from Libor plus 275 basis points, the second-lien term loan was downsized from $250 million and the revolver was reverse flexed from Libor plus 275 basis points.

JP Morgan and Deutsche Bank Securities acted as the lead banks on the term loan B and the revolver, with Wells Fargo Foothill acting as documentation agent.

JP Morgan and Lehman Brothers acted as the lead banks on the second-lien term loan, with D.B. Zwirn Finance acting as administrative agent.

Aspect Software is a Westford, Mass., provider of contact center software and services.

© 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.