Movie Gallery loan comes under pressure as bonds continue to fall; Dura Automotive sets talk

By Sara Rosenberg

New York, March 9 - Movie Gallery Inc.'s term loan headed on a downward spiral during Thursday's otherwise quiet market session as the paper was pressured by this week's overwhelming sell-off in the company's other securities.

Moving to the primary, Dura Automotive Systems Inc. came out with price talk on it second-lien term loan add-on as the new bank debt was presented to lenders on Thursday.

Movie Gallery's term loan dropped by more than a point in trading as the market tallied up the losses on the company's bonds and stock this past week and started to think that maybe the bank debt hadn't reacted nearly enough to the amendment news and whispers of possible bankruptcy in the future, according to traders.

The term loan closed the session quoted at 89¾ bid, 90½ offered, down from Wednesday's closing levels of 91¼ bid, 92 offered, traders said. On Tuesday, the bank debt had dropped to as low as 89½ bid, 90½ offered in the wake of the company's amendment request, but then recouped somewhat to the 91 bid, 91¾ offered context before the day was through. Prior to the lender call taking place, the term loan was quoted in the 92 bid, 93 offered region.

By comparison, the company's bonds started the week in the mid-60's, dropped into the low-60's on Tuesday, moved into the mid-to-high 50's on Wednesday and then plummeted into the high-49, low-50 type of range on Thursday.

As for the company's stock, the shares closed out at $2.04, down 43 cents, or 17.41%, on the day, after reaching a new low of $1.68 during market hours. On Monday, the stock had closed out the session at $3.27.

Overall, since Monday's close, the term loan has given up a total of 2.25 to 2.50 points, while the bonds have given up somewhere around 15 to 16 points and the stock has given up $1.23.

All of the turmoil began after it became widely known that Movie Gallery held lender calls on Monday afternoon - first for public lenders and then for private lenders - to discuss the overall business environment and the amendment of financial covenants.

The Dothan, Ala.-based operator of video retail stores is not currently in default under its covenants but is looking for relief going forward and in return would likely give lenders an amendment fee and higher pricing on all loan tranches.

It is anticipated that if the lenders consent to the amendment, the new terms would take effect on March 15.

Movie Gallery has hired the investment banking firm of Peter J. Solomon Co. to advise it in its discussions with lenders.

Blockbuster holds firm

Despite all the volatility surrounding Movie Gallery and the release of fourth-quarter numbers that included higher-than-expected profits but lower-than-expected revenues, rival Blockbuster Inc. has managed to hold steady on the loan side, according to a trader.

Blockbuster's term loan closed the session quoted at 97½ bid, 98½ offered, unchanged on the day, the trader said.

On Thursday morning, Blockbuster announced fourth-quarter numbers that included total revenues of $1.53 billion as compared with $1.72 billion for the fourth quarter of 2004. Analysts had been expecting revenues of around $1.70 billion.

In addition, the company reported net income of $18 million, or $0.09 a share, compared with $2.8 million, or $0.02 a share, last year. Adjusted net income was $34.2 million, or $0.17 per diluted share, as compared with adjusted net income of $16 million, or $0.09 per diluted share, for the fourth quarter of 2004. Analysts had been expecting net income of around $0.15 a share.

For full-year 2005, the company's revenues decreased 3.1% to $5.86 billion from $6.05 billion for 2004 and net loss totaled $588.1 million, or $3.20 per share, as compared with a net loss of $1.25 billion, or $6.89 per share, for 2004. Adjusted net loss for the full year totaled $52.6 million, or $0.29 per share, compared with adjusted net income of $147.1 million, or $0.81 per diluted share, in 2004.

Blockbuster is a Dallas-based provider of in-home movie and game entertainment.

Dura pricing guidance

Dura Automotive announced opening price talk in the Libor plus 400 basis points area on its $75 million second-lien term loan add-on as the deal launched with a meeting on Thursday, according to a market source.

JPMorgan is the lead bank on the deal.

Proceeds from this new loan, which is expected to close by the end of the first quarter, will be used for general corporate purposes.

In conjunction with the new loan, the company is seeking minor amendments to its existing $175 million asset-based revolving credit facility and its existing $150 million senior secured second-lien loan agreement.

Dura Automotive is a Rochester Hills, Mich., designer and manufacturer of driver control systems, seating control systems, glass systems, engineered assemblies, structural door modules and exterior trim systems for the automotive and recreation, and specialty vehicle industries.

Alion upsizes add-on

Alion Science and Technology Corp. increased the size of its 41/2-year term loan B add-on to $68 million from an original size of $50 million, according to a syndicate document.

Credit Suisse is the lead arranger on the deal.

The add-on is priced with an interest rate of Libor plus 250 basis points.

Proceeds from the add-on will be used for acquisition financing.

Alion is a McLean, Va.-based research and development company primarily serving the U.S. government.

© 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.