MetroPCS, Leap stronger on merger proposal; Movie Gallery holds firm; LCDX inches up

By Sara Rosenberg

New York, Sept. 4 - MetroPCS Communications, Inc. and Leap Wireless International, Inc. both saw their term loan Bs climb higher after news of a merger proposal hit the market, Movie Gallery Inc.'s first-lien term loan held steady after the company announced that it defaulted on its second-lien credit facility, and LCDX was better in light volume.

MetroPCS and Leap Wireless saw their term loan Bs gain some ground on Tuesday after news of a strategic stock-for-stock tax-free merger proposal emerged, according to traders.

MetroPCS' term loan B was quoted by one trader at 98 bid, 99 offered and by a second trader at 98½ bid, 99½ offered. On Friday, one trader had the paper quoted at 97¼ bid, 98¼ offered and another trader had it quoted at 97 bid, 98 offered.

Leap's term loan B was quoted by one trader at 98¼ bid, 99¼ offered and by a second trader at 98½ bid, 99½ offered. On Friday, one trader had the loan quoted at 96½ bid, 97½ offered and another trader had it quoted at around 97 bid, 98 offered.

On Tuesday morning, MetroPCS announced that it sent a letter to Leap proposing a merger, under which each outstanding share of Leap common stock would be exchanged for 2.75 shares of MetroPCS common stock.

Based on MetroPCS' trailing 20-day volume-weighted average stock price as of Aug. 31, the proposed exchange ratio implies a value of $77.89 for each share of Leap common stock, or about $5.5 billion in aggregate equity value.

MetroPCS also said that it will assume or refinance approximately $2 billion of Leap's existing debt.

According to preliminary analysis, MetroPCS believes the proposed combination could result in synergies with an estimated net present value of $2.5 billion.

The proposal is subject to satisfactory completion of due diligence, the approval by both companies' boards of directors, the approval by both companies' shareholders and the receipt of customary regulatory approvals.

If the companies move quickly to enter into a definitive merger agreement, MetroPCS expects that this proposed transaction could close in the spring of 2008.

MetroPCS is a Dallas-based provider of unlimited wireless communications service. Leap is a San Diego-based provider of wireless services.

Movie Gallery steady

Movie Gallery's first-lien term loan held in at previous levels, with little activity seen, despite the news that the company defaulted on its second-lien bank debt, according to a trader.

The first-lien term loan closed the day at 84 bid, with no real offers seen, compared with Friday's levels of 84 bid, 86 offered, the trader said.

"It's not really meaningful news because we already know they're in forbearance so we have to wait till Sept. 30 to see what happens and I don't see why the second-lien wouldn't go along with that," the trader remarked.

On Tuesday morning, Movie Gallery said that due to its inability to meet the financial covenants contained in its first-lien credit facility for the fiscal quarter ended July 1, it has sent a notice of default to the agent under its second-lien facility.

As a result of the default under the second-lien loan, the company also sent a notice of default to the agent under its first-lien facility, with the default subject to the forbearance agreement with the first-lien lenders.

The company is in discussions with its second-lien lenders regarding the situation.

Holders of Movie Galley's 11% senior notes due 2012 executed a forbearance agreement on Aug. 31 that is effective until Sept. 30.

And, earlier that same week, the company's first-lien credit facility lenders extended an existing forbearance agreement to Sept. 30 from Aug. 27.

Movie Gallery is a Dothan, Ala.-based video rental company.

LCDX rises

LCDX was a touch stronger during Tuesday's quiet trading session, according to traders.

The index went out around 95.20 bid, 95.35 offered, up from Friday's closing levels of 95.00 bid, 95.25 offered, traders said.

Stocks were better on Tuesday as well, with Nasdaq up 33.88 points, or 1.30%, Dow Jones Industrial Average up 91.12 points, or 0.68%, S&P 500 up 15.43 points, or 1.05%, and NYSE up 101.70 points, or 1.06%.

© 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.