AMR, Burlington gain on earnings; Cash, LCDX trade up; Anchor Drilling reworks deal

By Sara Rosenberg

New York, April 16 - AMR Corp. and Burlington Coat Factory Investments Holdings Inc. saw their term loans rise in trading on Wednesday as both companies announced financial results, and cash in general and LCDX 10 continued to grind higher.

In other news, Anchor Drilling Fluids USA Inc. made a number of changes to its credit facility so that it could wrap up on Wednesday, including adding a term loan A to the capital structure, downsizing the term loan B, increasing pricing on all tranches, and widening the original issue discount.

AMR's term loan strengthened during market hours following the release of somewhat better-than-expected first quarter 2008 numbers, according to a trader.

The term loan was quoted at 93¾ bid, 95¼ offered, up about a quarter of a point from Tuesday's levels, the trader said.

For the first quarter, AMR reported consolidated revenues of $5.7 billion, an increase of 5% year over year, and a net loss of $328 million, or $1.32 per share, compared to a net profit of $81 million for the first quarter of 2007, or $0.30 per diluted share.

The company said that record jet fuel prices contributed significantly to its loss. AMR paid $665 million more for fuel in the first quarter of 2008 than it would have paid at prevailing prices from the prior-year period, and it paid $2.74 per gallon for jet fuel in the first quarter compared to $1.85 a gallon in the first quarter of 2007, a 48% increase.

"The first quarter proved yet again that fuel prices remain one of the biggest threats to our industry and our company, and we also can't ignore the ongoing concerns about the U.S. economy and the potential impact on travel demand," said Gerard Arpey, chairman and chief executive officer, in a news release.

"While our first quarter financial results were disappointing, through our hard work in recent years to contain costs and strengthen our balance sheet and liquidity, we are better positioned to withstand today's uncertainty. However, we also recognize that we have a lot more hard work ahead of us and that our efforts must be ongoing," Arpey added in the release.

AMR is taking numerous steps to address the challenging circumstances that it faces, including a recent hiring freeze for management and support staff, additional reductions to its 2008 capacity plan and accelerating the replacement of its MD-80 fleet with more efficient Boeing 737-800s.

In addition, on Wednesday, the company announced that it has reached a definitive agreement to sell American Beacon Advisors Inc., its wholly owned asset-management subsidiary, to Lighthouse Holdings Inc.

Lighthouse, which is owned by Pharos Capital Group LLC and TPG Capital, is purchasing American Beacon for about $480 million.

AMR will retain a 10% equity stake in the business.

The transaction is expected to close this summer, subject to satisfactory completion of customary conditions as well as the approval of the board of trustees of the American Beacon family of mutual funds, shareholders of the American Beacon family of mutual funds, and consents from other American Beacon clients.

AMR is a Fort Worth, Texas-based scheduled passenger airline.

Burlington heads up

Burlington was another name that moved higher on the back of earnings coming out, with the term loan gaining about three quarters of a point, according to a trader.

Specifically, the term loan was quoted at 82¾ bid, 83¾ offered, up from 82 bid, 83 offered, the trader said.

On Tuesday night, Burlington announced net sales for the third quarter ended March 1 of $987.1 million, a decrease of $0.2 million from the same period last year, and net income was $26.8 million, compared with $31.1 million last year.

Consolidated net sales for the nine-month period ended March 1 was $2.6124 billion, down $16.5 million, or 0.6%, from the same period in 2007, and net loss was $0.4 million, compared with a net loss of $9 million last year.

"Relatively good [earnings]. Nothing fantastic but okay," the trader added.

Burlington is a Burlington, N.J.-based retailer of branded apparel.

Cash, LCDX stronger again

The cash market in general and LCDX 10 were up once again, inspired by an overall positive tone, and helped by equities performance as well, according to traders.

The cash market was said to be up anywhere from around a quarter to a half a point with the most active names being the more liquid names.

For example, Texas Competitive Electric Holdings Co. LLC (TXU), a Dallas-based energy company, saw its term loan B-2 quoted at 94¼ bid, 94¾ offered, up from 93½ bid, 94 offered, traders said.

Georgia-Pacific Corp., an Atlanta-based manufacturer and marketer of tissue, packaging, paper, building products and related chemicals, saw its term loan B quoted at 95 1/8 bid, 95 5/8 offered, up from 95 bid, 95½ offered.

And, First Data Corp., a Greenwood Village, Colo., provider of electronic commerce and payment services, saw all of its term loan B debt quoted at 93¼ bid, 94 offered, up from 93 bid, 93½ offered, traders continued.

Meanwhile, LCDX 10 was seen at 98.10 bid, 98.30 offered, up from around 97.45 bid, 97.65 offered on Tuesday.

"Things felt better across the board. Stocks were up. Probably piggybacked on that. Things were positive from the get go," one trader remarked.

Nasdaq ended the day up 64.07 points, or 2.8%, Dow Jones Industrial Average ended up 256.80 points, or 2.08%, S&P 500 ended up 30.28 points, or 2.27%, and NYSE ended up 225.57 points, or 2.51%.

Anchor Drilling restructures

Moving to the primary, Anchor Drilling was able to get enough commitments to oversubscribe its credit facility after a list of revisions were made to the transaction that included retranching, and sweetening pricing and original issue discounts, according to a market source.

Under the changes, the $15 million revolver saw pricing flex up to Libor plus 625 basis points from original talk at launch of Libor plus 500 bps and the original issue discount was raised to 98½ from 99, the source said.

The term loan B was downsized to $48 million from $110 million, pricing was increased to Libor plus 775 bps from original talk at launch of Libor plus 500 bps, and the original issue discount on this tranche also widened to 98½ from 99, the source continued.

And, a $56.5 million amortizing term loan A was added to the capital structure, the source remarked. The term loan A is priced at Libor plus 625 bps and was also sold at an original issue discount of 981/2.

The entire facility has a 3.5% Libor plus floor - a feature that has been present in the deal since launch.

The deal was done mostly by institutional accounts, the source added.

Jefferies acted as the lead bank on the now $119.5 million, down from $125 million, credit facility that funded on Wednesday.

Proceeds were used to help fund the buyout of the company by Castle Harlan Inc.

Other acquisition financing came from $60 million of mezzanine debt that was provided by American Capital Strategies and is priced at 12% cash plus 2.5% PIK.

More equity was used for the buyout to compensate for the $5.5 million reduction in term loan funds that the company obtained under the credit facility.

Anchor Drilling is a Tulsa, Okla., drilling fluids company.

Macrovision coming along

Syndication of Macrovision Corp.'s $500 million five-year term loan B (Ba1/BB-) has been "going well" since the deal launched with a bank meeting on April 9, a company spokesman told Prospect News.

The term loan B is talked at Libor plus 350 bps to 375 bps, with a 3.5% Libor floor, and 101 soft call protection for one year. It is being offered to investors at an original issue discount of 97.

Covenants include a maximum leverage ratio that opens at 4.5 times and gradually moves to 2.25 times at July 1, 2010, and a fixed-charge coverage ratio that opens at 1.3 times, moves to 1.4 times at April 1, 2010 and then to 1.5 times at Oct. 1, 2010.

JPMorgan and Merrill Lynch are the joint lead arrangers and joint bookrunners on the deal, with JPMorgan the administrative agent.

In the event the company's leverage ratio is greater than 2.5 to 1.0 and more than $50 million of aggregate principal amount of its 2.625% convertible senior notes due 2011 remain outstanding 180 days prior to their scheduled maturity, the term loan B will become due on that 180th day.

Proceeds will be used to help fund the acquisition of Gemstar-TV Guide International, Inc. in a cash and stock transaction valued at $2.8 billion.

Other financing for the acquisition will come from $150 million in senior unsecured notes, which are backed by a bridge loan commitment, and by about $965 million in cash and cash equivalents.

The roadshow for the high-yield bonds is scheduled to start on Tuesday.

Senior secured leverage is 2.5 times and total leverage is 4.3 times.

Commitments towards the credit facility are due on April 23 and closing is targeted for May 2.

Under the acquisition agreement, each share of Gemstar-TV Guide will be converted into the right to receive, at the election of each individual stockholder and subject to proration, $6.35 in cash or 0.2548 of a share of common stock in a new holding company that will own both Gemstar-TV Guide and Macrovision.

Upon completion of the transaction, Macrovision stockholders will own about 53% of the combined company, and Gemstar-TV Guide stockholders will own about 47%.

A special meeting of Macrovision stockholders will be on April 29 regarding the acquisition.

At first, Macrovision planned on getting $800 million of debt for the Gemstar-TV Guide purchase, comprised of a $650 million term loan B and a $150 million bridge loan, but the amount of funds needed was reduced using proceeds from the recently completed roughly $200 million sale of its software business unit to Thoma Cressey Bravo.

Macrovision is a Santa Clara, Calif.-based provider of services that enable businesses to protect, enhance and distribute their digital goods to consumers across multiple channels. Gemstar-TV Guide is a Los Angeles-based media, entertainment and technology company.

Hecla closes

Hecla Mining Co. closed on its new $140 million three-year amortizing term loan, according to a news release.

Scotia Capital acted as the lead bank on the deal.

The company also got a $240 million six-month bridge loan, of which $220 million was drawn at close.

Proceeds were used to help fund the $750 million acquisition of the Rio Tinto subsidiaries that held a 70.27% interest in the Greens Creek silver mine and joint venture located near Juneau, Alaska.

As a result of the transaction, Hecla subsidiaries now hold 100% of the Greens Creek joint venture, which is believed to be the fifth largest silver mine in the world in terms of annual production.

"Our Greens Creek and Lucky Friday silver mines generate a great deal of cash flow at current metals prices, which is expected to enable us to pay off the debt in less than three years. We have organized this financing to include a bridge facility that allowed us to eliminate a bank requirement to hedge a portion of our future zinc and lead production, and therefore avoid the earnings volatility associated with mark-to-market accounting. Over the course of the next several months, we will be evaluating various opportunities to retire the bridge loan," said Phillips S. Baker, Jr., president and chief executive officer, in the release.

Hecla is a Coeur d'Alene, Idaho, explorer, miner and processor of silver and gold.

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