Claire's drops on numbers; Airlines slide as oil rises; FTD, ATP Oil price talk surfaces

By Sara Rosenberg

New York, June 11 - Claire's Stores Inc.'s term loan slid lower during Wednesday's trading session as the company reported uninspiring financial results, and airline names, like UAL Corp., Northwest Airlines Corp., Delta Air Lines Inc. and US Airways Group Inc., weakened on increasing oil prices.

In other news, FTD Group Inc. released price talk as it launched its credit facility Wednesday, ATP Oil & Gas Corp. came out with price talk on its recently launched loan, and Hologic Inc. and Angelica Corp. revealed expected pricing on their proposed upcoming deals.

Claire's term loan traded down during market hours after the company released disappointing financial results for the first quarter ended May 3, according to a trader.

The term loan was quoted at 76¼ bid, 77 offered, down from previous levels of 78 bid, 79 offered, the trader said.

For the quarter, the company reported net sales of $327 million, down 4% from last year as same-store sales declined.

Consolidated same-store sales dropped 8.4% in the first quarter, consisting of a 3.7% increase in average transaction value that was offset by a 12.5% decrease in the average number of transactions.

Adjusted EBITDA in the quarter was $34.3 million compared to $60.6 million in the 2007 first quarter.

Cash used by operating activities was about $1.4 million during the quarter, compared with cash provided by operating activities of $20.3 million last year. This change in cash was primarily impacted by a decrease in operating income and an increase in interest paid on the debt incurred to fund the acquisition, offset by a decrease in working capital.

At May 3, the company's $200 million revolving credit facility was undrawn and fully available aside from an ongoing $5.9 million letter of credit. Cash and cash equivalents were $68 million.

"We are genuinely disappointed with our first-quarter results. The challenging retail environment continues to impact our sales with mall traffic declining, and consumers' discretionary spending being crimped by large price increases in food and gasoline," said Gene Kahn, chief executive officer, in a news release.

"We began 2008 with an expense structure that anticipated same-store sales growth. Given the current retail environment and economic conditions, we carefully reviewed our cost structure and estimate that we can save $40 million annually. We have begun to execute against a number of the identified opportunities and expect that we can save $15 million in this fiscal year, with the full annualized savings achieved in fiscal 2009.

"Our same-store sales, while still negative, have shown improvement in the second quarter. We are encouraged that the new merchandise organization, combined with our cost savings initiatives, will drive improved performance during the second half of this year," Kahn added in the release.

Claire's is a Pembroke Pines, Fla.-based specialty retailer of value-priced jewelry and accessories.

Airlines continue to feel pressure

The airline sector in general felt softer on Wednesday as oil prices jumped up by more than $5 per barrel, according to a trader.

For example, Chicago-based UAL saw its term loan quoted at 77 bid, 78 offered, down from 77¾ bid, 79¼ offered, the trader said.

Tempe, Ariz.-based US Airways saw its term loan quoted at 68½ bid, 69½ offered, down on the bid side from 68¾ bid, 69½ offered.

Eagan, Minn.-based Northwest Airlines saw its term loan quoted at 77¾ bid, 78¾ offered, down from 78 bid, 79 offered, the trader continued.

And, Atlanta-based Delta Air Lines saw its first-lien term loan quoted at 84 bid, 85 offered, down from 84½ bid, 85 offered.

In addition, the trader said that the overall cash market was off about an eighth to a quarter of a point during the session "on renewed inflation fear, oil going through the roof and weak earnings from retailers."

As for LCDX 10, that was weaker as well with levels quoted at 98.55 bid, 98.70 offered, down from 98.70 bid, 98.80 offered, the trader added.

FTD announces price talk

Moving to primary happenings, FTD Group held a "well-attended" bank meeting on Wednesday at 1:30 p.m. ET in New York to kick off syndication of its proposed $450 million credit facility, and in connection with the launch, price talk was released, according to a market source.

The $75 million five-year revolver and the $175 million five-year term loan A were presented to lenders with talk of Libor plus 350 basis points, the source said. Upfront fees on these tranches are 50 bps for commitments of less than $25 million, 75 bps for commitments in the $25 million to $35 million range and 100 bps for commitments of more than $35 million.

Meanwhile, the $200 million six-year term loan B was presented with guidance in the context of Libor plus 400 bps to 450 bps, with a 3% Libor floor and an original issue discount in the 98 to 99 range, the source continued. The price talk on the term loan B is dependant on credit ratings, which are expected to be received from the agencies next week.

Financial covenants include a leverage ratio, a fixed-charge coverage ratio and a maximum capital expenditures requirement.

Wells Fargo is the lead arranger, bookrunner and administrative agent on the deal that will be used to help fund United Online Inc.'s acquisition of FTD for $7.34 in cash, 0.4087 of a share of United Online common stock and $3.31 principal amount of United Online 13% senior secured notes due 2013 per share.

The total consideration to FTD stockholders will be about $456 million, consisting of $222 million in cash, 12.35 million shares of United Online stock and $100 million total principal amount of notes.

The remaining purchase price consists of repayment of FTD debt and expenses incurred in connection with the transaction.

Total and senior leverage at close will be 3.6 times.

Commitments toward the credit facility are due on June 24, the source added.

Upon closing of the transaction, the former FTD stockholders will own about 15% of United Online.

The acquisition is anticipated to be completed during the third quarter, subject to approval of FTD stockholders, a financing condition and customary closing conditions.

After the closing of the transaction, FTD will continue to operate as a wholly owned subsidiary of United Online from FTD's existing facilities, including its U.S. headquarters in Downers Grove, Ill., and its international headquarters in the United Kingdom.

FTD is a provider of floral related products and services. United Online is a Woodland Hills, Calif., provider of consumer internet and media services.

ATP sets talk

ATP Oil & Gas announced price talk on its $1.6 billion credit facility now that the deal has been launched with a conference call this past Tuesday, according to sources.

The $1 billion 5.5-year term loan and the $600 million 2.5-year asset sale bridge loan were both presented to lenders with talk of Libor plus 475 bps, with a 3.25% Libor floor and an original issue discount of 98, sources said.

Credit Suisse is the lead bank on the deal that will be used to refinance the company's existing credit facility and to repay $230 million of senior unsecured debt.

ATP is a Houston-based oil and gas acquisition, development and production company.

Hologic guidance emerges

Hologic disclosed anticipated pricing on its recently announced proposed $800 million four-year senior secured credit facility, while timing on the transaction is still to be determined.

According to the commitment letter, both the $600 million term loan A and the $200 million revolver are anticipated at Libor plus 275 bps initially, but the company has said in SEC filings that the pricing is estimated in the range of Libor plus 250 bps to 275 bps with a possible upfront fee of 50 bps to 100 bps.

The commitment letter also said that pricing on the two tranches could range from Libor plus 200 bps to 300 bps depending on leverage.

Goldman Sachs is the lead bank on the deal that will be used to help fund the acquisition of Third Wave Technologies Inc. for $11.25 per share, or about $580 million.

A tender offer for the share purchase is expected to begin within two weeks, with completion taking place about a month later.

Depending on whether the company needs to extend the tender offer period and on the timing of HSR review, it may be able to close the acquisition in the early-to mid-August time frame.

Hologic is a Bedford, Mass.-based developer, manufacturer and supplier of diagnostics, medical imaging systems and surgical products dedicated to serving the health care needs of women. Third Wave is a Madison, Wis.-based provider of DNA and RNA analysis products to clinical, research and agricultural customers.

Angelica details price talk

Also coming out with pricing guidance was Angelica as the company said in an SEC filing that its $100 million revolver is expected to be priced initially at Libor plus 225 bps and its $33 million term loan is expected to be priced initially at Libor plus 250 bps.

Regions Bank is the lead bank on the proposed $133 million five-year senior secured credit facility.

Proceeds will be used to help fund the buyout of the company by Lehman Brothers Merchant Banking Partners IV LP for $22 per share in cash.

Other acquisition financing will come from $135.2 million in equity and $90 million of 15% seven-year senior unsecured subordinated notes, of which up to 3% can be PIK, committed by Apollo Investment Corp.

The buyout is expected to close in late summer, subject to approval by Angelica shareholders, the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and satisfaction of other customary closing conditions.

Angelica is a Chesterfield, Mo.-based provider of textile rental and linen management services.

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