Dollar General up on numbers; Revlon rises with debt paydown plans; Invitrogen, 1-800 Contacts float talk

By Sara Rosenberg

New York, Sept. 3 - Dollar General Corp.'s term loan debt traded stronger during Wednesday's market hours as the company announced good earnings and Revlon Inc.'s term loan was better on news of debt reduction plans.

Also in trading, Ford Motor Co.'s term loan was higher despite August sales results showing a steep decline on a year-over-year basis, and General Motors' Corp.'s term loan held steady following its release of August sales numbers.

Over in the primary market, Invitrogen Corp. started circulating price talk on its term loan B as the company is getting ready to hold a retail syndication bank meeting later this week, and 1-800 Contacts Inc. revealed details on its bank deal ahead of its bank meeting as well.

Also on the new deal front, MBF Healthcare Acquisition Corp. found a way to replace its expired credit facility commitment just in time to save its acquisition agreement with Critical Homecare Solutions Holdings Inc.

Dollar General's term loan debt posted some gains during the trading session after the company came out with positive second quarter and year-to-date financials, according to a trader.

The company's term loan B-1 was quoted at 93 3/8 bid, 94 1/8 offered, up from 92 7/8 bid, 93 5/8 offered, and the term loan B-2 was quoted at 90½ bid, 91½ offered, up from 89 1/8 bid, 90 1/8 offered, the trader said.

The trader explained that the B-2 saw a greater amount of improvement on the day because it's a cheaper buy and therefore considered more of an opportunistic deal.

For the second quarter, Dollar General reported net income of $27.7 million, compared with a net loss of $68.8 million in the 2007 second quarter.

Sales for the quarter increased 11.2% to $2.61 billion, compared to $2.35 billion in the comparable period last year.

The second quarter gross profit rate increased by 250 bps from last year, to 29.1%, driven by improvements in shrink, lower markdowns and improved distribution logistics efficiencies.

In addition, EBITDA for the quarter increased to $200.1 million from $5.8 million last year, and adjusted EBITDA was $225.7 million, up 55% from $80.5 million.

For the 26 weeks ended Aug. 1, net income was $33.6 million, compared to a net loss of $35.2 million in the 2007 year-to-date period.

Total sales for the first half of the year increased 8.4% to $5 billion from $4.6 billion last year.

The gross profit rate increased 177 bps to 28.9% in the 2008 26-week period from 27.2% in 2007.

Lastly, EBITDA increased to $368.9 million from $109.6 million in the 2007 period, and adjusted EBITDA was $408.4 million, an increase of $120.3 million, or 42%, over last year.

"We are encouraged by Dollar General's strong financial performance during the second quarter and first half of 2008 in spite of the challenging economic environment," said Rick Dreiling, chief executive officer, in a news release. "We achieved solid same store sales growth and gross margin expansion and were able to further leverage our SG&A spend, all of which resulted in continued improvement in our profitability. Our sales increases in the quarter offer further evidence that customers continue to trust and rely on Dollar General for the quality products they want at value prices. While we believe that we may be benefiting somewhat from current economic conditions, we are confident that our recently implemented operating priorities are accelerating our progress."

As of Aug. 1, outstanding long-term obligations, including the current portion, were $4.18 billion, including $2.3 billion outstanding under the company's senior secured term loan.

The ratio of long-term obligations to adjusted EBITDA as of Aug. 1 was 5.2 times, down from 7.1 times since the closing of the company's buyout in July 2007.

Dollar General is a Goodlettsville, Tenn.-based discount retailer.

Revlon heads higher

Revlon's term loan also saw some strengthening in trading as the company revealed plans to repay some debt, according to a trader.

The term loan was quoted at 90¼ bid, 92 offered, up from 89½ bid, 90 offered, the trader said.

The trader explained that the term loan traded up because with a paydown, all ratios become better, meaning there's less likelihood of a covenant breach and defaults.

On Wednesday morning, Revlon announced that it plans to repay its $170 million senior subordinated term loan with MacAndrews & Forbes that is due on Aug. 1, 2009.

The funds for the paydown will come from the sale of the company's Bozzano business in Brazil - from which $63 million of proceeds will be used to repay the term loan - and a $107 million equity rights offering.

The equity offering is hoped to happen as early as the fourth quarter.

Revlon is a New York-based cosmetics, skin care, fragrance and personal care products company.

Ford inches up, GM steady

Ford's term loan gained some ground on Wednesday, while General Motors' term loan was unchanged even though both companies released August sales results that showed a decline from last year, according to a trader.

Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 78 bid, 78½ offered, up from 77¾ bid, 78¼ offered, the trader said.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 74¾ bid, 76 1/8 offered, unchanged on the day, the trader continued.

"There was more activity in Ford today than GM. People in general are pretty bearish on these names. I think people expect the numbers to be bad. It's priced in already," the trader said, adding that Ford was probably up on market technicals rather than on any credit specific news.

In August, Ford's vehicle sales totaled 151,021 down 26% from 203,001 last year.

Ford said that the decline primarily reflected lower demand for SUVs (down 53%) and trucks (down 39%), and lower sales to fleet customers (down 31%).

"We expect the second half of 2008 will be more challenging than the first half, as weak economic conditions and the consumer credit crunch continues," added Jim Farley, Ford group vice president, Marketing and Communications, in the release.

Meanwhile, General Motors delivered 308,817 vehicles in August, down 20% from last year, and truck sales declined 25.6% compared with a year ago.

However, when compared with July, General Motors' total sales were up 31%, retail sales were up 32% and fleet sales were up 29%.

Invitrogen B loan talk emerges

Switching to the primary market, Invitrogen revealed pricing guidance on its $900 million term loan B in preparation for the retail launch that is scheduled to take place on Friday, while pro rata price talk has been around since the senior managing agents round started in July, according to a market source.

The term loan B is being talked at Libor plus 300 basis points to 325 bps with a 3% Libor floor and an original issue discount of 98, the source said.

As was previously reported, the $250 million revolver and the $1.5 billion term loan A are both being talked at Libor plus 250 bps.

Bank of America, UBS and Morgan Stanley are the joint lead arrangers and joint bookrunners on the $2.65 billion senior secured deal (BBB-/BBB-), with Bank of America the left lead and administrative agent, and UBS and Morgan Stanley the co-syndication agents.

Proceeds will be used to help fund the acquisition of Applied Biosystems, help repay all of Invitrogen's debt, other than its convertible notes and certain other exceptions, and provide for ongoing working capital and general corporate purposes of the combined company.

Under the agreement, Invitrogen is buying Applied Biosystems from Applera Corp. in a cash and stock transaction valued at $6.7 billion.

The transaction is targeted to close in the fall, subject to approval by Invitrogen and Applera-Applied Biosystems shareholders and the satisfaction of customary closing conditions, completion of the previously filed and announced separation of Applera's Celera group, and regulatory approvals. It is not subject to financing.

On July 1, Applera announced that it completed the separation of its Celera business and that the remaining Applera business, which is what Invitrogen is purchasing, changed its name to Applied Biosystems.

Following the close of the transaction, the combined company will be named Applied Biosystems, Inc. and will have its corporate headquarters in Carlsbad, Calif.

Invitrogen is a provider of life science technologies for disease research, drug discovery and commercial bioproduction. Applied Biosystems is a developer and marketer of instrument-based systems, consumables, software and services.

1-800 Contacts structure, talk surface

1-800 Contacts announced structure and price talk on its $194 million credit facility as the deal is gearing up for the Thursday bank meeting that was put on people's calendars last week, according to a market source.

Both the $15 million revolver and the $179 million first-lien term loan are being guided at Libor plus 395 bps with a 3.75% Libor floor, the source said, adding that an original issue discount on the term loan hasn't been disclosed as of yet.

The term loan has 101 soft call protection for one year.

Currently, investors are expecting three-B corporate ratings.

JPMorgan is the lead bank on the deal that will be used to back the buyout of the company by Fenway Partners LLC, which was already completed about a year ago.

When that buyout was announced, it was said that the company was getting a $235 million senior secured credit facility, consisting of a $20 million six-year revolver expected at Libor plus 275 basis points, a $140 million seven-year first-lien term loan expected at Libor plus 275 bps and a $75 million 71/2-year second-lien term loan expected at Libor plus 625 bps.

It was not clear prior to press time whether the original credit facility for the buyout was funded with the same terms that the company had initially outlined.

1-800 Contacts is a Draper, Utah, direct marketer of replacement contact lenses.

MBF saves acquisition with revised loan plans

MBF Healthcare got a new credit facility commitment from banks on Aug. 28, a day before the deadline that would have allowed for the termination of its acquisition of Critical Homecare Solutions Holdings Inc. from Kohlberg & Co. LLC.

This new commitment currently contemplates that the company will get a $210 million senior secured credit facility consisting of a $25 million revolver, a $143 million funded term loan and a $42 million delayed-draw term loan, according to a market source.

However, the structure on the deal is still very fluid, the source said.

There is also expected to be $67 million of mezzanine financing, the source added.

CIT and Jefferies are the lead banks on the revised facility that is targeted to launch in late September, with CIT the left lead.

Originally, the company had received a commitment for a $285 million senior secured credit facility from Jefferies, consisting of a $25 million five-year revolver, a $140 million to $155 million five-year first-lien term loan, a $20 million first-lien one year delayed-draw, with a five-year final maturity, term loan, and a $40 million to $85 million six-year second-lien term loan.

This initial credit facility commitment, however, had expired on July 31.

In connection with getting the new financing commitment, the acquisition agreement was amended to extend the termination date to Oct. 31.

The enterprise value of the transaction is estimated at $479 million. Originally, it was estimated at $534 million, but was restructured this summer.

MBF Healthcare is a Coral Gables, Fla., blank check company formed to acquire businesses in the health care industry. Critical Homecare Solutions is a Conshohoken, Pa., provider of comprehensive home infusion therapy and specialty infusion services.

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