Masonite firm on forbearance; Movie Gallery plummets with market; Invitrogen oversubscribed

By Sara Rosenberg

New York, Sept. 17 - Masonite International Inc.'s term loan held firm on Wednesday as investors reacted to news that the company received a forbearance agreement, Movie Gallery Inc.'s term loan nosedived as the market in general continued to slide lower, and LCDX 10 continued to fall.

In other news, Invitrogen Corp.'s credit facility has been met with a very strong reception from investors and the current thinking is that the deal will wrap at initial terms within the next few days.

Masonite's term loan was actually unchanged on the day - a fairly significant event given that the rest of the cash market took a hit - with the loan firmness attributed to an announcement that a forbearance agreement was reached with lenders, according to a trader.

The term loan was seen trading around 83 and it ended the day with levels of 82 bid, 84 offered, same as on Tuesday, the trader said.

The trader went on to say that with the rest of the market down a whole bunch of points, Masonite being unchanged is a really good sign.

On Tuesday night, Masonite revealed that it entered into a forbearance agreement through Nov. 13 with its credit facility lenders.

The forbearance applies to non-compliance with covenants as of June 30 and, provisionally, any such non-compliance as of Sept. 30.

As previously announced, the company was not in compliance with its adjusted EBITDA and cash interest coverage ratio as of June 30. Masonite's net debt to trailing 12 months adjusted EBITDA ratio was 8.25 times at June 30, compared to a covenant maximum of 7.00 times, and its cash interest coverage ratio was 1.51 times at June 30, compared to a covenant minimum of 1.65 times.

The company has been trying to negotiate an amendment and a waiver of the covenant non-compliance with its credit facility lenders for quite a while now.

By obtaining the forbearance, the company got more time and flexibility to negotiate a potential amendment to the facility.

Masonite is a Tampa, Fla.-based manufacturer of residential and commercial doors.

Movie Gallery drops as market softens

Movie Gallery's term loan took a sizeable fall on Wednesday just as a result of the rest of the cash market being down once again, according to a trader.

The Dothan, Ala.-based home entertainment specialty retailer's term loan was quoted at 68 bid, 70 offered, down from Tuesday's levels of 74 bid, 76 offered, the trader said.

In terms of the cash market in general, par names were down by at least another two points in a very choppy market, and distressed names were off by about two to four points on the day, with some down even more than that, traders remarked.

Some other examples of names that retreated include autos, like General Motors Corp. and Ford Motor Co., and Tribune Co.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 73 bid, 75 offered, down about two points on the day, and, Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 73 bid, 75 offered, down from 76 bid, 78 offered, one trader said.

Meanwhile, Tribune, a Chicago-based media company, saw its term loan B quoted at 58 ½ bid, 59 ½ offered, down about a point on the day, another trader added.

LCDX weakens

LCDX 10 gave up some more ground in trading as cash was lower and equities fell as well, according to a trader.

The index went out around 93.40 bid, 93.65 offered, down from Tuesday's levels of 94.40 bid, 94.60 offered, the trader said.

On Wednesday, Nasdaq closed down 109.05 points, or 4.94%, Dow Jones Industrial Average closed down 449.36 points, or 4.06%, S&P 500 closed down 57.21 points, or 4.71%, and NYSE closed down 352.74 points, or 4.53%.

Invitrogen overfills

Invitrogen's $2.65 billion senior secured credit facility (Baa3/BBB-/BBB-) is substantially oversubscribed and syndication is expected to be completed with the next week or so, with the transaction currently expected to firm at initial terms, according to a market source.

The fact that the deal has moved successfully through the primary market is not of great surprise given that on the day of the Sept. 5 retail bank meeting, sources heard that the term loan was already oversubscribed and the term loan A probably had somewhere in the area of $100 million to $200 million more to go before being fully syndicated.

The orders placed prior to the retail launch were the result of a senior managing agents round syndication that began back in July.

"At this point, the financing process is going well and we are pleased with the number and quality of lenders who have subscribed to the syndication," said David Hoffmeister, chief financial officer, in a company news release from Tuesday evening.

"The investment-grade ratings we received at the beginning of the process from all three major rating agencies, coupled with the significant free cash flow generated by the combined company, have made our debt offering very attractive to many investors, both national and international," Hoffmeister added in the release.

Invitrogen's facility consists of a $900 million term loan B talked at Libor plus 300 basis points with a 3% Libor floor and an original issue discount of 98, a $1.5 billion term loan A talked at Libor plus 250 bps and a $250 million revolver talked at Libor plus 250 bps.

Covenants include total leverage that opens at 4.25 times and steps down to 3.0 times, and a fixed-charge coverage ratio of 1.75 times.

Bank of America, UBS and Morgan Stanley are the joint lead arrangers and joint bookrunners on the deal, 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 expected to close in the late October to early November timeframe, 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.

Also, in July, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired.

The company is currently engaging with the European Commission and plans to file a formal notification before the end of September.

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.

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