Hollywood Entertainment $250 million deal seen as step to improve capital structure

By Sara Rosenberg and Paul A. Harris

New York, Dec. 6 - Hollywood Entertainment Corp.'s credit facility is expected to syndicate successfully, according to one market source, since it is a relatively good credit and the purpose of the loan is to improve the company's capital structure.

"I like the credit. I've always liked the credit," a fund manager said. "And I think if they're fixing their short-term maturities that's a good thing. I will definitely be following it."

Hollywood Entertainment's bank meeting for a new $250 million senior credit facility is scheduled for Monday, according to a syndicate source. UBS Warburg is the lead bank on the deal.

The loan consists of a $200 million five-year term loan and a $50 million five-year revolver, the source said, adding that pricing is not being revealed at this time.

Speculation around the market is that the term loan will be priced anywhere from Libor plus 375 basis points to Libor plus 400 basis points, the fund manager said, admitting that he's leaning towards a pricing of Libor plus 400 basis points.

In addition to the new credit facility, the company plans to sell $200 million of senior subordinated notes due 2011, with UBS Warburg leading this deal as well. The roadshow for the notes is also expected to start next week, according to a company spokesman.

Proceeds from both the loan and notes will be used to repay borrowings outstanding on the existing credit facilities, redeem the remainder of its 10.625% senior subordinated notes due 2004 and for general corporate purposes.

The company is currently working on this financing package since it's "a favorable market right now," a company spokesman previously told Prospect News.

Hollywood Entertainment is a Wilsonville, Ore. video store chain.

In other primary news, Sinclair Broadcast Group Inc. is looking to obtain $150 million add-on to its term loan B with price talk of Libor plus 225 basis points on the tranche, according to market sources. JPMorgan is the lead bank on the deal.

"Their credit in general has tightened up pretty dramatically recently," a market professional told Prospect News. "This is an opportunistic borrowing. It should go extremely well."

Proceeds, combined with proceeds from an upcoming bond sale of a $150 million add-on to the 8% senior subordinated notes due March 15, 2012, will be used to repurchase or redeem the existing 8.75% senior subordinated notes due Dec. 15, 2007.

Sinclair Broadcast is a Baltimore diversified broadcasting company.

Allegheny Energy Inc. launched a $2.062 billion credit facility for the company and its subsidiaries on Friday, according to a market source. Citibank, JPMorgan and Scotia Capital are the lead banks on the deal.

The loan consists of a $1.148 billion term loan with an interest rate of Libor plus 400 basis points for Allegheny Energy Supply, a $269 million senior secured term loan secured by Springdale assets with an interest rate of Libor plus 400 basis points, a $470 million senior secured additional financing term loan with an interest rate of Libor plus 600 basis points and a $175 million senior revolver with an interest rate of Libor plus 500 basis points and a commitment fee of 75 basis points, the source told Prospect News. All tranches are scheduled to mature in April of 2005.

Proceeds will be used to refinance the Hagerstown, Md. energy company's existing debt.

And with Ball Corp. upsizing its high-yield note offering to $300 million from $200 million at pricing on Thursday, speculation was heard in the debt markets that the company might resize the bank piece of the acquisition financing through which it will acquire European container company Schmalbach-Lubeca AG.

However when Prospect News reached Ball's treasurer Scott Morrison Friday, he said that a resizing of the $1.4 billion credit facility (BB+) led by Deutsche Bank and Bank of America - a $500 million multi-currency revolver, a 250 million euro/sterling term A, a 300 million euro term B, a $350 million term B at Libor plus 250 basis points - was not likely.

The company hopes to close both the bank deal and the acquisition later this month Morrison added.

The 10-year senior notes (Ba3/BB) priced with a yield of 6 7/8%, claimed to be an all-time low for a junk issuer.

Meanwhile, the secondary bank loan market was said to be relatively quiet on Friday, according to one trader. Asked whether SPX Corp.'s bank debt had reacted on news of the company's plan to pay down bank debt and extend maturities, the trader said: "I haven't seen much of anything on it today. It was right below par last I saw it."

SPX expects to amend its senior secured credit facilities, reducing balances and extending maturities. The transaction is expected to close on or before Dec. 27.

Changes in the agreement will include: refinancing the term loan A, extending the maturity to March 2008 from Sept. 2004 and reducing the outstanding balance by up to $87 million; reducing the term loan B and term loan C by an aggregate of $100 million; and refinancing the revolver, extending the maturity to March 2008 from Sept. 2004 and reducing the capacity to $500 million from $600 million.

The company announced on Friday that it will sell $250 million of senior unsecured 10-year notes to help with the refinancing of the term loan A and reduce the outstanding amounts under the term loan B and C. The note offering will be managed by a group led by J.P. Morgan Securities Inc. and other institutions.

SPX is a Charlotte, N.C. provider of technical products and systems, industrial products and services, flow technology and service solutions.

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