Harrah's, Univision, Hertz down with numbers; Delphi softens; Ford dips; Wrigley trims spread

By Sara Rosenberg

New York, Aug. 8 - Harrah's Entertainment Inc., Univision Communications Inc. and Hertz Global Holdings Inc. all saw their bank debt levels head lower on Friday after the companies released earnings for the second quarter and the first half of this year.

Also in trading, Delphi Corp.'s second-lien debtor-in-possession financing term loan fell on the heels of some bankruptcy emergence warnings that were discussed in General Motors Corp.'s recent 10-Q filing, and Ford Motor Co.'s term loan was weaker.

Moving to the primary, Wrigley Co. lowered pricing on its well oversubscribed term loan B, and while the original issue discount was left unchanged, some are expecting to see that tighten during the week of Aug. 11.

Harrah's Entertainment's term loan B-2 and B-3 were softer during the trading session on the company's newly announced financial results that included a net loss for the quarter as well as for the first six months of 2008, according to a trader.

The term loan B-2 and B-3 were quoted at 87 bid, 87 ½ offered, down a half a point from previous levels, the trader said.

For the second quarter, the company reported a net loss of $97.6 million, compared with net income of $237.5 million in the year-ago quarter.

Total revenues for the quarter were $2.6 billion, down 3.7% from $2.7 billion in the same period last year.

Property EBITDA for the quarter was $646 million, down 9.5% from $714 million last year.

Adjusted EBITDA for the quarter was $634 million, down 11.1% from $713 million in the second quarter of 2007.

And, the company's second-quarter income from operations was $323.1 million, compared with $477.9 million last year.

For the six months ended June 30, net loss was $285.4 million, compared with net income of $422.8 million in the first half of 2007.

Total revenues were $5.2 billion, down 2.9% from $5.4 billion in the comparable 2007 period.

Property EBITDA for the six-month period was $1.3 billion, down 8.2% from $1.4 billion last year.

Adjusted EBITDA for the six months was $1.3 billion, down 10.5% from $1.4 billion in 2007.

And, income from operations totaled $724.1 million in the 2008 first half, compared with $929.1 million in the prior-year period.

"The first half of the year presented us with the most turbulent economic conditions the casino-entertainment industry has faced in years," said Gary Loveman, chairman, president and chief executive officer, in a news release. "Customer visitation fell in the second quarter as consumers coped with higher fuel costs, declining asset values, the impact of widespread flooding in the Midwest and other financial challenges.

"During the second quarter, we reduced certain costs in response to reduced demand, but continued to fund for the future," Loveman continued in the release. "We completed the re-branding of Caesars Indiana to Horseshoe Southern Indiana and Grand Tunica to Harrah's Casino Tunica. Today, we celebrate the grand opening of the $485 million expansion at Horseshoe Hammond in Northern Indiana, and we remain on track with the expansion of the hotel tower and convention center areas at Caesars Palace in Las Vegas. Further, we have completed the $565 million expansion of Harrah's Atlantic City."

Harrah's is a Las Vegas-based provider of branded casino entertainment.

Univision slides

Univision's term loan B also headed lower during Friday's market hours on the company's earnings report, according to a trader.

The term loan B was quoted at 79 3/8 bid, 80 3/8 offered, down from Thursday's levels of 79¾ bid, 80¾ offered, the trader said.

For the second quarter, Univision had a net loss of $100.7 million, compared to a net loss of $19.6 million in the 2007 comparable period.

Net revenue for the quarter was $533.1 million, down 4.3% from $557.3 million last year.

And, operating income before depreciation and amortization1 decreased 10.9% to $219.9 million in 2008 from $246.8 million in 2007.

For the six months ended June 30, net loss was $266.9 million, compared to net loss of $86.6 million in the same period last year.

Net revenue was $991.9 million, up 0.1% from $990.9 million in the first half of 2007.

And, operating income before depreciation and amortization decreased 5.8% to $370.8 million in 2008 from $393.5 million in 2007.

Univision is a Los Angeles-based Spanish-language media company.

Hertz falls

Hertz's term loan saw levels come in during trading as the company announced in its second-quarter earnings release that it was lowering full year guidance from what was previously provided in April, according to a trader.

The term loan was quoted at 91¼ bid, 92¼ offered, down from 92 bid, 93 offered, the trader said.

For the full year 2008, the company now forecasts total revenues of $8.7 billion to $8.8 billion, down from previous guidance of $8.9 billion to $9 billion.

Corporate EBITDA is now projected to be in the range of $1.4 billion to $1.465 billion, down from previous estimates of $1.575 billion to $1.615 billion.

Adjusted pre-tax income is now expected in the range of $550 million to $600 million, compared to prior guidance of $725 million to $750 million.

Adjusted net income is now expected between $340 million and $375 million, down from previous estimates of $450 million to $470 million.

And, adjusted earnings per share are now projected to be between $1.05 and $1.15, down from earlier guidance of $1.38 to $1.44.

As for current earnings results, the company reported net income of $51.2 million for the second quarter, or $0.16 per share on a diluted basis, compared with a net income of $83.7 million, or $0.26 per share on a diluted basis, for the second quarter of 2007.

Adjusted net income was $96.4 million, 1% lower than last year, resulting in adjusted diluted earnings per share for the quarter of $0.30, the same as the prior year period.

Total revenues for the quarter were $2.275 billion, compared to $2.176 billion last year.

Income before income taxes and minority was $93 million, a 34% decrease from $141 million in the second quarter of 2007.

Adjusted pre-tax income for the second quarter was $154.7 million, a decrease of 1.6% compared with last year.

And, corporate EBITDA for the quarter was $378.3 million, an increase of 1.9% from $371.1 million in 2007.

Hertz ended the second quarter with total debt of $12.69 billion and net corporate debt of $3.91 billion, compared with total debt of $12.45 billion and net corporate debt of $4.37 billion as of June 30, 2007.

"Despite significant economic headwinds in the U.S. and European consumer travel markets, we nearly matched last year's profits for the second quarter because of our efficiency initiatives and especially strong performance by U.S. car rental which generated double-digit earnings growth in a difficult demand and pricing environment," said Mark P. Frissora, chairman and chief executive officer, in a news release.

"Our results were affected by inflation in key areas, including fuel, vehicle damage and concession fees. We are accelerating our efficiency initiatives and now expect to reduce expenses by $300 million this year to help overcome higher inflation," Frissora added in the release.

For the six months ended June 30, net loss was $.6.5 million, or $0.02 per diluted share, compared to net income of $21.1 million, or $0.07 per diluted share, in the first half of 2007.

Total revenues for the six months were $4.314 billion, compared to $4.097 billion in the same period last year.

Income before income taxes and minority was $37.1 million for the six month period versus $50.4 million last year.

Hertz is a Park Ridge, N.J.-based car and equipment rental company.

Delphi retreats

Delphi's second-lien DIP term loan lost some ground in trading on the back of General Motors raising some concerns over the company's ability to exit Chapter 11 in a 10-Q that was filed late Thursday, according to a trader.

The second-lien DIP loan was quoted at 83½ bid, 84½ offered, down from 84½ bid, 85½ offered, the trader said.

"GM mentioned that Delphi may not exit. But, it could [also] just be a technical picture. Someone might be short and trying to quote it lower to move it in their favor. Been very quiet," the trader added.

More specifically, in the 10-Q, General Motors said, "The current credit markets, the lack of plan investors, and the challenges facing the auto industry make it difficult for Delphi to emerge from bankruptcy. As a result, it is unlikely that Delphi will emerge from bankruptcy in the near term, and it is possible that it may not emerge successfully or at all."

In more Delphi news, on Friday, the company released second quarter results that did show an improvement on a year-over-year basis.

For the second quarter, the company reported a net loss of $551 million, or $0.98 per share, compared to a net loss of $821 million, or $1.46 per share, last year.

The company said that the decrease in net loss was due to the absence of charges recorded in the second quarter of 2007 related to the securities and ERISA multi-district litigation settlement and employee termination benefits and other exit costs primarily resulting from the exit of a manufacturing facility in Cadiz, Spain.

Revenues for the quarter were $5.2 billion, down from $6 billion in the second quarter of 2007, with the drop primarily driven by a 28% decrease in GM North America production volume.

Delphi is a Troy, Mich.-based automotive electronics manufacturer.

Ford slips

Ford's term loan was lower during market hours although, since activity in the name was muted, the new levels were just quotes, not where actual trades went off, according to a trader.

The term loan was quoted at 77 bid, 77¾ offered, down from previous levels of 77¼ bid, 78¼ offered, the trader said.

On Friday, Ford announced that the memorandum of understanding for the sale of its Automotive Components Holdings' interiors business and Saline, Mich., plant to Johnson Controls Inc. was terminated.

The agreement, which outlined the terms of the proposed acquisition, was signed in November 2007. The companies have been in talks since that time.

The company said that the decision to cancel the pending sale was made by mutual agreement in light of current business conditions, which have deteriorated dramatically over the past several months.

"Higher gasoline prices, weakness in the housing industry and a slumping market for trucks and SUVs made negotiations increasingly difficult. These factors, coupled with circumstances unique to this deal, all contributed to the end of negotiations toward a final agreement," a news release explained.

Ford is a Dearborn, Mich.-based manufacturer and distributor of automobiles.

Wrigley flexes

Switching to new deal happenings, Wrigley cut pricing on its $3.6 billion term loan B as the tranche was something like two times oversubscribed and lenders were given until Monday to recommit to the deal, according to a fund manager.

With the change, the term loan B is now priced at Libor plus 350 basis points, down from initial talk of Libor plus 375 bps, the fund manager said. The 3% Libor floor was left unchanged.

As for the original issue discount on the term loan B, that is still currently talked at 97, but market players are anticipating - as has been the case for a while - that the discount will be reduced, possibly as early as Monday, the fund manager added.

This deal has been labeled as a blowout from the start. In fact, on the day of the retail bank meeting, which was July 23, the term loan B was already more than half done when looking at firm orders and oversubscribed when looking at indicated interest.

Initially, based on filings with the Securities and Exchange Commission, it was thought that the B loan would be sized at $4.45 billion, but it was reduced prior to launch to account for a bond issue being left in place.

And, back in May, when the structure on the deal first emerged, sources heard rumors that the term loan B was expected around the Libor plus 400 bps context, but nothing official had been announced at that time.

Wrigley's $4.85 billion credit facility also includes a $250 million revolver and a $1 billion term loan A, with both of these tranches priced in line with original talk at Libor plus 325 bps.

Goldman Sachs is the lead arranger on the deal, and Barclays, GE Capital, Rabobank and Sumitomo have signed on as co-arrangers.

Proceeds will be used to help fund the merger of Wm. Wrigley Jr. Co. and Mars Inc., and to provide for ongoing working capital and general corporate purposes.

Mars will pay $80 cash for each share of Wrigley common stock and class B common stock in a transaction valued at about $23 billion.

As part of the merger, Mars received a separate debt commitment from JPMorgan, Bank of America, BNP Paribas, Citigroup, Deutsche Bank, Lloyds TSB Bank and RBS Securities that provides for a $12 billion senior unsecured credit facility consisting of a $1.5 billion revolver, an $8.5 billion term loan and a $2 billion bridge loan, according to SEC filings. This facility is expected to be investment grade.

Proceeds from the Mars facility will be used to finance the $11.6 billion equity contribution from Mars, the repayment or refinancing of certain Mars debt and for general corporate purposes.

Also, Berkshire Hathaway has agreed to provide $4.4 billion in subordinated debt financing to the surviving corporation in the merger and to invest $2.1 billion in equity securities.

A special meeting for Wrigley's stockholders to vote on the merger agreement is scheduled for Sept. 25.

Regulatory approvals for the transaction have already been received from the European Commission, and from U.S., Canadian and Australian regulators.

Mars and Wrigley are hoping to complete the merger as quickly as possible following receipt of stockholder approval.

Confections company, Wrigley Co., will be operated as a separate, stand-alone subsidiary of Mars, keeping its headquarters in Chicago. Mars is a McLean Va.-based producer of confectionery, food and petcare products.

York Label closes

Diamond Castle completed its acquisition of York Label on Friday, according to a news release.

To help fund the buyout, York Label got a new $190 million credit facility (B1/B+), consisting of a $23 million five-year revolver, a $138 million six-year term loan, a C$2 million five-year revolver and a C$27 million six-year term loan.

The U.S. term loan is priced at Libor plus 500 bps with a 3% Libor floor and was sold at an original issue discount of 95.

During syndication, the U.S. term loan was upsized from $135 million when the Canadian term loan was downsized by C$3 million, pricing firmed at the high end of initial guidance of Libor plus 475 bps to 500 bps and the original issue discount increased from initial talk in the 97 to 98 area.

Bank of America acted as the lead bank on the deal.

York Label is an Omaha, Neb.-based provider of labeling technologies to major global consumer goods, wine & spirits, pharmaceutical and food & beverage companies.

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