Idearc, Lear, NRG move on earnings; Claire's slides; MonaVie pulled; AlliedBarton sets talk

By Sara Rosenberg

New York, July 29 - Idearc Inc.'s term loan B dropped in trading on Tuesday after the company came out with negative numbers, Lear Corp.'s term loan B slipped as full-year guidance was revised downwards and NRG Energy Inc.'s term loan moved higher on positive earnings results.

In more trading news, Claire's Stores Inc.'s term loan B was softer as investors continue to be skittish about the retail sector, especially with department store chain, Mervyns LLC, filing for bankruptcy.

Moving to the primary, MonaVie's loan deal is now dead as a result of market conditions, and Tower Automotive Inc.'s institutional bank debt, which will launch on Wednesday, is expected by some to be a tough sell based on the sector that the company operates in.

Also in the primary, AlliedBarton Security Services came out with official price talk as its deal was launched during the session and Broadlane's credit facility is currently expected to get done at initial talk as syndication is moving along nicely.

Idearc's term loan B experienced quite a fall during the trading session as the company's earnings results fell short of expectations, according to a trader.

The term loan B was quoted at 74¼ bid, 75¼ offered, down from Monday's levels of 77¼ bid, 78¼ offered, the trader said.

For the second quarter, Idearc reported net income of $76 million, or $0.52 per share, versus $109 million, or $0.75 per share, in the same period in 2007. On an adjusted pro forma basis, second-quarter net income was $87 million, a decrease of 31.5% from last year.

Revenues for the quarter were $759 million, a 5.7% decrease from $805 million last year.

EBITDA for the quarter was $299 million, a 17.9% decrease from $364 million in the same period in 2007. On an adjusted pro forma basis, second quarter EBITDA was $316 million, a 19.2% decrease from $391 million last year.

For the six months ended June 30, the company reported net income of $187 million, or $1.28 per share, compared to $212 million, or $1.45 per share, in the same period in 2007. On an adjusted pro forma basis, year-to-date net income was $203 million, a 17.5% decrease versus last year.

Revenues for the six month period were $1.529 billion, down 5.1% from $1.611 billion last year.

And, EBITDA for the six months was $658 million, down 8.4% from $718 million last year. On an adjusted pro forma basis, year-to-date EBITDA was $683 million, an 11.3% decrease compared to $770 million last year.

Free cash flow for the six months ended June 30 was $151 million based on cash from operating activities of $176 million, less capital expenditure of $25 million.

"As I complete my first 60 days with Idearc, I see opportunities everywhere. The future is in our hands and we aren't going to accept the economy as an excuse. It is clear that we have not made the leap from operating as a division of Verizon to being a stand-alone public company. You will see us catch up quickly," said Scott W. Klein, chief executive officer, in a news release.

"Our priorities are accelerating revenue growth, right-sizing expenses and creating a high-performance culture. These priorities can best be achieved by leveraging our key assets: our customers, our sales force and employee base and our products. We have already made significant changes that will improve performance," Klein added in the release.

Idearc is a Dallas-based provider of yellow and white page directories and related advertising products.

Lear softens

Lear also announced quarterly results on Tuesday, which were not great as well, and combined with cutting its full-year estimates, the result was that the company's term loan B came under a little bit of pressure, according to a trader.

The term loan B was quoted at 91¾ bid, 92¾ offered, down from previous levels of 92 bid, 93 offered, the trader said.

For the second quarter, the company reported net sales of $4 billion and pretax income of $55.8 million, including restructuring costs of $58.3 million. This compares with net sales of $4.2 billion and pretax income of $143.9 million, including restructuring costs of $34.8 million and other special items of $3.4 million, for the second quarter of 2007.

Lear said that the decline in net sales primarily reflects a 15% decline in industry production in North America, including the impact of the American Axle strike, partially offset by favorable foreign exchange.

Net income for the quarter was $18.3 million, or $0.23 per share, as compared with net income of $123.6 million, or $1.58 per share, last year.

Core operating earnings for the quarter were $163.8 million, compared to $229.3 million for the second quarter of 2007.

Free cash flow in the quarter was $15.7 million, compared with free cash flow of $204 million in the second quarter of 2007, reflecting lower earnings and unfavorable net working capital, including the adverse impact of the American Axle strike.

"Business conditions in North America were very difficult in the second quarter, primarily due to sharply lower industry production, a significant mix shift away from full-size pickups and large SUVs and higher raw material and energy prices. In this challenging environment, the Lear team remained focused on further diversifying our sales, implementing structural cost reduction actions, investing in growth opportunities and proactively managing our liquidity requirements," said Bob Rossiter, chairman, chief executive officer and president, in a news release.

"We have a clear operating plan and committed liquidity to manage through the challenging business conditions we see ahead," Rossiter added in the release.

The company recently extended a portion of its revolver commitments to 2012 from 2010. As a result, it now has $1.3 billion of revolver commitments available, $822 million of which mature on Jan. 31, 2012, and $468 million of which mature on March 23, 2010.

As for full-year 2008, the company now expects net sales to be about $15 billion, compared with its prior outlook of $15.3 billion, primarily as a result of lower forecasted industry production in North America.

Core operating earnings for the year are not expected in the area of $550 million to $600 million, down from the previous outlook of $600 million to $640 million, also reflecting lower industry production in North America.

Free cash flow is expected to be about $150 million for the year.

Lear is a Southfield, Mich.-based supplier of automotive seating systems, electrical distribution systems and electronic products.

NRG gains ground

On the flip side, NRG Energy's term loan strengthened as the company not only reported favorable second-quarter numbers, but also raised 2008 adjusted EBITDA guidance, according to a trader.

The term loan was quoted at 95½ bid, 96 offered, up from Monday's levels of 95 bid, 95½ offered, the trader said.

For the quarter, NRG reported net income of $129 million, or $0.49 per diluted common share, compared to $149 million, or $0.51 per diluted common share, for the previous year's second quarter. A $270 million pre-tax gain from the previously announced sale of Itiquira Energetica SA partially offset unrealized mark-to-market losses during the quarter.

Operating income for the quarter was $57 million, compared to $427 million last year.

Adjusted EBITDA was $683 million for the quarter, up 30% from $524 million reported for the second quarter 2007.

Liquidity increased $276 million during the second quarter as a $420 million increase in cash balances was partly offset by a $144 million decrease in letter-of-credit availability.

Net income for the first half of 2008 was $181 million, or $0.65 per diluted common share, compared to net income of $214 million, or $0.71 per diluted common share, for the same period last year.

Operating income for the first six months was $307 million, compared to operating income of $694 million in the first half of 2007.

For the first six months of the year, adjusted EBITDA was $1.2 billion versus $1 billion for the same period in 2007.

In addition, on Tuesday, the company increased its 2008 annual adjusted EBITDA guidance to $2.3 billion from $2.16 billion as a result of stronger first half results, driven by solid operational and commercial performance.

NRG's annual 2008 cash flow from operations guidance of $1.5 billion remained essentially unchanged as the cash benefits from the increased EBITDA are offset by higher cash collateral requirements and income tax payments.

However, free cash flow guidance after capital expenditures and net portfolio investments in repowering projects has increased by $71 million as a result of delayed environmental capital expenditures at the company's Big Cajun II facilities.

NRG is a Princeton, N.J.-based owner and operator of power generation portfolios.

Claire's trades down

Claire's term loan B headed lower in trading as people are nervous about the retail sector in general, and the Chapter 11 filing by Mervyns didn't help either, according to traders.

The term loan B was quoted by one trader at 67¾ bid, 68¾ offered, down about two points on the day, and by a second trader at 68¼ bid, 69¼ offered, down from 71¼ bid, 72¼ offered.

On Tuesday, Mervyns, a mid-tier department store chain in California and the Southwest, announced that it filed for bankruptcy so as to restructure its debt and re-align its business operations.

"Mervyns needs to reorganize its finances and operations due to the state of the economy and difficult operating environment for our industry," said John Goodman, chief executive officer, in a news release.

"After careful consideration of available alternatives, the company's management board determined that a Chapter 11 filing was a necessary and prudent step that allows us to operate our business without interruption as we seek to restructure our debt and other obligations in a controlled, court-supervised environment," Goodman added in the release.

In conjunction with the filing, Mervyns received a commitment for a $465 million debtor-in-possession facility from Wachovia.

Another negative for Claire's came late in the day on Monday, when Moody's Investors Service downgraded the company's ratings, including its senior secured bank debt to B2 from B1 and probability of default rating to Caa1 from B3.

Moody's said that the downgrade reflects the company's weak operating performance over the past two quarters that has led to deterioration in its debt protection measures.

In addition, Claire's long-term ratings were placed on review for further possible downgrade, reflecting the high likelihood that the company's debt protection measures will get worse given the challenging economic environment, which makes the company highly susceptible to further earnings and cash flow pressure.

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

Cash, LCDX firm

Overall the cash market felt strong on Tuesday with good two way flow, and LCDX 10 traded up, although activity in the index was light, according to a trader.

The cash market in general was described by the trader as unchanged to maybe slightly better, pretty well bid with enough sellers to create a nice amount of activity.

As for the index, levels moved up to 97.65 bid, 97.75 offered from Monday's close of 97.35 bid, 97.45 offered, but there was little to no volume, the trader added.

MonaVie deal not happening

Switching over to new deal happenings, MonaVie has pulled its $135 million credit facility from market because of primary conditions, according to a market source.

The deal consisted of a $10 million revolver and a $125 million term loan A.

At launch, the revolver and the term loan A were presented to lenders with guidance in the Libor plus 500 basis points to 550 bps range, with the understanding being that there would be a Libor floor and an original issue discount.

Then, during syndication, price talk was changed to an all-in rate on each tranche of 14%, with this rate expected to be obtained through the combination of Libor plus an undetermined spread, a Libor floor and an original issue discount.

Jefferies was acting as the lead bank on the facility that was going to be used for a dividend recapitalization.

MonaVie is a health drink with acai berries.

Tower could be hindered by sector

Syndication of Tower Automotive's portion of $570 million in institutional bank debt that is going to be launched on Wednesday may not be a smooth ride given that the company operates in the ever worsening automotive sector, a buyside source told Prospect News.

At a bank meeting at 1:30 p.m. ET at the Intercontinental Hotel on Wednesday, JPMorgan and Goldman Sachs are going to launch a portion of Tower Automotive's already funded $510 million first-lien term loan B and $60 million synthetic letter-of-credit facility.

The reason only a portion will be launched is because some has already been syndicated by the banks since the deal funded. Just how much has been sold, however, is unavailable.

Both tranches are priced at Libor plus 425 bps and currently there is no guidance available on the original issue discount.

At the meeting, potential lenders will basically be told the company's story, which according to one market source, is a good one, but the discount price talk is not expected to be revealed. Rather, the deal will likely operate like Avaya Inc., where the banks will wait to get some responses from investors and then talk about a discount level.

"I don't think the syndication is going to go that well because it's an auto name," the buyside source remarked. "They're logic is simple. Try to get out now before things get worse. No indication of OID, but I suspect it will be huge."

Proceeds from the credit facility, which funded last July, were used to help finance Cerberus Capital Management, LP's buyout of the company.

The 2007 credit facility also includes a $200 million asset-based revolver. There was a second-lien term loan as well but that tranche has already been repaid.

Tower Automotive is a Novi, Mich.-based auto parts maker.

AlliedBarton price talk

AlliedBarton Security Services held a bank meeting on Tuesday to kick off syndication on its proposed $380 million senior secured credit facility, and in connection with the launch, official price talk was announced, according to a market source.

Both the $55 million revolver and the $325 million term loan were presented to lenders with talk of Libor plus 450 bps, the source said.

Prior to the launch, guidance on the tranches was floating around in the Libor plus 425 bps to 450 bps area.

As was previously reported, the term loan has a 3.25% Libor floor and is being offered at an original issue discount of 98.

Credit Suisse, HSBC and GE Capital are the lead banks on the deal that will be used to help fund the buyout of the company by the Blackstone Group.

The transaction is expected to close in August subject to certain government approvals and other customary conditions.

AlliedBarton is a King of Prussia, Pa.-based provider of highly trained security personnel.

Broadlane nets interest

Broadlane's $150 million credit facility is "going very well" in terms of syndication, creating the expectation that the deal will likely clear at original pricing guidance, according to a market source.

The facility consists of a $15 million revolver and a $135 million term loan B, with both tranches talked at Libor plus 525 bps with a 3.25% Libor floor and an original issue discount of 981/2.

Jefferies is the lead bank on the deal that will be used to help fund TowerBrook Capital Partners LP's acquisition of the company from Tenet Healthcare Corp. for about $155 million in cash.

Broadlane's senior management team will continue to retain a significant ownership interest in the company.

Other acquisition financing will come from $67.5 million of mezzanine debt.

Leverage through the first lien is 3.0 times and total leverage is 4.4 times.

Closing on the transaction is expected to occur in the third quarter, subject to approval by regulatory authorities and other conditions.

Broadlane is a Dallas-based technology-oriented health care services company.

Newsday closes

Cablevision Systems Corp. completed its acquisition of 97% of Newsday Media Group through the formation of a new partnership with Tribune Co.

To help fund the transaction, Newsday LLC got $650 million of five-year term loan debt (B1/BB+), comprised of a $525 million fixed-rate tranche and a $125 million floating-rate tranche.

The fixed-rate piece is priced at 9¾% and it was sold at 99.035, while the floating-rate piece is priced at Libor plus 550 bps and it was sold at an original issue discount of 99.

Both tranches are non-callable for 2½ years.

During syndication, pricing on the fixed-rate tranche firmed wide of original guidance of 9% to 9¼%, and the amount of fixed-rate debt was downsized as the floating-rate tranche was carved out of the deal based upon investor demand.

Bank of America, Merrill Lynch and Citigroup acted as the joint bookrunners on the deal that was targeted to both high-yield and loan investors, with Bank of America and Merrill the joint lead arrangers.

Newsday is a daily newspaper serving Long Island and New York City.

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