Burger King better with numbers; Harrah's, GM run-ups progress; Flexsys upsizes, sets pricing

By Sara Rosenberg

New York, April 29 - Burger King Holdings Inc.'s term loan B was a little stronger during Wednesday's market hours as earnings results were released, but being that the cash market overall had a positive tone to it, the uptick could have been less credit specific and more market related.

Also in trading, Harrah's Operating Co. Inc. continued to rise, helped by recent earnings news as well as the general market improvement, and General Motors Corp., which has been grinding higher since news of a debt-for-equity swap hit at the start of the week, continued to keep its momentum going.

In addition, the LCDX 12 index gained some ground in sympathy with equities.

Over in primary happenings, Solutia Inc.'s German subsidiary, Flexsys Verkauf GmbH, increased the size of and priced its term loan, and Jones Apparel Group Inc. is close to wrapping up its proposed ABL revolving credit facility that will provide the company with greater flexibility.

Burger King inches higher

Burger King's term loan B was quoted higher on Wednesday in a strong secondary market following the company's earnings announcement, according to traders.

The term loan B was quoted at 96 bid, 97 offered, up from 95½ bid, 96½ offered on Tuesday, traders said.

For the third fiscal quarter of 2009, Burger King reported net income of $47 million, or $0.34 per diluted share, compared to net income of $41 million, or $0.30 per diluted share, in the prior year.

Revenues for the quarter were $600 million, up 1% from $594 million in the third fiscal quarter of 2008.

Adjusted EBITDA for the quarter was $99 million, down from $107 million last year.

Also, the company said it paid down $40 million in debt during the quarter and an additional $30 million in April, bringing total debt paid down since after the its initial public offering in May 2006 to $245 million.

Burger King provides guidance

In addition on Wednesday, Burger King released guidance for the fiscal year 2009 fourth quarter, including expectations for earnings per share in the range of $0.34 to $0.37.

"We continue to grow our top-line in this challenging economic environment with positive April comps and are tactically responding to ever-changing market dynamics. However, due to ongoing market challenges and unknown potential effects of the swine flu situation, we are taking a more conservative outlook to our fourth-quarter fiscal year 2009 earnings estimate," said John Chidsey, chairman and chief executive officer, in a news release.

As a result, full 2009 fiscal year adjusted earnings per share are now expected to be in the range of $1.39 to $1.42.

Burger King is a Miami-based fast food hamburger chain.

Harrah's trades up

Harrah's Operating's term loan B debt was higher once again as people looking at their recent numbers continued to react favorably to the news, and the overall strength in the cash market factored in as well, according to a trader.

The term loan B debt was quoted at in 69¾ bid, 70¾ offered context, compared to Tuesday's levels that were in the 68½ bid, 70½ offered context. On Monday, the debt was seen around 65½ bid, 67½ offered.

On Tuesday, Harrah's Operating came out with first quarter numbers that showed adjusted EBITDA of $407.3 million, down 8.3% from $444.3 million in the first quarter of 2008. Sources previously explained that although EBITDA was down year over year, it had not dropped by as much as people were expecting.

Revenues for the quarter were $1.756, down 10.4% from $1.955 in the prior year, and loss from operations was $218.2, down 24.6% from income from operations of $289.2 million in 2008.

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

GM still gaining

Another name to be helped by market conditions as well as by recent news was General Motors, which has now spent every day this week moving upwards, according to a trader.

The Detroit-based automaker's term loan was quoted at 64 bid, 65 offered, up from 63½ bid, 64½ offered, the trader said. Last Friday, the debt was quoted at 58 bid, 59 offered.

The company's revolver was quoted at 54½ bid, 56½ offered, up from 53 bid, 55 offered, the trader added. On Friday, this tranche had been seen at 47½ bid, 49½ offered.

General Motors' bank debt has been going strong since Monday when the company announced that it is commencing offerings to exchange 225 shares of its common stock for $27 billion of its unsecured public notes.

The exchange offers will expire on May 26.

If, prior to June 1, the company does not receive enough tenders of notes to consummate the exchange offers, it expects to file for bankruptcy.

LCDX, cash rise

The LCDX 12 index and, as already mentioned, the cash market in general were both stronger on Wednesday, as was stocks, according to traders.

The index was quoted at 80.25 bid, 80.50 offered, up from 78.60 bid, 78.80 offered, one trader said.

Cash was harder to put specific number on in terms of how much stronger it was, but things were definitely firm, a second trader remarked.

"Probably some capitulation on the upside," the trader said in explanation of why the loan market was better. "Stocks are having another up day. High-yield is having another up day."

Nasdaq closed up 38.13 points, or 2.28%, Dow Jones Industrial Average closed up 168.78 points, or 2.11%, S&P 500 closed up 18.48 points, or 2.16%, and NYSE closed up 146.29 points, or 2.72%.

Market helped by positive reports

The second trader went on to explain that the markets may have been helped by various Bloomberg stories, which reported that Barron's Bob O'Brien said that equities have reached a bottom and Lewis Ranieri, chairman of an investment firm, said that the housing slump is almost over.

Also, "GDP was waived off as not being very representative," the trader continued.

Real gross domestic product decreased at an annual rate of 6.1% in the first quarter when compared to the fourth quarter, according to advance estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP decreased 6.3%.

"People just assume now the news will be negative. Negative news has been priced in, as long as there are no surprises," the trader added.

Flexsys tweaks deal, prices

Moving to new deal happenings, Flexsys Verkauf, Solutia's German subsidiary, increased the size of its two-year senior unsecured term loan to $74 million from $50 million and set pricing at Libor plus 850 basis points with a 3.5% Libor floor and an original issue discount of 95, according to a market source.

At launch, pricing on the term loan was indicated at 12% plus an original issue discount that was still to be determined. It was unknown whether final pricing would end up as a fixed rate or a floating rate.

Jefferies is the lead bank on the deal.

Syndication was done through one-on-one roadshows, and the deal was run off of the bank's high-yield desk.

Proceeds will be used to provide additional liquidity to parent company Solutia.

Flexsys is a producer of a chemical used in tire manufacturing. The company has an 85% market share in Europe.

Jones readying close

Jones Apparel Group expects to close on its up to $650 million three-year ABL revolving credit facility (Ba2/BB-) within the next week, according to a news release.

And, in the company's Wednesday 10-Q filing, it was revealed that $600 million of commitments have come in so far, and that an additional $50 million may be done by obtaining additional commitments with the consent of the administrative agent.

JPMorgan and Citigroup are the lead banks on the deal.

The revolver is talked at Libor plus 450 bps.

Proceeds will be used to replace the company's existing $600 million ABL facility that expires in May 2010.

The company said that the new ABL agreement reduces financial covenants and provides ample liquidity for operations.

Jones Apparel is a New York-based designer, marketer and wholesaler of branded apparel, footwear and accessories.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.