Georgia-Pacific tweaks amendment, B loan rises; Hertz better on guidance; QVC still slow

By Sara Rosenberg

New York, June 25 - Georgia-Pacific LLC revised its amendment proposal, increasing pricing on the new term loan C and extended revolver commitments, and taking out all requests regarding financial and negative covenants.

In addition, following the changes to the amendment, Georgia-Pacific's term loan B headed higher in the secondary market.

Also in trading, Hertz Global Holdings Inc.'s strip of institutional bank debt gained some ground as the company revealed favorable earnings guidance.

Meanwhile, over on the new deal front, QVC Inc.'s term loan appears to be struggling to fill out ahead of Friday's commitment deadline despite the investor friendly changes that were made to the deal earlier in the week.

Georgia-Pacific modifies proposal

Georgia-Pacific came out with some changes to its amendment request that will basically result in this transaction just being a maturity extension and investors getting better pricing on any extended debt than was previously proposed, according to a market source.

As before, the company is looking to extend all or some of its revolver to October 2012 from December 2010.

However, the company is now only looking to extend up to $1 billion of its term loan B, as opposed to $1 billion to $1.5 billion, with a minimum amount of $750 million, to December 2014 from December 2012. The term loan B extension would be done through the creation of a new term loan C (Ba2/BB+).

If the company doesn't get enough term loan B extensions to amount to $750 million, then it will not price a new term loan C but will still execute the other terms of the amendment, such as the paydown, the source explained.

In connection with the amendment, the company would repay $750 million of term loan A and non-extended term loan B debt on a pro rata basis.

The company is not asking to extend its term loan A.

Georgia-Pacific ups pricing

In its attempt to get lenders to agree to the amendment, Georgia-Pacific raised pricing on extended revolver and term loan debt by 25 basis points over the original request, the source said.

Pricing on the extended revolver and the term loan C would now initially be set at Libor plus 325 basis points, based on total leverage being less than or equal to 4.5 times, and both tranches would have a step up to Libor plus 425 bps if total leverage is greater than 4.5 times.

Previously, the company was offering pricing on the extended debt of Libor plus 300 bps with a step up to Libor plus 400 bps.

The revolver will still have an unused fee that is initially set at 50 bps. This fee can step up to 75 bps based on leverage.

Georgia-Pacific takes out covenant requests

Also under the revised amendment proposal, Georgia-Pacific removed all amendment requests impacting the financial and negative covenants, including the second-lien basket.

Originally, the company was asking to increase the leverage ratio under the credit facility to 4.75 times from 4.0 times during 2011, and 4.5 times thereafter, and measure the ratio on a net basis going forward.

In addition, existing Most-Favored-Nation protection will be reinstalled to the term loan B, but there is no change to the Most-Favored-Nation protection being offered to the term loan C.

"Essentially the way its being described is that it's just an amend for extension. Because they don't want to increase the fee, they are taking out a lot of the asks in terms for amendment of covenants and such," the source remarked.

"The MFN is nothing really; it's the original language put to back it, but it's useless considering it's based on spread MFN not yield," the source added.

Georgia-Pacific trades up

As news of the amendment changes hit the market, Georgia-Pacific's term loan B was quoted better in the secondary, according to a trader.

The term loan B was seen at 94¼ bid, 95 offered, up from Wednesday's close of 94 bid, 94½ offered, the trader said.

Consents and commitments towards Georgia-Pacific's revised amendment are still due from lenders on Friday, and the amendment fee is still set at 5 bps.

Citigroup is leading the transaction.

Georgia-Pacific is an Atlanta-based manufacturer and marketer of building products, tissue, packaging, paper, pulp and related chemicals.

Hertz gains with guidance

Hertz's strip of term loan and letter-of-credit bank debt strengthened on Thursday as the company announced guidance for the second quarter and full-year 2009 revenues, corporate EBITDA, adjusted pre-tax income and adjusted diluted earnings per share, according to a trader.

The Park Ridge, N.J.-based car rental company's strip of bank debt was quoted at 91½ bid, 92½ offered, up from 91 bid, 92 offered, the trader said.

For the second quarter, the company estimates worldwide revenues to be in the range of $1.7 billion to $1.75 billion.

Corporate EBITDA for the quarter is expected to be in the range of $260 million to $270 million.

Adjusted pre-tax income for the quarter is guided in the range of $65 million to $70 million.

And, adjusted diluted earnings per share for the quarter is anticipated to be in the range of $0.09 to $0.10.

Hertz full-year guidance

For the full-year 2009, Hertz forecasts worldwide revenues to be in the range of $6.7 billion to $7 billion.

Corporate EBITDA for the year is expected in the range of $900 million to $935 million.

Adjusted pre-tax income for the year is guided in the range of $100 million to $120 million.

Lastly, adjusted diluted earnings per share for the year is anticipated to be in the range of $0.12 to $0.15.

"We are able to resume earnings guidance for the current quarter and full year for several reasons. Our car rental demand in the U.S. and Europe has stabilized and we are experiencing better-than-anticipated summer peak reservation build in both markets. We are adding fleet as a result," said Mark P. Frissora, chairman and chief executive officer, in a news release.

"Additionally, we anticipate no significant long-term financial impact from the GM and Chrysler bankruptcies, and we are increasing our estimate of incremental, annualized cost savings in 2009 by $70 million, to $570 million. These positive developments are offset partially by further, modest weakening in equipment rental demand and pricing, although we believe HERC will continue to generate strong corporate EBITDA throughout the year," Frissora concluded.

QVC continues struggling

Switching to the primary market, talk is that QVC's $500 million term loan B (Ba2/BBB) is moving slowly towards the goal of fully syndicating and some think it may not even get there at all before Friday's 3 p.m. ET commitment deadline hits.

"Heard roughly half of $500 [million] is committed. Looks like it will struggle to get to finish line," one source remarked. "And no indications of any more changes [...] so far."

The term loan B is talked at Libor plus 400 bps with a 2% Libor floor and an original issue discount of 98.

Earlier in the week, pricing on the loan had been increased from Libor plus 350 bps, the original issued discount had been narrowed down from an original range of 98 to 981/2, and Most-Favored-Nation language was added.

Before the changes were made, chatter was that the deal was not going so well with less than $100 million in the book as of last Friday afternoon. The loan had launched two days earlier on June 17.

QVC loan for general purposes

The use of proceeds for QVC's new term loan B were not clearly identified other than to say that they will be used for general corporate purposes.

Bank of America and JPMorgan are the lead banks on the loan.

The company already has a good amount of bank debt outstanding and recently the maturities on some of that debt were extended.

Under the amendment, the company's existing credit facility matures in six tranches between June 2010 and March 2014 with 11% of the outstanding principal due in 2010, 16% due in 2011, 9% due in 2012, 9% due in 2013 and 55% due in 2014.

Lenders consenting to the amendment, which represent $4.998 billion in commitments, received modified terms, including pricing that varies from Libor plus 350 bps to 550 bps, depending on the tranche maturity.

Loans held by non-consenting lenders, which represent $252 million in commitments, remain under the pricing terms of the previous credit facility, with such debt maturing in 2011. Non-consenting lenders continue to receive a maximum interest margin of Libor plus 100 bps.

QVC is a West Chester, Pa.-based multimedia retailer.

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