New Issue: Levitz prices $130 million in restructured two-part seven-year deal

By Paul Deckelman

New York, Oct. 29 - Levitz Home Furnishings Inc. was heard by high-yield market sources Friday to have priced a restructured $130 million two-part offering of seven-year notes, plus equity warrants, via Jeffries & Co.

The Woodbury, N.Y.-based home furnishings company was originally scheduled to sell $130 million of senior secured notes in a single tranche, but during the week, the Rule 144A/Regulation S deal was retooled - broken into two pieces, with warrants added to the smaller portion.

Levitz was heard to have sold $100 million of senior secured class A notes (B3/B-) due Nov. 1, 2011 at par to yield 12%, in line with pre-deal market price talk, and to have sold $30 million of 15% senior secured class B notes (Caa1) due Nov. 1 2011 as part of 30,000 units. Each unit consisted of a $1,000 principal amount note and a warrant to purchase Levitz common stock. The yield on the notes was also in line with price talk, and the units priced at $1,000 apiece. The warrants also expire on Nov. 1, 2011.

In the event the company calls the notes, either a make-whole call in the first four years after issue or on the standard call schedule after that, the offer for the optional redemption must first be made to the holders of the class A notes and all notes tendered for redemption must paid in full, and only then can an optional redemption offer be made to the holders of the class B notes. The same priority schedule - class A first, and then class B - is in effect for any equity clawback note repurchases the company may decide to make in the first three years after issue as well.

Levitz plans to use the net proceeds from the deal, together with available cash, to repay existing debt.

Issuer:	Levitz Home Furnishings Inc.
Security description:	Senior secured notes
Maturity:	Nov. 1, 2011
Book-running manager:	Jeffries & Co.
Settlement date:	Nov. 9
Tranche 1:
Amount:	$100 million
Coupon:	12%
Price:	Par
Yield:	12%
Call:	Make-whole call at T+50 bps until Nov. 1, 2008, then at 106, 103, and at par
Equity clawback:	For 35% of issue until Nov. 1, 2007, at 112.
Ratings:	Moody's: B3
	S&P: B-
Tranche 2:
Amount:	$30 million
Coupon:	15%
Price:	Sold in 30,000 units with warrants for common stock (one warrant for each note) at $1,000 per unit
Yield:	15%
Call:	Make-whole call at T+50 bps until Nov. 1, 2008, then at 107.5, 103.75, and at par.
Equity clawback:	For 35% of issue until Nov. 1, 2007, at 115.
Rating:	Moody's: Caa1

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