Foamex, Movie Gallery soft on numbers; LCDX up slightly; Managed Health talk emerges

By Sara Rosenberg

New York, Aug. 10 - Foamex International Inc. and Movie Gallery Inc. both saw their bank debt weaken on Friday after the two companies released uninspiring financial results, and LCDX saw a light uptick in levels.

In other news, Managed Health Care Associates, Inc. saw price talk surface on its in-market credit facility.

Foamex's term loan dropped off in trading on Friday on the heels of second-quarter numbers getting announced, according to a trader.

The term loan ended the day at 89 bid, 91 offered, down about a point and a half from previous levels, the trader said.

For the second quarter, the company reported net sales of $320.8 million, 7% below prior-year sales of $344.9 million, and net income of $7.6 million, or $0.32 per diluted share, compared with a net loss of $13.2 million, or $1.44 per diluted share, in the second quarter of 2006.

Net debt at the end of the second quarter was $610 million, down from $621 million at the end of the first quarter. Revolving loan availability was $83 million.

"Despite the soft market demand, Foamex was able to reduce net debt by $11 million. We anticipate continued debt paydown going forward. In addition, we continue to focus on reducing costs while increasing operating efficiencies throughout the company," John G. Johnson, Jr., chief executive officer, said in a company news release.

In addition, the company plans to deleverage the balance sheet by approximately $22 million in the third quarter as a result of the sale of its majority interest in Foamex Asia Co., Ltd. to its joint venture partner.

For full-year 2007, the company expects operating income of $85 million to $95 million, including restructuring costs of approximately $6 million and depreciation and amortization of approximately $20 million.

Capital expenditures for full-year 2007 are expected at $13 million to $16 million.

Foamex is a Linwood, Pa.-based producer of polyurethane foam-based solutions and specialty comfort products.

Movie Gallery slips with results

Movie Gallery's first-lien term loan headed lower on Friday after the company came out with financials for the quarter ended July 1, according to a trader.

The first-lien term loan ended the day at 80 bid, 82 offered, down from previous levels of 83 bid, 84 offered, the trader said.

For the quarter, the company reported a net loss of $309.939 million, or $9.69 per share, compared with a loss of $14.898 million, or $0.47 per share, last year.

Total revenue for the quarter was $561.224 million, down from $601.285 million for the same quarter of 2006.

For the 26 weeks ended July 1, net loss was $324.805 million, or $10.18 per share, compared with net income of $25.452 million last year, or $0.80 per share.

Total revenue for the 26 weeks ended July 1 was about $1.209 billion, down from about $1.296 billion for the comparable period last year.

At July 1, the company had $45.5 million of cash and cash equivalents and did not have any available borrowings under its credit facility.

Movie Gallery's liquidity is dependent upon cash flows from store operations, access to its existing credit facility and vendor financing.

The Dothan, Ala.-based video rental company said that during the thirteen weeks ended July 1, it incurred significant losses from operations as a result of current industry conditions and increased competition in the home video market.

And, during the latter part of fiscal 2006, and continuing into fiscal 2007, the company experienced significant vendor terms contraction, which eroded working capital capacity.

Furthermore, due to the company's previously announced non-compliance with covenants contained in the first-lien credit facility - which is currently covered by a short-term forbearance agreement from lenders - many of its vendors have discontinued extending trade credit, requiring payment for product before it is shipped.

"If we continue to experience substantial restrictions or tightening of terms with our vendors and continue to generate operating losses similar to those experienced for the twenty-six weeks ended July 1, 2007, we do not believe we will have sufficient liquidity to operate our business through the third quarter of 2007 without gaining access to additional capital," the company said in its Friday 10-Q filing with the Securities and Exchange Commission.

"In response to the challenging market conditions facing our business, we will continue to take actions to conserve cash and improve profitability. These actions include accelerating the closure of unprofitable stores, consolidating stores in certain markets, realigning our cost structure to better reflect our reduced size, and seeking a more competitive capital structure," the company continued.

"We also intend to consider a number of alternatives, including asset divestitures, recapitalizations, restructurings, alliances with strategic partners, and a sale to or merger with a third party, as well as whether a restructuring needs to be completed under chapter 11 of the Bankruptcy Code," the company added in the filing.

LCDX edges higher

LCDX was a touch better on Friday in a somewhat low-key summer trading session, according to a trader.

The index went out around 94.625 bid, 95.125 offered, up from Thursday's levels of 94.60 bid, 94.90 offered, the trader said.

Managed Health sets talk

Price talk came out on Managed Health Care's $265 million credit facility, which has actually been in the market since late July but had left talk to be determined because of primary conditions, according to a source.

The $15 million revolver (B1/B+) and the $155 million first-lien term loan B (B1/B+) are both being talked at Libor plus 325 basis points, the source said.

The $95 million second-lien term loan (Caa2/CCC+) is being talked at Libor plus 650 bps, the source continued.

The second-lien term loan carries call protection of 102 in year one and 101 in year two.

Bear Stearns and Credit Suisse are the lead banks on the deal, with Bear Stearns the left lead.

Proceeds will be used to help fund the acquisition of the company by Diamond Castle.

Managed Health Care is a Florham Park, N.J., provider of contract purchasing services to long-term care pharmacies and a provider of a variety of services to pharmaceutical manufacturers.

Tata Steel reworks term B

Tata Steel completely restructured its £1.5 billion term loan B, dividing it into three sub-tranches with different pricing and adding an original issue discount of 99¼ to all of the term loan B debt, according to a market source.

Under the changes, there is now a £500 million term loan B1 tranche that is due on Oct. 30, 2012 and priced at Libor/Euribor plus 200 bps, with a step down to Libor/Euribor plus 150 bps when total leverage is less than 2.5 times, the source said.

There is also a £500 million term loan B2 tranche that is due on April 30, 2013 and priced at Libor/Euribor plus 237.5 bps, with a step down to Libor/Euribor plus 187.5 bps when total leverage is less than 2.5 times, the source continued.

And, there is a £500 million term loan B3 tranche that is due on April 30, 2014 and priced at Libor/Euribor plus 275 bps, with a step down to Libor/Euribor plus 225 bps when total leverage is less than 2.5 times, the source remarked.

The B1 and B2 tranches have been structured predominantly for bank lenders, while the B3 tranche is aimed at the fund community, the source added.

By comparison, under the original structure, there was just a £1.5 billion seven-year term loan B, a portion of which was U.S., talked at Libor/Euribor plus 225 bps.

Commitments on the deal, which was launched to U.S., European and Asian investors, are now due on Aug. 20.

Citigroup, ABN Amro and Standard Chartered Bank are the lead banks on the deal, with Citi the left lead in the United States.

This term loan B debt is part of a £3.59 billion credit facility (BB/BB+) that also includes a £1.59 billion five-year term loan A and a £500 million revolver, with both of these tranches priced at Libor/Euribor plus 175 bps.

The term loan A and revolver were syndicated primarily to relationship banks.

Proceeds will be used to help refinance a £3.62 billion acquisition bridge facility and revolving credit facility that was used to fund the acquisition of Corus Group plc.

Tata Steel is a Mumbai-based integrated steel company.

Syniverse closes

Syniverse Technologies Inc. closed on its $479 million senior secured credit facility (Ba2/BB), according to a news release.

The facility consists of a $42 million U.S. revolver, a $20 million euro-denominated revolver, a $112 million U.S. funded term loan, a $160 million U.S. delayed-draw term loan, a $130 million euro-denominated delayed-draw term loan and a $15 million letter-of-credit facility all priced at Libor/Euribor plus 250 bps.

The funded U.S. term loan was sold to investors with an original issue discount of 991/2, and the U.S. and the euro delayed-draw term loans carry an upfront fee of 100 bps and a commitment fee of 125 bps.

Furthermore, the funded and delayed-draw term loans have 101 soft call protection for one year.

During syndication, the company divided and downsized its $297 million funded U.S. term loan into the $160 million delayed-draw piece and the $112 million funded piece, made the entire $130 million euro-denominated term loan into delayed-draw from funded and added the letter-of-credit facility.

In addition, pricing on all tranches was lifted from original talk of Libor/Euribor plus 200 bps, a leverage-based pricing step down was removed from all of the term loans, the discount was added to the funded term loan, the call protection was added to the funded and delayed-draw term loans, the delayed-draw upfront fee was increased from 25 bps and the delayed draw commitment fee was changed from 75 bps, with two 25 bps step ups over time.

Furthermore, the accordion feature under the term loans was capped at $100 million, whereas before it was greater of $100 million or leverage-based test, and a consolidated total leverage covenant was added that applies to the revolvers and the term loans. The covenant opens at 3.25 times, stepping up when the delayed-draw debt is funded. The revolvers already contained a leverage covenant, but it was basically revised to match the new one added to the term loans.

Funded term loan proceeds were used to refinance Syniverse's existing senior secured credit facility.

Proceeds from the delayed-draw loans will be used to fund the $290 million proposed acquisition of Billing Services Group Ltd.'s wireless division, a provider of clearing, settlement, payment and financial risk management services for communications service providers.

The reason for the switch to delayed-draw funding was because the European Commission has initiated a Phase II review of the acquisition.

The delayed-draw terms loans are available until March 21, 2008 or if they terminate the acquisition agreement.

Lehman Brothers and Deutsche Bank acted as the joint lead arrangers and joint bookrunners on the deal, with Lehman the left lead.

Syniverse is a Tampa, Fla., provider of mission-critical technology services to wireless telecommunications companies.

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