Hudson Products frees to trade; Michaels Stores falls on earnings; LCDX up with equities

By Sara Rosenberg

New York, Aug. 27 - Hudson Products Corp.'s credit facility hit the secondary market, with the term loan B quoted near the original issue discount price at which it was sold during syndication.

In more trading news, Michaels Stores Inc.'s term loan headed lower on Wednesday on the heels of the company's release of financial results and LCDX 10 was better in sympathy with stocks.

Hudson Products' credit facility freed up for trading during the session, with the term loan B quoted right around the original issue discount price, according to a market source.

The $220 million seven-year term loan B was seen at 97 bid, 97½ offered, the source said, adding that the name was pretty quiet.

Pricing on the term loan B is Libor plus 500 basis points with a 3% Libor floor for life. The tranche was sold to investors at an original issue discount of 97.

During syndication, pricing on term loan B was flexed up from original talk at launch of Libor plus 425 bps, and the original issue discount widened from initial talk of 98.

Hudson Products' $250 million credit facility (Ba3/BB-) also includes a $30 million five-year revolver that is priced at Libor plus 500 bps with a 3% Libor floor for life as well.

During syndication, pricing on the revolver was also flexed up from original talk of Libor plus 425 bps.

BNP Paribas acted as the lead bank on the deal that allocated on Tuesday and closed and funded on Monday.

Proceeds were used to help fund the buyout of the company by Riverstone Holdings LLC from the Sterling Group LP.

Other buyout financing came from $125 million of mezzanine debt.

Hudson Products is a Sugar Land, Texas, designer and manufacturer of air-cooled heat exchanger equipment to serve the oil, gas and petrochemical processing industries.

Michaels slides

Michaels Stores' term loan lost some ground on Wednesday on the back of quarterly and first half of the fiscal year numbers coming out late in the previous session, according to a trader.

The term loan was quoted at 76 3/8 bid, 77 7/8 offered, down from Tuesday's levels of 77½ bid, 78½ offered, the trader said.

For the second quarter, the company reported a net loss of $25 million, compared to a $44 million loss for the 2007 second quarter.

Net sales for the quarter increased 1% to $796 million from $788 million last year, with same-store sales declining 2.6%.

Operating income for the quarter was $27 million, or as a percent to sales flat to last year at 3.4%.

Adjusted EBITDA for the second quarter declined about $17 million to $73 million, or 9.2% of sales, from $90 million, or 11.4% of sales, for the same period last year.

Second-quarter debt levels totaled $4.034 billion, down $64 million from last year's second-quarter balance of $4.098 billion. During the quarter, the company made a $5.9 million amortization payment on its senior secured term loan.

For the six months ended Aug. 2, the company reported a loss of $45 million, compared to a $67 million loss for first half of fiscal 2007.

Net sales for first half of the fiscal year increased 1% to $1.643 billion from $1.627 billion for the corresponding period of the prior year, with same store sales declining 2.8%.

Year-to-date fiscal 2008 operating income was $75 million, or 4.6% of sales, versus $87 million, or 5.3% of sales, last year.

Adjusted EBITDA for the six-month period was $170 million, or 10.3% of sales, versus $203 million, or 12.5% of sales, in the first half of fiscal 2007.

"Overall, the soft economic environment continues to adversely affect the business, particularly with respect to certain high-ticket discretionary items and home-related categories. While a number of our product categories performed well, such as Kids Crafts, Jewelry & Bead making, and Bakeware, sales declines in home-related categories including Floral, Home Décor, and Custom Framing businesses more than offset these increases on a comparable store basis," said Brian Cornell, chief executive officer, in the release.

As for an outlook on future performance, the company said that low consumer confidence and increased economic volatility are expected to have a continued adverse effect on the business for the remainder of the year, causing the forecasting of future results with any level of certainty to be difficult.

However, the company also said that it expects the first half trends for same-store sales, adjusted EBITDA, net income and cash flow from operations to continue for the second half.

Michaels Stores is an Irving, Texas-based arts and crafts specialty retailer.

LCDX inches up

LCDX 10 was a touch stronger in trading as the stock market posted some gains, according to a trader.

The index was quoted at 97 bid, 97.10 offered, up from Tuesday's levels of 96.90 bid, 97 offered, the trader said.

Nasdaq closed up 20.49 points, or 0.87%, Dow Jones Industrial Average closed up 89.64 points, or 0.79%, S&P 500 closed up 10.15 points, or 0.80%, and NYSE closed up 86.12 points, or 1.04%.

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