MTS looking for $100 million debtor-in-possession facility

By Jeff Pines

Washington, Feb. 9 - MTS, Inc. said it has negotiated a $100 million debtor-in-possession financing facility with its existing lenders, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

MTS, which owns music recording retailer Tower Records, had a prepetition facility of $100 million with The CIT Group/Business Group, Inc.

But the new facility gives MTS more flexibility. In fact, the company described the proposed DIP as "substantially superior" that the credit facility it had for the last 18 months. The proposed exit facility, which CIT also will provide will give the company another $6.5 million in flexibility.

The $100 million facility includes an $18 million term loan and a $10 million real estate sub-line. The remainder will be a revolving loan.

The borrowing base will be based on value of MTS' inventory. An appraisal will be conducted by a third party.

The interest rate for the revolver will be Libor plus 350 basis points. The real estate loan will be prime plus 500 basis points with a floor of 11%.

MTS will pay a $500,000 commitment fee and a $250,000 closing fee if the company continues operating under the DIP after the plan's effective date. The revolver has a 50 basis points unused fee.

The case number is 04-10394.

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