Blockbuster rises on amendment plans; Avaya soft with acquisition news; Skype works on timing

By Sara Rosenberg

New York, Sept. 14 - Blockbuster Inc.'s term loan B moved higher in the secondary market on Monday following the company's announcement that it will try to amend its credit facility so as to exchange or extend the maturity on the debt.

In more trading happenings, Avaya Inc.'s term loan weakened as the company emerged as the winning bidder for Nortel Enterprise Solutions.

Over in primary happenings, Skype Technologies SA is still in the process of trying to nail down timing on the launch of its credit facility, with the company now looking at next week for the possible launch as opposed to this week.

Blockbuster trades up

Blockbuster's term loan B gained some ground during the trading session with news of a planned amendment that would deal with the debt's maturity, according to a trader.

The term loan B was quoted at 92 bid, 93 offered, up from Friday's levels of 90¾ bid, 91¾ offered, the trader said.

On Monday, Blockbuster revealed that it will be giving term loan B lenders the option to trade in their debt for new notes or extend the maturity on their debt.

The notes that are being offered in exchange for term loans are senior secured notes due in 2014 that will have equal priority to liens granted under the company's credit facility.

Blockbuster is offering to sell up to $340 million of these new notes.

JPMorgan is the lead on the notes and plans to hold an investor call on Tuesday to launch the offering.

Proceeds from the notes that are not exchanged for term loans will be used to repay all outstanding debt under the company's revolver and Canadian asset-based revolver and for general corporate purposes.

Blockbuster also seeks extension

Concurrently with the notes offering, Blockbuster is doing an extension offer for its term loan B, under which lenders can agree to push out the debt's maturity to May 31, 2012 from Aug. 20, 2011.

The extended term loan B debt will have higher pricing.

In addition, the extended term loan B will have a revised loan amortization payment schedule.

The credit facility amendment will also include changes to financial covenants.

Blockbuster is a Dallas-based provider of in-home movies and game entertainment.

Avaya slides

Avaya's term loan moved lower on Monday after the company announced that, following completion of an auction, it was selected to acquire Nortel Enterprise Solutions, according to a trader.

The term loan was quoted at 77½ bid, 79½ offered, down from 80 bid, 81 offered, the trader said.

Avaya is purchasing Nortel Enterprise Solutions for $900 million in proceeds to Nortel and an additional pool of $15 million reserved for an employee retention program.

The transaction is expected to close in the fourth quarter, subject to court approvals in the United States, Canada, France and Israel as well as regulatory approvals, other customary closing conditions and certain post-closing purchase price adjustments.

Canadian and U.S. court approvals of the transaction will be sought at a joint hearing on Tuesday.

Avaya is a Basking Ridge, N.J.-based provider of unified communications, contact centers and related services to businesses and organizations.

Skype possible timeframe

Moving to the new deal market, timing on the launch of Skype Technologies' credit facility is still very fluid, but what has become clear is that the bank meeting will not be this week's business as was previously hoped, according to an informed source.

"Perhaps next week," the source added.

The credit facility is expected to consist of a roughly $600 million term loan and a revolver. The size of the revolver is not yet public and it's possible that the revolver will not be syndicated.

JPMorgan, Barclays and RBC Capital Markets are the lead banks on the deal.

Proceeds will be used to help finance the purchase of a 65% stake in the company by an investor group led by Silver Lake and including Index Ventures, Andreessen Horowitz and the Canada Pension Plan Investment Board.

eBay Inc., the current owner of Skype, will retain a 35% interest in the company.

Skype using equity

Other funds for the buyout of Skype will come from equity from both the buying group and the seller.

eBay is expected to receive about $1.9 billion in cash upon the completion of the sale and a subordinated note from the buyer in the principal amount of $125 million. The transaction values the company at $2.75 billion.

The acquisition, which is not subject to a financing condition, is expected to close in the fourth quarter.

Skype generated revenues of $551 million in 2008, a 44% increase compared to 2007, and registered Skype users reached 405 million by the end of 2008, a 47% increase from 2007.

In addition, eBay has projected that Skype revenues will exceed $1 billion in 2011.

Skype is a Luxembourg-based software that enables individuals and businesses to make free video and voice calls, send instant messages and share files with other Skype users.

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