Solutia breaks; Herbst drops as advisor hired; Leap, Revlon bid up with numbers; Cash, LCDX down

By Sara Rosenberg

New York, Feb. 28 - Solutia Inc.'s exit financing credit facility freed up for trading late Thursday, with the term loan B quoted well above its original issue discount price, and Herbst Gaming Inc.'s term loan plummeted during market hours on the back of news that the company has hired an advisor to evaluate financial and strategic alternatives.

Also in trading, Leap Wireless International Inc. and Revlon Inc. saw levels on their term loans tighten as the bid side crept up following the release of earnings, and cash and LCDX 9 were both softer.

Solutia closed the books on its exit financing credit facility at noon ET on Thursday, and then proceeded to allocate and break the deal for trading by early evening, according to a trader.

The $1.2 billion seven-year term loan B (B1/B+) was quoted at 92½ bid, 93½ offered on the break, and then moved up to 93 bid, 94 offered, where it closed out the day, the trader said.

The term loan B, which ended up filling out in the end, is priced at Libor plus 500 basis points, with a 3.5% Libor floor for four years, and was sold at an original issue discount of 91.

During syndication, pricing on the term loan B was increased from Libor plus 350 bps, the Libor floor was added, with it first being proposed at 3.25% for three years and then being revised prior to close, and the original issue discount was increased from the 96 area.

"It's trading up well. Not too many guys are flipping. It's juicy paper," the trader added about the term loan B.

Solutia's $1.65 billion senior secured credit facility also includes a $450 million asset-based revolver (Ba1) priced at Libor plus 175 bps.

During syndication, the asset-based revolver was upsized from $400 million.

Citigroup, Goldman Sachs and Deutsche Bank acted as the lead banks on the credit facility that funded on Thursday. These banks have also committed to provide the company with a $400 million senior unsecured bridge facility.

Proceeds from the facility, along with bridge loan, are being used to pay creditors under the company's plan of reorganization and to fund ongoing operations now that it has emerged from Chapter 11.

Solutia and the banks had been arguing over the exit financing for weeks, and even went to court over the dispute, because the banks were trying to back out of the debt commitment by using the market material adverse change provision.

The banks claimed that an adverse change occurred in the loan syndication, financial or capital markets since Oct. 25 that, in their reasonable judgment, materially impaired syndication of the facility.

The company, however, argued that the ongoing conditions in the credit markets began long before Oct. 25 and, therefore, the banks were required to fund their commitments.

As part of the recent resolution, the banks agreed to waive the market material adverse change provision and Solutia agreed to dismiss the lawsuit, with prejudice, that it filed on Feb. 6 against the banks.

Solutia is a St. Louis-based manufacturer and provider of performance films, specialty chemicals and an integrated family of nylon products.

Herbst dips as alternatives under review

Herbst Gaming's term loan fell off by a couple of points in trading after news emerged that the company engaged a financial advisor to assist with an evaluation of strategic alternatives, according to a trader.

The term loan was quoted at 75 bid, 79 offered post news, down from 81 bid, 83 offered on Wednesday, the trader said. In the beginning of the week, the term loan was being quoted at 84 bid, 86 offered.

On Thursday afternoon, Herbst said that it hired Goldman, Sachs & Co. to help evaluate various alternatives, including a recapitalization, refinancing, restructuring or reorganization of its obligations or a sale of some or all of its businesses.

"The company has a long history of providing gaming services in Nevada and we believe in the strength of the Terrible's brand; however, the recent impact from Question 5, the Nevada smoking ban, and general economic weakness has required us to explore our alternatives. We are confident that our retention of a financial advisor will help us capitalize on the strength of our brand and position the company to maximize long-term value," said Ed Herbst, chairman, president and chief executive officer, in the release.

Herbst Gaming is a Las Vegas-based casino and slot route operator.

Leap bid higher

Leap Wireless' term loan levels tightened on Thursday after fourth quarter and full year 2007 numbers came out, with the bid on the debt inching up and the offer coming down, according to a trader.

The term loan was quoted at 95 bid, 96 offered, compared to Wednesday's levels of 94¾ bid, 96¼ offered, the trader said.

For the fourth quarter, the company reported service revenues of $372.2 million, up 38% from fourth quarter 2006, total revenues grew by 37%, operating income was $21.7 million, an improvement of $37.7 million from the operating loss of $16.5 million reported for the fourth quarter of 2006, and adjusted OIBDA was $112.5 million, up 117% from adjusted OIBDA of $51.9 million last year.

Also in the fourth quarter, net loss was $18.1 million, or $0.27 per diluted share, compared to a net loss of $45.6 million, or $0.69 per diluted share, for the fourth quarter of 2006.

For full year 2007, total revenues were $1.631 billion, up 39.7% from 1.167 billion last year, operating income was $60.3 million, up 154.4% from $23.7 million in 2006, net loss was $75.9 million compared to net loss of $24.4 million last year, and diluted net loss per share was $1.13, compared to net loss per share of $0.40 in 2006.

"Our 2007 results demonstrate the success of our growth initiatives and continuing customer acceptance of our unlimited value proposition," said Doug Hutcheson, chief executive officer, president and acting chief financial officer, in a news release. "The year-over-year doubling of fourth quarter adjusted OIBDA reflects benefits of scale from our larger customer base and increasing contributions from our 2006 and 2007 market launches. We expect to add our three millionth customer today and believe the business is well positioned for the future.

"Looking ahead, the company intends to enhance financial returns by optimizing the relationship between ARPU, customer growth and cost as we evolve our product and service offerings, launch new markets and expand our broadband initiatives," Hutcheson added in the release.

Leap is a San Diego-based provider of wireless services.

Revlon bid strengthens

Revlon's term loan had a similar fate as that of Leap on the heels of financial results being released, as it too saw better bids with slightly lower offers, according to a trader.

The term loan was quoted at 91½ bid, 93 offered, compared to previous levels of 91¼ bid, 93¼ offered, the trader said.

For the fourth quarter, the company reported net sales of $382.6 million, compared to net sales of $378.9 million in the fourth quarter of 2006, operating income was $80.4 million, versus operating income of $70.1 million last year, net income was $40.8 million, or $0.08 per diluted share, compared with a net loss of $5.5 million, or $0.01 per diluted share, and adjusted EBITDA was $106.3 million, compared to an Adjusted EBITDA of $108.2 million in the same period last year.

For full year 2007, net sales increased to $1.4 billion from $1.33 billion last year, operating income increased to $121 million, compared to an operating loss of $50.2 million in 2006, net loss was $16.1 million, or $0.03 per diluted share, compared to a net loss of $251.3 million, or $0.60 per diluted share, and adjusted EBITDA was $224.5 million, compared to $78.2 million in 2006.

"We are executing our strategy and our financial results in 2007 were our best in many years. We generated $224.5 million in adjusted EBITDA and our negative free cash flow was $13.8 million. Our improved financial performance was driven by increased net sales, continued benefits from our restructuring actions and ongoing control of our costs. We fully recognize the need to further improve our performance, and enter 2008 with a continued focus on increasing the value of our company by building the Revlon brand and driving towards both profitable sales growth and positive free cash flow," said David Kennedy, president and chief executive officer, in a news release.

Revlon is a New York-based cosmetics, hair color, beauty tools, fragrances, skincare, anti-perspirants/deodorants and personal care products company.

Cash, LCDX slide

The cash market in general was weaker on Thursday, and LCDX 9 suffered as well, as investors are likely involved in some profit taking and equities had a negative day, according to a trader.

Cash was off by about a quarter of a point to three eighths of a point, while LCDX was down about half a point to 92.05 bid, 92.15 offered from 92.55 bid, 92.65 offered, the trader said.

"Equities sold. General market weakness, but, then again, the loan market had a run up [recently] so I think there was some profit taking in cash and the index. And, for the index, guys are trying to reset shorts," the trader remarked.

On Thursday, Nasdaq was down 22.21 points, or 0.94%, Dow Jones Industrial Average was down 112.10 points, or 0.88%, S&P 500 was down 12.34 points, or 0.89%, and NYSE was down 71.01 points, or 0.76%.

Cablevision down with market

Cablevision Systems Corp.'s term loan softened during the trading session despite its release of positive fourth quarter and full year numbers, as the debt succumbed to the overall negative tone in the secondary, according to a trader.

The term loan was quoted at 92 bid, 93 offered, down from 92½ bid, 93½ offered, the trader said.

For the fourth quarter, the company reported consolidated net revenue of $1.842 billion, up 10.8% from the prior year period, consolidated adjusted operating cash flow increased 20.4% to $610.2 million and consolidated operating income grew 62.9% to $330.3 million.

For the full year 2007, consolidated net revenue increased 11.3% to $6.484 billion, consolidated adjusted operating cash flow grew 16.8% to $2.087 billion and consolidated operating income increased 54.7% to $911.1 million.

"Cablevision had a good fourth quarter and a strong 2007 with annual double-digit revenue and AOCF (adjusted operating cash flow) growth. Our cable operations helped drive this year's performance with strong subscriber increases in digital video, voice and data, which ensured that Cablevision maintained its industry-leading penetration rates. Also fueling our success in 2007 was Rainbow Media and MSG, which both delivered double-digit increases in revenue and AOCF for the full year," said James L. Dolan, president and chief executive officer, in a news release.

Cablevision is a Bethpage, N.Y.-based entertainment and telecommunications company.

NRG firm on numbers, management changes

NRG Energy Inc.'s opco term loan held steady on Thursday after the company announced earnings results and a couple of changes to management, according to a trader.

The term loan was quoted at 92½ bid, 93½ offered, unchanged on the day, the trader said.

For the fourth quarter, the company reported net income from continuing operations of $100 million, or $0.34 per diluted common share, compared to a net loss of $35 million, or $0.19 per diluted common share, for fourth quarter of 2006.

Also in the fourth quarter, cash flow from operations was $541 million and adjusted EBITDA was $518 million.

For full year 2007, net income from continuing operations was $569 million, or $1.95 per diluted common share, compared to 2006 net income from continuing operations of $543 million, or $1.78 per share.

Net cash flow from operations was $1.517 billion for full year 2007, compared to adjusted cash flow from operations in 2006 of $1.473 billion, and adjusted EBITDA was $2.279 billion.

For 2008, the company estimates $1.5 billion of cash flow from operations and $2.16 billion of adjusted EBITDA.

In addition, on Thursday, the company announced some management changes, including that Robert Flexon, chief financial officer, will assume the newly created position of chief operating officer, Clint Freeland, treasurer, will become chief financial officer, Kevin Howell, executive vice president commercial operations, will fill the vacant position of chief administrative officer, and Mauricio Gutierrez, vice president of trading, will become senior vice president of commercial operations.

NRG is a Princeton, N.J.-based owner and operator of a diverse portfolio of power-generating facilities.

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