UAL rises with earnings; Rite Aid better; Reynolds sets official talk; Rural/Metro launches

By Sara Rosenberg

New York, Oct. 20 - UAL Corp.'s term loan headed higher in trading following the company's release of third-quarter numbers and Rite Aid Corp.'s existing tranche-4 term loan was a little stronger after seesawing around during the previous session.

Over in new deal happenings, Reynolds released official guidance on its credit facility as the deal was launched with a bank meeting on Tuesday morning and Rural/Metro Corp. came out with a refinancing deal.

Also, Universal Orlando announced plans for a new credit facility and, being that the launch is set to take place on Wednesday, details on tranching and price talk emerged.

UAL stronger on numbers

UAL's term loan gained some ground on Tuesday after the company came out with third-quarter earnings results, according to traders.

The Chicago-based airline company's term loan was quoted by one trader at 79 bid, 79½ offered, up from 76 bid, 78 offered, and by a second trader at 79½ bid, 81½ offered, up from 76½ bid, 77½ offered.

For the third quarter, the company reported a net loss of $57 million, or $0.39 per share, compared to a net loss of $792 million, or $6.22 per share, last year.

Revenues for the quarter were $4.433 billion, compared to $5.565 billion in the third quarter of 2008.

During the third quarter, the company generated $56 million of positive operating cash flow and $4 million of negative free cash flow.

The company ended the quarter with a total cash balance of $2.8 billion, an unrestricted cash balance of more than $2.5 billion and restricted cash of $309 million.

UAL raises funds

In the third quarter, UAL raised about $270 million, including $155 million from the spare parts financing previously announced in July, $27 million from issuances of common equity, $70 million from aircraft secured financings and about $20 million from asset sales.

Then, early in the fourth quarter, the company raised an additional $1.3 billion. This includes $345 million from a convertible debt offering, $138 million from the issuance of common equity, $129 million from a financing with SkyWest Inc. and $659 million from refinancing an enhanced equipment trust certificate.

"We have made significant progress relative to last year, reporting an operating profit of $123 million, excluding charges, and generating what we believe will again be leading cost control among our peers, reducing our mainline unit costs even as we reduce capacity," said Kathryn Mikells, chief financial officer, in the release.

"We continue to take action to improve our liquidity, and after successfully executing about $1.5 billion in transactions over the last four months, our unrestricted cash balance today stands at more than $3.1 billion, with only about $90 million in debt payments remaining this year," Mikells added.

Rite Aid inches up

Rite Aid's tranche-4 term loan was a touch better in trading after a bit of a rocky day on Monday when news of an add-on was released, according to a trader.

The tranche-4 term loan was quoted on Tuesday at 104 bid, 104¾ offered, up a quarter of a point on the day, the trader said.

On Monday, the loan hit a low of 103 bid, 104 offered after the add-on was first announced. It then climbed back up, but still ended lower when compared to Friday's closing levels of 104¼ bid, 1051/4.

The company held a conference call on Monday morning to launch a $125 million add-on to the tranche-4 term loan due June 2015 priced at Libor plus 650 basis points with a 3% Libor floor, and carrying call protection of 105, 103, 101.

Market chatter is that the add-on to the tranche-4 term loan may be issued at a premium of 103, but nothing official has been announced as of yet.

Rite Aid also increasing revolver

In addition to the term loan add-on, Rite Aid is doing a $175 million senior secured revolver add-on priced at Libor plus 450 bps with a 3% Libor floor.

Proceeds from the additional term loan and borrowings under the upsized revolver will be used to help repay and cancel the company's accounts receivable securitization facilities.

Other funds for the refinancing will come from a $270 million senior secured notes offering.

As of Oct. 16, there was $475 million outstanding under the securitization facilities.

Upon successful completion of the transactions, the company will have refinanced all of its September 2010 debt maturities.

Citigroup is the left lead bank and a bookrunner on the incremental bank debt, and Bank of America, Wells Fargo and Goldman Sachs are joint bookrunners as well.

Rite Aid is a Camp Hill, Pa.-based drugstore chain.

Supervalu holds firm

Supervalu Inc.'s term loan B was unchanged on the day after earnings were announced, with one trader quoting it at 96 bid, 96½ offered and a second trader quoting it at 95½ bid, 96½ offered.

"They were bad, but maybe a little better than expected," the first trader remarked about the quarterly results.

For the second quarter fiscal 2010, Supervalu's net earnings were $74 million, or $0.35 per diluted share, compared to net earnings of $128 million, or $0.60 per diluted share, in the prior year.

Reported operating earnings for the quarter were $245 million, or 2.6% of net sales, compared to $342 million, or 3.3% in the fiscal 2009 second quarter.

Net sales for the quarter were $9.5 billion, compared to $10.2 billion in the same period last year.

And, total debt to capital was 75% at quarter-end, compared to 77% at fiscal 2009 year-end.

"Consumer purchasing behavior, deflationary pressures, as well as our decision to make meaningful investments in price and promotions significantly impacted our second-quarter sales and margins. As a result, earnings were lower than the prior year, generally in line with our expectations, and slightly better than analysts' consensus of $0.33 per share as reported by First Call," said Craig Herkert, chief executive officer and president, in a news release.

Supervalu updates guidance

Also on Tuesday, Supervalu updated its guidance for fiscal year 2010, including revising diluted net earnings per share estimates to a range of $1.95 to $2.05 from a range of $1.95 to $2.15.

And, non-GAAP adjusted diluted net earnings per share are now expected to be in the range of $2.01 to $2.11 as opposed to in the range of $2.01 to $2.21.

"We are taking 10 cents off the top of our previous fiscal 2010 earnings guidance range as the economic outlook in the back half of the year and its impact on consumers has become clearer," Herkert explained in the release.

The full-year outlook is based on the assumptions that, among other things, net sales will be around $41 billion, capital spending will be around $700 million, and debt reduction will be around $700 million.

Supervalu is an Eden Prairie, Minn.-based supermarket operator.

MGM Mirage steady with charge

MGM Mirage's term loan held firm on Tuesday despite news of an expected pre-tax non-cash impairment charge in the third quarter of about $955 million related to its investment in CityCenter, according to traders.

The term loan was quoted by one trader at 91¾ bid, 92¾ offered and by a second trader at 92 bid, 93 offered, with both traders calling the paper flat on the day.

In addition to the $955 million charge, the company said that it will recognize 50% of CityCenter's $348 million non-cash impairment charge related to residential real estate under development.

The net pre-tax impact of the CityCenter residential charge to the company's third-quarter operating results is expected to be about $200 million.

Third quarter results will be released on Nov. 5.

MGM Mirage is a Las Vegas-based gaming, hospitality and entertainment company.

Reynolds price talk

Moving to the primary market, Reynolds held a bank meeting on Tuesday to kick off syndication on its credit facility and in conjunction with the launch, official pricing guidance was announced, according to a market source.

The $835 million term loan was presented to lenders with talk of Libor plus 500 bps with a 2% Libor floor, and an original issue discount in the 97 to 98 area, the source said.

By comparison, prior to the meeting, sales people were telling investors to expect price talk to emerge around the Libor plus 450 bps to 500 bps area with an original issue discount of 98.

The company's roughly $1.45 billion credit facility also includes a $120 million revolver, an €80 million revolver and a €250 million term loan.

Credit Suisse is the lead bank on the deal.

Reynolds funding acquisition

Proceeds from the Reynolds credit facility will be used to help fund the acquisition of Closure Systems International and Reynolds Consumer Products by Beverage Packaging Holdings, the holding company of SIG Group, which is owned by Rank Group.

According to the market source, the Tuesday bank meeting for the credit facility was "well attended."

"Interesting story, though. Rank sort of combining their portfolio companies on the packaging and then relevering. Smells like there's a dividend also being paid out to the sponsor [...]," the source added.

Reynolds getting notes

Reynolds also plans on getting $1.1 billion of senior secured notes and €450 million of senior secured notes for the acquisition, and additional funds will come from €116 million of existing cash and €500 million of equity.

These financings will also be used to repay existing bank borrowings at Beverage Packaging of around €485 million and repay existing Reynolds debt.

The total purchase price for the companies is $3.023 billion, or 7.7 times LTM adjusted pro forma EBITDA.

Pro forma for the transaction, net senior secured leverage will be 3.3 times and net total leverage will be 4.8 times.

Closing is expected to take place in the fourth quarter and the combined entity will assume the Reynolds name.

Reynolds is a manufacturer of aluminum foil, wraps and bags. Closure Systems is a manufacturer of plastic caps and closures, primarily serving the beverage market. And, Beverage Packaging is a manufacturer of aseptic carton packaging systems.

Rural/Metro doing refinancing

Rural/Metro also launched a new deal with a bank meeting on Tuesday, but proceeds from this facility will be used to refinance an existing credit facility that is due in 2011.

The $190 million credit facility consists of a $40 million revolver and a $150 million term loan, with both tranches talked at Libor plus 525 bps with a 2% Libor floor and an original issue discount of 98, according to a market source.

RBC is the lead bank on the deal.

Commitments are due from lenders on Nov. 5.

This credit facility refinancing is a condition of the company's tender offer for its 12.75% senior discount notes due 2016.

Rural/Metro is a Scottsdale, Ariz.-based provider of emergency and non-emergency ambulance services and private fire protection services.

Universal Orlando schedules launch

Universal Orlando told investors that a conference call will be held on Wednesday to launch a $975 million credit facility comprised of a $900 million five-year term loan B and a $75 million four-year revolver, according to sources.

Price talk on both the revolver and the term loan B is Libor plus 425 bps with a 2.5% Libor floor, the source said, adding that original issue discount is still to be determined.

JPMorgan and Bank of America are the joint lead arrangers and bookrunners on the facility, and Barclays, Deutsche Bank, Goldman Sachs and Morgan Stanley are bookrunners as well.

Proceeds will be used to help fund the redemption of 11¾% senior notes due in 2010, 8 3/8% senior notes due in 2010 and floating-rate senior notes due in 2010.

Other funds for the redemptions will come from a $400 million senior unsecured notes offering and a $225 million senior subordinated notes offering.

Universal Orlando is an Orlando, Fla.-based owner and operator of theme parks.

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