Levi Strauss term loan B dips on tax fraud allegations

By Sara Rosenberg

New York, April 15 - Levi Strauss & Co.'s term loan B bank debt caught a lot of attention on Tuesday as the paper slid lower by a couple of points. The downward drop was attributed to allegations of tax fraud in a news report.

The San Francisco Chronicle printed an article on Tuesday stating that two high-level tax managers, who were recently fired from the company, filed a lawsuit on Monday claiming that Levi "booked hundreds of millions of dollars in questionable income and tax deductions that artificially inflated the company's profit...Had Levi told the truth about its income and accrued financial troubles last year, the lawsuit claims, the company would have reported a 2002 net operating loss of at least $336 million."

The article went on to say that the company denied these allegations, stating that the financial statements are accurate.

Levi's term loan B was quoted with a 95 bid, 97 offer by the end of the day on Tuesday, according to a trader. On Monday the San Francisco brand name clothing company's loan was quoted in the area of a 97½ bid, 98½ offer.

Meanwhile, Calpine Corp.'s bank paper was up by about a quarter to a half a point on Tuesday, according to a trader, with trades taking place at around 941/4.

The marginally better levels are mainly due to the better tone in the power/energy industry in general now that many companies - such as Reliant Resources Inc., Dynegy Inc. and Allegheny Energy Inc. - have refinanced existing credit facilities, extending maturities and increasing liquidity.

Calpine is a San Jose, Calif. power company.

Qwest Communications International Inc.'s revolver was up by about ¾ to a point on Tuesday, with trades taking place around 963/4, according to a trader.

However, there was no specific reason given as to why the Denver telecommunications company's revolving bank debt was stronger.

Charter Communications Inc.'s term loan B once again traded at 90½ during market hours, according to a trader, unaffected by the company's 10-K filing with the Securities and Exchange Commission.

In the filing, the Charter revealed that effective April 14, the St. Louis cable company entered into a commitment letter with Vulcan Inc., which is an affiliate of Paul Allen, under which Vulcan would lend Charter Communications VII, LLC up to $300 million. This credit facility includes a subfacility of up to $100 million for the issuance of letters of credit, according to a filing with the Securities and Exchange Commission (see story in this issue for further details).

In the primary, Central Garden & Pet's new $200 million credit facility (Ba2/BB+), which launched on Tuesday, is expected to go okay for a couple of reasons including that the company is a repeat issuer, leverage is about three times "which isn't all that bad" and the company has some relationship banks, a market professional told Prospect News.

However, he continued say that it's hard to tell for sure just what the outcome will be since "the market is kind of finicky."

The loan consists of a $100 million five-year revolver with an interest rate of Libor plus 225 basis points and a $100 million six-year term loan with an interest rate of Libor plus 300 basis points, sources said.

CIBC and SunTrust are the lead banks on the deal that will be used to refinance existing debt.

Central Garden & Pet is a Lafayette, Calif. distributor of lawn and garden and pet supply products.

In follow-up news, Behrman Capital completed its acquisition of a majority stake in ILC Industries Inc. In connection with this leverage buyout, ILC obtained a $130 million senior secured credit facility consisting of a $15 million five-year revolver and a $115 million seven-year term loan B with an interest rate of Libor plus 450 basis points. UBS Warburg was the lead bank on the deal.

Behrman Capital partnered with ILC chief executive officer Clifford Lane in the transaction, which has a total value of $303 million.

ILC is a Bohemia, N.Y. supplier of defense electronics, advanced microelectronic components and engineered materials.

Dan River Inc. closed on its $200 million asset-based senior secured credit facility, consisting of a $160 million five-year revolver with an interest rate of Libor plus 250 basis points and a $40 million five-year term loan with an interest rate of Libor plus 275 basis points. Deutsche Bank, Fleet and Wachovia were the lead banks on the deal.

Availability under the revolver is based upon a borrowing base determined by eligible accounts receivable and inventory.

Proceeds, combined with proceeds from the sale of $157 million aggregate principal amount of 12¾% senior notes due 2009, were used to repay all borrowings outstanding under the existing credit agreement, redeem all of its outstanding 10 1/8% senior subordinated notes due 2003 for an aggregate redemption price of $120 million and pay related fees and expenses.

Dan River is a Danville, Va. designer, manufacturer and marketer of products for the home fashions and apparel fabrics markets.

The Pantry Inc. closed on a new $356 million senior secured credit facility, which includes a $52 million revolver that matures on March 31, 2007. Wachovia Securities, Inc. and Wells Fargo Bank served as co-lead arrangers.

Proceeds are being used to refinance amounts outstanding under the company's existing senior secured credit facility. The new revolver replaces an existing $45 million facility, providing the company additional liquidity and flexibility.

With the new loan, the Sanford, N.C. convenience store retailer's scheduled minimum principal payments are reduced to $46 million through fiscal 2005 compared to $164 million under the existing credit facility.

"The new financing provides us greater liquidity through an increase in the revolving credit facility and a significant reduction in scheduled principal payments over the next several years. While this financing transaction enhances our financial flexibility, we remain focused on reducing our outstanding debt and selectively investing in those store upgrade projects that have the highest return on investment. I would like to thank the participating banks and financial institutions for their support and confidence in The Pantry, Inc.," said Peter J. Sodini, president and chief executive officer, in a news release.

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