Cengage bounces around; Neiman falls; Cash, LCDX drop; Affinia pulls deal; Apria talk emerges

By Sara Rosenberg

New York, Sept. 24 - Cengage Learning's term loan seesawed on Wednesday, popping up early in the session immediately following the release of positive fourth-quarter numbers, but then falling with the rest of the market to end the day lower.

Also in trading, Neiman Marcus Inc.'s term loan was lower after earnings were announced, but the heaviness in the market may have been the real reason behind the drop, more liquid names like Texas Competitive Electric Holdings (TXU), General Motors Corp. and Ford Motor Co. were down as selling appeared to be investors' prime objective, and LCDX 10 dropped as well.

In other news, Affinia Group Inc. removed its asset-based revolving credit facility from market as a result of the recent volatility and Apria Healthcare Group Inc. came out with timing on the launch of its proposed credit facility and price talk as well.

Cengage Learning's term loan rollercoastered during Wednesday's market hours, with levels moving higher right after earnings were announced and then coming in with the overall market as the day progressed, according to traders.

In the morning, the term loan was seen quoted in the 84 bid, 85 offered context on the earnings news, but it then started to slide, moving to 83½ bid, 84½ offered by around midday and to 83 bid, 84 offered by the end of the day, where it closed out the session, traders said. By comparison, on Tuesday, the loan went out at 83½ bid, 84½ offered.

"Numbers came this morning and they were pretty good. EBITDA number was way higher than expected," one trader remarked.

"Numbers were phenomenal. The call went really well. It just couldn't hold it. Whole market is down one to two points probably," a second trader added.

For the fourth quarter, Cengage reported EBITDA of $84.1 million, up 364.6% from $18.1 million in the fourth quarter of 2007.

Revenue for the quarter was $354.8 million, up 22.1% from $290.7 million in the comparable period last year.

Net loss for the quarter was $308.1 million, compared to a net loss of $40.4 million in 2007.

And, free cash flow for the quarter was negative $83 million versus negative $23.9 million last year.

Cengage is a Stamford, Conn., provider of print and digital instructional and reference materials for the higher education and library reference markets.

Neiman trades down

Neiman Marcus' term loan was softer in trading on the back of the release of fourth-quarter numbers, but traders said that the slide may have been more a function of the overall market being down and less a function of the earnings results.

The term loan was quoted at 89 bid, 90 offered, down from 90½ bid, 91½ offered, traders said.

For the fourth quarter, the company reported total revenues of $1.03 billion, compared to $981.7 million in the prior year.

Net loss for the quarter was $35.6 million versus a net loss of $15.9 million in the comparable period last year.

Operating loss for the quarter was $6.2 million, compared to operating earnings of $32.2 million for the fourth quarter of fiscal year 2007, and adjusted operating earnings were $43.4 million for the quarter, down 22.2%from $55.8 million last year.

In addition, EBITDA for the quarter was $55 million, compared to $85 million last year, and adjusted EBITDA was $86 million, down from $91 million in 2007.

Neiman Marcus is a Dallas-based high-end specialty retailer.

Liquid names suffer as sellers dominate; LCDX dips

The more liquid names, like Texas Competitive, General Motors and Ford, just to name a few, continued to grind lower on Wednesday as people seem interested in selling their paper and getting cash, according to traders.

Texas Competitive, a Dallas-based energy company, saw its term loan debt drop to 85¾ bid, 86¾ offered from 86¾ bid, 87¾ offered on Tuesday, traders said.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 68½ bid, 70½ offered, down from 70 bid, 71 offered.

And, Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 68½ bid, 70½ offered, down from 69¾ bid, 71¾ offered, traders remarked.

"People are just selling anything they can sell today. People selling more liquid names because you can get bids for that and raise cash," one trader explained.

"People are worried to see what's going on with this bailout and people are just nervous. Seems like people are definitely trying to get in cash right now so that when things start getting better, they can buy stuff," the trader added.

"Quieter, heavier days I've seen in a long time," a second trader said. "There's a ton of liquidity that's going to be taken out of the market soon because hedge funds keep blowing up. Not enough money to bail out the banks, so who's going to bail out the hedge funds?"

Overall, the par cash market was down one to two points on the day, while the distressed loan market was down by about two to four points.

Meanwhile, LCDX 10 ended Wednesday at around 93.40 bid, 93.60 offered, down from Tuesday's levels of 94.40 bid, 94.60 offered.

Stocks were a mixed bag, with Nasdaq up 2.35 points, or 0.11%, Dow Jones Industrial Average down 29 points, or 0.27%, S&P 500 down 2.35 points, or 0.20%, and NYSE down 16.45 points, or 0.21%.

Affinia cancels revolver plans

Over in primary happenings, Affinia decided to suspend its previously announced plans to syndicate a $340 million asset-based revolving credit facility given the recent volatility in the capital markets, according to a news release.

In addition, the company has decided not to go ahead with its $200 million senior secured notes offering either.

Proceeds from the revolver, along with the notes, were going to be used to repay all amounts outstanding under the company's existing senior secured credit facility and to finance the acquisition of HBM Investment Ltd.

The acquisition of Haimeng is expected to proceed as planned and is expected to close in the fourth quarter of this year.

The company went on to say that it may consider refinancing alternatives in the future, as market conditions allow.

Affinia is an Ann Arbor, Mich.-based designer, manufacturer and distributor of aftermarket vehicular components.

Apria sets launch, floats talk

Apria Healthcare Group announced a bank meeting date for its proposed $150 million senior secured asset-based revolving credit facility, and also revealed price talk on the deal, according to market sources.

The revolver, which is set to launch on Oct. 2, is being talked at Libor plus 250 basis points, sources said.

Bank of America, Wachovia and Barclays are the lead banks on the deal that is being obtained in connection with the company's buyout by the Blackstone Group for $21.00 per share in cash. The transaction is valued at about $1.6 billion.

Borrowings under the revolver can be used for working capital and general corporate purposes. Up to $30 million may be drawn under the revolver at close as long as availability is not less than $75 million.

The Blackstone acquisition will also be financed with $700 million of equity and the issuance of $1 billion of senior secured notes that is backed by a senior secured bridge loan.

If the borrowing base under the revolver is less than $150 million but equal to or greater than $100 million, additional notes will be issued to make up for the shortfall.

Closing on the acquisition is expected to take place in the second half of 2008, subject to customary conditions, including approval by Apria's shareholders and termination of the Hart-Scott-Rodino regulatory waiting period, which was already obtained.

A meeting for Apria's shareholders is set to take place on Oct. 10.

Apria is a Lake Forest, Calif., home health care services company.

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