Central Parking loan on hold after CFO quits, company pulls earnings guidance

By Sara Rosenberg

New York, Feb. 18 - Central Parking Corp.'s proposed $350 million credit facility has hit a bump in the road that has some wondering whether the loan will be completed or not. The question arose following Friday's news that the company will not provide earnings guidance and that the chief financial officer and senior vice president resigned.

According to a syndicate source the deal "is on hold right now. We're waiting to get more information and then see what we'll do."

"People liked it," a market professional said, "But investors may be pulling out of the book. The CFO quit and they withdrew earnings forecasts this year. It's way up in the air."

"We're very driven by free cash flow and ability to service debt," a sell side source said. The deal may pull through "if they can get their act together."

During Friday's shortened session, Central Parking released earning results, which included GAAP net earnings of $0.19 per diluted share for the quarter ended Dec. 31, 2002 and revenues for the first quarter of fiscal 2003 excluding reimbursed management costs of $183 million compared to $177.0 million in the year-earlier period.

More importantly though the company announced that it was not providing earnings guidance for the second quarter or the balance of fiscal 2003 given the uncertainty in the economy due to the potential for conflict in the Middle East. Central Parking also discontinued the practice of reporting pro forma earnings.

"I don't know what the Middle East has to do with a parking company," the market professional said in regards to Central Parking's reasoning.

In addition to the earnings news, the company also announced that Hiram A. Cox, senior vice president and chief financial officer, resigned and William J. Vareschi, Jr., the chief executive officer, is acting chief financial officer in the interim.

Despite all this, Central Parking did not express concern over the proposed credit facility in Friday's release. "The company's credit facility is reflected as current on the balance sheet for the first quarter. The company is negotiating a refinancing of its credit facility which it anticipates closing on or before February 28," said Vareschi in the release.

However, in a filing with the Securities and Exchange Commission the company stated: "The failure of the company to secure refinancing of the credit facility would force the company to secure other forms of financing as current operating cash flows would not be sufficient to cover the contractually required debt service requirements. The company's inability to secure other financing to refinance the credit facility would have a material adverse impact on the company. Additionally, refinancing the credit facility with other financing at higher interest rates could impact the company's financial performance."

The $350 million credit facility was launched in January to a very receptive market. In fact, the institutional market liked the deal so much that the expectation was that the term loan B would flex down by 25 basis points before the deal was done, according to the market professional.

The facility consists of a $175 million five-year revolver with an interest rate of Libor plus 275 basis points and a $175 million seven-year term loan B with an interest rate of Libor plus 325 basis points, expected to be reduced to Libor plus 300 basis points.

Currently, the company's existing facility consists of $200 million five-year revolver including a sub-limit of $40 million for standby letters of credit and a $200 million five-year term loan. The amount outstanding under the credit facility was $226 million with a weighted average interest rate of 2.8% as of Dec. 31, 2002, including the principal amount of the term loan of $62.5 million, which is required to be repaid in quarterly payments of $12.5 million through March 2004, according to a filing with the Securities and Exchange Commission. The aggregate availability under the facility was $30.6 million at Dec. 31, which is net of $29.3 million of stand-by letters of credit.

As of Dec. 31, the company wasn't in compliance with the leverage ratio and therefore a waiver was obtained from the lenders for the quarter. The company also projected that non-compliance with the leverage ratio at the next measurement day is probable and, accordingly, has classified the $163.5 million outstanding balance as a current liability at Dec. 31.

Bank of America is the lead bank on the Nashville parking facility operator's proposed credit facility.

Meanwhile, the secondary bank loan market was labeled as inactive on Tuesday as traders felt the effects of the snowstorm on the east coast.

"There's not a soul around to discuss anything with," a trader told Prospect News. Today was a good day to take off. Nobody seems to be around."

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