Jack in the Box term loan B may get upsized and flexed down due to good reception

By Sara Rosenberg

New York, Jan. 15 - Modifications were proposed on Wednesday for Jack in the Box Inc.'s 41/2-year term loan B including a change in size and pricing since the deal "went so well", according to a fund manager.

The syndicate is currently looking to increase the term loan B to $150 million from $125 million and flex pricing down to Libor plus 325 basis points from Libor plus 350 basis points.

"They came out to everybody today and said we're going to do this, get back to us if it's okay," the fund manager said. "I don't think it's finalized but more than likely it will happen.

"The change in size may affect the amortization schedule a little bit, but nothing major," the fund manager added.

The San Diego operator and franchiser of hamburger restaurants launched its new credit facility last week via Wachovia. Besides the term loan, the facility also contains a $175 million three-year revolver with an interest rate of Libor plus 250 basis points. The fund manager had not heard of any proposed changes to the revolver and the syndicate was not immediately available.

Proceeds from the loan will be used to refinance existing debt.

In other primary news, Sun Media Corp.'s credit facility that is scheduled to hit the market on Thursday is expected to attract investor interest mainly because of its appealing capital structure, according to a market source. Bank of America is the lead bank on the deal.

The loan consists of a C$75 million five-year revolver and a $200 million six-year term loan B with an interest rate of Libor plus 300 basis points, according to the source.

"It has a nice capital structure. U.S. term loan. Canadian revolver. The book equity is suggestive of the fact that they're not putting much leverage on this thing. I think it's under two times leverage at the bank level," the source explained.

"[The company] is nothing particularly sexy but it looks well under-levered. People will look at this and say 'great capital structure. I'll take it'," the source continued.

"Some of the proceeds, $200 million, are going to pay dividends at the parent company. Some people won't like that. But I don't think that will stop it from getting done."

Besides going towards dividend payments, proceed will also be used to refinance existing debt.

Sun Media is a Toronto newspaper publishing company.

Central Parking Corp.'s $350 million credit facility is expected to syndicate without a problem, according to one market professional. Bank of America is the lead bank on the deal.

The loan 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, sources said.

"I'm sure it will disappear and be hard to trade," the market professional said. "[The deal] is fairly small and so diversifying it's got to go into the CLOs and just disappear.

"Why would anybody sell it?" the professional continued. "It doesn't look like a deal that would have credit problems. They're not doing anything radical. Parking garages is a very stable business. A nice, decent, unexciting business."

Central Parking is a Nashville operator of parking facilities.

Nexstar Broadcasting Group Inc.'s $260 million credit facility, which launched on Tuesday, was incredibly successful as talk is that "it was immediately oversubscribed," the market professional said.

On Tuesday, a source close to the deal labeled it "a massive blowout".

The loan consists of an $85 million revolver with an interest rate of Libor plus 325 basis points and a $175 million term loan B with an interest rate of Libor plus 350 basis points, sources said.

"It's a nice little company," the professional explained. "Simple strategy. Decent diversity of networks. And the management group behind it has a history of having success with TV stations."

Bank of America and Bear Stearns are the lead banks on the deal that will be used to refinance existing debt.

Nexstar is a Clarks Summit, Pa. owner and operator of television stations.

As for the secondary, Charter Communications Inc.'s bank debt was off about a point on Wednesday at 85 bid, 86 offer following the downgrade of the company's and its subsidiaries debt by Moody's Investors Service, according to a trader.

The downgrades conclude a review that began in October. The outlook remains negative.

Included in the downgrade was Charter Communications Operating LLC, Falcon Cable Communications LLC, CC VI Operating LLC and CC VIII Operating LLC senior secured bank debt to B2 from B1.

"The downgrades are attributed to the growing probability of expected credit losses which Moody's believes will be sustained in connection with an increasingly likely debt restructuring over the near-to-intermediate term," Moody's said. "Rapidly growing term loan amortization payments and debt maturities scheduled for year-end 2003 (Avalon) and 2005 (CCI converts) will be very difficult to meet without some form of restructuring and/or capital injection.

"Moody's notes its revised expectation that maximum permitted financial leverage maintenance covenants in Charter's four subsidiary bank credit agreements, which are scheduled to step-down this quarter and again later this year, may need to be modified and/or waived in 2003. This could be particularly problematic if the prior flexibilities afforded by the company's pre-funded excess cash balances and its ability to equitize intercompany loans have been reduced in any way given the operating cash flow shortfall for the fourth quarter of 2002," Moody's added.

Ratings do anticipate that banks may accommodate the St. Louis cable company's liquidity needs by amending covenants due to their structural seniority and the sizeable asset coverage that exists. However, due to recent performance levels and growth assumptions, the company is still expected to be unable to fully service its debt-burden, Moody's said.

The B2 rating assigned to the credit facilities reflects the expectation that banks would realize full recovery in a more distressed and potential default scenario.

Meanwhile, Fleming Cos. Inc. held a lender call on Tuesday afternoon following the release of worse-than-expected financial estimates during which the company discussed amending its credit facility and updated participants on the progress of the previously announced asset sales.

Earnings from continuing operations for the fourth quarter ended Dec. 28, 2002 are now expected to be approximately $5.0 to $6.0 million, or 10 cents to 12c per share on a diluted basis. The company's estimates fall very short of average analyst estimates of earnings per share of 31c.

According to the company fourth quarter results were negatively impacted by meat deflation, soft comparable store sales, a highly promotional retail environment and higher employment-related expenses.

For the full year 2002, Fleming expects to report earnings from continuing operations of approximately $39.5 to $40.5 million, or 78c to 80c per share. The average analyst estimate for the year was $1.01 EPS.

As for the amendment, the company is seeking relief on its total leverage covenant for the first quarter, according to a fund manager. "I think that has to do with the timing of the asset sales," the fund manager said in regards to the proposed amendment. "If they don't get release and they don't get asset sales, they may be in violation.

"There was a mixed reception to the amendment," the fund manager continued. "Not everyone was enamored by the proposals. Responses are due on the 22nd."

The company explained during the call that the sale of 110 existing price-impact stores that operate under the Food 4 Less and Rainbow Foods banners are going slower than planned. Furthermore, the company expects the asset sales to bring in less than the previously anticipated amount of $450 million.

"Through the entire divestiture process, Fleming has attempted to balance two important strategic objectives: to maximize net proceeds and to enter into new supply arrangements to increase continuing operations revenues. In certain instances, the benefits from a new supply arrangement warranted accepting a lower selling price. While the company initially anticipated total supply agreements of $400 million and total net proceeds in excess of $450 million, based upon the current status of the divestiture process, the company now believes the level of new supply agreements will exceed the projected $400 million and that the total net proceeds will be less than $450 million," a news release said.

To date, Fleming has signed agreements to sell 32 price-impact retail stores. The company expects to receive regulatory approval this week for the sale of 19 of the 28 California price-impact stores and expects the stores to be sold to Save Mart during February 2003. The sale of the remaining nine California stores is subject to anti-trust regulatory approval. The company expects approximately $175 million of net proceeds from these transactions, including approximately $58 million attributable to the nine stores pending regulatory approval.

Last month Fleming's bank debt strengthened to around 98¼ as the company sought and successfully completed an amendment to its credit facility agreement that allowed for the sale of the retail assets. Under the amendment, Fleming agreed to sell $150 million in assets by Dec. 31 and an additional $250 million by March 31, 2003, a source previously told Prospect News.

With the proceeds from the asset sales, Fleming plans to repay its entire term loan. As the amendment started to gain momentum, the bank debt started to strengthen because people figured that they could make a quick profit by purchasing the paper now and getting paid down at par in the near future, the source explained.

Other terms of the amendment included the increase of pricing on the term loan B to Libor plus 250 basis points from Libor plus 225 basis points and the payment of a 12.5 basis point amendment fee.

Currently, Fleming's bank debt is still hovering around the 98/99 region, according to the fund manager, who explained that people still think the company can complete its objectives.

Fleming is a Lewisville, Tex. distributor of consumable goods and operator of price impact supermarkets.

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