Columbia House, Herbalife obtaining new credit facilities this week as part of LBOs

By Sara Rosenberg

New York, May 13 - Leveraged buyouts have paved the way for two new credit facility deals this week. Columbia House Co., the subject of a proposed LBO by Blackstone Group, held a bank meeting Monday in Los Angeles for its new $175 million credit facility and is scheduled to hold a second meeting on Wednesday in New York, according to a syndicate source. Also, Herbalife International Inc., to be acquired in a LBO by Whitney & Co. LLC and Golden Gate Capital Inc., is hosting a bank meeting Thursday regarding its new $190 million bank loan.

Columbia House's new loan consists of a $30 million five-year revolver with an interest rate of Libor plus 450 basis points and a $145 million five-year term loan with an interest rate of Libor plus 450 basis points. All the assets of the New York City-based direct marketer of music and videos will be used to secure the loan. UBS Warburg and Bank of America are co-leads on the deal.

The meeting in Los Angeles was well attended by West Coast investors and there was good feedback, according to a syndicate source. People seem to be excited about the deal and are confident in management's ability to deliver, he added.

Herbalife International's loan consists of a $25 million five-year revolver with an interest rate of Libor plus 375 basis points and a $165 million six-year term loan B with an interest rate of Libor plus 400 basis points, a syndicate source said. UBS Warburg is the lead bank on the deal.

Herbalife, headquartered in Los Angeles, Calif., is a network marketing company that sells weight management products, nutritional supplements and personal care products.

The deal is anticipated to go well due to the current market environment in which demand outweighs supply, a fund manager said. However, the fund manager admitted to having turned the deal down because there is "no benefit to being a senior secured lender." Herbalife is a pyramid organization, which pays layers of commissions. The company does not have a lot of assets, therefore, the loan is not backed by a lot of collateral. Without the collateral backing, the upside of being a senior secured lender is gone, the fund manager explained.

In secondary activity, bids on Xerox Corp.'s bank loan moved up to 93¾ Monday on news of the receipt of financing from GE Capital, according to a market researcher. Previously, bids were around 911/2. Meanwhile, the offer was all over the place, the researcher said.

Xerox received $496 million from GE Capital, which is secured by lease receivables in the U.S. and will be amortized through 2005, according to a company press release.

The paper did not experience much trading activity during market hours. One reason for the lack of trading is that there are not a lot of sellers, a trader said. The company's loan is expected to be amended, redone and paid down by June 30. The closer it gets to the refinancing date, the less likely it is that there will be sellers, the trader explained.

Otherwise, secondary performance has stayed consistent, with new issues still generally trading at premiums. For example, Isle of Capri Casinos Inc. traded at around 101½ Monday, a fund manager said.

Also Monday, Spherion Corp., a Fort Lauderdale, Fla. recruitment, technology and outsourcing services company, said it anticipates canceling its $325 million revolver during the second quarter of 2002, according to a filing with the Securities and Exchange Commission. The revolver does not expire until June 30, 2004.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.