Hollywood Entertainment postpones $275 million eight-year deal

By Paul A. Harris

St. Louis, Mo., April 30 - Hollywood Entertainment Corp. announced Tuesday that it has postponed its offering of $275 million senior subordinated notes due 2010 (Caa1/B-), saying the likely interest rate was not low enough to justify going ahead with the deal.

"The company's goal in its re-financing is for the net effect of the transaction to be non-dilutive to its earnings while further strengthening its balance sheet," stated Jim Marcum, executive vice president and chief financial officer, in a Tuesday press release. "With our financial performance we believe there is no reason to accelerate the refinancing of our notes at any price other than that which is favorable to our shareholders."

Proceeds from the postponed deal were to have been used to prepay its existing $250 million of 10 5/8% senior subordinated notes due Aug. 15, 2004, the release stated,

"Based upon the response from institutional investors over the last week, the company believes it could complete the issuance of $275 million in senior subordinated notes at a lower interest rate than the existing 10.625% notes, however the lower interest rate would not be enough to compensate for the current call premium of 105.313% and expenses, which the company must pay for redeeming the existing notes," the release stated.

It added that the company is under no pressure to refinance the 10 5/8% notes in the near term, and has decided to postpone the transaction "until such time as it believes it can accomplish its objectives at a lower net cost when considering the reduced interest of the new notes together with the call premium and expenses on the existing notes."

The call premium reduces from 105.313% currently to 102.656% on August 15, 2002 and remains there until August 15, 2003 at which time the notes are redeemable at par, the release added.

UBS Warburg and Bear Stearns & Co. were the bookrunners on the proposed off-the-shelf deal from Hollywood Entertainment.

The deal was expected to price on Thursday.

The Portland, Ore.-based company owns and operates the Hollywood Video chain.

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