Capital Markets

Let’s at Least Give Somebody Credit

Some companies defy the credit crunch by raising money, improving liquidity, and renewing existing facilities.
Roy Harris and Stephen TaubDecember 23, 2008

A number of companies continue to defy the credit crunch by finding ways to raise new money, improve their liquidity, or renew the terms of their existing facilities.

Take Brookfield Homes Corp., a troubled homebuilder that announced that it had registered a proposed rights offering to its common stockholders of up to 10 million shares of 8 percent convertible preferred stock. Each whole right will entitle the holder to purchase one share of convertible preferred stock for $25, which will bring $250 million to the company. Brookfield said the proceeds from the rights offering will be used for general corporate purposes, including repayment on the credit facility of an affiliate of its largest stockholder, Brookfield Asset Management Inc.

Mobile products maker Palm Inc. said private equity concern Elevation Partners agreed to make another $100 million investment in Palm, acquiring newly issued Series C preferred that is convertible into Palm common at $3.25 per share, a 31 percent premium over the market price. “The additional capital from Elevation Partners will enable us to put added momentum behind the new product introductions scheduled for 2009 and will provide us with enhanced stability in unsettled economic times,” said Palm president and CEO Ed Colligan.

Among companies refinancing their existing credit facilities, Avis Budget Group Inc. said it received commitments to renew its $1.45 billion principal asset-backed bank conduit facility and its $1 billion seasonal conduit facility, used to finance cars for its rental fleet. The commitments provide for reallocation of $100 million from the principal conduit facility to the seasonal conduit facility, the company added. The principal conduit facility will be extended through Dec. 22, 2009, and the seasonal conduit facility will have a final maturity in November 2009, following 25-percent reductions in borrowing capacity in September and October.

Avis also said that the initial borrowing spreads for these annually renewing facilities are unchanged from levels established with the extension of the principal conduit facility in October. “We are very pleased to have received these conduit commitments from our lenders in today’s difficult environment,” said chairman and CEO Ronald L. Nelson. “These commitments should allow us to acquire sufficient fleet to satisfy our demand projections for 2009.”

The company also announced that it has launched an amendment to its senior credit facilities to replace the leverage and interest coverage ratios with a minimum EBITDA covenant. The amendment also provides for a reduction to the revolving credit facility from $1.5 billion to $1.15 billion and a 2.5 percent increase in the cost of borrowings and letters of credit.

Meanwhile, Landry’s Restaurants Inc. announced that it has launched cash tender offers to purchase any or all of its more than $395 million of its 9.5 percent senior notes due 2014, and more than $4 million outstanding of its 7.5 percent senior notes due 2014. In connection with the tender offers Landry’s seeks approval to amend certain indentures governing the notes to eliminate substantially all restrictive covenants and certain events of default.

Elsewhere, Circuit City Stores Monday received final approval for $1.1 billion in debtor-in-possession financing to provide liquidity as it reorganizes.