Movie Gallery Bonds Plummet As Company Seeks Amendment

Movie Gallery's bonds plunged 26 points as the ailing video rental company sought an amendment to its credit facility last week.

  • 10 Mar 2006
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Movie Gallery's bonds plunged 26 points as the ailing video rental company sought an amendment to its credit facility last week. Its 11% '12 bonds fell to 52, while its term loan "B" fell two points to 90. A trader said there were a large number of sellers on the name and an estimated $30 million of bond paper changed hands. Another trader added that a bank sold off $30 million of Movie Gallery bank debt in an auction. Levels could not be determined.

Movie Gallery held an investor call last week to discuss the changes to its bank facility. A trader said he had heard there was some push back on the amendment, but it is expected to go through. The coupon on Movie Gallery's $750 million term loan "B" will be increased to LIBOR plus 5 1/4% from LIBOR plus 3 3/4%. Fifty basis points of the increase will be payment-in-kind. There is a 50 basis points amendment fee. If the banks agree to the amendment, it will go into affect March 15. Wachovia Securities and Merrill Lynch lead the loans. "They'll get a 12-month lease on life," said one portfolio manager who owns the credit. "They asked for four quarters of relief and they will probably get it."

Movie Gallery's CEO Joe Malugen said in February that the company would be seeking an amendment to its senior credit facility because of continued softness in the rental industry. The last time the company sought covenant relief on its term loan was last September when it increased the coupon by 25 basis points and increased the loan by $50 million. The company has a lot of debt on its book following its $1.25 billion acquisition of Hollywood Entertainment Corp. last May. It took on $1.195 billion in debt for the deal.

Standard & Poor's lowered the corporate credit and bank loan ratings on Movie Gallery to CCC+ from B- and its unsecured note rating to CCC- from CCC. It revised its bank loan recovery rating to 5 from 3, indicating it expects negligible recovery of principal if it defaults. The ratings agency said there is growing concern the company's operating results will continue to be pressured. A Movie Gallery spokesman did not return calls.

"It wasn't like it wasn't expected," said one investor. "Initially people liked this over Blockbuster, but now it is the other way around. We know the industry is in decline, the real question is, is this a short-term dip because of movie selection or a real trend that people aren't renting as much."

  • 10 Mar 2006

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 317,691.74 1201 8.90%
2 JPMorgan 291,227.96 1326 8.16%
3 Bank of America Merrill Lynch 285,088.11 991 7.99%
4 Goldman Sachs 217,749.25 714 6.10%
5 Barclays 209,291.80 811 5.87%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 HSBC 32,320.82 147 6.67%
2 Deutsche Bank 32,259.50 104 6.66%
3 Bank of America Merrill Lynch 28,890.43 85 5.96%
4 BNP Paribas 25,663.29 144 5.30%
5 Credit Agricole CIB 22,617.86 130 4.67%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 18,160.85 71 9.15%
2 Morgan Stanley 15,215.44 76 7.67%
3 UBS 14,195.29 55 7.15%
4 Citi 14,014.57 86 7.06%
5 Goldman Sachs 12,113.98 67 6.10%