UBS Warburg is preparing a January launch for syndication of a credit for Hollywood Entertainment, the second largest video store chain in the U.S. A banker said the loan will refinance the existing $255 million Société Générale-led credit facility that expires next March, and is contingent on a $100 million common stock sale. Diane Shand, analyst at Standard & Poor's, said the company needed to refinance since it was facing a heavy amortization schedule on its existing facility. The video-store company is also planning a $300 million shelf registration to reduce debt, she said.
The company has good cash flow, but due to an aggressive expansion that did not fully pay off before the amortization kicked in, Hollywood Entertainment ran into problems, she explained, adding issues are raised by the threat of new-technology to the industry. It could not be ascertained why SG is not leading the loan. "The video industry is a risky business," Shand said, stating, "if someone comes out with new technology that makes it easier to get videos at home, such as video on demand, this could heavily impact Blockbuster and Hollywood Entertainment." There is no timeframe for this to occur though, she commented. The old credit facility is rated CCC, but a new rating has not yet been assigned. Jim Marcum, cfo of Hollywood Entertainment did not return calls. The UBS banker responsible for syndication could not be reached. Calls to SG officials were not returned.