Blockbuster is looking to increase the coupon on its $550 million "B" term loan by 75 basis points and pay a fee of 25 basis points to get an amendment on the credit. The amendment would also cover its $100 million term "A" loan, but details on the coupon change on that piece could not be determined. A trader said the company is raising the coupon on the term "B" loan to LIBOR plus 4% from LIBOR plus 3 1/4%. The trader said the company is seeking relief on covenants related to its debt to EBITDA ratio. The term loan dropped a point to 97 and then rebounded to 98 1/2 after a call with investors.
Blockbuster confirmed in a press release that the company had a meeting with its lender group to discuss changes to its credit agreement that would give it improved operating flexibility over the term of the original credit agreement. As part of the changes, the company will pursue raising capital that will be used for working capital purposes, including debt reduction. A Blockbuster spokesman declined to comment further on the release.
It is the third time Blockbuster has sought amendments to loosen debt covenants. The most recent was in August, when it paid lenders a fee and boosted the coupon on its term loan to amend its credit agreement. Competitor Movie Gallery also sought covenant relief on its $700 million term "B" loan in September (CIN, 9/05). Both companies have been weakened by the declining video rental industry.
