Blockbuster last week asked for a new amendment to its bank deal in a long investor call one buysider described as "rancorous." The company's $550 million "B" term loan dropped from 98.6-99 the day before the call to 97.7-98.4 at press time, according to Markit. One investor, whose firm opted out of the deal, said the price could drop even further. "I thought it was an accident waiting to happen," he said. A Blockbuster spokesman said the company will not comment beyond a release last week on the company's performance. Other information about the second quarter will come from a call tomorrow, when it announces second quarter earnings.
The length of the call, estimated to be close to three hours, was due to various presentations, including a public presentation, a bank private-side presentation and then a meeting just for lenders, another investor said. "I think the take-away is that they are significantly behind plan, they are going to trip covenants and require relief. JPMorgan has their workout group involved and also brought consultants in to analyze the situation," he said. A spokesman from JPM declined comment. It is thought that the EBITDA covenant will be tripped.
Blockbuster is looking to pay lenders 12.5 basis points to approve the amendment and will increase the coupon on the LIBOR plus 2 3/4% to LIBOR plus 3%. The company will also offer the lenders security in stock, cash and inventory.
The company got an amendment approved about three months ago, loosening debt covenants and increasing the coupon from LIBOR plus 2 1/2% to LIBOR plus 2 3/4%. In the release last week, John Antioco, Blockbuster chairman and ceo, said that the industry decline and poor theatre performance had a negative impact on the second quarter and created uncertainty about the balance of the year. The JPMorgan-led deal was initially launched as a $500 million revolver priced at LIBOR plus 2%, a $100 million term loan "A" priced at LIBOR plus 2% and a $550 million term loan "B" priced at LIBOR plus 2 1/2%.
