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Columbia House Moves Up As Deal Is Filled

29 Jun 2002

Bank of America and UBS Warburg's credit for Columbia House moved upwards to par last week after approximately 20 institutions came on board to fill the deal. The $145 million "B" loan was offered at 98 1/2 in an effort to allay concerns over the storied nature of the B2 credit. "The CLOs love discounted paper as it offsets losses elsewhere," one banker said. In addition to the discount, two years of call protection at 102/101 was thrown in as a sweetener, and the amortization schedule was revamped. The spread, however, remained at 4 1/2 % over LIBOR. Officials at B of A and UBS declined to comment.

Some buysiders considered the all-senior deal risky due to questions over collateral coverage and were hoping for the addition of bonds (LMW, 6/6). But Columbia House has strong cash flow, and bankers said bonds aren't part of the structure because the cash flow should result in repayment of the bank debt outpacing theoretical bond maturities.

The loan, which also comprises a $30 million revolver, backs Blackstone Capital Partners' $450 million acquisition of a majority stake in the company from a partnership of AOL Time Warner and Sony. Columbia House is a direct marketer of music, videos and DVDs.

29 Jun 2002