Regal Cinemas is reportedly preparing a new bank deal to retire debt and word of the new credit is pushing up levels on the existing loan. A $10 million piece of the company's bank debt traded last week at 93, up about five points from recent levels. Details about a new deal have yet to be hammered out, bankers said. Calls to a company spokesman were not returned by press time.
One banker familiar with the buzz about a new credit said it makes sense with the capital reshuffling underway for Regal. "Some debt gets cancelled; the current equity group gets wiped out, and the debt guys turn to equity," he said, explaining that consolidation of existing debt and a new issue is more cost effective. "Right now there are a lot of different plans being thrown around, and it's difficult to say. It's not yet decided."
The identity of the buyer and seller of the $10 million piece could not be determined last week. One trader said word of a new deal is pushing the market, as is an improved outlook for the company. "It's good news. It hits the other banks on cash flows," he said of a potential deal. "It's also about decent fundamentals and having a pretty good product." Regal, based in Knoxville, Tenn., has over 400 theaters across 30 states. Dealers also say a better product--box office winners--is helping theater credits. Investor Phillip Anschutz's interest in the bank debt is another draw, as well as consolidation of the cineplexes.
It's been a bumpy ride for most theater names, as levels bottomed out late last year on market saturation, then pulled up as underperforming theaters were closed. The release of blockbusters like "The Mummy Returns" and "Shrek" also helped. The company has a $1 billion deal that breaks down into four tranches. Pricing is tied to a spread and ranges from LIBOR plus 2% to LIBOR plus 21Ž 2%. Bank of Nova Scotia, J.P. Morgan Chase and Bank of America are the lead arrangers, according to Capital DATA Loanware.