The institutional bank debt for Home Interiors & Gifts, a Hicks,Muse,Tate & Furst portfolio company, has been trading in the mid-90s after dropping a few points last week. The $317.5 million seven-year term, which fell below 92 in August before recovering to the high 90s in September, fell again as Moody's Investors Service highlighted deterioration in the company's operating results and a weakening of its financial position. Ken Cichocki, senior v.p. and cfo of Home Interiors, declined comment and a Hicks Muse spokesman did not respond to questions.
The loan, which is priced at LIBOR plus 4 1/4%, traded at 94 1/2-95 1/2, said a trader. Mark-It Partners/LoanX had the name quoted at 95 3/8-96 3/8 as LMW went to press. There is also a $50 million revolver that was quoted in a thin market at 92 1/2-93 1/2. J.P. Morgan and Bear Stearns lead the debt, which was put in place last March as part of a refinancing. Other lenders that signed the credit agreement include GE Capital, UPS Capital, MCG Capital and National City Bank. One source said Nat City sold its $7.5 million exposure to the revolver several months ago. Officials at the banks did not return calls.
Home Interiors may have problems maintaining its current dept repayment schedule over the next 12-18 months due to a decline in its operating results, says Moody's. In the first quarter of 2004, EBITDA declined approximately 32% relative to the first quarter of 2003. Home Interiors is facing weak consumer spending, a less productive consultant base and problems within the larger U.S. home décor industry. The agency has placed Home Interiors' B2-rated bank debt on review for possible downgrade and believes that covenant compliance may become constrained. Hicks Muse took a majority position in the company in 1998.