McLeodUSA’s bank debt has dropped more than 15 points into the 55-57 range after the competitive telecommunications service provider disclosed disappointing earnings earlier this month. Late last week the debt was quoted by street players in the 55-59 range. Two weeks ago, McLeod disclosed earnings that market participants considered disappointing causing the drop from the 70s, a buysider noted. It could not be determined if it is trading at these levels. The debt being quoted is a $575 million “B” loan that has a LIBOR plus 3% spread.
McLeod reported a net loss of $91.4 million for the first quarter, compared to a net loss of $84 million a year earlier. Additionally, the company reported total revenues of $193 million compared to around $226 in the first quarter of 2003. McLeod attributed this decline in revenue to a reduction in the number of its customers. According to McLeod’s most recent 8-K filing, revenues have been declining since the company filed for Chapter 11 bankruptcy in 2002. A McLeod spokesman did not return repeated calls.
McLeod also has a $110 million revolver led by J.P. Morgan, Bank of America and Citibank that is the exit financing from the 2002 bankruptcy. The company recently obtained amendments to the credit including changes to the minimum revenue, leverage ratio and interest coverage ratio covenants. There is no minimum revenue covenant in 2005 and the leverage ratio was replaced with a minimum cumulative EBITDA covenant. The capital expenditure limits for 2004 and 2005 were revised downwards to $75 million and $100 million, respectively. The lender group was paid $1.9 million in connection with the amendment. Forstmann Little & Co. is McLeod’s principal shareholder.
Meanwhile Tower Automotive’s first-lien bank debt inched down slightly to the 100-100 1/2 range after breaking yesterday north of 101. “The whole market is better in general, but this one is down,” a trader said. “The first-lien has had some seller pressure,” a trader noted. “The deal was not as well subscribed as advertised.” However, another trader countered that after some seller pressure the paper is being better bid in the low par range and was seen in the 100 1/8-100 5/8 range. The second-lien, on the other hand, is trading well, traders commented. One trader said the five-and-a-half year second-lien is consistently trading at 101 1/4-101 3/4.
Tower’s first-lien was said to be oversubscribed prior to its launch at a bank meeting held at the beginning of the month. The $565 million credit comprises a $50 million revolver, a $375 million first-lien loan and a $140 million second-lien synthetic letter of credit. The revolver and “B” are priced at LIBOR plus 4 1/2% and the second-lien has a spread of LIBOR plus 7%. Morgan Stanley and J.P. Morgan lead the credit. A Tower Automotive spokesperson did not return calls by press time.