Levi Strauss & Co.'s fixed-rate term loan slipped after the company revised its financial guidance for full year 2003. The bank debt, which was said to have traded as high as the 105 level due to its relatively plush interest rate, fell back to the 102-1021/ 2 range last week. The company's operating margin, excluding restructuring charges, net of reversals, and restructuring-related expenses as a percent of sales is now expected to be 1-2% lower than previously expected. In addition, full-year net sales are expected to be down 6-7%, compared to previous guidance, which had expected net sales to be roughly flat.
The company has a six-year, $500 million term loan, which includes a $200 million fixed-rate tranche priced at 10% and a $300 million floating rate tranche with LIBOR plus 67/ 8% pricing. Bank of America holds the lead role on the term loan portion. The rich pricing and the collateral package support the bank debt at its premium level over par despite Levi's restructuring efforts. The term loan is backed by the company's trademark, noted a Levi spokeswoman. The company also has a $650 million asset-backed revolver that is priced at LIBOR plus 23/ 4%. B of A holds the lead on the revolver as well. Fleet Retail Finance is the syndication agent and GE Capital, Wells Fargo Foothill and J.P. Morgan are co-documentation agents.
The term loan is also coming under pressure from the ratings agencies. Moody's Investors Service and Fitch Ratings have downgraded the company's senior secured term loan rating to Caa2 and BB-, respectively.Standard & Poor's placed the ratings on watch with negative implications.