A $250 million "B" term loan for Hollinger International Publishing has come up against investors unprepared to accept skinny pricing and in a position to do something about it. TD Securities, Barclays Capital and Wachovia Bank flexed pricing upwards 50 basis points to LIBOR plus 31/ 2%, a clear indication that the supply-demand imbalance that has favored issuers for most of this year has swung the other way. "Banks have been very aggressive, and this should at least have come out at LIBOR plus 31/ 4%," said one investor, relieved that spreads are finally widening. Bankers at Wachovia declined to comment, and officials at Barclays and TD did not return calls.
Hollinger is pursuing a $350 million refinancing to reduce overall interest costs and establish a more efficient borrowing structure for the company's British subsidiaries. But one investor said the company is pursuing this at a tough time for the business. Indeed, there has been a severe decline in cash flow due to the weak advertising market, affecting the Chicago Sun Times and The Daily Telegraph, a U.K. newspaper. Furthermore, the Jerusalem Post is expected to remain unprofitable given the political turmoil in its market, according to a Moody's Investors Service report.
The new facility also consists of a $50 million revolver and a $50 million "A" loan. The refinancing leaves Hollinger highly leveraged, with thin fixed-charge coverage and total debt-to-EBITDA of about five times. Repeated calls to Paul Healy, v.p. of corporate development at Hollinger, were not returned.