UBS Warburg will hold a bank meeting for Hollywood Entertainment on Jan. 23, launching syndication of a $175 million facility. The deal refinances a $255 million Société Générale-led facility that expires in March and is contingent on a $100 million stock sale (LMW, 12/17). Comprising a $25 million revolver and a $150 million term loan, pricing should be in the LIBOR plus 31/ 2% range for the revolver and LIBOR plus 4% for the term loan, said a banker.
The company has good cash flow, but due to an aggressive expansion, which did not fully pay off before the amortization kicked in, the second largest video-store chain in the U.S. ran into problems. A banker said, "the house is in order, and the rally of the bonds is evidence of that." The company reported 11% same store sales growth this year, after expectations of 5% and there is a healthy outlook for 2002, he added. Calls to Jim Marcum, cfo of Hollywood were not returned.
The video industry though is a risky business with new technology posing a threat. If someone comes out with new technology that makes it easier to get videos on demand, this could heavily impact Blockbuster and Hollywood Entertainment, according to a Standard & Poor's report.