American Media’s tabloid story

American Media, the publisher of National Enquirer, is becoming a story in its own right. Its subsidiary American Media Operations is currently pushing for a debt-for-equity swap that, if mismanaged, could put the company into bankruptcy.

The company recently attempted a debt-for-equity exchange but it was rejected by a group of bondholders. Under terms of the rejected offer, holders of its US$414.5m 10.25% senior subordinated notes due 2009 and US$155m subordinated notes due 2011 were offered the opportunity to swap into US$260m in new 11.25% senior subordinated notes and warrants convertible into a 20% stake in the company. But the bondholders want more.

The company is currently under technical default after failing to make a payment on its 10.25% senior subordinated notes due 2009 last Monday. The publisher could file for bankruptcy if it fails to reach an agreement with its creditors during the 30-day grace period provided for under the terms of the notes.

As part of the debt-for equity proposal the company is negotiating an amendment on its US$459.6m JP Morgan-led credit facility.

American Media is currently undergoing discussions with its creditors regarding a financial restructuring of the company. The company is required by its bank indentures to have a plan in place by February 1 to refinance its US$414.5m 10.25% senior subordinated notes due 2009. The company also has US$155m in subordinated notes due 2011.

Elsewhere, Delphi is negotiating an amendment that will allow it to extend the maturity of its US$4.354bn debtor-in-possession facility. JP Morgan is leading the deal. The DIP package includes a US$1bn ABL and a US$600m term loan, both of which pay L+400bp and carry a 3.15% floor. The package also includes a US$2.496bn second-priority piece.

Precision Drilling Trust‘s US$1.2bn credit facility hit the market last Tuesday. The financing consists of a US$400m revolver, a US$400m term loan A and a US$400m term loan B. The term loans are talked at L+400bp and L+500bp, respectively. Proceeds back the US$1.6bn acquisition of Grey Wolf. RBC is leading the deal. Deutsche Bank, HSBC and Toronto-Dominion are also lenders.

The four banks are on the hook to finance the US$1.12bn aggregate cash portion of the transaction. The deal values GW at about 4.3x 2009 Ebitda. Also backing the transaction are US$400m 144a senior notes due 2016.

Precision agreed to pay US$9.00 per share for Grey Wolf, comprising US$5.00 in cash and 0.1883 newly issued trust units for each GW common share. In June, however, when natural gas prices were higher, Grey Wolf’s board of directors rejected an unsolicited bid by Precision Drilling of US$10.00, opting instead for a merger with Basic Energy Services. Grey Wolf shareholders then voted against the Basic Energy merger, setting the stage for another lower offer by Precision Drilling.

GE has provided a US$250m plan of reorganisation credit facility for Vertis Communications. The financing was used to refinance Vertis’s debtor-in-possession financing, upon the company’s emergence from a pre-packaged Chapter 11 bankruptcy. GE also provided a US$380m DIP. Vertis is a targeted print advertising and direct marketing solutions provider.

Other borrowers are using cash to repay debt. Energy Future Holdings‘ subsidiary Texas Competitive Electric Holdings (TCEH) has repaid roughly US$1bn under its US$2.7bn Citi-led revolver.

Neither Energy Future nor TCEH had any immediate need for the additional liquidity. It will use the availability under the revolver as a precautionary measure against difficult market conditions. If financial conditions worsen, the company said, it may tap the repaid funds again.