GM rises with increased belief of par paydown; Ashland holds steady; Capmark delays close

By Sara Rosenberg

New York, May 22 - General Motors Corp.'s term loan jumped up by a couple of points during Friday's shortened trading session as the market seems to be getting more and more comfortable with the rumors that the bank debt may get repaid at par.

Also in the secondary market, Ashland Inc.'s term loan B spent its second day of trading holding firm at post-break levels and the LCDX 12 index was a little stronger by early afternoon, moving to 82.45 bid, 82.65 offered from 82.10 bid, 82.40 offered.

In other news, Capmark Financial Group Inc. has pushed out the anticipated closing date on its proposed term loan to gain additional time to finalize documentation.

GM up on repayment buzz

General Motors' term loan rallied during market hours on continued rumors of a potential par repayment that would be funded by the U.S. government in a bankruptcy situation, according to traders.

The Detroit-based automotive company's term loan was quoted by one trader at 80 bid, no offers, compared to Thursday's levels of 72 bid, 73 offered.

A second trader, meanwhile, had the term loan quoted even higher at 83½ bid, 85½ offered, up from 73 bid, 74 offered.

"Everyone kind of coming to the point where people think it will get taken out at par," the first trader remarked.

"Rumors there was a private lender call yesterday [talking about the] chance of government paying off the term loan and revolver at par, and there was a Washington Post article today."

The Washington Post article claimed that the government is looking to push General Motors into bankruptcy as early as late next week, and that with the filing, the company would receive close to $30 billion in federal loans.

GM gains mounting

Chatter of the government possibly repaying General Motors' credit facility in full at par has been circulating for about a week and a half now, and since these rumors first hit, the bank debt has traded up a considerable amount.

On May 13, the term loan was quoted in the 58½ bid, 61 offered context. On May 14, when the repayment buzz first emerged because of talk that a lawyer call took place with some lenders, the term loan traded up to around 66 bid, 68 offered. The loan closed out that week in the low-70s where it pretty much remained until now.

Although the speculation on the government repaying the loan is fairly new, talk about the company possibly filing for bankruptcy has been around for a while.

In April, General Motors launched offerings to exchange 225 shares of its common stock for $27 billion of its unsecured public notes, at which time, the company said that if, prior to June 1, it does not receive enough tenders of notes to consummate the exchange offers, it expects to seek relief under the U.S. Bankruptcy Code.

This relief may include seeking bankruptcy court approval for the sale of most or substantially all assets to a new operating company and a subsequent liquidation of the remaining assets, pursuing a plan of reorganization, or seeking another form of bankruptcy relief.

In a recent S-4/A filed with the Securities and Exchange Commission, General Motors said that it believes that if it pursues one of the alternatives, a sale would be the most likely.

Ashland B loan firm

Ashland's $830 million term loan B, which hit the secondary market late in the day on Thursday, was able to hold basically steady at the higher levels that it traded up to on the evening of its break, according to a trader.

The term loan B was quoted at par bid, par 3/8 offered, compared to Thursday's closing levels of par bid, par ½ offered, the trader said. On the break on Thursday, the term loan B was seen at 99 3/8 bid, 99 7/8 offered.

The term loan B is priced at Libor plus 440 basis points with a 3.25% Libor floor, and was sold to investors at an original issue discount of 981/2. Original discount talk on the loan had been 98, but it was tightened prior to allocating.

Bank of America and Scotia Capital are the lead banks on the deal that was funded in November 2008 but not syndicated because of market conditions.

Proceeds had been used to help finance the acquisition of Hercules Inc.

Ashland is a Covington, Ky.-based provider of specialty chemical products and services.

Capmark extends closing timeframe

Over in the new deal market, Capmark Financial Group now hopes to close on its up to $1.5 billion term loan by May 29, according to a news release, whereas before, it was expected that the deal would close by this past Thursday.

The company said that the closing delay is simply to allow more time for documentation to be completed.

Based on previous disclosures from the company, it is expected that the term loan will be due on March 23, 2011. However, the maturity will be accelerated to April 2010 if certain conditions with respect to the restructuring of the company's senior notes due 2010 are not met.

Security is the company's U.S. and Canadian non-bank mortgage loan assets.

Covenants include minimum liquidity and run rate operating expense requirements and limitations on incurring debt, granting liens and making certain restricted payments, investments and capital expenditures.

Proceeds from the term loan, along with $75 million in cash, will be used to refinance a portion of the company's bridge loan and senior credit facility.

Capmark revises bridge loan

To facilitate the closing of the term loan, Capmark has obtained a further extension of the maturity date of 100% of the outstanding principal balance under its bridge loan agreement until May 29.

In addition, the company also got a further waiver, which will be effective until May 29, of compliance with the leverage ratio covenants in its bridge loan and senior credit facility for the quarters ended Dec. 31 and March 31.

The bridge loan had previously been set to expire on May 21, and so had the waiver.

In connection with getting the new term loan, the company is planning on amending the senior credit facility and bridge loan to extend the maturity date under the bridge loan to the maturity date of the term loan and to conform the financial covenants to the term loan.

Closing on the amendment is now also hoped to take place by May 29.

Capmark is a Horsham, Pa.-based provider of financial services to investors in commercial real estate assets.

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