Ford jumps with numbers; Michael Foods sets tranche sizes; Flexsys price talk surfaces

By Sara Rosenberg

New York, April 24 - Ford Motor Co.'s term loan rallied on Friday after the company released earnings results that showed spending of less cash than expected, reiterated that government funding won't be necessary and expressed expectations to beat financial targets.

Also in the secondary market, the LCDX 12 index was a little stronger, and the cash market overall felt better, possibly helped along by Ford's positive day.

Over in the primary market, Michael Foods Inc. firmed up sizes on its term loan A and term loan B and pricing is expected to finalize at the start of the April 27 week, and pricing guidance on Flexsys Verkauf GmbH's, the German subsidiary of Solutia Inc., term loan emerged as the deal is now being marketed to investors.

In other news, Spirit AeroSystems Inc. has received some orders for its proposed revolving credit facility tranche B and is expecting to get some more before closing on the transaction.

Ford revs higher

Ford's term loan gained a couple of points in very active trading on Friday as investors were pleased with the company's earnings announcement that was full of positives, including the fact that less cash was spent than expected by the market, according to a trader.

The Dearborn, Mich.-based automotive company's term loan was quoted at 62 bid, 63 offered, up from Thursday's levels of 56¾ bid, 57¾ offered, the trader said.

First thing Friday morning, the paper had been quoted around 57½ bid, 58 offered and then it just kept flying higher, the trader remarked.

"Everyone very surprised by their cash burn, or lack thereof. Burned only $3.7 billion [in automotive operating-related cash flow during the first quarter]. Estimates were for, like, $6 or $7 billion," the trader added.

Ford cash increases

Overall, Ford's automotive gross cash increased by $7.9 billion during the first quarter, primarily reflecting the draw of $10.1 billion under its revolving credit facility and the net impact of $2 billion related to the conversion of assets in the Temporary Asset Account set aside for the VEBA health care trust into a new Ford note.

The company finished the quarter with $21.3 billion in automotive gross cash and reiterated that based on current planning assumptions, it does not expect to seek a bridge loan from the U.S. government.

In addition, based on current planning assumptions, the company said it remains on track to meet or beat its financial targets, including the target for its overall and North American automotive pre-tax results to be breakeven or better in 2011, excluding special items.

"Clearly, these continue to be challenging days for the global auto industry. I remain encouraged by the progress Ford is making to allow us to operate through the downturn and emerge as a lean, globally integrated automaker poised for profitable growth when the economy rebounds," said Alan Mulally, president and chief executive officer, in a news release.

Ford loses $1.4 billion

Also on Friday, Ford said that for the first quarter it had a net loss of $1.4 billion, or $0.60 per share, compared to net income of $70 million, or $0.03 per share, in the first quarter of 2008.

Revenue for the quarter, excluding special items, was $24.8 billion, down from $39.2 billion a year ago.

"Our results in the first quarter reflected the extremely difficult business environment and weak demand for autos around the world," Mulally, remarked in the release.

"Despite the challenges, Ford made strong progress on our transformation plan by gaining share with strong new products, slowing operating-related cash outflows, reducing outstanding debt, lowering our structural costs and reaching new agreements with the UAW," Mulally added.

LCDX rises, cash stronger

The LCDX 12 index posted some gains during the trading session and cash was higher as well, with some pointing to the positive sentiment surrounding Ford as a possible impetus behind the climb in cash.

The index was quoted at 79.20 bid, 79.45 offered, up from Thursday's levels of 78.50 bid, 78.75 offered, on trader said.

As for cash, a second trader said that things were firm and maybe up about a half a point on the day, although activity was light other than in Ford.

Meanwhile, stocks ended the day higher with Nasdaq up 42.08 points, or 2.55%, Dow Jones Industrial Average up 119.23 points, or 1.5%, S&P 500 up 14.31 points, or 1.68%, and NYSE up 96.31 points, or 1.79%.

Michael Foods sizes surface

Switching to the new deal front, Michael Foods has set tranche sizes on its term loan A and term loan B, and pricing on the tranches is anticipated to firm on Monday, which would also be the day that allocations are hoped to be distributed, according to a market source.

The 31/2-year term loan A ended up with a size of $200 million and the five-year term loan B ended up with a size of $250 million, the source said.

When the deal was announced, it was disclosed that the term loan A and the term loan B would total $450 million and that each tranche could be a maximum of $275 million, but specific sizes were going to be based on demand.

"Demand was pretty strong, oversubscription was healthy," the source added regarding the term loans.

Price talk on the term loan A is Libor plus 400 basis points with a 2% Libor floor and an upfront fee in the area of two points, and price talk on the term loan B is Libor plus 450 bps with a 2% Libor floor and an original issue discount in the area of 95 to 96.

Michael Foods includes revolver

Michael Foods' $525 million credit facility (Ba3/BB) also includes a $75 million 31/2-year revolver that is talked at Libor plus 400 bps with a 2% Libor floor and an upfront fee in the area of two points.

Bank of America is the lead bank on the deal that will be used to refinance the company's existing credit facility.

The deal is being marketed primarily to existing lenders and was just launched with a bank meeting this past Tuesday.

Michael Foods is a Minnetonka, Minn.-based food processor and distributor.

Flexsys releases guidance

Flexsys Verkauf GmbH, the German subsidiary of Solutia, came out with indicated pricing on its proposed $50 million two-year senior unsecured term loan now that the deal has launched to investors, according to a market source.

The term loan is talked at 12% plus an original issue discount that is still to be determined, the source said. The final pricing could end up as either fixed rate or it could be floating rate, meaning that the 12% could include a spread over Libor plus a Libor floor.

The loan was launched on Thursday and is being syndicated through a roadshow that involves one-on-ones, the source explained.

Flexsys giving liquidity to parent

Proceeds from the Flexsys Verkauf term loan will be used to provide additional liquidity to its parent company, Solutia.

Jefferies is the lead bank on the deal that is being done off of the high-yield desk, and likely buyers are anticipated to be existing Solutia lenders, the source remarked.

Closing is targeted for the week of May 18.

Flexsys is a producer of a chemical used in tire manufacturing. The company has an 85% market share in Europe.

Spirit Aero getting orders

Spirit AeroSystems was heard to have received roughly $250 million in commitments towards its revolving credit facility tranche B, and the anticipation is that another $100 million to $150 million in commitments will come in before closing, according to a market source.

The revolver tranche B is basically being carved out of the existing revolver, will have an extended maturity date of 2012 and will carry pricing of Libor plus 300 bps with a 75 bps commitment fee, based on a leverage grid.

The lenders under the company's existing undrawn $650 million revolver that decide not to extend their commitments by being part of the tranche B will continue to be lenders under a revolver tranche A that will still mature in June 2010 and continue to carry pricing of Libor plus 225 bps with a 50 bps commitment fee.

Spirit Aero needs term lenders consent

In order to split the revolver into two tranches, Spirit Aerosystems needs its term loan lenders to approve the transaction and amend its existing credit facility.

Originally, commitments from revolver guys and term loan lender consents were due last Tuesday, but the deadline was extended to a date that is still to be determined so that banks would have more time to get through committee.

Term loan lenders will get a 25 basis point upfront fee for their consents.

Bank of America is the lead bank on the amendment.

Spirit AeroSystems is a Wichita, Kan.-based designer and manufacturer of aero-structures.

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