Ford softer with draw, numbers; Lear inches up; LCDX dips; Landry's catching interest

By Sara Rosenberg

New York, Jan. 29 - Ford Motor Co.'s term loan traded lower on Thursday morning after the company announced plans to borrow on its credit lines and fourth-quarter financials, but a good portion of those losses were recouped before day's end once investors had time to digest the news.

Lear Corp. also came out with numbers and revealed that it was unable to meet its leverage covenant, yet its term loan was quoted higher, and US Airways Group Inc.'s term loan was unchanged on its earnings results.

Meanwhile, LCDX 10 headed lower with stocks and the cash market was all over the place, with some describing it as down and others calling it more of a mixed bag.

On the new deal front, Landry's Restaurants Inc.'s credit facility has been attracting some good inquiry from investors, enough so that a formal bank meeting may not need to take place in order for syndication to wrap up.

Ford term loan slides

Ford's term loan headed down early on in the trading session following news of a draw down and earnings results; however, levels then started to come back a little as initial nervousness over the announcements receded, according to traders.

By late day, the term loan was quoted at 35¾ bid, 36¾ offered, down from Wednesday's closing levels of 36¼ bid, 37 offered, but up from Thursday's morning levels of 35 bid, 36 offered, one trader said.

A second trader had the term loan quoted at 35 bid, 37 offered by late day, down from Wednesday's closing levels of 35½ bid, 37½ offered, but up from Thursday's lows of 34 bid, 36 offered.

"Draw caught most peoples' attention. Down initially with numbers. Then people reading through it and realizing drawing down the revolver, they get a little more liquidity. Not really a reason to panic," the first trader added.

On Thursday, Ford said that it is drawing on its available credit lines and that it expects to receive the funds on Feb. 3. The $10.1 billion will be added to its cash and be reflected on its first quarter 2009 balance sheet.

"Ford went to the credit markets two years ago when they were functioning normally and obtained the funding necessary - including our credit lines - to support our product transformation and restructuring," said Alan Mulally, president and chief executive officer, in a news release.

"Given the instability of the capital markets with the uncertain state of the global economy, we believe it is prudent to draw these credit facilities at this time," Mulally added in the release.

Ford posts almost $6 billion loss

Also on Thursday, Ford came out with its fourth-quarter results, including a net loss of $5.9 billion, or $2.46 per share, compared with a net loss of $2.8 billion, or $1.33 per share, in the fourth quarter of 2007.

Pre-tax operating loss from continuing operations, excluding special items, was $3.7 billion, compared to a loss of $620 million a year ago. On an after-tax basis, the company lost $3.3 billion in the fourth quarter, or $1.37 per share, compared with a loss of $487 million, or $0.23 per share, last year.

Revenue for the quarter was $29.2 billion, down from $45.5 billion in the comparable 2007 period.

"Ford and the entire auto industry faced an extraordinary slowdown in all major global markets in the fourth quarter that clearly had an impact on our results," Mulally said in the release.

"We continued to take the decisive actions necessary to lower production to match the lower worldwide demand and reduce costs, which we expect will allow us to significantly reduce negative operating cash flow in 2009 and position Ford for growth when the economy rebounds," Mulally continued.

Ford has enough liquidity

In addition, along with its earnings, Ford reaffirmed that it has sufficient liquidity to fund its business plan and product investments.

At the end of 2008, the company had $24 billion in available automotive liquidity, including $13.4 billion in automotive gross cash.

In January, the company converted the temporary asset account funds into a new Ford note, payable at year-end, providing flexibility to use more than $2 billion of funds to support operations, if needed. As a result, this amount will improve liquidity and be included as part of Ford's automotive gross cash beginning with the first quarter of 2009.

The company also reiterated that, based on current planning assumptions, it does not need a bridge loan from the U.S. government, barring a significantly deeper economic downturn or a significant industry event, such as the bankruptcy of a major competitor that causes disruption to the company's supply base, dealers or creditors.

Ford cash improvements plan progressing

Ford also said it is on track to deliver the plan announced in November to deliver $14 billion to $17 billion of cash improvements by 2010.

These actions include reducing spending and inventories and achieving other working capital improvements, reducing salaried personnel-related costs and achieving additional efficiencies in engineering, manufacturing, advertising, and information technology, releasing capital consistent with Ford Credit's smaller balance sheet and focus on Ford brands, and developing incremental sources of funding, including sale of non-core assets.

Furthermore, the company said that it is pursuing other restructuring opportunities in conjunction with its various stakeholders and will have more to discuss at a later date.

Ford is a Dearborn, Mich.-based automotive company.

Lear quoted up

Lear's term loan was quoted stronger on Thursday despite uninspiring earnings and news that the company did not meet the leverage ratio under its credit facility, according to a trader.

The term loan was quoted at 43 bid, 46 offered, up from previous levels of 42 bid, 45 offered, the trader said.

"[Levels] not really reflective of anything because it's not really trading actively," the trader added.

For the fourth quarter, the company reported a net loss of $688.2 million, or $8.91 per share, compared to net income of $27 million, or $0.34 per share, in the 2007 fourth quarter.

Net sales for the quarter were $2.6 billion, compared to net sales of $3.9 billion last year.

Free cash flow for the quarter was negative $38.3 million, compared with free cash flow of $170.9 million in the previous year.

In terms of liquidity, the company had about $1.6 billion in cash and cash equivalents as of Dec. 31.

Lear facing compliance issues

Lear also said on Thursday that it is not in compliance with the leverage ratio under its credit facility as a result of drawing down $1.2 billion during the fourth quarter and choosing not to repay it at year-end.

The company has initiated discussions with the co-agents under the facility to seek a long-term amendment, and, according to Lear, the discussions have been constructive and are continuing.

Because the amendment will require support from lenders holding a majority of outstanding commitments and borrowings under the facility, the company intends to pursue discussions with a broader lender group before finalizing the amendment proposal and launching the formal amendment process.

Lear is a Southfield, Mich.-based supplier of automotive seating systems, electrical distribution systems and electronic products.

US Airways holds steady

Another company to come out with financials during market hours was US Airways Group, but the news seemed to have very little impact on bank debt trading levels, according to a trader.

The company's term loan was quoted at 45 bid, 47 offered, basically unchanged from previous levels, the trader said.

For the fourth quarter, US Airways had a net loss of $541 million, or $4.74 per share, compared to a loss of $79 million, or $0.87 for the same period last year. Excluding special charges totaling $321 million, the net loss was $220 million, or $1.93 per share.

Total revenue for the quarter was $2.761 billion, compared to $2.776 bullion last year.

As for liquidity, at Dec. 3, the company $2 billion in total cash and investments, of which $0.7 billion was restricted.

"Like other airlines that have reported before us, our financial results reflect the staggering increase in fuel prices that we faced throughout most of 2008," said Doug Parker, chairman and chief executive officer, in a news release.

"As we begin the new year, US Airways is well prepared for a difficult global macroeconomic environment. We are running a great operation, have restructured our business model through the introduction of new fees, reduced capacity and increased our liquidity. With the help of falling fuel prices, we believe we are well positioned for the challenges ahead," Parker added in the release.

US Airways is a Tempe, Ariz.-based airline company.

LCDX slips lower

Also in the secondary market, LCDX 10 was a little lower with equities, while the cash market was harder to read, according to traders.

The index was quoted at 77.40 bid, 77.65 offered, down from Wednesday's levels of 77.75 bid, 78.25 offered, one trader said.

As for the overall cash market, it was said to be weaker by a quarter to a half a point on the day by one trader, with "not a whole lot of liquidity," while a second trader said it was all over the place with some stuff down, some stuff up and some stuff unchanged.

Nasdaq closed down 50.50 points, or 3.24%, Dow Jones Industrial Average closed down 226.44 points, or 2.7%, S&P 500 closed down 28.95 points, or 3.31%, and NYSE closed down 200.56 points, or 3.65%.

Landry's nets attention

Landry's Restaurants' $210 million amended and restated credit facility is being quietly marketed to investors, and the deal is receiving a positive enough response that a formal launch may not be necessary, a market source told Prospect News.

The facility consists of a $160 million term loan and a $50 million revolver, with both tranches priced at Libor plus 600 basis points with a 3.5% Libor floor.

The term loan will have some sort of original issue discount, but the size of the discount is still to be determined, the source remarked.

Proceeds will be used to help refinance an interim credit facility, and the company's 9.5% senior notes and 7.5% senior notes.

The interim facility, obtained in December, consists of a $31 million term loan and a $50 million revolver, with both tranches priced at Libor plus 600 bps with a 3.5% Libor floor, and the term loan issued at roughly 961/2.

The source said that the original issue discount on the new deal will likely be around where the interim deal priced.

Landry's also getting notes

As was previously reported, Landry's is also marketing $270 million of senior secured notes to help in refinancing its debt.

Originally, the company was planning to get $210 million of notes and a $210 million term loan, but the notes were upsized and the term loan was downsized before marketing even started.

Wells Fargo Foothill and Jefferies are the lead banks on the credit facility.

The deal is expected to close by the end of February.

Landry's is a Houston-based restaurant company.

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