Plains Exploration, Louisiana Pacific bring deals; bankruptcy buzz busts Blockbuster; no NXP lift on exchange offer

By Paul Deckelman and Paul A. Harris

New York, March 3 - Plains Exploration & Production Co. brought a downsized seven-year note offering to market late Tuesday, with the 10% bonds pricing at a steep discount to par to boost their yield further into the double digits.

Also pricing was a split-rated (Ba3/BBB-) offering of notes and warrants from Louisiana Pacific Corp.

Back among the established issues, bond and equity investors were giving two thumbs down to Dallas-based movie rental company Blockbuster Inc. on the news that the company had hired a law firm known for its restructuring work - spurring speculation that a bankruptcy filing could be near, although Blockbuster specifically denied this.

MGM Mirage bonds continued to be pummeled mercilessly by the market - and this was even before the Las Vegas-based gaming giant's warning late in the day that if recent negative trends in the economy and more specifically, its own industry continue, it will likely fall out of compliance with its debt covenants.

NXP BV, as expected, announced an offer to swap new "Super Priority" secured notes for, first, its current crop of unsecured notes and then, its existing second-lien secured notes - but the dollar-denominated tranches of both kinds of existing notes traded at levels well below the takeout levels offered in the exchange announcement.

Plains Exploration downsizes

In new deal activity, Plains Exploration & Production Co. priced a downsized $365 million issue of 10% seven-year senior notes (B1) at 92.373 to yield 11 5/8% on Tuesday.

The quick-to-market deal, which was cut from $500 million, had clearly not gone well, according to informed sources.

The yield came at the wide end of official price talk of the 11½% area at a discount. However the company had come into the market anticipating a rate in the 11% area, sources said.

J.P. Morgan, RBS Greenwich Capital, Wachovia Securities, Goldman Sachs, Morgan Stanley and Banc of America Securities were joint bookrunners for bank debt refinancing and general corporate purposes deal from the Houston-based energy company.

Louisiana-Pacific upsizes

Elsewhere Tuesday Louisiana-Pacific Corp. priced an upsized $375 million of split-rated units (Ba3/BBB-) consisting of 13% senior secured notes due 2017 and warrants for 18.4 million shares.

The notes priced at 75.00 to yield 19.24%.

There was no official price talk.

Some of the issue had been placed before the deal was announced on Monday, according to an informed source who added that, with a couple of key anchor orders, the deal, which was upsized from $350 million, played to a decent-sized book.

Banc of America Securities, Goldman Sachs and RBC Capital Markets were joint bookrunners for the general corporate purposes, including debt repayment, deal from the Nashville-based building products manufacturer.

One syndicate source noted that given market renewed capital markets volatility, the premium on issuing new bonds in the high-yield market, which contracted during February, has likely gapped back out to 100 basis points.

The new Plains Exploration and Louisiana Pacific bonds priced way too late in the session for any kind of aftermarket activity.

Market indicators retreat again

A trader saw the widely followed CDX High Yield 11 index of junk bond performance - which had plunged 1½ points on Monday - continuing to backslide on Tuesday, quoting it down another ¾ point to 68 7/8 bid, 69 3/8 offered.

The KDP High Yield Daily Index meantime fell by 48 bps to 50.75, while its yield widened by 15 bps to 14.22%.

In the broader market, advancing issues continued to trail decliners, by a not quite two-to-one margin.

Overall market activity, measured by dollar-volume totals, rose by 35% from the levels seen in Monday's session.

A trader said that "this market is not easy, not for the faint of heart.

"Nobody wants surprises, especially in this nervous market."

He noted that even with the market struggling, "the calendar is still there - but the buyers are getting a little pessimistic again, I'll tell you that."

Another trader said that "everybody was beat up again by [Treasury secretary Timothy] Geithner's testimony" about the economy and federal spending plans before the House Ways and Means Committee. "It feels like the Chinese water torture, listening to these guys on TV."

A trader said "equity's not helping us, although they didn't go down that much" in contrast to recent sessions where the losses could be measured in the hundreds of points on the Dow, "so maybe we're getting ready for a big rally - we'll see, if anybody's left to enjoy it."

On Tuesday, stock market action was almost anticlimactic after Monday's huge slide, with the bellwether Dow Jones Industrial Average - a nearly 300-point loser on Monday - off by a relatively modest 37.27 points, or 0.55%, to end at 6,726.02. The Standard & Poor's 500 was off by 0.64%, although that 4.49-point decline brought the index below the psychologically important 700 support level for the first times since the fall of 1996. The Nasdaq composite index eased by 0.14%.

In line with the relatively orderly decline in stocks, in contrast with Monday's wild rout, high yield - which had seen many issues down two, three or even more points on Monday -- was likewise relatively restrained.

A trader saw Community Health Systems Inc.'s 8 7/8% notes due 2015, considered by some to be a market barometer because of the Franklin, Tenn.-based hospital operator's issue's great liquidity and widespread distribution, unchanged at 93 bid, on $17 million traded.

He also saw First Data Corp.'s 9 7/8% notes due 2015, another sometime-market bellwether, off slightly at 52.25, with $13 million traded, noting that after a period during which the Greenwood Village, Colo.-based financial transaction processor's issue traded at overly light activity levels not consistent with its $2 billion size, "activity in those has actually picked up" over the last few sessions.

Blockbuster bedeviled by bankruptcy talk

A trader said that Blockbuster Inc. "is the name right now," as its 9% notes due 2012 fell badly on news reports that the company had retained legal counsel to supposedly explore a possible bankruptcy filing.

He quoted the bonds at a "wide" 44 bid, 47 offered, up from around 40 bid earlier, and said the bonds are now trading flat, or without their accrued interest.

He noted that the bonds fell "even though management came in and denied" any intention of filing. "They said they're not considering bankruptcy" - but added that the denial did not help the bonds at all.

Blockbuster, another trader quipped, "was one of the blockbuster names of the day." He saw the bonds get as low as 40, before going out at 43 bid, 46 offered, well down from the low 50s at the start of the day, "on the alleged bankruptcy rumor." He said that there was "decent size traded" in the credit.

Yet another trader, who called the 9s "the biggest loser on the day," saw some $16 million of the bonds change hands at a final round-lot level of 40, down from the day's highs around 52, and noted that he heard they were trading flat, "even though Bloomberg still has them trading with the accrued because they haven't officially filed yet. It's always up to the buyer and the seller - it's not like they have to have filed already, it is possible for buyer and seller to agree on flat."

Blockbuster's New York Stock Exchange-traded shares were in absolute freefall, plunging as much as 86.4% at one point in the session before coming off their lows, no doubt helped a little by company denials of any intent of filing, to end down 74 cents, or 77.08%, at 22 cent a share, on volume of 13.6 million shares, or 9 times the usual turnover.

News reports said that the company had hired turnaround specialist law firm Kirkland & Ellis LLP to evaluate its restructuring options, including possibly a pre-packaged bankruptcy.

MGM murdered, again

For yet another session, MGM Mirage's capital structure "was getting hit again," a trader said.

A trader answered "Oh, God, yes," when asked whether those bonds continue to be pounded around by the market, quoting the company's 8 3/8% notes due 2011 offered at 20.25. He said the bonds traded as low as 19 bid, 19.75 offered, "down about 5 or 6 points" on the session.

Another trader saw the company's 13% notes due 2013 at 66 bid, 69 offered, "down a few points." Its 6 5/8% notes due 2015 were being quoted down 5 points at around the 33 level, although another market source only had the bonds down 1½ points at 37.

Its 7½% notes due 2016 fell to 36 bid, down another 3½ points on the day.

Another trader said the MGM 7 5/8% notes due 2017 "have been getting crushed" since their recent peak level of 49 bid in the second half of February. Now, he said, the bonds are at 33 bid, 36 offered, down another 3 points on the session.

The first trader saw the company's 6½% notes coming due July 31 at a round-lot level of 60 bid - a 175% yield-to-maturity - well down from the most recent prior round-lot level of 79 last Friday. Volume was just $1 million.

He also saw the 8½% notes due 2010 fall 4 points to 43 bid, on $10 million traded, while the 7½% 2016s ended at 35, down a deuce on the day.

The company's NYSE-traded shares meantime were also taking it on the chin again, falling as much as 21.3% during the session before going out off 14.10%, or 43 cents, to end at $2.62. Volume of 9.7 million shares was over twice the norm.

MGM Mirage's bonds have been getting clobbered ever since the company announced last week that it had drawn down the final $842 million available on its $4.5 billion revolving credit line, raising concerns about its liquidity and ability to get more capital, as well as the effective subordination that the new borrowing causes, pushing bonds further toward the back of the line in any kind of restructuring scenario.

As if that were not enough, MGM Mirage and joint venture partners have been trying to line up the financing needed to complete their ambitious City Center development project on the Las Vegas Strip, currently stalled because of tight funding

MGM warns on debt

And as trading was wrapping up for the day, the company disclosed in a Securities and Exchange Commission filing that it believes that it will soon fall out of compliance with the covenants in its debt agreements.

Explaining to the SEC why it must delay filing its 10-K annual report for the fourth quarter and full year ended Dec. 31, MGM Mirage warned that while it was in compliance with its financial covenants under its senior credit facility as of Dec. 31, "if the recent adverse conditions in the economy in general - and the gaming industry in particular - continue, [MGM Mirage] believes that it will not be in compliance with those financial covenants during 2009."

It noted that such noncompliance would constitute an event of default under the senior credit facility, and said that it is in talks with the administrative agent for its senior credit facility in order to obtain either a waiver for any instances of noncompliance, or else, an amendment to the senior credit facility to modify such covenants.

It further cautioned that there could be no assurance that such remedies would be obtained, and that could leave it liable to possible acceleration of the loan and possible cross-defaults on its bonds or other debt instruments.

Isle of Capri shrugs off lackluster numbers

In that same gaming sector, a trader said that Isle of Capri Casinos Inc.'s 7% notes due 2014 "were hanging right in there" in a 46 to 46.5 range, "even though their earnings were below estimates."

He said the St. Louis-based gaming company reported that fiscal third-quarter results were down 4%, "while people thought it would be flat. But it was not that bad - you'd think it was almost a relief."

Debt exchange no help to NXP

NXP BV's announcement that it will offer holders of its unsecured dollar- and euro-denominated bonds new, higher-coupon, shorter maturity "Super Priority " secured bonds failed to excite the holders of the Dutch semiconductor maker's existing debt.

While the company is offering total consideration in new secured bonds of as much as 17 cents on the dollar for tendering the existing 9½% unsecured notes due 2015, a trader said those notes were still in the same 9-10 context they were in before the offer was announced, "so it didn't help at all, it did not help."

A second opined that "everyone is skeptical about anything," seeing the 91/2s unchanged at 10 on $14 million traded, mostly in round lots of $1 million or more.

He also saw the company's 7 7/8% secured notes due 2014 - which the company is also willing to exchange new bonds for, at up to 32 cents on the dollar, though on a lower priority than the 91/2s - actually falling to 16.25 from prior levels at 21.5, though on only $4 million traded.

At another desk, a trader pegged the 7 7/8s down 6 points on the day at 16 bid, 18 offered.

Yet another trader agreed that the 9 ½% bonds were "active - but right around where they were [Monday] at 9.5-10, a lot of them traded there," while the company's secured floating-rate notes due 2013, also covered by the exchange offer, though at the lower priority, ended at 14 bid, 16 offered, versus 16 bid previously (see related article elsewhere in this issue).

Little bond impact from GM, Ford sales data

A trader said that General Motors Corp.'s bonds, and those of Ford Motor Co., were unchanged, despite the respective announcement from each carmaker that North American vehicle sales continued to slide badly versus year-ago levels in February - down 52.9% for GM and 48.2% for Ford.

He said the GM benchmark 8 3/8% bonds due 2033 were still at 13.5 bid, 14.5 offered and the Ford 7.45% bonds due 2031 remained at 17.5 bid, 18.5 offered.

At another desk, a trader saw the GM benchmarks in the low teens and the 7.20% notes due 2011 at 15 bid, 17 offered "but trading sideways."

He saw the Ford long bonds down a point at 17 bid, 19 offered.

Clear Channel short bonds move up

On the upside, a trader said that Clear Channel Communications Inc.'s 4¼% notes coming due on May 15 "continue to trade up, as it looks like a safer bet that they're going to be paid up."

The San Antonio, Tex.-based media company's bonds - which had traded at 69 bid as recently as last Thursday - were seen Tuesday at 86 bid, or an 88% yield to maturity, up from 83.5 on Monday, "up 20 points since Friday."

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