Ford rises as loan tender increased; Hertz trades up with amendment; LCDX, cash strengthen

By Sara Rosenberg

New York, March 23 - Ford Motor Co.'s term loan rallied during Monday's trading session as the company upped the amount of term loan debt it will be buying back in its Dutch auction tender offer as a result of the original offer being oversubscribed.

In other secondary happenings, Hertz Global Holdings Inc.'s strip of institutional bank debt headed higher in follow through from the company's recently launched amendment that would allow for the repurchase of term debt.

Also, the LCDX 10 index and the overall cash market were both better as stocks rallied, helped along by the government's new toxic asset plan.

Ford jumps on tender news

Ford's term loan gained a couple of points in trading as the company came out with an update on its term loan tender offer that revealed not only the final pricing, but a planned increase in the amount of debt that would be bought back, according to traders.

The Dearborn, Mich.-based automaker's term loan was quoted by one trader at 43 bid, 48 offered, up about four to five points on the day, and by a second trader at 45 bid, 46 offered, up from Friday's levels of 38 bid, 40 offered.

The second trader remarked that the term loan was trading all over the place on Monday, starting the day at 44 bid, 46 offered and reaching a high of 45¼ bid, 46¼ offered.

Ford loan tender results

On Monday morning, Ford announced that its $500 million Dutch auction cash tender offer for senior secured term loan debt was oversubscribed and that the tender price was 47.

As a result of the strong reception, the company is increasing the cash it will use for the tender offer to $1 billion, which would result in the repurchase of $2.2 billion of the $6.9 billion term debt outstanding.

The final tender price ended up at the high end of the company's scale. Term loan lenders had been invited to submit bids to sell their paper in a price range of 38 to 47 by March 19.

Ford updates notes tender, too

Also on Monday, Ford provided some additional information on the $1.3 billion cash tender offer for its unsecured non-convertible debt securities, of which $8.9 billion is outstanding.

As of the early tender date of March 19, about $3.4 billion principal amount of convertibles had been validly tendered, resulting in an aggregate purchase price of about $1.1 billion.

The notes tender offer is scheduled to end on April 3, which is also the expiration date for the company's previously announced conversion offer for its $4.88 billion of 4.25% senior convertibles due Dec. 15, 2036.

"We are very pleased with the results to date of our debt restructuring initiatives," said Neil Schloss, treasurer, in a news release.

"With these tenders, we have taken significant steps towards reducing Ford's long-term debt and strengthening our balance sheet," Schloss added.

Hertz better on amendment

Hertz's strip of term loan letter-of-credit facility debt was stronger on Monday as news of a recently launched amendment proposal became more widespread, according to a market source.

The strip of debt was quoted around 67¾ bid, 68¼ offered, up from Friday's levels of 67 bid, 68 offered, the source said.

Prior to chatter on the amendment hitting last week, the paper was quoted around the mid-60s, the source remarked.

Under the amendment, which was launched this past Friday, Hertz would be allowed to use up to $500 million in cash to repurchase term loan debt through tender offers for a period of one year.

The company would only be allowed to execute four tenders during that one-year period and there would be a minimum tender size of $10 million.

Hertz could use revolver for tender

As part of the amendment proposal, Hertz would be allowed to draw on its revolving credit facility to fund any term loan buybacks, the source said.

However, the company would have to meet a minimum liquidity test of $1 billion between cash and its revolver before it could approach the market with a tender offer. Currently, the company has $1.8 billion of liquidity.

Deutsche Bank is leading the amendment and responses are due from lenders this coming Friday.

In return for their consents, lenders will be paid a 5 basis points fee.

Hertz is a Park ridge, N.J.-based car rental brand.

LCDX, cash head higher

The LCDX 10 index and the cash market in general were stronger on Monday in sympathy with the stock market and on news of a plan that is supposed to help banks, according to traders.

The index was quoted at 73.10 bid, 73.50 offered, up from Friday's levels of 72.25 bid, 72.55 offered, traders said.

Meanwhile, the cash market was up about half a point to a point on the day, one trader added, saying: "[The] whole toxic asset plan has people thinking maybe they'll buy some of these distressed assets. Takes away some of the threat of banks dumping it into the loan market, so supports loan levels."

Under the plan, the government would fund purchases of up to $1 trillion in toxic assets from banks.

Stocks also rallied on the news, with Nasdaq closing up 98.5 points, or 6.76%, Dow Jones Industrial Average closing up 497.48 points, or 6.84%, S&P 500 closing up 54.38 points, or 7.08%, and NYSE closing up 353.73 points, or 7.32%.

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