Ford, GM slide with March numbers; Solutia rises on asset sale; LCDX, cash better

By Sara Rosenberg

New York, April 1 - Ford Motor Co. and General Motors Corp. both saw levels on their term loans come in on Wednesday as sales numbers for March were released that showed a large drop when compared to the previous year.

Also in secondary happenings, Solutia Inc.'s term loan headed higher following the company's announcement that it has reached an agreement to sell its Nylon business and that proceeds will be used to repay some bank debt.

In addition, the LCDX 10 index and the cash market in general were both stronger on the day in sympathy with stocks.

Ford heads lower

Ford's term loan gave up some ground during the trading session as the company reported total sales for the month of March of 131,465, down 40.9% from 222,337 in March 2008, according to a trader.

Car sales for March were 46,467, down 36.6% from 73,296 last year.

And, total truck sales for the month were 78,640, down 43.7% from 139,778 in the 2008 comparable period.

By late day, Ford's term loan was being quoted at 46¾ bid, 47¾ offered, down from 47¾ bid, 48¾ offered, the trader said.

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

General Motors also falls

General Motors' term loan also weakened up on Wednesday as its March numbers were even worse than Ford's, percentage wise, with total sales down 44.7% to 156,380 from 282,732 last year, according to a trader.

General Motors' car sales for the month were 68,877, down 41.3% from 117,378 in March 2008.

And, total truck sales for March were 87,503, down 47.1% from 165,354 in the previous year.

Late in the session, General Motors' term loan was quoted at 39½ bid, 40½ offered, down from 41½ bid, 42½ offered, the trader said.

"Sales for GM and the industry showed signs of life at the end of the month compared with January and February," said Mark LaNeve, vice president, GM North America vehicle sales, service and marketing, in a news release.

"We are encouraged by actions taken by the Federal government to stabilize the industry and stimulate demand," LaNeve added.

General Motors is a Detroit-based automotive company.

Solutia strengthens

Solutia's term loan was on the rise in trading after the company revealed that it has found a buyer for its nylon business, according to a trader.

The St. Louis-based performance materials and specialty chemicals company's term loan was quoted at 68 bid, 70 offered, up from 66½ bid, 68½ offered, the trader said.

Early Wednesday morning, Solutia announced that it is selling its nylon business to an affiliate of SK Capital Partners II LP, a New York-based private equity firm that is focused on the chemical, material and health care sectors.

At the closing of the sale, Solutia will receive $50 million in cash and a 2% equity stake in a new company formed to hold substantially all of the assets of the nylon business. Solutia will also receive $4 million in deferred cash payments to be paid in annual $1 million installments beginning in 2011.

Solutia to pay down debt

Solutia said on Wednesday that proceeds from the sale of the nylon business will be used to repay some borrowings under its asset-based revolving credit facility.

In addition, SK Capital will secure replacement of $25 million of letters of credit associated with the nylon business, which will result in increased availability for Solutia under its credit agreements.

"Following this divestiture, Solutia will have completed its transformation into a pure-play performance materials and specialty chemicals company, with a portfolio of high-value products with world-leading positions," said Jeffry N. Quinn, chairman, president, and chief executive officer, in a news release.

"The nylon sale is a positive step toward securing Solutia's future. We recognize that we are operating in an unprecedented economic environment and we remain focused on cost reduction, operational efficiency, cash flow generation, liquidity, and covenant compliance," added James M. Sullivan, executive vice president and chief financial officer, in the release.

The transaction is expected to close in the second quarter, subject to various conditions.

Idearc holds steady

Idearc Inc.'s term loan B held firm on Wednesday at 37¾ bid, 38¼ offered, which is where it closed out Tuesday after rallying from 31¾ bid, 32¾ offered on bankruptcy news, according to a trader.

On Tuesday, Idearc announced that it has reached an agreement in principle with the agent bank and a steering group of its secured lenders on certain critical elements of a plan of reorganization, and that a Chapter 11 filing was made.

Under the agreement in principle, the company's total debt will be reduced to a pro forma level of $3 billion of secured bank debt, with a 12% interest rate and a six-year term, from about $9 billion currently.

Mandatory amortization will be $60 million for each of the first two years following confirmation and $40 million per year thereafter, and, the company will retain 32.5% of surplus cash flow, with the balance to be paid as additional amortization on the bank debt.

Idearc lenders getting cash collateral

Idearc also agreed with the agent bank and steering committee to continue to fund operations from all but $250 million of the company's more than $600 million cash collateral balance, and the remaining $250 million of cash collateral will be paid to the secured lenders as adequate protection, subject to bankruptcy court approval.

Other terms of Idearc's proposed plan of reorganization are still to be negotiated, but it is anticipated that the remainder of its bank debt and bonds will be converted to equity.

As part of the plan, the company will not obtain debtor-in-possession financing during the reorganization, since it maintains substantial cash balances and continues to generate positive cash flow, and has reached an agreement on use of cash collateral.

The company expects to be able to file a plan of reorganization in about 30 days.

Idearc is a Dallas-based provider of yellow and white page directories and related advertising products.

LCDX, cash trade up

The LCDX 10 index and the overall cash market were both higher on Wednesday as stocks posted some gains, according to a trader.

The index was quoted at 72.90 bid, 73.15 offered, up from 72.80 bid, 73 offered, and cash was better by about a half a point, the trader said.

As for stocks, Nasdaq closed up 23.01 points, or 1.51%, Dow Jones Industrial Average closed up 152.68 points, or 2.01%, S&P 500 closed up 13.21 points, or 1.66%, and NYSE closed up 106.78 points, or 2.14%.

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