A&P active, steady after bankruptcy filing; Home Inns & Hotels to price; Medtonic, Ford trade

By Rebecca Melvin

New York, Dec. 13 - Great Atlantic & Pacific Tea Co. convertibles were actively traded and a central focus of trade in the convertible bond market on Monday after word that the Montvale, N.J.-based grocery store chain filed for Chapter 11 bankruptcy protection on Sunday.

The GAP bonds settled close to the levels at which they closed out on Friday, after the bonds tanked on that day on reports about an impending filing.

"Investors were surprised on Friday that they were going to file," a Connecticut-based sellside trader said, adding that the big move down was on Friday and on Monday they were just very actively traded by short-sellers and people trying to get out of the bonds.

Otherwise it was a rather sleepy session, sources said, with only the usual suspects in trade and nothing of note. As has been the pattern of late, however, new issues emerged after the market close.

Home Inns & Hotels Management Inc. launched a $160 million offering of five-year convertible senior notes that was seen pricing after the market close on Tuesday.

The Home Inns paper was being sold via bookrunners Credit Suiise and J.P. Morgan and was talked to yield 2% to 2.5%, with an initial conversion premium of 20% to 25%.

Also after the close, Angle Energy Inc. of Canada announced a C$60 million deal of 5.75% convertibles.

Among other names in trade during the session was Medtronic Inc., which was steady as market players were seen using the large, liquid issues of the Minneapolis-based medical device maker as more of a place holder for cash or a cash substitute rather than a name on which they are taking a strategic position.

Ford Motor Co. was also actively traded, with its underlying shares ending down 2%.

Overall, the market was described as "dead," with A&P as the "main special situation right now."

A&P active, steady post-filing

The A&P 5.125% notes due 2011 traded between 26 bid, 29 offered during the session and closed tighter at 28 bid, 29 offered, which was just about where they went out on Friday, according to a Connecticut-based sellside trader.

The paper plummeted into the high-20s on Friday from levels around 78 on Thursday.

The A&P 6.75% convertibles due 2012 traded in the same 26 bid, 29 offered range, the trader said.

The filing Friday took investors by surprise, the sellsider said, so trading on Monday was very active, with "everyone" trading it, whether short-sellers or outrights.

Market players were watching headlines about the filing and debtor-in-possession, yet figuring a valuation at this point wasn't likely, the trader said.

The company will have access to $800 million of debtor-in-possession financing from JPMorgan Chase & Co., which will enable it to continue paying local suppliers, vendors, employees and others in the normal course of business.

The company said it continues to conduct its business and serve customers at its 395 stores despite the bankruptcy filing on Sunday.

As A&P implements its restructuring, it plans to continue and accelerate most of the basic elements of the turnaround plan announced in October.

Under this plan, a completely new management team is in place, structural and operating costs will be reduced, A&P will improve its value proposition for customers and the in-store customer experience will be enhanced.

A&P said its major shareholders support the bankruptcy filing.

Debt details

According to court documents, A&P had $2.531 billion of assets and $3.211 billion of debt as of Sept. 11.

The company's largest unsecured creditors include indenture trustee Wilmington Trust Co., with a $229 million claim for the company's 6.75% unsecured convertible senior notes due 2012, a $200 million claim for 9.375% unsecured quarterly interest notes due 2039, a $165 million claim for 5.125% unsecured convertible senior notes due 2011 and a $12.84 million claim for 9 1/8% unsecured senior notes due 2011.

The company's preferred shareholders include Christian W.E. Haub, Erivan Karl Haub, Karl-Erivan Warder Haub, Tengelmann Warenhandelsgesellschaft KG and Yucaipa Cos. LLC.

The largest common stockholders include those preferred shareholders as well as Alethia Research & Management, Gamco Investors, Inc., Bank of America Corp. and DBD Cayman Ltd.

The filing will bring changes in management, including chief administrative officer Frederic F. "Jake" Brace taking the additional title of chief restructuring officer.

The company's legal representative in its Chapter 11 cases is Kirkland & Ellis LLP, and its financial adviser is Lazard.

Home Inns & Hotels to price

Home Inns plans to price $160 million of five-year convertible senior notes via a Regulation S and Rule 144A offering that is being sold thought Credit Suisse and JP Morgan, according to a market source.

The notes will be non-callable for life with no puts. There is dividend and takeover protection, and proceeds are expected to be used for new business development, investments in complementary businesses and assets, strategic acquisitions and general corporate purposes.

The notes and the ADSs into which those notes may be convertible have not been registered.

Home Inns is a Shanghai-based hotel chain operating throughout China.

Mentioned in this article:

Angle Energy Inc. Toronto: NGL

Ford Motor Co. NYSE: F

Great Atlantic & Pacific Tea Co. NYSE: GAP

Home Inns & Hotels Management Inc. Nasdaq: HMIN

Medtronic Inc. NYSE: MDT

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.