Clear Channel drops with downgrade; Freescale slides on selling pressure; LCDX softens

By Sara Rosenberg

New York, March 9 - Clear Channel Communications Inc.'s term loan headed lower during Monday's trading session after the company was hit with a ratings downgrade by Moody's Investors Service.

Also in trading, Freescale Semiconductor Inc.'s term loan was down as there appeared to be some more sellers in the name, the LCDX 10 index weakened with equities and the cash market in general was described as softer to unchanged depending on who was asked.

Clear Channel dips

Clear Channel's term loan softened up during market hours as Moody's announced that it cut several of the company's ratings, according to a trader.

The term loan was quoted at 35 bid, 37 offered, down from Friday's levels of 37 bid, 39 offered, the trader said.

On Monday, Moody's downgraded Clear Channel's corporate family rating to Caa3 from B2, senior secured credit facilities to Caa2 from B1 and all senior unsecured notes to Ca from Caa1. The outlook was revised to negative.

Moody's explained that the downgrade reflects the belief that there is a high probability that the company will violate its secured 9.5 times leverage covenant this year, and that when this occurs, a debt restructuring will be likely.

"With a capital structure that was highly speculative from its inception, the company's ability to continue as a going concern is completely dependant upon remaining in compliance with its covenants," stated Neil Begley, senior vice president of Moody's, in the ratings release.

"But in the current economic environment, compliance will be very challenging, and as a result, such a capital structure will not likely be sustainable," Begley added.

Moody's expects restructuring for Clear Channel

According to Moody's, there are three possible scenarios for Clear Channel, with the highest probability associated with the first two, which reflect a covenant breach, and both leading to certain debt restructuring.

The first consists of the senior secured bank debt holders forcing an immediate restructuring to eliminate additional capital leakage to fund over $320 million of annual junior debt holder cash interest repayments as well as about $384 million of junior debt maturities in 2010.

The second scenario consists of the company successfully receiving a waiver of its covenant breach or covenant relief via an amendment. Moody's expects that in this situation, the company would likely be given only limited relief of the covenant and could require a second request within a few quarters. Also, there would be a significant cash fee paid to the banks, and an upward adjustment in pricing on the first amendment request, as well as on subsequent requests.

The third scenario, which Moody's believes has a low probability of occurring, assumes that the company does not violate its bank agreement covenant. In this case, even though the company still faces nearly $3 billion of debt maturities through 2013, it should have sufficient cash to meet these maturities. However, 2014 maturities are very significant and would likely require the company to possess materially lower leverage in order to be able to refinance them.

Clear Channel is a San Antonio-based media and entertainment company.

Freescale trades lower

Freescale Semiconductor's term loan gave up some ground on Monday with increased selling named as the culprit behind the move being that there was no credit specific news seen, according to traders.

The term loan was quoted at 35 bid, 40 offered, down about a point on the day, traders remarked.

Freescale is an Austin, Texas-based designer and manufacturer of embedded semiconductors for the automotive, consumer, industrial, networking and wireless markets.

LCDX heads down

The LCDX 10 index was weaker in trading as equities fell off, while the cash market was labeled as anywhere from unchanged to lower, according to traders.

The index was quoted at 70.85 bid, 71 offered, down from 71.20 bid, 71.40 offered on Friday, one trader said.

This trader said that cash in general felt like it was down by about a half a point across the board.

However, a second trader said that the market was more likely unchanged to maybe slightly softer.

"Seems like everybody started the day thinking weaker and then it seems to have firmed up a little by the end of the day," the trader remarked.

One such example of this, according to the trader, was NRG Energy Inc.'s strip of institutional bank debt, which was 88¼ bid, 89¼ offered by the end of the day but as low as 87¾ bid, 88½ offered throughout the session. On Friday, the Princeton, N.J.-based power company's strip was 88 bid, 89 offered.

AS for stocks, Nasdaq closed down 25.21 points, or 1.95%, NYSE closed down 58.18 points, or 1.36%, S&P 500 closed down 6.85 points, or 1%, and Dow Jones Industrial Average closed down 79.89 points, or 1.21%.

Tyson completes revolver

Tyson Foods Inc. closed on its new $1 billion three-year senior secured ABL revolving credit facility, according to a news release.

JPMorgan, Bank of America, Barclays, Wachovia and Rabobank acted as the joint lead arrangers and joint bookrunners on the deal, with JPMorgan the left lead and administrative agent.

Initial pricing on the revolver is Libor plus 400 basis points based on the company's corporate credit ratings of Ba3/BB.

If the corporate rating is Ba1/BB+ or higher, pricing will move to Libor plus 375 bps and if the rating is B1/B+ or lower, pricing will move to Libor plus 425 bps.

Tyson revolver part of refinancing

Proceeds from Tyson's new ABL facility are being used to replace an existing revolving credit facility.

In addition, the company recently sold $810 million of 10.5% senior notes due 2014 at 92.756 to yield 12½%, the proceeds of which are being used to repay borrowings and terminate commitments under its accounts receivables facility, repay and/or refinance other debt and for other general corporate purposes.

The oversubscribed notes offering was originally expected to be sized at $500 million.

"Given the current financial market, we believed it was prudent for us to proceed with these measures now," said Dennis Leatherby, executive vice president and chief financial officer, in the release. "The offering and new credit facility provide Tyson with continued financial flexibility, giving us the option of paying off some existing debt early as well as funds for future financing needs."

Tyson is a Springdale, Ark.-based processor and marketer of chicken, beef and pork.

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