GMAC boosted by bondholder agreement; Huntsman dives as buyout falters; MGM gains on asset sale news

By Stephanie N. Rotondo

Portland, Ore., Dec. 15 - Distressed bond traders reported that the market was mostly lower Monday, though there were some names that went against the grain.

One such name was GMAC LLC. The company's bonds moved up as much as 5 points on the day following a series of declines last week. The improvement was credited to news that a group of bondholders - who had previously objected to the company's recently announced tender offer - had unanimously agreed to support the revised deal.

Huntsman International Corp., however, did not fare as well as GMAC. Huntsman's debt fell at least 20 points during the session as the company announced it had terminated a buyout deal with Hexion Specialty Chemicals Inc. Though the company will receive at least $1 billion as a settlement, some market players fear Huntsman's fate is in jeopardy.

Meanwhile, an asset sale gave MGM Mirage's bonds a boost. The company plans to sell its Treasure Island property, located on the Las Vegas Strip, for $775 million.

GMAC boosted by agreement

GMAC's debt regained some ground after it was announced that a group of bondholders had agreed to the company's revised terms of its tender offer.

A trader saw the 5.85% notes due 2009 move up to around 90 after falling off last week on worries that the exchange would not be successful. He also saw the 5 5/8% notes due 2009 inch higher to 73.

Another market source deemed the company's benchmark 8% notes due 2031 at 33, or 5 points better, while the 6 7/8% notes due 2012 were 4 points firmer at 39 bid.

A group of bondholders holding about $10.5 billion in debt had previously objected to GMAC's $38 billion debt swap. However, last week the company revised the terms of the offer and the group reacted positively to the new deal.

GMAC is attempting to retire the debt as a way to lessen its debt load, but also to raise capital in an effort to become a bank. By becoming a bank, the struggling finance arm of General Motors Corp. could gain access to $700 billion in TARP funds. If the exchange were to fail, the company would likely face a default by the end of the year.

GMAC needs at least 75% of bondholders to participate in the tender to qualify for the federal funding. So far, only about 25% of the debt included in the offer has been tendered.

Huntsman dives as buyout collapses

The biggest lower of the day was Huntsman International. The company's bonds fell more than 20 points after the company's sale to Hexion Specialty Chemicals Inc. was terminated.

A market source said the 7 3/8% notes due 2015 dropped nearly 25 points to 38 bid, 39 offered. Another source also saw that issue at that level, as well as the 7 7/8% notes due 2014 around 40.

Still, the second source said trading in the bonds was "very little considering."

"It was really small given that the deal fell apart," he said, noting that less than $10 million traded.

Also, in response to the announcement, Hexion's term loan was quoted at 41 bid, 46 offered, down from Friday's levels of 47 bid, 50 offered, the trader said.

And, Huntsman's term loan was quoted at 50 bid, 55 offered, down from Friday's levels of 59 bid, 62 offered, the trader added.

The termination of the $6.5 billion buyout ended after Huntsman's founder, Jon Huntsman, met with Leon Black, the founder of Apollo Management LP, which owns Hexion. After three days of negotiations, the two reached a deal in which the buyout offer would expire and Huntsman would be paid $1 billion.

The buyout was announced mid-2008. Hexion tried to back out of the deal at one point, as the company and its lenders wondered if the move was solid in the current economic environment.

The massive credit facility that was going to fund Hexion's acquisition of Huntsman was already considered by the market as probably gone since a few weeks ago the court decided not to extend the financing commitment from the banks past the Nov. 1 expiration date.

Under the original commitment, Credit Suisse and Deutsche Bank had agreed to provide Hexion with a $9.4 billion credit facility, consisting of an $8.4 billion term loan and $1 billion revolver, or a $7.4 billion term loan and $2 billion asset-based revolver.

Hexion's purchase of Huntsman was previously hoped to close in October, but the closing was delayed as the banks refused to fund the debt financing, claiming that the solvency opinion of American Appraisal Associates and the solvency certificate of Huntsman's chief financial officer did not meet the condition of the commitment letter.

Not included in the Hexion/Huntsman settlement is Huntsman's suit against Credit Suisse and Deutsche Bank that claims that the banks conspired with Apollo and tortuously interfered with Huntsman's prior merger agreement with Basell, as well as with the later merger agreement with Hexion.

A jury trial on those claims currently is set to begin on May 11, 2009.

As part of the settlement agreement with Hexion, Apollo and its principals have agreed to fully cooperate in connection with Huntsman's litigation against the banks.

"This is a significant settlement for our company and its shareholders, but we must continue to pursue our multibillion dollar Texas case against Credit Suisse and Deutsche Bank for the harm they have caused. We remain focused on preparing for our May jury trial against the banks," Jon M. Huntsman, founder and executive chairman, said in a news release.

"We are happy to be resolving this situation in the best interest of our investors," Black said in a statement. "It puts to an end the six-month disagreement and distraction between our companies."

But not everyone shared Black's optimistic view.

"Although we thought a settlement was likely, it is substantially smaller than that which Huntsman was seeking through the courts," Gimme Credit analyst Carl Blake wrote in an afternoon comment. "The abrupt and miniscule settlement leads us to believe that Huntsman's current financial position could be worse than previously thought."

Huntsman has said it would not search for another interested buyer.

Hexion is a Columbus, Ohio-based thermoset resins company. Huntsman is a Salt Lake City-based manufacturer of differentiated chemicals and pigments.

MGM jumps on asset sale news

Casino operator MGM Mirage saw its corporate debt get a boost following news that the company had sold its Treasure Island property.

A trader pegged the 7½% notes due 2016 at 57 and the 8 3/8% notes due 2011 at 52. Another source called the 6 5/8% notes due 2015 more than 3 points higher at 56.75 bid.

MGM is selling its pirate-themed casino and hotel to Ruffin Acquisition LLC for $775 million, the company said. Ruffin will pay $500 million in cash and $275 million in secured notes for the Las Vegas Strip property. The sale is expected close in the second quarter of 2009.

Elsewhere in the sector, Station Casinos Inc. announced that it was canceling its exchange offer for five series of notes. The news did not please investors.

A trader called the 6% notes due 2012 6 points weaker around 23. Another called the bonds "pretty active" at 23 bid, 24 offered, down from around 30 on Friday.

Station said Monday that it was terminating the debt swap after a group of bondholders called the terms of the deal "deficient." The cancellation could adversely affect the company's financial position, leaving it at the mercy of its bank lenders.

Trump Entertainment Resorts Inc.'s 8½% notes due 2015 fell more than a point to close at 12 bid.

Broad market mostly lower

Charter Communications Inc.'s paper "traded a bunch," a trader said, following Friday's trend. The bonds had gotten busy after the company said it was engaging in talks with bondholders regarding a possible restructuring.

The trader said $25 million of the 11% notes due 2015 traded around 11.5, while another $25 million of the 8¾% notes due 2013 changed hands around 43.

Another trader also saw the 11% notes around 11, adding "they may be a little higher, but I would have put them around 10 bid, 12 offered on Friday."

The second trader also saw the 10¼% notes due 2010 "where they were" in the high-20s.

Moody's Investors Service cut Nortel Networks Corp.'s rating Monday. The downgrade put more pressure on the company's bonds.

A trader placed the 10 1/8% notes due 2013 at 17, down a point, while another called the bonds off more than 3 points at 16.75 bid.

Bon-Ton Stores Inc.'s 10¼% notes due 2014 dropped as much as 4 points on the day, according to a trader, to around 15. The trader said there was news out on the company regarding its bank lenders.

Sara Rosenberg contributed to this article.

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