Rite Aid dips on tax expense; Autos pressured in weaker market; Consolidated Precision, Dr Pepper set talk

By Sara Rosenberg

New York, March 17 - Rite Aid Corp.'s term loan headed lower on Monday after news of a tax expense hit the market, auto names, such as General Motors Corp., Ford Motor Co. and Chrysler Financial Services LLC, got hit pretty hard as the overall secondary tone was negative, and LCDX 9 softened.

In other news, Consolidated Precision Products began circulating price talk on its credit facility as the deal is gearing up for its launch this Thursday, and Dr Pepper Snapple Group, Inc. came out with price talk on its credit facility in connection with its Monday bank meeting.

Rite Aid's term loan dropped in trading during market hours as the company announced that it expects to record a non-cash income tax expense in its fourth quarter, according to a trader.

The tax expense is related to a valuation allowance on deferred tax assets.

Rite Aid said that it anticipates the valuation allowance to negatively impact net loss by $800 million to $1.0 billion or loss per diluted share by $1.11 to $1.38, and as a result, net loss and net loss per share will be greater than previously issued guidance.

The company confirmed its fiscal 2008 adjusted EBITDA guidance, which it expects to be between $950 million and $1.0 billion and its guidance for capital expenditures, including integration capital expenditures but excluding proceeds from sale and leaseback transactions, which it expects to be between $790 million to $820 million.

Fiscal 2008 fourth quarter and year-end results will be announced on April 10.

Following this news, Rite Aid's term loan was quoted at 89½ bid, 90½ offered, down from 90½ bid, 91½ offered, the trader said.

Rite Aid is a Camp Hill, Pa.-based drugstore chain.

Autos down with market

The auto sector was noticeably weaker on Monday, coming in with the rest of the market, as investors were unnerved by the low purchase price that JPMorgan Chase & Co. is paying for Bear Stearns Cos. Inc., according to a trader.

General Motors, a Detroit-based automaker, saw its term loan quoted at 86¾ bid, 87¾ offered, down from 87¾ bid, 88¾ offered, the trader said.

Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted at 80¼ bid, 81¼ offered, down from 81¾ bid, 82¾ offered.

And, Chrysler Financial, a provider of financial services for vehicles in the NAFTA region, saw its first-lien term loan quoted at 80 bid, 81 offered, down from 82¼ bid, 82¾ offered, the trader remarked.

On Monday, Standard & Poor's placed General Motors's ratings on CreditWatch with negative implications due to the extended American Axle strike.

S&P said that the work stoppage that began Feb. 25 at American Axle's U.S. United Auto Workers plants has forced closure of many General Motors plants, as well as plants of certain General Motors suppliers.

"We believe the strike has gone on long enough to possibly begin to affect the financial resources of GM and those suppliers most exposed to the automaker," said S&P credit analyst Robert Schulz in the rating release.

"A lot of trading happened before that came out," the trader said regarding the rating announcement. He went on to explain that the fall in autos seemed to have more to do with the general market than with the credit specific news, being that the fall in levels took place before the S&P announcement was made.

"Generically things feel a bit weaker [in cash] on light volume, down a half a point to a point," the trader continued.

LCDX 9 was down as well, with levels quoted at 91.20 bid, 91.35 offered, compared to 91.45 bid, 91.65 offered on Friday, the trader said.

A big part of Monday's market weakness had to do with the news that JPMorgan is purchasing Bear Stearns for about $2 per share.

"When you see a bid for $2 a share for a company that was trading as high as $170 per share in 2007, it makes people question the value of other things out there. Stock market did pick up in the afternoon, but loans still felt weaker," the trader added.

JPMorgan is buying Bear Stearns in a stock-for-stock exchange, under which JPMorgan will exchange 0.05473 shares of common stock per one share of Bear Stearns stock.

Effective immediately, JPMorgan is guaranteeing the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations.

The transaction is expected to have an expedited close by the end of the second quarter, subject to shareholder approval. The Federal Reserve, the Office of the Comptroller of the Currency and other federal agencies have given all necessary approvals.

In addition to the financing the Federal Reserve ordinarily provides through its Discount Window, the Fed will provide special financing in connection with this transaction. The Fed has agreed to fund up to $30 billion of Bear Stearns's less liquid assets.

The acquisition news comes on the heels of Bear Stearns's Friday announcement that it reached an agreement with JPMorgan and the Federal Reserve Bank of New York to provide a secured loan facility for an initial period of up to 28 days.

According to Bear Stearns, the loan was necessary because its liquidity had significantly deteriorated over a 24 hour period.

Stocks were a mixed bag on Monday, with Nasdaq down 35.48 points, or 1.60%, Dow Jones Industrial Average up 21.16 points, or 0.18%, S&P 500 down 11.54 points, or 0.90%, And NYSE down 146.54 points, or 1.70%.

Consolidated Precision price talk

Moving to the primary, Consolidated Precision Products price talk started making its way around the market as the $157 million deal is getting ready to launch to investors with a bank meeting this coming Thursday, according to a market source.

Both the $20 million revolver and the $137 million term loan are being talked at Libor plus 425 bps to 450 bps, with the original issue discount still to be determined, the source said.

GE Capital and the Bank of Ireland are the lead banks on the deal that will be used to help fund the acquisition of the company by Arlington Capital.

Other financing will come from $59 million of mezzanine debt provided by Audax.

Leverage through the credit facility is 3.39 times and total leverage is 4.85 times.

The company has $180 million of sales and $40 million of EBITDA.

Consolidated Precision Products is a manufacturer of highly engineered, complex metal components and assemblies supplying the commercial aerospace, military and defense markets.

Dr Pepper talk emerges

Dr Pepper Snapple Group held a bank meeting on Monday to kick off syndication on its $2.4 billion credit facility, and in connection with the launch, price talk was announced, according to a market source.

Both the $500 million revolver and the $1.9 billion term loan are being talked at Libor plus 200 bps, the source said, adding that the deal is targeting commercial banks as its investor base.

JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley and UBS are the lead banks on the facility that will be used to help fund the spin-off of Cadbury Schweppes plc's Americas Beverages business into an independent company named Dr Pepper Snapple Group.

The spin-off is expected to be completed on May 7.

Dr Pepper Snapple Group is a brand owner, bottler and distributor of non-alcoholic beverages, including Dr Pepper, 7UP, Sunkist, A&W, Canada Dry, Schweppes, Snapple, Mott's, Hawaiian Punch and Clamato.

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