Thornburg bonds mellow out; Level 3 paper creeps up; Delphi revises credit facility for third time

By Stephanie N. Rotondo

Portland, Ore., March 27 - During a day in which trading volume was categorized as "pretty light," traders reported that the distressed bond market was weaker overall Thursday.

"It certainly hasn't been a good day," one trader said. "The market was very weak - not disastrous, but not great."

The trader said CDS spread widening on brokers - Lehman Brothers CDS spreads, for example, widened 30 basis points to 280/300 bps - and financials "trading off" was putting more pressure on the marketplace.

Given the slight action, many market players stepped away from their desks early.

"I think that is a good idea," said a trader who remained seated despite the lack of volume. "Go home, relax, cool off and we will try again tomorrow."

Even Thornburg Mortgage Corp.'s bonds, which have been trading actively for a couple weeks now, were on the quieter side. As the market continued to wait for word on whether the company met its cash-raising deadline, the bonds closed unchanged to just slightly softer.

Bucking the downward trend was Level 3 Communications Inc. That company's debt edged higher in trading, though there was no news to prompt the movement.

In the autosphere, Delphi Corp. yet again modified its credit facility. That marks the third time - the second in just a week - that the company has amended its exit facility, not including the initial launch.

Last week, Delphi officials conceded that a March 31 emergence from Chapter 1 protection was not realistic. In a filing with the court overseeing its case, Delphi said "it now appears that the (reorganization) plan is unlikely to become effective by March 31," adding that it had not yet obtained enough cash to fund its exit.

Thornburg mellows out

Thornburg Mortgage's bonds took a break during Thursday trading, as traders reported activity in the name slowed.

Price movement was also largely unaffected in the recently volatile debt. One trader said the 8% notes due 2013 remained in the low-60s, with still "no news yet on that deal," citing the company's plan to sell more than $1 billion in new notes.

Another trader said the name was "not very active, which was unfortunate," pegging the bonds at 62.5.

"That's down a little, but not much," he said.

Another source deemed the debt unchanged at 63, while another also saw them unchanged at a wide 60 bid, 65 offered.

However, a market source at another desk saw the bonds go home at 62.5 bid, down about a point, after first bouncing around at bid levels between 61 and 65, in fairly active dealings with some large-block trades late in the session.

Another trader said the bonds were up 2 points on the day at 60 bid, 65 offered.

The market continued to look for news regarding the company's refinancing plan and whether the deal was on its way to completion. On Tuesday, Thornburg announced that it would issue $1.4 billion in new debt, instead of the original plan of selling $1 billion in convertible debt securities. The company was forced last week to find nearly $1 billion in cash - in just one week - to appease it bank lenders. If the company succeeds, lenders have agreed to cease their margin call and repayment demands until March 2009.

Thornburg Mortgage is a Santa Fe, N.M.-based mortgage lender specializing in jumbo home loans.

Elsewhere in the financial sphere, GMAC LLC's 8% notes due 2031, considered one of the benchmark issues, ended unchanged at 72.25.

A trader called Residential Capital LLC's 6½% notes due 2013 down 2 points at 50 bid, 52 offered, while parent GMAC's 8% bonds were off a point at 72 bid, 74 offered.

At another desk, ResCap's 8 7/8% notes due 2015 lost 1.5 points to around the 50 bid area.

Countrywide Financial Corp.'s bonds were little changed, with the 3¼% notes coming due May 21, 2008 still at 98 bid, par offered, while its 6¼% notes due 2016 stayed at 79 bid, 81 offered.

Level 3 paper edges higher

Level 3 paper "seems to be creeping up," a trader said. Still, it was unclear what propelled the bonds upward.

The trader quoted the 9¼% notes due 2014 at around 82, up half a point to a point. Another source saw that issue at 82.25 and the 5 7/8% notes due 2015 at 96.75.

In a filing with the Securities and Exchange Commission Wednesday, Level 3 said it had reached a "separation agreement" with Kevin O'Hara, its president and chief operating officer, as well as one of its founders. The filing also stated that O'Hara would remain with the company as a consultant.

However, it seemed unlikely that the news would trigger the gains, a source opined.

Level 3 is a Broomfield, Colo.-based fiber-optic network operator.

Delphi modifies facility - again

Delphi modified its credit facility yet again, this time increasing the size of the first-lien term loan since it was oversubscribed, and reducing the size of the ABL revolver and the second-lien term loan that General Motors Corp. is taking down, market sources reported.

The seven-year first-lien term loan (Ba2) is now sized at $2 billion, up from $1.7 billion, sources said, explaining that there were more than $2 billion in orders from investors toward this tranche. Pricing on the loan was left at Libor plus 575 basis points, with a 3.25% Libor floor for life, an original issue discount of 92, and call protection of 102 in year one and 101 in year two.

The six-year ABL revolver is now sized at $1.4 billion, down from $1.6 billion, sources continued. Pricing on this tranche was left at Libor plus 300 bps, with a 150 bps unused fee.

And, the eight-year second-lien term loan (B2) is now sized at $2.65 billion, down from $2.825 billion, sources added. Pricing on this loan is Libor plus 695 bps, with a 3.25% Libor floor for life and call protection of 103 in year one and 101½ in year two.

JPMorgan and Citigroup are the lead banks on the now $6.05 billion (down from $6.125 billion) deal.

Allocations are expected to go out on Friday.

Delphi's exit financing credit facility has gone through a number of changes during its syndication process.

When the company first launched the facility in early January, the deal was comprised of a $3.7 billion first-lien term loan (Ba3/B+), an $825 million second-lien term loan (B3/B-), of which $750 million was expected to be issued to General Motors in connection with plan of reorganization distributions, and a $1.6 billion ABL revolver.

The first-lien term loan had been launched at Libor plus 450 bps, with an original issue discount of 96 and call protection of 102 in year one and 101 in year two.

The ABL revolver had been launched with talk of Libor plus 250 bps.

Then, on March 11, the deal was relaunched, structured as a $1.7 billion first-lien term loan (Ba2/BB-), a $2 billion junior first-lien term note (B2/B), an $825 million second-lien term loan (B3/B-), and a $1.6 billion ABL revolver.

And, at the start of this week, the $2 billion junior first-lien term note that was going to be issued to an affiliate of General Motors was removed from the capital structure and the second-lien term loan was upsized to $2.825 billion from $825 million.

In addition, at that time, pricing on the second-lien term loan was reduced from Libor plus 875 bps and a 92 original issue discount was eliminated, and the unused fee on the ABL revolver was increased from 50 bps.

Also, initially, the second-lien loan was going to be sized at $1.5 billion, but it was downsized prior to the first launch as a result of a permanent improvement in liquidity as the company generated cash flow during the second half of 2007 in excess of the amount projected in its revised business plan.

Proceeds from the credit facility will be used to repay the company's debtor-in-possession financing facility, to fund other payments required upon emergence from Chapter 11 and to conduct post-reorganization operations.

Delphi is a Troy, Mich.-based automotive electronics manufacturer.

Broad market mostly softer

United Rentals Inc.'s 6½% notes due 2012 slipped to 89.75 bid, 90 offered from levels around 92 last week.

Meanwhile, Neff Corp.'s 10% notes due 2015 did not trade, a trader said, after edging higher in the previous two sessions. The trader pegged the bonds at 47.5 bid, 48.5 offered.

Neff will hold its quarterly conference call at 11 a.m. ET Friday. The equipment rental company reportedly posted better full-year results than had been expected.

A trader said numbers were the catalyst for Ion Media Networks' floating-rate notes to fall. He said the bonds were "down a few points" into the high-20s.

There was "not much" going on in Spectrum Brands Inc.'s paper. A trader placed the 11½% notes due 2013 at around 83.

Linens n'Things Inc. floating-rate notes due 2014 continued to "creep up," a trader said, closing at around 32.5.

Idearc Inc.'s 8% notes due 2016 were seen up 2 points to just below the 67 level. Another market source saw them move up to 66.625 from 64.25 on Wednesday and said the bonds were among the day's most actively traded paper, helped by the news that the company plans to conserve cash by suspending its stock dividend. Another trader saw the bonds up 1.5 points at 65.5 bid, 66.5 offered.

A trader saw AbitibiBowater Inc.'s 6.95% notes due April 1 back down to par bid, 102 offered from prior levels at 102 bid, 104 offered and said that the company's 5¼% notes due June 20 were also 2 points lower at 97 bid, par offered. On the long end of the curve, he said the 8.85% bonds due 2030 were unchanged at 66 bid, 68 offered. Its 8 3/8% notes due 2015, meantime, firmed 2 points to the 53 level.

However, another trader quoted the 6.95% notes up 4 points to 105 bid, 107 offered on a guaranteed delivery basis. He also saw the new Abitibi 13¾% notes due 2018 at 103.75 bid, 102.25, which he called down a point from the new bonds' late aftermarket surge after pricing at par earlier Wednesday. He further saw sector peer Ainsworth Lumber Co. Ltd.'s 7¼% notes due 2012 down 2 points at 57 bid, 59 offered.

MagnaChip Semiconductor's 8% notes due 2014 lost 2 points to 57 bid, 59 offered.

True Temper Sports' 8 3/8% notes due 2011 were seen down 2.5 points to below the 60 level.

Herbst Gaming Inc.'s 8 1/8% notes due 2012 lost 1.5 points to languish at 17 bid.

Sara Rosenberg and Paul Deckelman contributed to this article.

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