Weak earnings hurt Hawaiian Telcom notes, loan; Thornburg slips; Delphi loan begins trading

By Stephanie N. Rotondo

Portland, Ore., March 31 - Hawaiian Telcom Communications Inc. posted its full-year and fourth-quarter results Monday, and the company's debt responded by declining.

Traders called the earnings "weak," despite the company selling its directory business. As a result, the telecommunications provider's bonds fell 20 points on the day. Its bank debt also fell, though only by single digits.

In the financial arena, Thornburg Mortgage Corp. received a second extension on its deadline to complete its refinancing deal. The announcement renewed concerns that the deal might not get completed, which pushed the lender's notes lower. However, traders said trading activity in the name was relatively light.

Delphi Corp.'s first-lien term loan - part of the company's exit facility - broke for trading Monday. The automotive parts supplier's $2 billion loan, which was originally sold at a discount of 92, saw little price movement, though a trader did see the spread tightening by the end of business.

As March came to a close, many market players busied themselves with month-end pricing matters. Activity in the distressed sector was therefore lackluster overall.

"It's hard to think of many notables," said one trader.

Hawaiian Telcom debt pressured

Hawaiian Telcom's debt got trampled after the company posted weak earnings, traders reported.

One trader called the action in the name the "highlight of the day," pegging the 9¾% notes due 2013 down about 20 points at 50 bid, 52 offered from 71 bid, 73 offered previously.

Another trader said the bonds got "beat up," with the 9¾% notes and the floating-rate notes due 2013 ending around 50.

Meanwhile, the company's term loan gave up a couple of points on the heels of the financial results, a trader said.

The term loan was quoted at 75½ bid, 77 offered, down from 79 bid, 80 offered on Friday.

In a press release, the company's chief executive officer acknowledged that 2007 was "challenging." He also said that the company is "currently evaluating options that will sharpen our operational focus."

For the fourth quarter, Hawaiian Telcom reported revenues of $116.4 million, down $4 million from the previous quarter and 6.6% lower year over year. Operating expenses increased from the third to fourth quarters to $86.8 million. The company attributed the higher figures to "bad debt expense."

For the quarter, net income was $109.9 million, primarily attributable to the sale of the company's directory publishing business, compared to a quarterly net loss of $29.9 million in the same period a year ago.

For the full year ended Dec. 31, revenues declined $19.5 million, or 3.9%, to $483.7 million. However, year over year the company showed a 6% decrease in operating expense to $326.3 million.

Standard & Poor's has rated the company "B-." However, it is also on CreditWatch with negative implications.

Hawaiian Telcom is a Honolulu-based telecommunications provider serving the Hawaiian Islands.

Elsewhere in the sector, a source saw Level 3 Communications Inc.'s 5 7/8% notes due 2015 slide half a point to 96.25. Another source, however, said there was "no movement one way or the other" in the name.

Thornburg receives extension

Concern over whether its refinancing deal would get done increased Tuesday when Thornburg Mortgage announced a second extension for closing the deal.

The announcement weighed on the lender's debt, with one source pegging the 8% notes due 2013 lower by 4 points at 58.

Another trader, however, said there was very little trading in the name. When the bonds were trading, he said, they were moving in the high-50s.

"The longer they wait, it makes you more concerned whether they can get it done or not," the trader said of the plan to raise more than $1 billion by issuing new debt.

At another desk, a trader called the bonds down a point at the end of the day at 60 bid, 62 offered, but another trader saw a round-lot trade at 57 bid late in the day, well down from prior levels in the lower 60s, and said the bonds were trading flat. He suggested that "either people are betting that they did not get their financing in a timely manner, or the news is already there and we haven't seen it yet." He said there had been no definitive news on the financing, "only speculation."

A market source actually pegged the bonds as having gone home Friday as high as 67 on some late odd-lot trading, although the final round-lot trade of that session had been at 62. The bonds fell as low as 55 in early trading Monday and then edged back up into the 60s, before being driven back down late in the day.

On March 19, Thornburg said it had agreed with five of its lenders to cease their margin calls and repayment demands until March 2009. For its part, Thornburg was to raise $948 million in new capital - in just one week.

Originally, the company said it would sell convertible debt securities to raise the funds. However, last week the company changed its mind, deciding instead to issue $1.4 billion in new debt.

On the positive side, the company said it already had a buyer for much of the debt: Fairfax Financial Holdings agreed to purchase $450 million of the notes, providing Thornburg could find buyers for at least $700 million of the remaining portion.

The deadline to get the deal inked came and went Thursday with no word on where things stood. Then the company said it had extended the deadline to Friday. But as the trading week came to a close, there was once again no word.

Come Monday, the company received yet another extension through the end of the business day. Market players still had not heard the outcome by the market's close.

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

Among other financial names, most of the sector was unchanged to lower on the day, market sources said.

One trader said there was some trading in Countrywide Financial Corp. "here and there" but noted that the bonds closed the day unchanged overall.

The trader also said that CIT Group Inc.'s paper "continued to creep up," its 4.65% notes due 2010 up at around 82 from previous levels around 80.

Meanwhile, Residential Capital LLC was "a little bit lower," its 6 3/8% notes due 2010 down at around 51.

Another source deemed ResCap's 8 7/8% notes due 2015 a point lower at 49, while parent GMAC LLC's 6 7/8% notes due 2012 slipped 1.5 points to 76.

Delphi loan begins trading

Delphi's credit facility broke for trading during market hours, with its $2 billion seven-year first-lien term loan (Ba2) quoted at 93 bid, 94 offered on the open and then tightening to 93½ bid, 94 offered, where it closed the day, according to a trader.

The first-lien term loan is priced at Libor plus 575 bps, with a 3.25% Libor floor for life and call protection of 102 in year one and 101 in year two. The paper was sold to investors at an original issue discount of 92.

During syndication, the first-lien term loan was first downsized from $3.7 billion to $1.7 billion when a $2 billion junior first-lien term note to General Motors Corp. was added to the capital structure (which was later removed), and then upsized to $2 billion due to oversubscription.

In addition, pricing on the first-lien term loan was revised from initial talk of Libor plus 450 bps and the original issue discount widened from 96.

Delphi's $6.05 billion exit financing credit facility also includes a $1.4 billion six-year ABL revolver priced at Libor plus 300 bps, with a 150 bps unused fee, and a $2.65 billion eight-year second-lien term loan (B2) priced at 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.

During syndication, the ABL revolver was downsized from $1.6 billion, pricing flexed up from initial talk of Libor plus 250 bps and the unused fee was increased from 50 bps.

Also, during syndication, the second-lien term loan was upsized from $825 million to $2.825 billion when the $2 billion junior first-lien term note was eliminated, and then it was downsized to $2.65 billion when the first-lien term loan was upsized.

Furthermore, at the time of the upsizing, pricing on the second-lien term loan was changed from initial talk of Libor plus 875 bps and a 92 original issue discount was eliminated.

General Motors is taking down the second-lien term loan.

JPMorgan and Citigroup are the lead banks on the deal, with JPMorgan the left lead.

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 mixed

Tropicana Entertainment LLC's 9 5/8% notes due 2014 were deemed unchanged at around 52 as the company entered into a definitive agreement to sell its Casino Aztar in Evansville, Ind., to Eldorado Resorts LLC.

Linens n'Things Inc. floating-rate notes due 2014 were "a little bit higher," a trader said, at 33 bid, 34 offered.

AbitibiBowater Inc.'s 5¼% notes coming due June 20, 2008 ended at 99 bid, 101 offered, up from 97 bid, par offered on Friday. The 8.85% bonds due 2030, however, closed down 3 points at 47 bid, 50 offered.

Meanwhile, the new Abitibi Consolidated 13¾% notes due 2011 - which priced at par last Wednesday and then shot up to almost the 103 level in aftermarket dealings only to come back down after that over the next two sessions - continued to head lower Monday, off a point at par bid, 102 offered.

A market source said that Abitibi's 6% notes due 2013 lost nearly 3 points to end at 48.

Neff Corp.'s 10% notes due 2015 lost a point to end at 47 bid, 49 offered.

Claire's Stores Inc.'s 9¼% notes due 2015 were seen down a point at 62 bid, 64 offered.

A trader saw Charter Communications Inc.'s bonds down a point, with the 8 3/8% senior notes due 2014 at 90 bid, 92 offered and the 10¼% subordinated notes due 2014 at 47 bid, 49 offered.

Herbst Gaming Inc.'s 7% notes due 2015 were seen off nearly 4 points on the day to 14.5 bid.

Idearc Inc.'s 8% notes due 2016 lost a point to the 65 area. Rival Dex Media Inc.'s 8% notes due 2013 gained slightly to end at 73 bid, 75 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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