Ford, US Airways rise with earnings; GM better but restrained by ResCap noise; Macrovision tweaks deal

By Sara Rosenberg

New York, April 24 - Ford Motor Co. and US Airways Group Inc. both saw levels on their bank debt rise on the heels of first-quarter financials being announced, and General Motors Corp.'s term loan was better in sympathy with Ford, but momentum was limited by the recent drama at Residential Capital LLC.

In other news, Macrovision Corp. revised its oversubscribed term loan B, increasing the size and tightening the original issue discount.

Ford's term loan got a nice boost on Thursday as the company came out with surprisingly good quarterly results, according to a trader.

The term loan was quoted at 90 bid, 90¾ offered, up from 89 bid, 89½ offered on Wednesday, the trader said.

"It traded up but to a limited amount. Guys are still questioning how they managed those earnings. Guys are still digging into that call," the trader added.

For the first quarter, the company reported net income of $100 million, or $0.05 per share, compared to a net loss of $282 million, or $0.15 per share, in the first quarter of 2007.

Ford's first quarter pre-tax operating profit from continuing operations, excluding special items, was $736 million, up $669 million from a year ago. On an after-tax basis, first-quarter operating profit from continuing operations, excluding special items, was $525 million, or $0.20 per share, compared with a loss of $172 million, or $0.09 per share, in the same period a year ago.

Revenue for the quarter, excluding special items, was $39.4 billion, down from $43 billion a year ago.

"The results of this quarter are encouraging, particularly our outstanding performance in Europe and South America," said Alan Mulally president and chief executive officer, in a news release.

"In the past several years, we have substantially restructured these businesses. We believe this is an indication that our efforts to leverage Ford's global assets across the world will bear fruit. Going forward, we remain committed to our key business objectives, including our goal of reaching North America and overall Automotive profitability in 2009 despite the challenging economic conditions."

The company posted profits of $739 million in Europe and $257 million in South America in the first quarter, North America results improved by nearly $600 million compared with the first quarter of 2007, and $1.7 billion in cost savings were achieved.

"The remainder of 2008 will be a challenge, but we are cautiously optimistic despite the external challenges," Mulally added in the release. "Our plan is working. Our initial quality is now among the best in the business, the restructuring in North America is taking hold and we will continue to take actions to stay on our plan."

Ford is a Dearborn, Mich.-based manufacturer and distributor of automobiles.

US Airways soars

US Airways's term loan also gained ground during the trading session as the company released first-quarter numbers, which although not great, were better than analysts had been expecting, according to traders.

The term loan was quoted at 72½ bid, 73½ offered, up from 71½ bid, 73 offered on Wednesday, traders said.

One trader, however, pointed out that on Thursday morning, post earnings news, the term loan was still being quoted in the 71½ bid, 73½ offered context and it crept up throughout the course of the day with the rest of the market.

The cash market in general was up about a quarter to three eighths of a point and LCDX 10 was up to 98.90 bid, 99 offered from around 98.80 bid, 98.95 offered.

For the first quarter, US Airways reported a net loss of $236 million, or $2.56 per share, compared to a net profit of $66 million, or $0.70 per diluted share for the same period last year.

Excluding net special items of $3 million, the company reported a net loss of $239 million, or $2.60 per share, compared to a net profit excluding special items of $34 million, or $0.37 per diluted share last year.

"Our first quarter results reflect the extremely high fuel prices that are affecting our entire industry. The large losses posted by U.S. airlines this quarter, the forecast for further losses and the recent liquidations and bankruptcies of a number of carriers, indicate quite clearly that the U.S. airline industry is in financial turmoil," said Doug Parker, chairman and chief executive officer, in a news release.

Had jet fuel prices remained constant versus the first quarter 2007, the company's fuel expenses including realized gains on fuel hedging instruments would have been $260 million lower.

"Fortunately, US Airways has taken steps to prepare for this environment. We have a solid balance sheet with significant cash on hand, minimal debt payments through 2013, and our employees have made extraordinary progress in our operational improvement plan. As we move forward, we are continuing to keep capacity in check, exploring opportunities to generate additional sources of revenue, modifying our pricing structure, and reducing our capital expenditures," Parker added in the release.

As of March 31, the company had $2.8 billion in total cash and investments, of which $2.4 billion was unrestricted.

US Airways is a Tempe, Ariz.-based airline company.

GM rise curtailed by ResCap

General Motors's term loan was stronger on Thursday, helped by Ford's positive earnings news, but levels didn't quite move as much as they could have as a result of recent happenings at Residential Capital LLC (ResCap), according to traders.

Detroit-based automaker General Motors saw its term loan quoted at 94 bid, 95 offered, up from 93¾ bid, 94¾ offered, traders said.

"Look at how much Ford popped and then at this. ResCap does affect GM at the end of the day," one trader remarked.

Over the course of the week, ResCap has announced a number of board changes and it has been downgraded by both Moody's Investors Service and Standard & Poor's.

Thomas Marano, former senior managing director and global head of mortgage and asset-backed securities at Bear Stearns & Co. Inc., was appointed as ResCap's non-executive chairman of the board of directors, succeeding former chairman Michael Rossi, who resigned in March due to medical reasons. Marano was also appointed to the board's executive committee.

ResCap also announced the election to the board of Joshua Weintraub, formerly a senior managing director with Bear Stearns's global mortgage operations, who has also been appointed to the board's executive committee, and James Young, ResCap's chief financial officer.

The new board members replaced departed members Eric Feldstein, Sanjiv Khattri and Paul Bossidy.

ResCap is also conducting a search to identify two additional independent directors, to be appointed as soon as practicable, to replace Thomas Jacob and Thomas Melzer, who left the board earlier this week.

"They can't file for bankruptcy unless they get approval from the board and two external directors. They hired these two guys from Bear. People are not really sure what that means," a trader said.

On Wednesday, Moody's downgraded ResCap's senior debt to Caa1 from B2, citing the resignation of the two independent directors on its board as the primary impetus for the rating action.

Then, on Thursday, S&P lowered ResCap's ratings to CCC+ from B.

S&P said that ResCap has not said why the board members resigned, and the directors' leaving sharpens concerns about company performance, hit by turmoil in housing and mortgage markets.

ResCap's term loan was quoted at 88 bid, 90 offered on Thursday, unchanged from Wednesday's levels, a trader added.

ResCap, an indirect wholly owned subsidiary of GMAC Financial Services, is a Minneapolis-based real estate finance company.

Macrovision revises structure

Macrovision made some changes to its five-year term loan B (Ba1/BB-), increasing the size and reducing the original issue discount, according to sources.

The term loan B is now sized at $550 million, up from $500 million, and the original issue discount is now set at 971/2, down from 97, sources said.

The $50 million upsizing is to help compensate for a $150 million senior unsecured notes offering that was scheduled to kick off with a roadshow this past Tuesday, but was then canceled. The remaining $100 million of funds is now going to come in the form of $100 million subordinated bonds that are being privately placed.

Rumors of a possible term loan B upsizing hit the market on Wednesday after news emerged that the bond roadshow was no longer going to take place, but the official word on the matter and firm details didn't emerge until Thursday.

Pricing on the term loan B was left unchanged at Libor plus 375 basis points, with a 3.5% Libor floor and 101 soft call protection for one year.

At launch, the term loan B pricing was being talked at Libor plus 350 bps to 375 bps, but during the syndication process, the talk was revised to focus only on the wide end of that guidance.

Covenants include a maximum leverage ratio that opens at 4.5 times and gradually moves to 2.25 times at July 1, 2010, and a fixed-charge coverage ratio that opens at 1.3 times, moves to 1.4 times at April 1, 2010 and then to 1.5 times at Oct. 1, 2010.

JPMorgan and Merrill Lynch are the joint lead arrangers and joint bookrunners on the deal, with JPMorgan the administrative agent.

In the event the company's leverage ratio is greater than 2.5 to 1.0 and more than $50 million of aggregate principal amount of its 2.625% convertible senior notes due 2011 remain outstanding 180 days prior to their scheduled maturity, the term loan B will become due on that 180th day.

Proceeds will be used to help fund the acquisition of Gemstar-TV Guide International, Inc. in a cash and stock transaction valued at $2.8 billion.

Under the acquisition agreement, each share of Gemstar-TV Guide will be converted into the right to receive, at the election of each individual stockholder and subject to proration, $6.35 in cash or 0.2548 of a share of common stock in a new holding company that will own both Gemstar-TV Guide and Macrovision.

Upon completion of the transaction, Macrovision stockholders will own about 53% of the combined company, and Gemstar-TV Guide stockholders will own about 47%.

A special meeting of Macrovision stockholders will be on April 29 regarding the acquisition.

At first, Macrovision planned on getting $800 million of debt for the Gemstar-TV Guide purchase, comprised of a $650 million term loan B and a $150 million bridge loan, but the amount of funds needed was reduced using proceeds from the recently completed roughly $200 million sale of its software business unit to Thoma Cressey Bravo.

Macrovision is a Santa Clara, Calif.-based provider of services that enable businesses to protect, enhance and distribute their digital goods to consumers across multiple channels. Gemstar-TV Guide is a Los Angeles-based media, entertainment and technology company.

Local Insight closes

Local Insight Regatta Holdings Inc. completed its acquisition of Berry Co's independent line of business from L.M. Berry and Co., a subsidiary of AT&T, according to a news release.

To help fund the transaction, Local Insight got a new $365 million senior secured credit facility (BB-) consisting of a $30 million six-year revolver and a $335 million seven-year term loan.

The term loan is priced at Libor plus 400 bps, with a 3.75% Libor floor for life, and was sold at an original issue discount of 90.

During syndication, the discount on the term loan was increased from an originally proposed level of 94.

JPMorgan, Lehman, Wachovia and Merrill Lynch acted as the bookrunners on the deal, with JPMorgan and Lehman the joint lead arrangers.

Senior leverage is 3.5 times and total leverage is 5.5 times.

Local Insight is an Englewood, Colo., publisher of print and online directories.

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