WCI bonds, loans slide after Chapter 11 filing; Idearc clobbered again; Young's bonds move down

By Paul Deckelman and Sara Rosenberg

New York, Aug. 4 - WCI Communities Inc.'s bonds and bank debt slid lower Monday after the Bonita Springs, Fla.-based homebuilder announced that it filed for Chapter 11 as a result of the downturn in the real estate market and the economy in general and a failed effort to exchange its $125 million of 4% contingent convertible senior subordinated notes putable on Aug. 5.

With the junk bond market generally lower, in line with a steep fall in equities, most other distressed names were also pushed downward, among them Idearc Inc. still reeling from the disappointing numbers which it reported last week.

General Motors Corp.'s bank debt was lower, although junk market participants seemed split on whether its bonds had managed to stabilize from last week's earnings-inducted tumble.

Young Broadcasting Inc.'s bonds and shares were moving to the downside, although there was no fresh news out on the troubled New York-based television station group owner that might explain that movement

One of the rare upsiders among the distressed names was Six Flags Inc., propelled upward by unexpectedly strong quarterly results, largely due to a big gain it got from reducing its debt.

Chapter 11 pushes WCI lower

A trader in the bank loan market said that WCI Communities' debt slid lower after the company announced that it filed for Chapter 11.

He saw the company's term loan quoted at 85½ bid, 86½ offered, down from 87 bid, 89 offered and its revolver quoted at 86 bid, 87½ offered, down from 88 bid, 89½ offered.

"People think it's covered but maybe it's not so convincingly slam dunk covered. Definitely had some nervous people want to sell some risk," the trader added regarding the bank debt.

Over in the distressed-bond market, a trader said that WCI's 9 1/8% notes due 2012 dropped to 31 bid, 33 offered from prior levels around 39, and opined that of the company's bond issues "this was the only one that looked like it traded."

He also saw WCI's 7 7/8% notes due 2013 and 6 5/8% notes due 2015 each go to a 29 bid, 31 offered level from around 37 previously, and observed the company's 4% convertible notes due 2023 dropping to 29 bid from 57 previously.

At another desk, a market source pegged the 9 1/8s some points lower around 32.

Another trader, though said that WCI "wasn't the busier stuff for some reason. Once it all kind of settled in, in that 29-30 range, that's where it sat."

He continued that he "didn't see as much WCI trade as I would have thought." The fact that the company - hard-hit by the meltdown of the housing market in its home territory of Florida - went into bankruptcy "shouldn't have been a huge surprise." He said there had been some trading in the bonds, "but not the kind of volume that you might have expected."

That's what's been happening lately in distressed," he added. "the leading-up-to is really busy, but the actual event is a yawn."

With the bankruptcy filing, the company's bonds were seen trading flat, or without their accrued interest, as generally happens in cases of default.

On Monday, WCI announced that it and approximately 130 of its wholly-owned subsidiaries had filed voluntary petitions with the U.S. Bankruptcy Court in Wilmington, Del, seeking to restructure their debt and capital. It claimed debt of $1.9 billion and assets of $2.2 billion as of June 30.

Prior to the bankruptcy filing, the company reached a definitive agreement with its principal secured lenders regarding the terms on which it will have access to over $50 million of cash on hand to continue operating its business on an interim basis. A motion for approval of that arrangement has been filed with the court.

Furthermore, the company received a proposal from some senior lenders to provide an additional $100 million of excess liquidity through a debtor-in-possession financing facility.

With the filing, Jerry L. Starkey, chief executive officer, left the company and David L. Fry, chief operating officer, has been appointed to act as interim president and chief executive officer until a permanent replacement is found.

"While WCI remains cash-flow positive and our asset base is strong, our ongoing operations have been adversely impacted by the continuing downturn in the real estate sector and the overall economy," Fry said in a news release. "Like other large homebuilders across the country, WCI continues to experience declines both in pricing and the sale of new homes and condominiums, as well as dramatic increases in cancellation rates.

"As a result, we need to restructure our debt and bring our capital structure in line with today's marketplace realities. We believe Chapter 11 provides the most efficient and timely process for accomplishing this," Fry continued in the release.

WCI also announced on Monday that it is terminating the offer to exchange $125 million of 4% contingent convertible senior subordinated notes due 2023. The exchange offer was subject to, among other things, a 90% minimum tender condition, the completion of the amendment and restatement of the company's credit facility and the issuance of $375 million of new secured second-lien notes.

The new second-lien notes were going to be used to repay the company's tower loan agreement in full and the existing credit facility pro rata between the term loan and the revolver.

"The company, with all diligence, has attempted to avoid a bankruptcy filing. However, the filing became necessary because of the recent failed effort to obtain financing and the recognition that the company's entire $1.8 billion of debt may soon be in default," said Carl C. Icahn, chairman of the board of directors, in the release.

"This was confirmed when certain holders of the company's $125 million convertible notes informed the company that they rejected its exchange offer and instead insisted on being paid in cash in full on Aug. 5, 2008," Icahn added in the release.

Beazer higher

Elsewhere in the homebuilding sector, a trader saw Beazer Homes USA Inc.'s 8 5/8% notes due 2011 push up to 82 bid from prior levels around 79 bid, 81 offered, but suggested that "it must be due to short-covering," since he saw all of the Atlanta-based builder's other bonds still languishing at the 75 bid, 76 offered level.

Idearc keeps sliding

A trader said that Idearc's bonds "got hit a little bit more today, which has been an ongoing saga."

He saw the Dallas-based telephone director publisher's 8% notes due 2016 "trading for the first time at or below 40. That's down another 10 points" from recent levels, "and they've hit a low of down about 20 points" from where the bonds had traded before the company came out with poor second-quarter numbers last Tuesday.

Investor reaction to those numbers had caused the bonds to slide from levels above 60 down to around a 49-50 context; while the notes picked up a point or 2 on Wednesday, moving back over the 50 mark, they gave all of that back and then some on Thursday, falling to 44, and then falling further on Friday to the lower 40s.

After trading as low as 39 and change on Monday, the trader said, "they did bounce back at the end of the day, seemingly a little bit, but they broke through 40 a few times," trading as low as 39.75 bid "in multiple, multiple millions."

Another trader saw the bonds ending at 39, calling that down a point, while at another desk, a source said they were down 1½ points on the day to close at 40.

Idearc sector peer Dex Media Inc.'s 8% notes due 2013 also remained on the slide, easing to 59 bid.

GM bank loan off, bonds seen mixed

Bank-debt traders said that automotive names in general, such as General Motors, Ford Motor Co. and Chrysler Financial, continued to get slammed in trading as last week's negative attitude towards the sector followed the names into this week.

GM saw its term loan quoted at 74½ bid, 75½ offered, down from the 75½ bid, 76½ offered levels seen on Friday after a huge quarterly loss and poor July sales were announced, traders said. On Thursday, the loan had been quoted at 77¾ bid, 78¾ offered.

Over on the bond side of the fence, GM's bonds, and those of its 49% owned GMAC LLC automotive financing unit, were seen bouncing around at various levels following last week's downturn.

A trader called GM's benchmark 8 3/8% bonds due 2033 up a point on the session at 47.5 bid, 48.5 offered, although another figured them unchanged at 46 bid, 48 offered, while GMAC's 8% bonds due 2031 were likewise unchanged at 54 bid, 55 offered. GM's 6.85% notes coming due on Oct. 15 were quoted up nearly a point, above the 98 level.

However, another market source called the GM benchmarks down 3/8 on the day, at around 46.625, while estimating a nearly 4 point loss for GM's 7.20% notes due 2011 down to 58.5. GM's 7 1/8% due 2013 were seen likewise down more than 2 points to 49.5 But yet another market source, while also seeing those 7 1/8s down a deuce, saw them going out at 51 bid.

GM investors were apparently still shell-shocked after GM on Friday reported a net loss of $15.5 billion, or $27.33 per share, including significant charges and special items, compared with net income from continuing operations of $784 million, or $1.37 per share, in the second quarter of 2007. It was the third-biggest quarterly loss in the Detroit-based top U.S. auto producer's century-long history.

Regarding sales results, General Motors delivered 235,184 vehicles in the United States in July, down 26.7% from last year.

Moving on to Ford, GM's Dearborn, Mich.-based domestic arch-rival, its term loan was quoted at 76½ bid, 77½ offered, down from 77 1/8 bid, 78 1/8 offered on Friday, traders remarked. On Thursday, the loan was quoted at 78¾ bid, 79¼ offered.

Its 7.45% bonds due 2031 were up ½ point, a trader said, to 48 bid, 49 offered. But at Ford's auto-loan unit, Ford Motor Credit Co.'s 9¾% notes due 2010 were quoted down nearly 2 points at 82.5.

Besides being dragged down by investor angst over GM's big loss and poor sales, Ford had its own bad news to report Friday, announcing that for July, total sales were 161,530, down 14.9% from 189,920 last year.

Lastly, Chrysler Financial, a provider of automotive financial products and services, saw its first-lien term loan move down to 80 bid, 81 offered from 81 bid, 82 offered and its second-lien term loan drop to 58 bid, 60 offered from 60 bid, 62 offered, traders added.

On Sunday, Chrysler Financial announced that it renewed $24 billion in credit facilities, $6 billion shy of the actual $30 billion amount that it had hoped to raise.

The company said that it ended up renewing a smaller amount because of conditions in the credit markets and changes in its retail strategy.

The credit facilities provide funding for the company's dealer and consumer financial services products.

Same old story for Young

Elsewhere, Young Broadcasting's 10% notes due 2011 were seen by a market source to have retreated 2½ points on the session to 46 bid.

Another market source, on the other hand, saw no fresh activity in the bonds, saying they had most recently traded last month around the 50 level, while its 8¾% notes due 2014 had also last traded in July at around 43.

Young's Nasdaq-traded shares - which started the year trading at slightly above $1 per share but which have since lost 80% of what little value they still had - were seen Monday down another 2 cents, or 9.32%, to 18 cents. Volume of 53,000 shares was less than one-third the usual turnover.

There was no fresh news out Monday on the company, which is heavily laden with some $840 million debt as a result of its purchase some years back of San Francisco TV station KRON, which took place, observers say, at or near the top of the market and which has proven unprofitable for Young. Since the beginning of the year, the company in fact has been shopping KRON, its largest-market TV property, in hopes of unloading it for at least $250 million - a fraction of $823 million it paid for the asset back in 1999 - but so far has failed to find any buyers, even at that discounted price.

Young itself could be a potential fire-sale acquisition candidate. Broadcasting industry trade papers reported last month that Silver Point Capital, a hedge fund that specializes in buying distressed companies, may be eyeing Young as its next acquisition, reportedly buying its bonds to well position itself for exercising control in the event of a bankruptcy or other restructuring transaction. The $8 billion Greenwich, Conn.-based fund already owns Young sector peers Granite Broadcasting and Communications Corp. of America, buying both TV station group owners out of bankruptcy.

Claire's Stores lower on no news

A trader saw Claire's Stores Inc.'s 9¼% notes due 2015 drop 5 points to the 40 bid level.

At another desk, a market source quoted its 9 5/8% notes due 2015 down 2 points to just under 29 bid.

The trader saw no fresh news out on the Pembroke Pines, Fla.-based specialty retailer that might explain the movement in its bonds.

Six Flags on an upside ride

A rare departure from the generally negative tone in the junk market, and especially among the distressed-debt issues, was Six Flags, whose bonds were seen to have moved up after the New York-based theme park company reported substantially better numbers than it had a year ago.

Six Flags, a trader said, "had a nice little rebound" after the company reported its second quarter results, quoting its 12¼% notes due 2016 trading in a 92.5-93 context, while its most actively traded issue, the 9 5/8% notes due 2014, were trading in a "53ish" area, "up a solid 3 or 4 points" from the levels in the upper 40s at which the bonds were trading at the end of last week.

A market source saw those 9 5/8s having moved up to around the 52.5-53 area on several large trades, pegging the bonds up as much as 6½ points from Friday's closing level around 47. Even tossing out that previous trade, which was relatively small and perhaps not representative, the bonds were still up at least 4 points from last week's final round-lot trade, in the 49.5 neighborhood on Thursday.

Another market source saw the bonds get as good as 54.5, calling them up 5 points intraday, although later on, the bonds came off that peak to close at 53, still up more than 3 points on the day.

Six Flags' less-actively traded 9¾% notes due 2015 moved up to 56 bid, a more than 4 point gain, while its 8 7/8% notes due 2010 were quoted sharply higher at 89.5, up more than 6 points, though on very limited trading.

While Six Flags' bonds were hot - its New York Stock Exchange-traded shares definitely were not, falling 9 cents, or 8.04%, to finish at $1.03, on volume of 8.3 million shares, more than four times the usual daily handle.

Six Flags, which operates the Great Adventure theme park in Jackson, N.J., about mid-way between New York and Philadelphia, as well as around 20 other theme, animal safari and water parks near various large-sized markets across the United States, said that its second-quarter earnings totaled $89.1 million, or 63 cents per share, versus its year-earlier loss of $50.9 million, or 54 cents per share. Excluding discontinued operations, earnings totaled $108.7 million, or 72 cents per share, versus a loss of $41.9 million, or 50 cents per share, in the year-earlier period. Wall Street had been expecting a 19 cent per share loss.

While revenue rose 1% in the latest quarter to $345.7 million, the rise was driven by increases in sponsorship, licensing and other fees, as well as higher guest spending. Overall attendance actually dropped 3% from a year-earlier due to a calendar quirk - the Easter holiday period, when most schools are closed and many people take vacations and might be expected to go to someplace like Great Adventure or one of its counterparts elsewhere, fell in March this year, so holiday-time attendance was counted in the first quarter, unlike a year ago. First-half attendance was steady at 10.1 million.

Six Flags said the latest figures include a $107.7 million gain from debt repayment related to an exchange of senior unsecured notes that occurred in the quarter. In that transaction, which took place over several weeks in May and June, noteholders exchanged a portion of their 8 7/8% notes, 9¾% notes and 9 5/8% notes for newly issued 12¼% notes.

Besides cutting debt, Six Flags also boasted of a 7% reduction in operating costs and expenses.

On an afternoon conference call, company executives reiterated the projection they made several weeks ago, saying that based on attendance trends in July - historically the most important month in the company's calendar year, with all of its parks in full summer swing - Six Flags expects to become free cash flow positive, something that it has never in its history been able to do. Assuming current revenue and cost-control trends hold up, company officials predict that the company should be free cash flow positive for the year, with an adjusted EBITDA nearing $280 million.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.