CIT offers plan to cut debt; Spansion aided by reorganization news; Lyondell Chemical dips

By Stephanie N. Rotondo

Portland, Ore., Oct. 2 - As was the case through most of the week, Friday's distressed debt market was dominated by CIT Group Inc.

Late Thursday, CIT announced that it was indeed planning a debt exchange for "certain unsecured notes," though it did not specify which issues. The company said it was also soliciting votes on a potential pre-packaged bankruptcy filing, just in case the exchange was not successful. As a result of the news, traders saw the bonds declining as much as 5 points on the day.

Meanwhile, Spansion Inc.'s debt moved up slightly following news it had come to terms with a group of noteholders regarding its reorganization plan.

Lyondell Chemical Worldwide Inc. meanwhile got slapped with a lawsuit from noteholders alleging that a 2007 buyout wrongfully subordinated them to holders of $20 billion in debt - which was incurred in the buyout. On the news, a trader said the bonds dipped a couple of points.

Elsewhere, Morris publishing Co.'s bonds continued to move higher. The notes had improved earlier in the week on news the company was working with bondholders regarding an out-of-court restructuring.

CIT's plan to cut debt

CIT Group's bonds traded actively and lower following late Thursday's restructuring news.

A trader said about $300 million in total of the company's debt traded, with the 6.1% hybrid notes due 2067 being the most active. The trader also noted that the issue was "probably off the most" at 101/2, down from 15 previously.

The trader also said that about $50 million of the floating-rate notes due 2010 moved down a point to around 69, while the 4¼% notes due 2010 - which he called the name's "bellwether issue" - slipped to around 69 on $50 million to $60 million traded. He added that the 4.65% notes due 2010 were also trading with a 69 handle, with about $25 million changing hands.

"They don't have a lot of options," the trader said of the news CIT was to conduct a debt swap and also solicit votes on a pre-packaged bankruptcy plan. "I think you're kind of damned if you do, damned if you don't. I don't know of anyone who gave them better than a 50/50 chance on this one."

At another desk, a trader said the bonds were down as much as 5 points on the day. He saw the 6.1% notes around 10, compared to 13 bid, 17 offered previously.

"So those are down 7 to 8 points on the week," he said.

The 4¼% notes were meanwhile pegged around 68, compared to levels around 71 on Thursday, "so they are down like 3 points." He noted that the issue had been trading around 77 on Monday.

Another source mentioned that several bid wanted lists - with CIT prominently featured - were circulating.

CIT is hoping to cut its debt by at least $5.7 billion via a debt exchange for "certain unsecured notes," according to a press release published late Thursday.

"If the company does not achieve the objectives of the exchange offers, it may decide to initiate a voluntary filing under Chapter 11 of the U.S. Bankruptcy Code," the release continued. "Therefore, the company is concurrently soliciting bondholders and other holders of CIT debt to approve a pre-packaged plan of reorganization.

"The company has been informed by advisors to the steering committee that, subject to review of the offering memorandum, [holders of] approximately $10 billion of outstanding unsecured indebtedness have already indicated their intention to participate in the exchange offer or vote for the pre-packaged plan of reorganization."

"Over the last several months, CIT's management, together with its board of directors and outside advisors, has developed a comprehensive plan to position CIT for future success," said Jeffrey M. Peek, chairman and chief executive, in the release. "We believe this plan maximizes franchise value and can be executed quickly and effectively through a series of voluntary debt exchange offers or an expedited in-court restructuring process.

"Upon completion of either alternative, CIT will be a well-funded bank holding company with a strong capital position and market leading franchises.

"We have the liquidity to serve our small business and middle market clients throughout this process," Peek added.

CIT Group is a New York-based lender to small businesses and middle-market companies.

Spansion helped by news

Spansion bonds gained slightly on news the company had come to terms with noteholders regarding a reorganization plan.

A trader quoted the floating-rate notes due 2013 at 103 bid, 104 offered. He added that, while he did not see any trades, the 11¼% notes "usually trade a little bit higher."

Spansion and a group of bondholders holding the floaters came to terms on a reorganization plan, the company announced Friday.

Under the plan, the floating-rate noteholders would receive $100 million in cash plus post-bankruptcy interest, as well as 14.5% of equity in the newly reorganized company, $250 million principal amount of 4.75% convertible senior secured notes due 2016 and $225 million principal amount of 10¾% senior secured notes due 2014.

Unsecured creditors would receive the remaining 85.5% of new equity.

"This is a significant step in the company's restructuring process," John Kispert, president and CEO, said in the release. "While we are still finalizing certain details or our plan of reorganization and the disclosure statement, I am pleased with the tremendous progress the entire company has made since beginning our restructuring process."

Spansion expects to exit Chapter 11 protections late in the fourth quarter or early 2010.

Spansion is a Sunnyvale, Calif.-based manufacturer of flash memory products.

Lyondell notes dip

Lyondell Chemical's bonds traded lower - though in light trading - after it was learned that a group of noteholders was suing the company and its lenders over a 2007 buyout.

A trader placed both the 10¼% notes due 2010 and the 9.8% notes due 2020 at 651/2, calling that "a couple points down from yesterday." He added that the 10¼% notes were at 66 bid, 67 offered earlier in the week.

The lawsuit alleges that the 2007 buyout resulted in a massive amount of debt for Lyondell and as such, the group has been wrongfully subordinated to holders of about $20 billion in debt.

Morris notes moving upward

Morris Publishing's 7% notes due 2013 continued to gain ground, a trader said.

The trader explained that the bonds had been in the single-digits early on in the week. But on Sept. 28, the company announced that it was working with its bondholders regarding an out-of-court restructuring plan. Just a few days later on Sept. 30, the bonds jumped to around 25.

Come Friday, the bonds were seen ending around 27.

The trader noted that before the trades this week, the bonds had last traded in July at 8.

Morris Publishing is an Augusta, Ga.-based newspaper publisher.

© 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.