CIT notes unchanged; MGM bonds hold their ground; McClatchy loan stronger; broad market mixed

By Stephanie N. Rotondo

Portland, Ore., Oct. 15 - CIT Group Inc. continued to be a common name heard in the distressed debt market Thursday.

Traders saw the company's bonds holding steady, as more news came out of the struggling lender. CIT has reportedly engaged bondholders regarding amending its previously announced debt exchange.

Meanwhile, MGM Mirage notes shook off some potentially bad news from its CityCenter joint venture partner, Dubai World. Dubai said Thursday it was close to finalizing a restructuring plan, which could involve selling equity stakes in its units.

McClatchy Co. released its third-quarter results during the session. Following the release, traders saw the newspaper company's bank debt improving.

After hitting nearly $2 billion in the wider high-yield market, volumes fell by nearly 50%, according to one market source. The source said about $1.3 billion traded during business hours.

"That's pretty low, given where we have been," he said. "Especially for a Thursday."

The source further opined that volumes would be weak come Friday.

CIT notes unchanged

CIT Group continued to be one of the more active names during Thursday's session, though traders deemed the lender's bonds more or less unchanged on the day.

A trader said "short, short paper" - such as the November maturities - was "right where it's been" around 66. Another trader called the 4¼% notes due 2010 unchanged at 65 bid, 66 offered.

Yet another source saw the short-dated issues at 69 bid, 70 offered. He added that the rest of the issues were trading in a range of 62 to 65, "depending on which maturities you are in."

At another desk, a trader saw CIT's paper "holding its own," seeing the short-dated issues get up to 70 and trade in a 69 to 70 context, while somewhat longer-dated paper, like its 7 5/8% notes due 2012, stayed around 62 to 64. That was pretty much where the latter bonds had been on Wednesday, "but it was still an active trader," the trader said. "There was good volume."

He also said that CIT "seemed to be the name bantered about, while there's news pending, as they say what this [financing] deal is going to look like."

CIT has remained topical over the last few weeks, as bankruptcy concerns prompted the company to launch a debt exchange. Shortly after the swap began, the company announced its top executive was resigning, effective Dec. 31.

On Thursday, news reports indicated that the New York-based financial institution was in talks with some bondholders to possibly amend the terms of the debt exchange. The discussions also reportedly touched on amending a potential pre-packaged bankruptcy, which bondholders are currently voting on, should the exchange fail.

CIT wants to cut its overall debt load by $5.7 billion, thus the need for the exchange. However, many market players believe that the swap will not be successful.

CIT is also said to be close to securing a loan of up to $6 billion from a group of bondholders who already gave the struggling lender $3 billion in July. The funds would be used either to retire the debt under the exchange offer, or for debtor-in-possession financing.

The tender offer on the notes expires Oct. 29.

MGM holding its ground

MGM Mirage bonds finished unchanged to lower, traders reported, though trading activity was light.

A trader said less than $1 million of the 9 3/8% notes due 2010 traded, around par.

Another trader saw the 7 3/8% notes due 2013 at 78 bid, 79 offered, which he said "looks kind of unchanged." One other source pegged the 7 3/8% notes due 2017 at 77.5 bid, 78, down a point on the day.

On Thursday, Dubai World - MGM's joint venture partner on its CityCenter project in Las Vegas - said it was nearly finished with a restructuring plan that could include selling equity stakes in some of its units.

But at least one market player didn't see the news as having a large effect on the casino operator.

"That's a pretty well insulated joint venture," the trader said. He said he believed that MGM had already received the funds it needed from Dubai, "so they probably don't care."

McClatchy loan stronger

McClatchy's term loan was stronger in trading following the company's third quarter earnings announcement, according to a trader.

The term loan was quoted at 84.5 bid, 87.5 offered, up from 83 bid, 86 offered, the trader said.

For the quarter, net income was $23.6 million, or $0.28 per share, compared to $4.2 million, or $0.05 per share, in the 2008 quarter.

Adjusted earnings for the quarter were $11 million, or $0.13 per share, compared to $10.4 million, or $0.13 per share, last year.

Revenues in the third quarter were $347.4 million, down 23.1% from $451.6 million in the third quarter of 2008.

At the end of the quarter, McClatchy's debt principal outstanding was $1.99 billion, down $134.3 million from the end of 2008.

The company's leverage ratio at the end of the quarter was 5.7 times and its interest coverage ratio was 2.8 times.

"Both of these ratios are well within the covenant requirements under our credit agreement of a leverage ratio of less than 7.0 times and an interest coverage ratio of greater than 2.0 times. At the end of the quarter, we had approximately $172.0 million available under our bank credit line," said Pat Talamantes, chief financial officer, in a news release.

McClatchy is a Sacramento, Calif.-based newspaper company.

Broad market mixed

Elsewhere in the wide world of distressed debt, Sprint Nextel Corp.'s 9¼% notes due 2014 traded around 99.5, on about $25 million in volume. The 6% notes due 2016 were seen as falling nearly a point to 85.75 bid.

Tousa Inc.'s debt continued to trade, just one day after a bankruptcy judge ruled that a fraudulent transfer regarding its Transeastern Properties Inc. joint venture had in fact occurred. A trader said the subordinated issues were holding around 7 bid, 8 offered, while the seniors were 53 bid, 55 offered.

Also, Smurfit-Stone Container Enterprises Inx.'s bonds remained "right around 80," according to a trader.

Sara Rosenberg and Paul Deckelman contributed to this article.

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