General Growth trends upward; CIT gets boost from tender results; Bon-Ton improves on numbers

By Stephanie N. Rotondo

Portland, Ore., Nov. 19 - General Growth Properties Inc. and CIT Group Inc. were Thursday's "big movers," a trader said, as positive news helped the bonds gain ground.

General Growth announced it had reached an agreement with lenders holding about $8.9 billion in mortgage loans to restructure the debt. That news pushed the bankrupt company's bonds in the neighborhood of par.

And, CIT released updated results of its tender offer. A majority of those that participated voted to accept the company's plan of reorganization, though CIT had already gone forward with the plan when it filed for bankruptcy earlier this month. Still, sources saw the lender's debt moving up a couple points.

Bon-Ton Stores Inc. was also on the firm side, after the company reported a narrower loss for the third quarter. Traders saw the bonds gaining as much as 3 points on the day.

But even with the gains in General Growth, CIT and Bon-Ton, market players still characterized the day as a weak one.

"The market felt weaker," a trader said. However, "all new issues traded up; it was a weird day."

"It's brutal out there," said another source.

General Growth trends upward

General Growth Properties' debt continued its upward climb Thursday, as the company announced it had reached a restructuring agreement with lenders holding $8.9 billion of secured mortgage loans.

A trader said the 7.20% notes due 2012 and the 8% notes that were to have matured in April 2009 "crept up towards par."

Another market source saw the paper gaining 2 to 3 points, depending on the issue, placing the 7.20% notes at 99 bid, par offered and the 8% notes at 99.5 bid, 100.5 offered.

Chicago-based shopping mall owner General Growth announced Thursday that it had inked a deal with lenders to extend maturities of 70 mortgage loans, with no loan maturing before January 2014. The lenders also agreed to keep interest rates at non-default levels, resulting in a weighted average contract interest rate of 5.35%.

"We are extremely pleased to reach this consensual agreement with lenders representing more than half of the mortgage debt covered by the bankruptcy proceedings," said Thomas H. Nolan, Jr., president and chief operating officer, in a press release.

"We believe that these agreements provide a basis for consensually completing a restructuring of the debtors' remaining approximately $6 billion of secured mortgage loans and we are hopeful that our other secured mortgage lenders will work with us to reach agreements quickly.

"We are working with the unsecured creditors committee, the equity committee and other constituents to resolve the restructuring of our corporate level debt and equity and believe that these agreements with our mortgage lenders represent an important step toward establishing a long term capital structure for GGP," he concluded.

The company said it hopes to "emerge the regional shopping centers associated with these mortgage loans from bankruptcy prior to the end of 2009."

CIT results give bonds a boost

Also among the day's gainers was CIT Group, which announced updated results of its tender offer for certain, unsecured issues.

A trader said the paper was "up a little bit," as "everyone is signing on" to the company's prepackaged plan of reorganization. He called the 4.65% notes due 2010 a point better at 97.5.

Another trader said the majority of the issues were trading up around "plus/minus 71-ish." He added that "some paper was even higher," like the 6 7/8% notes due 2009, which hit a high of 72.

Approximately 83% of CIT's eligible bondholders participated in the tender offer. A majority of participants also voted to accept CIT's plan of reorganization, which included a prepackaged bankruptcy filing.

CIT's board of directors had previously voted to accept the plan - and thus file for bankruptcy - before the offers expired.

"Under the plan, CIT expects to reduce total debt by approximately $10 billion, significantly reduce its liquidity needs over the next three years, enhance its capital ratios and accelerate its return to profitability," the company said in a press release.

A confirmation hearing is scheduled for Dec. 8.

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

Bon-Ton improves on numbers

In the world of retail, Bon-Ton Stores reported its third-quarter results, which gave the company's bonds about a 3-point boost.

A trader said the 10¼% notes due 2014 were "up a few points on the news this morning," quoting the issue at 92 bid, 93 offered. He said the bonds had ended at 90 on Wednesday, which was also up a couple points.

Another trader said that paper was up at 93 bid, 94 offered.

For the quarter ending Oct. 31, the York, Pa.-based retailer saw total sales fall to $703.9 million from $724.9 million the year before. However, operating income was better at $19.6 million, compared with a loss of $12 million in the third quarter of 2008.

Net loss also narrowed, coming in at $4.2 million, or 24 cents per share, versus $14.3 million, or 85 cents per share, the previous year.

"Our third-quarter financial performance reflects the benefit of initiatives we implemented in 2008 and 2009," remarked Bud Bergren, president and chief executive officer, in the earnings release.

"We were pleased with the sustained improvement of our sales trend throughout the quarter, which included a comparable store sales increase of 3.1% in the month of October, as well as a 200 basis point gross margin improvement in the third quarter which we attribute to well-managed inventory levels and reduced levels of clearance merchandise in our assortment.

"In addition, we realized $27.1 million in cost savings during the quarter," Bergren noted. "Looking ahead, we believe we have a great assortment of distinctive quality merchandise at value price-points to entice customers to shop Bon-Ton for holiday gift-giving. While encouraged by recent trends, we will continue to manage our business conservatively to ensure we maintain cash flow and liquidity."

Among other retailers, Blockbuster Inc.'s 9% notes due 2012 were "trading back up," a trader said. He said the notes ended "close to 50," which he deemed about a point firmer.

Nebraska Book shows up on radar

A trader said Nebraska Book Co. Inc.'s 8 5/8% notes due 2012 traded at 82 bid, 84 offered. That market was echoed by a source at another desk as well.

"It's not really a big price move," the first trader said. "But I don't generally see a lot of activity in the name."

Both sources were not sure what had caused the rarely traded credit to move around. The company put out numbers on Nov. 13, but there has been no fresh news since then.

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