LyondellBasell jumps on reliance bid; Clear Channel bonds improve; CIT notes steady to softer

By Stephanie N. Rotondo

Portland, Ore., Nov. 23 - LyondellBasell was the nom du jour in an otherwise lackluster day, traders reported Monday.

The chemical maker's debt jumped as much as 10 points on the day, following news that Reliance Industries had made a cash offer for a controlling stake in the company. According to one trader, the deal had been talked about previously, but was finally made official - and at a higher-than-expected price.

Clear Channel Communications Inc.'s bonds also moved up during trading. There was no news to explain the movement, though traders said the bonds were somewhat active.

Meanwhile, CIT Group Inc.'s debt was seen holding steady - or weakening slightly - as the company received approval for a $500 million credit facility.

Traders said that the focus was on the calendar ahead of the Thanksgiving holiday, leading to a relatively subdued marketplace. When asked what the day's notable names were, one trader quipped, "There's only three more days" until the holiday. "That's notable."

Lyondell jumps on Reliance bid

LyondellBasell saw its bonds gaining 5 to 10 points, depending on the issue, following news that Reliance Industries, an India-based energy company, had made a non-binding cash offer for a controlling stake in the bankrupt chemical maker.

A trader said the 10¼% notes due 2010 jumped 10 points on the news to around the low-80s. Other issues, such as the 8 3/8% notes, gained 5 points, hitting a high of 28 before coming back in some to end at 25 bid, 27 offered.

"Reliance was already talking about $6 billion, but I think now they made it official and its $12 billion," he said.

Another trader said Lyondell "paper was up a good bit." He also saw the 10¼% notes, as well as the 9.8% notes due 2020, closing in the low-80s.

"That's [up] in the neighborhood of 10 points," he said.

And, LyondellBasell's CAM, which is basically all of the company's pre-petition bank debt that trades together as one facility, saw a big improvement on the news, according to traders.

The CAM was quoted by one trader at 69.5 bid, 70.5 offered, up from Friday's levels of 60.5 bid, 61.5 offered, and by a second trader at 68.5 bid, 69.75 offered, up from 59.75 bid, 60.625 offered.

The first trader went on to say that the debt had traded as high as 75, but a lot of sellers came out at those higher levels, pushing the debt down a few points.

Meanwhile, the second trader remarked that he heard a rumor that the debt traded as high as 78 at one point.

"Very choppy trading," the first trader added.

On Saturday, LyondellBasell announced that it received a preliminary non-binding offer from Reliance Industries to acquire for cash a controlling interest in the company.

The purchase would be done contemporaneously with LyondellBasell's emergence from Chapter 11.

"This offer is in addition to the previous non-binding equity financing proposals received by the company and represents a potential alternative to the initial plan of reorganization previously filed by the company," LyondellBasell said in a news release.

"Consistent with its fiduciary duties, management will continue to work with all parties to design an approach that maximizes value for the company's creditors through the pursuit of a confirmable plan of reorganization and enhances the financial strength of the reorganized company," the release added.

Lyondell filed for bankruptcy earlier this year, as the debt incurred by Basell AF in its December 2007 acquisition weighed on the company's balance sheet. Creditors are currently suing the company's lenders, alleging that the debt caused the company's failure.

LyondellBasell is a Netherlands-based polymers, petrochemicals and fuels companies.

Clear Channel bonds improve

Clear Channel Communications' debt ended about a point stronger across the board, traders reported, though there was no news to explain the gains.

One trader quoted the 10¾% notes due 2016 at 59 bid, 59.75 offered, while the "kind of active" 11% notes due 2016 finished at 46 bid, 47 offered, up from 45 bid, 46 offered.

"It looks like they are probably all up about a point," he said.

Another trader also called the bonds "better," placing the 10¾% notes "close to 60" and the 11% notes at46 bid, 47 offered.

On Nov. 10, Clear Channel's parent company, CC Media Holdings Inc., posted a loss of $89.9 million, compared with a loss of $90.2 million the year before. Revenue fell 17% to $1.39 billion.

Though the numbers look disastrous, they were in fact an improvement year over year. The San Antonio-based company also said that it expected ad sales to stabilize soon, giving investors some confidence.

But not all market players believe the hype.

"We couldn't bring ourselves to recommend Clear Channel bonds in September," wrote Gimme Credit analyst Shelly Lombard in a morning report. Lombard said that they knew there was a chance the company would stay in compliance with covenants, thus negating the need for lenders to force a restructuring. "But the possibility of a restructuring was especially scary since we believe Clear Channel bonds are practically worthless in a worst case scenario," Lombard wrote.

"Now the market is ignoring the fundamentals and driving the bonds higher after the company posted third-quarter results that gave investors confidence it could remain in covenant compliance," she said. As such, though the company cannot grow its capital structure, "it may have delayed a restructuring since it has enough liquidity to stay afloat until 2011 when it will face some major debt maturities."

CIT steady to weaker

CIT Group's notes ended the day "probably unchanged, maybe a smidge lower," a trader said.

The trader pegged the majority of issues at 70 bid, 71 offered.

On Monday, CIT received court approval to borrow as much as $500 million to issue letters of credit guaranteeing its debt. The New York-based lender has a $750 million credit facility, but it expires in May 2010 and is therefore deemed insufficient. The lenders of the facility have also refused to extend the maturity.

Among other lenders, a trader said that Residential Capital LLC's 6 3/8% notes were bid for at 57.75, "looking, with no offer," in the wake of the news that KDP Investment Advisors recommended in a research report that ResCap bondholders should sell its short-dated bonds, warning that further government support for ResCap parent GMAC is unlikely to be used to support the troubled mortgage company - making a near-term bankruptcy of the unit highly likely.

Another trader said that ResCap's short paper, like its 8½% notes due 2010, were down a quarter- to a half-point at 88 bid, 90 offered. However, he was surprised to see the longer end "actually up" 2 points on the day - he initially thought that the longer paper "might be out a little more" - with the 9 5/8% notes due 2015, at 68 bid, 70 offered.

A market source at another desk pegged the 9 5/8% notes at 69.5, up as much as 3 points on the day.

Sara Rosenberg and Paul Deckelman contributed to this article.

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