Lyondell Chemical under pressure; Hawker Beechcraft takes nosedive; Clear Channel still churns

By Stephanie N. Rotondo

Portland, Ore., Dec. 15 - There were clear winners and losers in Tuesday's distressed debt market, as Lyondell Chemical Worldwide Inc. continued to lose ground and Clear Channel Communications Inc. continued to gain.

Lyondell's bonds dropped another 5 to 6 points during trading, as investors continued to react to a revised reorganization plan. However, one trader opined that the negative reaction could also be to the company's statement that it was still considering bid made by Reliance Industries back in November.

Also among on the losing side was Hawker Beechcraft Acquisition Co. LLC. The aircraft manufacturer's bonds declined as much as 10 points following a financial update and the announcement of order cancellations.

Clear Channel, however, continued its upward path. Traders saw the bonds gaining 2 to 3 points in active dealings.

Overall, the day was "interesting," in the words of one trader, as "end of year stuff" remained the focus.

"People don't want to do stuff and it's hard to do anything," he said.

Another trader speculated that the worst had yet to come.

"I think it's going to get a little tougher," he said.

Lyondell bonds under pressure

Lyondell Chemical's bonds continued to lose ground, according to traders, as the polymer maker's debt fell 5 to 6 points on the day.

The losses were in addition to the 10 points lost on Monday, after the company filed an amended plan of reorganization and stated it was considering a bid made by Reliance Industries.

A trader said the 9.80% notes due 2020 and the 10¼% notes due 2010 were trading in a 73 bid, 74 offered context. He speculated that the recent reaction in the notes was due to bondholders' lack of interest in a Reliance takeover.

Another market source also saw the issues at 73 bid, 74 offered, down from 79 bid, 80 offered.

On Monday, the Netherlands-based company filed a plan of reorganization that included a $2.8 billion rights issue and the 100% repayment of senior lenders.

Lyondell said it was also still considering Reliance's offer of up to $12 billion for a controlling stake in the company. Reliance is reportedly planning to make a decision about its bid after a court hearing on the plan.

Hawker notes take nosedive

Among the day's other losers, Hawker Beechcraft Acquisition's debt came under pressure as the company announced that it has received cancellation notices from NetJets Inc. for a significant number of aircraft previously contracted to be delivered over several years beginning in 2011.

The impact of the cancellations will reduce the company's current backlog by approximately $2.6 billion.

A market source pegged the 8½% notes due 2015 at 59.5 bid, down 10 points on the day.

Another source also placed the 8½% notes at 591/2, and also saw the 8 7/8% notes due 2015 at 52 bid, 53 offered.

Also on the news, Hawker Beechcraft's term loan B was quoted at 73 bid, 75 offered, down from 75.5 bid, 77.5 offered, a trader said.

The Wichita, Kan.-based company added that NetJets - while a considerable source of backlog - was not expected to provide it with any substantial revenue during 2009 or 2010 and has historically not represented more than 10% of its annual revenue.

Also on Tuesday, Hawker Beechcraft came out with some financial expectations, including that revenue for the fourth quarter is estimated to be approximately $1.1 billion, bringing estimated full year revenue to roughly $3.2 billion.

Operating income for the fourth quarter is expected to be between approximately zero to a loss of $15 million, with full year 2009 operating loss estimated to be between $725 million and $740 million.

Adjusted EBITDA for the full year is expected to be between $95 million and $110 million after adjusting for certain non-recurring items expected to have an approximate net $330 million negative effect on operating income.

After removing the canceled NetJets orders from backlog and considering the anticipated sales and order activity for the fourth quarter, backlog is expected to be approximately $3.5 billion at Dec. 31.

A conference call to discuss the financial update, as well as the NetJets cancellation, is planned for Wednesday at 9 a.m. ET.

Clear Channel still churning

Clear Channel Communications' bonds were still cranking during Tuesday's session, according to traders.

A trader said the notes "remain active," the 11% notes due 2016 stronger at 70 bid, 72 offered. The 10¾% notes due 2016 were also firm around 78.75.

Another trader said about $50 million of the 11% notes were "up again" at 71 bid, 71.5 offered.

The San Antonio-based multimedia company's debt has been on a run of late. At first, it was rumors of a new issue that were generating the momentum. But now, as the company has confirmed the planned new security, the bonds remain on an upward path.

Clear Channel is expected to price the new $750 million senior unsecured issue sometime this week. Proceeds will be used to prepay a portion of a $2.5 billion intercompany note coming due in August.

GM notes improve

A trader saw General Motors Corp.'s benchmark 8 3/8% bonds due 2033 up more than three-quarters of a point on the day to 25 bid, 26 offered, citing the news that GM said it will have fully repaid its government loans by this coming June, assuming no adverse economic or business conditions.

He also cited a report put out by a researcher connected with car-rental giant Avis Budget Group predicting that automobile sales will go up in response to pent-up demand.

Another trader quoted GM at 25 bid, 25.5 offered, which he called up a point on "lots of volume."

However, a third trader, who saw the GM bonds in a 25 bid, 25.25 offered context, called the bonds "up a little," from prior levels around 24 bid, 24.5 offered on Friday and Monday, "though not screaming."

Also in the autosphere, Visteon Corp. bonds "were easier," a trader said, seeing its 8¼% notes due 2010 down 1 point on the day at 25, while quoting the 7% notes due 2014 at 26.5 bid, on "no activity." The recently issued 12¼% notes due 2016 were quoted in the 40s, with "not much activity in it, it was just quoted down."

Broad market unchanged

Also in the distressed realm, Idearc Inc.'s 8% notes due 2016 ended at 7 bid, 8 offered "again," a trader said.

Another trader said about $160 million of Wells Fargo's 5.80% notes due 2049 finished unchanged at 77 bid, 77.5 offered. He noted that a "bulk of stuff" trading in the distressed and secondary high-yield arenas was financial.

The trader also saw about $15 million of Michaels Stores Inc.'s 11 3/8% notes due 2016 trade with a 104 handle.

And, a trader saw Dubai development company Nakheel PJSC's bonds "settling down" after having soared on Monday on news that oil-rich Abu Dhabi would front its troubled neighboring emirate $10 billion to pay off the 3.172% sukuk bonds that were maturing on Monday and have enough cash to run Nakheel parent Dubai World's operations for the coming months.

Those 2¾% noted due 2011 and floating-rate paper due 2010 had about doubled on Monday, rising into the mid-60s from prior levels in the 30s on the news, but on Tuesday, the trader quoted them early on at 61 to 63, and said that by later in the day, they had come in to 59 bid, 60 offered.

Sara Rosenberg and Paul Deckelman contributed to this article.

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