Freescale dips on new loan news; Nortel falls post-CDS auction; Aramark dips, Dollar General gains

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Feb. 10 - Freescale Semiconductor Inc.'s debt structure fell Tuesday, following news that the company planned to obtain a new term loan.

Holders of Freescale's corporate debt were invited to tender their bonds for a stake in the term loan. But investors were not too keen on the idea and one trader noted that even bank debt investors did not want any more.

Elsewhere in the technology arena, Nortel Networks Corp.'s bonds dropped a couple points following a credit default swap auction. The auction results placed the value of the debt around 12, to which the bonds fell in early trading. However, a few traders said the debt rebounded some before the end of business.

Aramark Corp., a food and uniform service company, posted its first quarter results and the market players saw the company's bonds dip in reaction. Conversely, Dollar General Corp. also posted earnings Tuesday. But those figures gave the discount retailer's debt a boost, traders reported.

As the equity markets took a dive, traders saw the distressed bond market relatively stable. Still, some sources noted that investor interest was directed toward the "richer end" of the credit scale and new issues.

"There is cash in the market, but the market is kind of weird," a trader said. "There is cash in the market, but nobody seems to be happy about it."

Freescale dips on loan news

Freescale Semiconductor's debt weakened during the trading session as the company revealed its intention to obtain a new term loan.

The company's existing term loan was quoted at 48 bid, 50½ offered by late day, down from early Monday levels of 52 bid, 53 offered, a trader said.

On Tuesday morning, shortly after the news first hit, the term loan was being quoted pretty wide at 46 bid, 51 offered, the trader continued.

The trader went on to explain that the term loan softened since bank debt guys don't really want more bank debt at the company.

In the bonds, a trader said the 8 7/8% notes due 2014 "opened OK," around 21 bid, 24 offered. But once the news came out, "the bids initially pulled out."

"The bids gradually came back, but there was not a whole lot of trading," he added, given that there were no bids in the market. He saw the bonds close the day at 21 bid, 22 offered.

Another trader quoted the 8 7/8% notes at 20 bid, 21.5 offered, down from 21 bid, 24 offered earlier and from 23 bid, 24 offered on Monday.

Freescale's proposed incremental term loan of up to $1 billion will carry pricing of 12.5% and will be due Dec. 15, 2014, according to an 8-K filed with the Securities and Exchange Commission.

The guarantors of its senior secured credit facility will guarantee the new term loan.

Holders of the company's existing notes, including the senior floating-rate notes due 2014, the 9 1/8%/9 7/8% senior pay-in-kind notes due 2014, the 8 7/8% senior fixed rate notes due 2014 and the 10 1/8% senior subordinated notes due 2016, were invited to participate in the new incremental term loan.

Also invited to participate in the new loan are the company's existing credit facility lenders.

Bank lenders have a deadline of 5:00 p.m. ET on Feb. 19 to commit to the new loan, and funding of these orders must take place by 11:00 a.m. ET on March 17.

Commitments from the existing bank group would reduce the amount of term loan available to noteholders, meaning that if the bank lenders commit to all $1 billion, noteholders would be unable to participate in the deal.

Proceeds from the new incremental term loan will be used by Freescale to refinance its existing notes.

According to the company, the purpose of the transaction is to improve its financial flexibility by reducing overall debt and related interest expense.

For noteholders, up to $250 million of the senior PIK-election notes, which are priority one, and up to roughly $746 million of the senior subordinated notes, which are priority two, can be swapped for the new term loan debt.

The senior floating-rate notes are acceptance priority three and the senior fixed rate notes are acceptance priority four. Maximum amounts for swaps of these notes are not available.

Each note invitation will terminate at midnight ET on March 10.

Freescale is an Austin, Texas-based designer and manufacturer of embedded semiconductors for the automotive, consumer, industrial, networking and wireless markets.

Nortel falls post-CDS auction

After the initial results came out from its credit default swaps auction, Nortel Networks' bonds slipped some, but rebounded a little by the end of the session.

A trader pegged the 10¾% notes due 2016 at 13.5 bid, 14 offered late in the day. But after the results from the CDS auction were released, that issue fell to 12 bid, 12.75 offered, he remarked.

Another trader said the name "continues to feel weak," its floating rate-notes due 2014 around 12 and the 10 ¾% notes at 12.5.

At another desk, a source placed the 10 1/8% notes due 2013 at 13.5 bid, a loss of more than 2 points on the day.

Sellers of protection on Nortel's debt will have to pay 88% of the insurance sold, meaning that the debt being protected was valued at just 12 cents on the dollar. Currently, there are about $478.8 million CDS' in the market, according to data complied by the Depository Trust & Clearing Corp.

Furthermore, Nortel is working on a "detailed plan" to further reduce its work force, according to court papers. Also, the company is looking to suspend its annual shareholders' meeting.

"The annual meeting would be a distraction to both management and other company resources at a time when they are required to be focused on stabilizing and restructuring the business," Ernst & Young Inc., the overseer of Nortel's bankruptcy case, said in a court report.

Nortel is a Toronto-based telecommunications equipment manufacturer.

Aramark dips, Dollar General gains

Both Aramark and Dollar General put out quarterly reports Tuesday, but the reactions to the numbers were mixed for the two companies.

A trader said Aramark's 8½% notes due 2015 fell to 91 bid, 92 offered from around 96, following the release of the results and the subsequent conference call. He added that "it didn't sound like [the call] was very good."

Another trader, calling the debt active, placed the issue at 91.5 early on in the session, a decline of more than 5 points. However, the bonds rallied a bit to close at 93.

Sales for the first quarter fell 5% to $3.2 billion, attributed to a foreign-currency exchange lag. Net income dropped to $8.2 million, versus $26.1 million the year before.

Meanwhile, a trader called Dollar General's 10 5/8% notes due 2015 a point better at 101.

The discount retailer's sales rose 9.4% during the fourth quarter, the company said. As such, the company has plans to speed up the opening of new stores.

Total sales gained 11.2% to $2.84 billion for the quarter ending Jan. 30.

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