Freescale bonds mixed post-exchange update; Rite Aid notes firm, Neiman loan slips; Herbst loan steady

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., March 11 - Freescale Semiconductor Inc.'s bonds closed Wednesday's session mixed following the conclusion of the company's tender offer.

The company said it received $3.03 billion commitments in the debt swap. Noteholders will get loans for their tendered bonds.

The company was also reported to have been included on Moody's Investors Service's recent "Bottom Rung" report, a list of 283 issuers most likely to default.

Rite Aid Corp. was also among those on the list. But that did not seem to deter would-be investors, and the pharmacy chain's bonds gained as much as 5 points on the day.

Also in the world of retailers, Neiman Marcus Group Inc. reported its fourth-quarter results. The numbers served to put added pressure the company's term loan.

Meanwhile, Herbst Gaming Inc.'s term loan closed essentially unchanged. The lack of major price movement came despite word that the company's lenders had agreed to a financial restructuring.

Freescale bonds end mixed

Freescale Semiconductor's bonds closed the session mixed following another debt exchange update.

A trader called the 9 1/8% notes due 2014 2 points better at 9.75, while the 10 1/8% notes due 2016 were "about the same, maybe down a little" at 14. The 8 7/8% notes due 2014 were seen unchanged at 16.5 bid, 16.75 offered.

Another trader quoted the 9 1/8% notes at 9 bid, 10.25 offered, the 8 7/8% notes at 16 bid, 17.5 offered and the 10 1/8% notes at 13 bid, 14.5 offered.

However, Freescale's term loan was a touch stronger at 39 bid, 41 offered, up from 38½ bid, 40½ offered, a trader said.

Freescale announced that it had received commitments of $3.03 billion in its debt exchange offer. The holders who tendered their debt will receive new loans with longer maturities. Still, the debt swap has been considered a distressed exchange, prompting both Moody's Investors Service and Standard & Poor's to lower their ratings on the Austin, Texas-based chipmaker.

Furthermore, Freescale was included among a list of 283 issuers most likely to default, according to Moody's recently released "Bottom Rung" list.

In its last earnings release, Freescale said it had more than $10 billion in long-term debt.

"The challenging economic climate significantly impacted our fourth-quarter results," Freescale chairman and chief executive officer Rich Beyer said in an accompanying statement. "Despite the current climate, our priorities are clear and achievable. We remain focused on further reducing our break-even point while ensuring we execute on our strategic growth initiatives and leverage our market leadership positions."

Rite Aid posts gains

Rite Aid also made Moody's list of likely defaulters, but that news did little to scare away investors.

A trader said the Camp Hill, Pa.-based company's debt got as good as 5 points better on the day, with the senior debt leading the pack. He saw the 9½% notes due 2017 around 21, up from 18 bid, 19 offered. The 10 3/8% notes due 2016 were trading around 50, while the 7½% notes due 2017 - a senior issue that showed a 5-point gain - moved up to 46 bid, 47 offered. The 8 5/8% notes due 2015 closed "up a couple" at 22 bid, 23 offered.

Another source deemed the 8 5/8% notes more than a point firmer at 21.5 bid, while another called the 7½% notes 45 bid, 46 offered.

But Rite Aid's inclusion on the "Bottom Rung" report did affect others with interest in the company. For example, McKesson Corp., a drug wholesaler that gets about 13% of its revenue from Rite Aid, saw its shares drop as the possibility of default at the pharmacy chain gained momentum. In a research note, Deutsche Bank analyst Ross Muken even went so far as to say that "Investors have become increasingly concerned that Rite Aid's business may become impaired in this continually challenging economic environment."

Elsewhere in the retail arena, Neiman Marcus' term loan headed lower during the trading session after the company released results for the quarter ended Jan. 31, according to a market source.

The term loan was quoted at 57 bid, 59 offered, down from Tuesday's levels of 59 bid, 61 offered, the source said.

For the second quarter of fiscal year 2009, the company reported a net loss of $509.2 million, compared with net earnings of $44.3 million in the prior year. The loss includes non-cash impairment charges of $560.1 million.

Total revenues for the quarter were $1.08 billion, compared with $1.37 billion in the second quarter of fiscal 2008.

And, adjusted EBIDTA for the quarter was $24.6 million, compared with adjusted EBITDA of $187.3 million in the previous year.

Neiman Marcus is a Dallas-based high-end specialty retailer.

Herbst loan steady

Herbst Gaming's term loan was pretty flat on the day despite news that the company reached an agreement with lenders holding approximately 68% of its loans on a financial restructuring plan, according to a trader.

The term loan was quoted at 19 bid, 21 offered, in line with previous levels, the trader said, explaining that people already had an understanding on what was going to happen with the company before the announcement came out.

The proposed restructuring plan will be done through a pre-arranged Chapter 11 filing, which is expected to take place shortly.

"All of our casinos and the route business are generating positive EBITDA, even in the current challenging economic environment," Troy Herbst, chief executive officer, said in a news release. "Our problem is a balance sheet issue; we have more debt than our operations can support. This agreement with our bank lenders is designed to resolve our balance sheet problem by restructuring our debt."

Under the restructuring plan, Herbst Gaming's casino and slot route business will be separated into two holding companies.

Outstanding obligations under the company's senior credit facility will be converted into debt and equity of the reorganized companies, with bank lenders receiving 100% of the new equity of the reorganized casino company and the reorganized casino company owning 10% of the new equity in the new slot route business.

Furthermore, the plan provides for termination of all outstanding obligations under the company's 8.125% senior subordinated notes and 7% senior subordinated notes, and the cancellation of all existing equity in the company.

Herbst Gaming is a Las Vegas-based slot and casino company.

Broad market firms

Wyndham Worldwide Corp.'s 6% notes due 2016 "looked a little better," a trader said, around the 49 level.

Sirius XM Radio Inc.'s 13% notes due 2013 were also better at 49, up from the low- to mid-40s.

West Corp.'s 9½% notes due 2014 closed with a 65 handle, about 3 points higher on the day.

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