MGM notes firm on waiver news; GM loans gains, bonds drain; Capmark better despite lender suit

By Stephanie N. Rotondo

Portland, Ore., April 13 - MGM Mirage and General Motors Corp. remained topical in the distressed marketplace on Monday.

MGM's bonds were seen finishing the day with a mostly firm tone, despite chatter that talks with Colony Capital LLC had ended. However, the company did announce that it had secured yet another waiver from lenders to make a payment on its CityCenter project.

With time ticking away, some are concluding that a GM bankruptcy is imminent, though the company has claimed it is trying to create a restructuring plan that would avoid such a thing. But the increasing bankruptcy buzz led to GM's term loan gaining ground Monday, though its bonds were continuing on its path toward zero.

Capmark Financial Group Inc. was hit with a lender lawsuit, according to a regulatory filing. The lender, which owns 6% of the company's bridge loan, is alleging a covenant breach. Still, the company's bonds ended the day on a higher note.

Overall, traders reported that the day was positive, despite a weaker equity market.

"It was a typical Monday after a holiday," said one trader. "Volumes were definitely lighter, but it was more positive than the equities. In the secondary market, things were up half a point, maybe more."

"In general, a lot of stuff feels a little better," said another trader.

MGM firms on waiver news

MGM Mirage's bonds were mostly better, despite reports that Colony Capital LLC had ended negotiations regarding a potential $750 million term loan.

A trader called the 6¾% notes due 2013, the 5 7/8% notes due 2014 and the 8 3/8% notes due 2011 each a half-point better at 40, 40.5 and 31, respectively. However, the trader said the 9 3/8% notes due 2010 dipped a point to 38.5.

At another desk, a market source deemed the 6% notes due 2009 unchanged at 68.5 bid, 71.5 offered, while the 6¾% notes due 2012 moved up half a point to 42 bid, 43 offered. But the 8½% notes due 2010 were seen down about 8 points at 50 bid, 51 offered.

A Bloomberg report indicated that the negotiations were on hold, rather than ended completely, as MGM continues its discussions with its lenders.

On Monday, those discussions led to the casino operator receiving another waiver for its CityCenter project, allowing a $70 million payment without any input from Dubai World, its joint venture partner on the Las Vegas Strip project.

Furthermore, Dubai World has reportedly submitted a proposal to MGM regarding completion of the project. Under the terms, Dubai would resume making its share of the payments in return for certain concessions from MGM. Dubai had previously filed a suit against the company, claiming auditor comments regarding the casino's future constituted a contractual breach.

GM loan gains, bonds drain

General Motors' term loan gained some ground on Monday as market expectations for a potential bankruptcy filing seemed to increase, according to a trader.

The Detroit-based automotive company's term loan was quoted at 46 bid, 51 offered, up about a point on the day, the trader said.

The trader explained that the term loan strengthened on the additional bankruptcy chatter since people feel like recoveries are going to be "good."

"Seems to be the trend these days. People think you're going to file and [the bank debt] moves up," the trader added.

Over in the bonds, market sources saw the debt largely lower, for the same reasons the Detroit-based company's term loan was seen gaining.

A trader called the benchmark 8 3/8% notes due 2033 weaker by 1.5 points at 9.5. The 8¼% notes due 2023 fell about 32 points to the 7 level, while the 7.20% notes due 2011 dropped 2.5 points to 11.5.

"Eventually, they will have nowhere to go," a trader said of the debt.

Another source placed the 7 1/8% notes due 2013 at 10 bid, a decline of a point.

Yet another trader quoted GM's 8 3/8% bonds down 2 points on the day at 8.5 bid, 9.5 offered, while another trader said that GM's bonds were "worse than the reliability of their cars," calling the benchmarks down 2.5 points in round-lot trading to 8.5 bid, after having dipped as low as 7.5 earlier in the session, with $13 million changing hands.

News reports published Sunday in the New York Times and the Wall Street Journal stated that the government is reportedly pushing GM to prepare for a bankruptcy filing by June 1. The company has been reworking a viability plan after the first draft failed to get approval from President Barack Obama. The company's new chief executive, Fritz Henderson, has seemed more willing to consider a Chapter 11 filing, though he has also stated that the company's board is working on making more cuts to avoid doing that.

The government is pushing GM to file for what is being touted as a "surgical" bankruptcy. Under the tentative plans for the filing, certain parts of GM would quickly exit from Chapter 11 protections - those parts being the "good" parts of the automaker - while the "bad" parts could remain under court protections for a longer period.

In more General Motors news, on Friday, Standard & Poor's cut the rating on the company's $4.5 billion senior secured revolving credit facility to CCC- from CCC and revised the recovery rating to 2 from 1, indicating that lenders can expect substantial (70% to 90%) recovery in the event of a payment default.

"The lowering of the rating on the revolving credit facility reflects our view of persistently weaker demand for light vehicles in North America, as well as declining pools of assets securing the revolving credit facility," said Greg Maddock, Standard & Poor's recovery analyst, in the ratings release.

The rating on General Motors' $1.5 billion senior secured term loan was left unchanged at CCC and the recovery rating on remained at 1, indicating that lenders can expect very high (90% to 100%) recovery in the event of a payment default.

Also, the corporate credit rating on General Motors remained unchanged at CC, reflecting Standard & Poor's view of the likelihood that the company will default either through a bankruptcy or a distressed debt exchange.

Meanwhile, Ford Motor Co.'s bonds continued to move higher, as investors see the carmaker as a stronger option of the Big Three.

A trader called the 6 5/8% notes due 2028 more than 6 points better at 25.75 bid, 36.25 offered. The benchmark 7.45% notes due 2031, however, fell a tad to 41.25, while the 8.9% notes due 2032 ended flat at 38.75.

Another source saw the 7% notes due 2013 gaining a point to close at 71 bid.

Capmark better despite lawsuit

Capmark Financial Group's paper ended the session mostly better, despite a newly filed lawsuit by one of its lenders.

A trader called the company's floating-rate notes due 2010 unchanged at 29.5, while another saw the 5 7/8% notes due 2012 move up 2 points to 19.5 bid, 20 offered. The second source also saw the 6.3% notes due 2017 firm nearly a point to 18 bid, 19 offered.

Capmark lender DK Acquisition Partners LP filed a complaint against the Horsham, Pa.-based company, alleging that the non-repayment of its $48 million bridge term loan constituted a breach of covenant.

DK holds about 6% of the bridge loan. Capmark has secured a waiver until April 20 for the remaining 94% of the loan.

Broad market mixed

In the rest of the distressed arena, a trader called Pilgrim's Pride Corp.'s 8 3/8% notes due 2017 down 2 points at 38 bid, 40 offered, not helped by news the bankrupt company plans to close a Georgia plant and eliminate as many as 280 jobs there.

Exopack Holding Corp.'s 11¼% notes due 2014 ended up 4.5 points to 56.5 bid from 52 last Wednesday, "a big move," a trader said, despite a lack of fresh news about the Spartanburg, S.C.-based packaging materials company.

The trader also saw "another nice move" in Huntsman International LLC's 7 7/8% notes due 2014, which rose to 45.5 bid from last week's 43 finish, on $5 million traded.

"One of the few downsiders, apart from the autos," the trader said, was the bankrupt Chemtura Corp.'s 7% notes coming due on July 15, which were issued by predecessor company Great Lakes Chemical Corp. He saw the Middlebury, Conn.-based chemical maker's bonds dip 2 points to 26 bid.

Another rare loser, he added, was mining company Teck Cominco Ltd.'s 6 1/8% notes due 2035, down 1.5 points on the day at 53.5 bid, on $9 million traded.

Sara Rosenberg and Paul Deckelman contributed to this article.

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