Rite Aid structure mixed; Avis loan up on financing news; GMAC, ResCap stronger; GM bonds realign

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., May 26 - Rite Aid Corp.'s bonds traded actively in an otherwise muted trading session Tuesday.

The activity came after the company announced a new term loan along with plans to complete a refinancing project. But the drugstore chain's bank debt did not fare as well.

In other financing news, Avis Budget Group Inc.'s term loan drove higher on news that the company had obtained $325 million in operating lease financing. The funds will be used to add to the company's U.S. rental fleet.

Meanwhile, GMAC LLC and Residential Capital LLC remained on the gainers list, despite Standard & Poor's maintaining the parties' lower-level ranking.

General Motors Corp. is nearing its bankruptcy deadline and, as such, the carmaker's bonds are realigning. Traders saw the bonds - still trading in the single digits - begin to once again trade generically.

Rite Aid structure mixed

Rite Aid's bonds got a boost after the company launched a new term loan offering, but the bank debt did not respond in kind.

A trader saw about $30 million of the 9½% notes due 2017 trading at 64 bid, 65 offered, which he deemed "a little better."

A second trader also placed the issue around the 64 mark, compared with 60.5 bid, 61 offered last week. One other source placed the 8 5/8% notes due 2015 up more than 4 points at 65.25 bid.

"They're trying to refinance some stuff," a trader said. "There is an exchange ongoing for the shorter paper, but the stuff in the middle still seems to be going up a little bit."

Still, not everyone was convinced that the new financing was the cause of the bonds' movement.

"I think that's been in the market for awhile," the second trader said. However, he conceded that it was a step in the right direction for the company.

"They need to refinance," he said. "They have way too much debt."

Meanwhile, Rite Aid's "old" term loan was unchanged to weaker in the secondary market, depending on whom you asked.

One trader told Prospect News that he had the old term loan quoted at 79 bid, 81 offered, flat from Friday's levels.

However, a second trader had the term loan quoted at 78½ bid, 79½ offered, down from 79 bid, 80 offered late last week.

On Tuesday, Rite Aid held a conference call to launch a new $400 million term loan due 2015 that is talked at Libor plus 650 basis points.

The loan is expected to have a Libor floor and an original issue discount, but specifics of those features are still to be determined.

Citigroup, Bank of America, Wells Fargo and GE Capital are the joint lead arrangers on the deal, with Citi the left lead.

Proceeds will be used to refinance the company's $145 million term loan tranche 1 due 2010, and to repay and cancel a portion of the commitments outstanding under its revolver.

In connection with the term loan, Rite Aid is also looking to amend its existing credit facility to allow for the new debt and the completion of a refinancing plan, which the term loan is a part of, according to an 8-K filed with the Securities and Exchange Commission.

The company is looking to refinance its September 2010 debt maturities, including its accounts receivable securitization programs.

Funds for the refinancing is targeted to come from a combination of a new revolver, new term loans, the issuance of high-yield notes, which may be secured on a first or second priority basis or unsecured, or the entry into a new securitization program.

Rite Aid is a Camp Hill, Pa.-based drugstore chain.

Avis up on financing news

Avis Budget Group's term loan B posted some gains during market hours on news that the company has obtained commitments for approximately $325 million of operating lease financing, according to traders.

Following the announcement, one trader had Avis' term loan B quoted at 71 bid, 76 offered, up about 2 points on the day.

Meanwhile, a second trader had the loan quoted at 73 bid, 74½ offered, up from 72½ bid, 73½ offered on Friday.

In a press release on Tuesday, Avis explained that the new financing commitments are for vehicles that it plans to add to its U.S. car rental fleet over the next four months.

"This transaction represents another important step in the evolution and expansion of our fleet financing to reflect the changes that have occurred in the credit markets," said David B. Wyshner, executive vice president and chief financial officer, in the release.

"With this financing, we are not only obtaining additional liquidity at competitive rates; we are also executing against a funding strategy that anticipates a rebound in car rental demand in 2010," Wyshner added.

Avis is a Parsippany, N.J.-based provider of vehicle rental services.

GMAC, ResCap firm

GMAC and its subsidiary Residential Capital continued to have positive momentum Tuesday, though Standard & Poor's kept the companies firmly in junk territory.

A trader said GMAC's 6 7/8% notes due 2011 were "trading a lot" at 89 bid, 90 offered, calling that up a point.

The trader also saw the benchmark 8% notes due 2031 at 77 bid, 78 offered, "about unchanged to maybe up half a point," he said.

Another trader observed that GMAC was "doing pretty well." He said its 6 7/8% notes were trading in the mid-90s, which he said was up a point.

"The further out on the curve you move, maybe [the size of the gain] goes down a little bit, but most of those [credits] continue to trade strong," he said.

Another market player called ResCap's 8 7/8% notes due 2015 a deuce firmer at 71.5 bid.

S&P maintained its CCC/C counterparty credit rating on the two companies, noting that the $7.5 billion of new federal bailout funds - announced last week - would benefit the bottom line. However, the agency acknowledged that times are still tough all over.

"Several actions GMAC LLC has taken in conjunction with the U.S. Treasury, the Federal Reserve and the FDIC have materially enhanced the company's capital and liquidity profiles and better positioned the company for what we believe will be continued challenging operating conditions," said credit analyst John K. Bartko.

GM bonds realign

As a potential bankruptcy looms ever larger, General Motors' bonds once again began trading generically, traders reported.

The Detroit automaker's bonds had been trading in the single digits, but were all over the place within that range. Come Tuesday, traders saw the values realigning to 6 bid, 7 offered virtually across the board.

One trader called that 1 to 2 points better on the day, at least for the benchmark 8 3/8% notes due 2033 and the 7.2% notes due 2011. But another said it was a decline for the 7 1/8% notes due 2013.

"Maybe it's short covering," the first trader said. "Who knows?"

Another trader saw several GM issues up from recent round-lot levels, pegging its 8 3/8% bonds due 2033 at 6.5 bid, versus 4.75 bid on Friday, on volume of some $11 million.

He also saw the GM 7.2% notes having moved up to 7 bid from 5, on volume of $6 million.

As a June 1 deadline to file or not to file approaches, many market players believe that a filing is imminent. That belief was further encouraged by news reports that the company's refuted debt-for-equity swap was far from reaching its goal of 90% participation.

The deal was set to expire at 12 a.m. May 27.

Under the terms of the deal, bondholders would receive 1% of new equity in the reorganized company. However, bondholders had previously rejected the plan and offered a counterproposal in which they would receive up to 50% of the new equity. The company then rejected that plan.

Paul Deckelman contributed to this article.

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