GM, noteholders go another round; Visteon files, ends weaker; MGM steady as investors cash out

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., May 28 - Thursday was all about the automotive industry in the distressed market, as General Motors Corp. announced a new debt-for-equity swap.

The company also confirmed that it would file for bankruptcy. Market players reported that the company's debt moved higher following the news.

Also, Visteon Corp., an automotive parts supplier, announced it had filed for Chapter 11 protections. The bonds reacted by weakening a bit in somewhat active trading.

MGM Mirage's bonds were mostly holding in there after the company announced early results of its tender offer for its 6½% notes and 6% notes maturing this year. The results indicated that bondholders were reacting favorably to the offer and one trader speculated as to what the next issues up for tender might be.

GM, noteholders go another round

General Motors' paper drove higher following the release of a new debt-for-equity swap, which bondholders have already agreed to support.

A trader said the 8 3/8% notes due 2033, the 8¼% notes due 2023 and the 7 1/8% notes due 2013 were the day's most active, with $27 million, $22 million and $20 million trading, respectively. He saw the bonds gaining anywhere from 1 to 1.5 points, all of them closing in the 8 to 8.5 range.

Another trader also called the debt better, generically quoting the notes at 8.5 bid, 10.5 offered.

Also, both traders noted that some of the Detroit automaker's bonds were trading flat, or without accrued interest.

The first trader saw a market for 7.4% notes due 2025 without accrued, but added that it was "not official."

"I guess until they file, I guess it's by preference," he opined.

On Thursday, GM rolled out a new debt swap offer, following the massive failure of its original proposal on Wednesday. The U.S. Department of the treasury was heavily involved in the creation of the new proposal and is also asking bondholders to get on board.

Under the terms of the swap, the reorganized company would give the old company 10% of its equity - along with warrants for 15% more - to pay bondholders. GM said that at least 20% of bondholders have already agreed to support the deal - which is about 5% more than had reportedly participated in the original tender offer.

"The ad hoc committee of GM bondholders supports the revised offer from GM and believes that when contrasted with the alternative - uncertain and costly bankruptcy court litigation - that it represents the best alternative for bondholders in the current difficult and dire situation," the committee said in a statement. "Since the initial offer was made on April 27th, circumstances have materially changed that make today's offer more attractive.

"While the committee continues to remain troubled by preferential treatment that the UAW VEBA is receiving compared to the bondholder class - rejecting this offer in the expectation that the bondholders will do better in a litigated outcome was a risk the committee is unwilling to take," the committee added.

"The benefits of this deal are the opportunity to exit bankruptcy faster and additional upside for bondholders," wrote Shelly Lombard, analyst at Gimme Credit LLC, in an afternoon comment. "The downside is that the terms still favor the UAW since the VEBA is getting what bondholders, as pari pasu creditors, should have gotten as well: debt and/or preferred stock which are easier to value, provide current income, and are safer to own than common equity, especially the equity of a restructured company. "And we believe the inclusion of warrants will be confusing for individual bondholders who may not be accustomed to those securities," she continued. "But since GM already has the support of 20% of the bondholders, we expect this deal to be approved."

Bondholders holding $27.2 billion of the company's debt have until Saturday at 5 p.m. ET to tender their debt. GM is planning to then file for bankruptcy in June 1.

Visteon files, debt ends mixed

Elsewhere in the autosphere, automotive parts supplier Visteon said it filed for bankruptcy protections, sending its debt structure off in opposite directions.

Traders saw the company's 7% note due 2014 unchanged to slightly weaker on the news, placing the issue between 4.5 and 5.5. The notes were trading without accrued interest.

However, Visteon's term loan moved to higher ground in the secondary market, according to traders.

The term loan was quoted by one trader at 37 bid, 39 offered, up from 36½ bid, 38½ offered on Wednesday, and by a second trader at 36¾ bid, 38½ offered, up from 36 bid, 37½ offered.

"Visteon is taking this step to maximize the long-term value of the company," said Donald J. Stebbins, chairman and chief executive officer, in a news release.

"During the reorganization period, we will seek to address our capital structure and legacy costs that are not sustainable given the current economic environment. The results of these actions, combined with our innovative products and excellent product quality, will allow Visteon to emerge a financially sound and well-positioned company," Stebbins added.

Visteon is planning on getting a debtor-in-possession financing facility to help fund its operations during its time in bankruptcy.

The Van Buren Township, Mich.-based company said that Ford Motor Co. has executed a commitment letter to support the debtor-in-possession financing.

Other funds for the company's operations will come from U.S. cash balance and cash flows from operations.

On the news, both Standard & Poor's and Fitch Ratings cut Visteon to D.

"We believe the filing was prompted by the company's heavy debt burden and a sharp decline in liquidity caused by severe automotive production declines in the North America and elsewhere," said S&P analyst Robert Schulz in a statement.

Also, Metaldyne Corp., a Plymouth, Mich.-based automotive parts supplier, filed for Chapter 11 protections. But traders saw little to no action in the company's debt.

Another trader saw no activity in the name, noting that "they bought a lot of those bonds back, and there's only a small amount still outstanding" - only about $30 million of its 11% notes due 2012, out of an originally issued $250 million - "so that's why you don't see them."

According to the Trace system, the 11% notes due 2012 last traded on April 15 at 10, while the 10% notes due 2013 last moved at 20.75 in November 2008.

Metaldyne said that two separate private equity firms - RHJ International and the Carlyle Group - have expressed interest in purchasing certain assets.

"Selling operations on a going concern basis is the best way to preserve as many jobs as possible, best serve our customers and will allow certain of our operations to emerge from bankruptcy in a matter of months," said Thomas A. Amato, president, chairman and chief executive officer, in a press release. "The operations we are selling have strong product portfolios, advanced technologies and continue to perform well operationally."

S&P also cut Metaldyne's rating to D.

MGM steady as investors cash out

MGM Mirage's debt ended unchanged to weaker after the company released early results of its tender offer.

A trader said the 9 3/8% notes due 2010 were the day's most active, falling a touch to around 95.25 on $9 million traded. The 7 5/8% notes due 2017 were also languishing at lower levels around 64, while the 6 7/8% notes due 2016 ended flat, also around 64.

Another trader said the senior unsecured notes, such as the 6 7/8% notes, were trading around 65. He also saw the 9 3/8% notes around 95.

"I guess that's the one everyone will glom on to after the 6% [notes due 2009] get taken out," he said, adding that the 8½% notes due 2010 would also likely be the next big issue.

As of Thursday, holders of MGM's 6½% notes coming due July 31 had tendered $121.8 million of debt. That represents about 54% of the total offer to repurchase $226.3 million of the notes.

Additionally, holders of $760.8 million of the 6% notes coming due Oct. 1 had participated, representing 93% of the $820 million offer.

The tender expires at 11:59 p.m. ET on June 10.

Also in the gaming arena, Harrah's Operating Co. Inc.'s term loan B-2 took a step back on Thursday as there seemed to be some profit taking on the heels of the debt's recent run-up and also, some investors may have been selling the loan so that they could buy the company's bonds that just started trading, according to traders.

The term loan B-2 was quoted by one trader at 76¾ bid, 77¾ offered, down from 79 bid, 80¼ offered, and by a second trader at 77 bid, 78 offered, down from 78½ bid, 79½ offered.

On Wednesday, the term loan B-2 had moved up from 76½ bid, 77½ offered after the company announced plans to sell $1 billion in senior secured notes and use proceeds toward the repayment of some term loan and revolver borrowing, and for general corporate purposes.

In the end, Harrah's increased the bond offering to $1.375 billion. The 11¼% notes priced at 96.225 to yield 12%.

One market source, however, said the upsized deal "didn't seem to do too well," quoting the new issue at 96 bid, 97 offered.

Completion of the bond offering is subject to the company successfully amending its senior secured credit facility.

As was previously reported, Harrah's is looking to amend its credit facility to allow for the sale of secured notes or loans as long an agreed amount of the net cash proceeds from any notes or loan issuance are used to prepay existing term loans or revolving loans at par.

The amendment would exclude from the maintenance covenant notes secured with a first-priority lien on the assets that secure the senior secured credit facility that collectively result in up to $2 billion of gross proceeds and up to $250 million of consolidated debt of subsidiaries that are not wholly owned subsidiaries.

In addition, Harrah's is hoping to get permission from its bank group to repurchase loans at a discount.

And, the amendment would allow the company to agree with individual lenders to extend the maturity of their term loans or revolving commitments in return for increased interest rates or otherwise modified terms.

Harrah's is a Las Vegas-based provider of branded casino entertainment.

Paul Deckelman contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.