R.H. Donnelley jumps on exit news; GM dips on profit taking; AIG steady to slightly stronger

By Stephanie N. Rotondo

Portland, Ore., Jan. 12 - Tuesday saw the distressed debt market giving back some of the gains it had incurred over its most recent run-up, according to traders.

"There was a little bit of a pullback from where some of the stuff had been," a trader said.

"The general tone was weaker," said another. "You saw profit taking on a number of things."

"The market has roared so much," the first trader added. "I think the perspective is, people still think it has room to run, so nobody is dumping. But every once in a while, you need a little bit of a breather. I think that is what this was."

Still, R.H. Donnelley Corp. managed to be the day's "big outlier," as it was up significantly in an otherwise negative marketplace. Traders reported seeing the company's bonds gain as much as 14 points on the day, as it was learned that a bankruptcy judge had approved its plan of reorganization.

Meanwhile, General Motors Corp.'s paper was either steady to lower, depending on whom you talked to. However, the bonds did not trade as actively as they had in recent sessions.

American International Group Inc.'s bonds were also dubbed a busy one, though the insurance giant's debt was seen largely unchanged.

Donnelley jumps on exit news

R.H. Donnelley won the day's big mover award, gaining as much as 14 points on the day as the company's reorganization plan was confirmed.

A trader called the credit "definitely the busy one," seeing the bonds moving up 5 to 10 points on the day.

"I think people are trying to figure out where some of these fit in, as they don't all trade together," he said, placing the 8½% notes due 2010 - issued under Donnelley's Dex Media West LLC subsidiary - around 120. He also saw the 11¾% notes due 2015 hit 113 bid, 114 offered.

Another trader said there was "a decent amount of action" in the bonds, placing subordinated issues - such as the 6 7/8% notes due 2013 and the 8 7/8% notes due 2016 - at 13 bid, 13.25 offered, up from levels around 12.5.

"That paper was way up," said a source at another desk. He pegged the 11¾% notes at "115-ish," a 12- to 14-point gain. The 8½% notes meantime "moved way up" to hit a high around 132, compared with 118 bid, 119 offered previously.

The Cary, N.C.-based phonebook publisher received confirmation of its reorganization plan Tuesday, after receiving more than 96% approval from the company's creditors. Donnelley hopes to emerge from bankruptcy protections by the end of the month.

"We are very pleased with the court's decision, which clears the way for us to complete our balance sheet restructuring in the next few weeks," said David C. Swanson, chairman and chief executive officer, in a press release announcing the news. "The plan confirmed today allows us to reduce our debt by more than $6 billion and emerge with a more manageable capital structure and a stronger financial foundation.

"I'd like to thank all of our employees and advisors for their hard work and commitment during this process," Swanson continued. "Through their collective efforts, R.H. Donnelley will become a stronger entity, better positioned to helping local businesses address their marketing needs."

According to the terms of the plan, the company will reduce its overall debt by $6.4 billion and total cash interest expense will be reduced by approximately $500 million annually.

Also, approximately $6 billion in unsecured bonds and $300 million in unsecured notes will be exchanged for nearly 100% of new equity in the reorganized company. Existing equity will be eliminated.

GM dips on profit taking

General Motors' debt was seen unchanged to down a point, the latter blamed on profit taking.

One trader said there were only "tiny trades" in the automaker, placing the benchmark 8 3/8% notes due 2033 around 29 and the 7.2% notes due 2011 around 28.

Another trader said the 8 3/8% notes were "about the same" around 28 on "not a ton" of trading.

But another trader deemed the benchmark bonds down a point at 28.

On Tuesday, the "old" GM reported an improved operating loss for the month of November. The company posted a $10.94 million loss on $1.81 million in rental income.

Net income came to $2.467 billion, compared with $1.055 billion in October.

AIG steady to slightly stronger

American International Group's bonds "continues to be a little bit busier," according to a trader.

The trader said "$30-odd million" of the 5 5/8% notes due 2013 traded unchanged at 84.5 bid, 84.75 offered.

Another trader called the 4 7/8% notes due 2012 "maybe just a touch better" with an 86 handle, while the 4% notes due 2011 - deemed the day's "most active one" under the AIG umbrella - were "unchanged to maybe up a little" at "93 and change."

Elsewhere in the financial realm, CIT Group Inc.'s 7% notes due 2016 were "probably down a point," according to a trader, "straddling 89."

Spansion launches term loan

Spansion Inc. held a bank meeting on Tuesday morning in New York to launch its $450 million five-year term loan, and in connection with the launch, price talk was announced, according to a market source.

The term loan was presented to lenders with talk of Libor plus 550 basis points with a 2.5% Libor floor, and an original issue discount in the 98 area, the source said.

In addition, the term loan carries 101 soft call protection for one year.

Barclays and Morgan Stanley are the lead banks on Spansion's exit financing term loan and are asking that lenders place their orders by Jan. 22.

Also as part of the exit financing package, the company will be getting a new $65 million asset-backed loan revolver with different banks leading this part of the transaction.

Total leverage is less than 2.0 times.

Spansion is a Sunnyvale, Calif.-based maker of flash memory products.

Broad market mixed

Also seen in the distressed debt market were Energy Future Holdings Corp.'s 11¼% notes due 2017, which ended around 75, according to a market source.

The trader also saw Vitro Sociedad Anonima Commanditaire Vennootshap's 9 1/8% notes due 2017 firm by about 3 points to close around 49.

NewPage Corp.'s 10% notes due 2012 slipped to 81 bid, 82 offered from around 83 on Monday, another trader said.

Hexion Specialty Chemicals Inc.'s 9¾% notes due 2014 meanwhile firmed on news the company had received commitments for a revolver and was also looking to amend its facilities to allow for extended maturities and the issuance of new debt. A trader said the paper "ticked up" to 101½ bid, 102 offered, compared to levels around par previously.

Sara Rosenberg contributed to this article.

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