By Stephanie N. Rotondo
Portland, Ore., Jan. 25 - The distressed debt market continued to feel "slightly weaker overall" on Monday, according to a trader.
"It seemed very light," he added regarding the day's total turnover.
International Lease Finance Corp., a unit of American International group Inc., saw its bonds fall by as much as 3 points on the day following a credit rating revision. The downgrade was due in part to concerns about AIG's ability to sell off the unit and the hefty amount of debt linked to it that matures this year.
Meanwhile, Blockbuster Inc.'s bonds continued to come under pressure. The bonds have lost more than half their value since last week when the company lowered its EBITDA guidance for 2009.
General Motors Corp. was another active name, sources reported, and the bonds were either steady or better, depending on whom you asked. The company announced Monday that its current interim chief executive had been asked to stay on permanently.
ILFC downgraded, bonds slip
A trader said American International Group's International Lease Finance bonds were "weaker by 2 to 3 points after the downgrade," pointing to a rating revision from Standard & Poor's.
The trader quoted the 5.30% notes due 2012 at 83 bid, 84 offered, down from 86 bid, 87 offered. He also saw the 5.45% notes due 2011 around 92, compared to 93½ bid, 94 offered last week.
Another source also deemed the paper down 2 to 3 points on the day, the 5.55% notes due 2012 at 81 bid, 82 offered and the 5.65% notes due 2014 at 76 bid, 77 offered.
ILFC, the aircraft leasing division of the New York-based insurance giant, saw its credit rating cut to BBB- from BBB+ by S&P. The agency attributed its decision to the belief that it could take "several years" to sell off the unit.
"We believe that parent AIG is no longer actively marketing ILFC for sale in its entirety, and may now plan to pursue a sale when the aviation and capital markets have improved," S&P said in a statement. "This could take several years."
In early January, AIG reportedly received an unsolicited bid for the unit, valued somewhere around $12 billion. However, AIG never commented on the offer and it is unknown if that bid has been rejected or not.
ILFC currently has more than $4 billion in debt that will come due by September of 2010.
Blockbuster bonds going bust
Blockbuster's 9% notes due 2011 were "the main bond again," a trader said, continuing the trend that began last week.
The trader said the bonds got "all the way down" to around 22, which he deemed "down another couple of points."
Another trader placed the issue at 22½ bid, 23 offered, compared with levels around 25 on Friday. The trader also saw the 11¾% notes due 2013 at 70 bid, 71 offered, versus 73 previously.
Early last week, Blockbuster released preliminary projections regarding its 2009 results. The initial figures came in less than had been expected, which the Dallas-based movie rental chain blamed on weaker-than-expected holiday sales.
The lower estimates concerned market players and the bonds quickly lost nearly 30 points in one trading session. Since then, the bonds have been on the decline.
"Blockbuster bonds got busted last week when the company slashed its EBITDA guidance - the price of the subordinated debt was cut by more than half from 62 to below 30 and the secured debt fell below 80," wrote Gimme Credit analyst Kim Noland in a morning report to clients. "Not only does the poor performance cause an immediate deterioration in credit measures, it fuels our continuing concern that the company's in-store business model can't survive the tough competitive landscape."
"Given the secular decline in price of the company's product and continuing competitive inroads into its business, we see little value for the subdebt in a downside restructuring scenario and recommend its sale," she added.
GM active on CEO news
General Motors' debt was among the day's more active credits, as the Detroit carmaker announced that Edward E. Whitacre Jr. will remain the company's chief executive.
One trader said the benchmark 8 3/8% notes due 2033 traded actively, but still unchanged at 26 bid, 27 offered.
However, another said the bonds improved some by afternoon. He saw the notes open around 26½ and end the day with a 27 handle.
Whitacre took over the CEO post after Fritz Henderson was ousted last summer amid a restructuring effort that landed the company in bankruptcy.
"The board of directors asked if I would be willing to stay on at GM and help continue the company's road back to success," Whitacre said in a prepared statement. "Having spent the past few months learning the business, meeting with our employees, customers, suppliers and dealers, and working with the GM leadership team, I was both honored and pleased to accept this role. This is a great company with an even greater future, and I want to be part of it.
Whitacre also noted that GM was focused on repaying the bailout funds it received from the U.S., Canadian and Ontario governments by June of this year.
"We've made significant progress in the past couple of months, so much so that I can confirm with certainty that we will pay back in full the U.S. Treasury and Canadian and Ontario government loans by June," Whitacre said. "This represents a significant milestone in our journey back to being a profitable and viable company."
Chemtura revises DIP pricing
Chemtura Corp. reduced pricing on its $450 million debtor-in-possession financing credit facility and tightened the original issue discount on the term loan, according to a market source.
The $150 million revolver and the $300 million term loan are now priced at Libor plus 400 basis points, down from initial talk of Libor plus 425 bps, with the 2% Libor floor left unchanged, the source said.
| And, the original issue discount on the term loan was reduced to | 99½ | from | 99, the source continued.
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| Citigroup is the lead bank on the deal.
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| Chemtura is a Middlebury, Conn.-based manufacturer and seller of specialty chemicals and polymer products.
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| Broad market unchanged, weaker
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| Also in distressed territory, a trader said Clear Channel Communications Inc.'s 11% notes due 2016 ended around 62.
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| "I don't think that's much changed," he said.
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| The trader also saw Sabine Pass LNG LP's 7½% notes due 2016 steady at 88.
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| General Growth Properties Inc.'s 8% notes that were to have matured last year were also seen unchanged, even as the company announced it had completed a $9.4 billion restructuring of mortgage notes. The trader pegged the paper at 1051/2.
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| Sara Rosenberg contributed to this article.
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