General Growth boosted by Simon bid; Lyondell settlement helps CAM; Realogy higher on numbers

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Feb. 16 - General Growth Properties Inc. dominated distressed debt trading on Tuesday, according to market sources.

The surge in activity came as Simon Property Group proved the chatter right and made a bid for the bankrupt shopping mall operator. The news gave Chicago-based company's bonds at least a 4-point boost.

Meanwhile, chemical maker LyondellBasell Industries announced that it had settled a lawsuit regarding its 2007 leveraged buyout. That helped push the company's pre-petition CAM upward, though the bonds seemed little fazed.

Realogy Corp. came out with its fourth-quarter earnings Tuesday. The company's narrower net loss resulted in some improvement in its bank and corporate debt.

Overall, traders said the day was "pretty light" in terms of volume, "with a few exceptions," in the words of one trader. Another noted that total turnover was just over $1 billion.

"The market was a little off its lows," the first trader said. "But there's not much follow-through."

GGP boosted by Simon bid

General Growth Properties' bonds jumped in trading, as rival Simon Property Group made a $10 billion offer for the bankrupt shopping mall operator.

A trader called the name the day's "volume leader," seeing the 8% notes that were to have matured in 2009 at 109 bid, 109¾ offered. He also saw the 5 3/8% notes due 2013 trading around the 105 mark.

"This has been working its way into the market for a while," the trader said, noting that Simon had been "threatening" to make an offer for the company for some time.

"It's a lot of money," he added regarding the price of the proposed takeover. "[Simon] seems to be buying everything."

At another desk, a source called General Growth's debt up "4 and change" across the board, pegging the 5 3/8% notes around 1051/4, while the 8% notes ended around 109.

"I think they touched 111 at one point, but it was for a small trade," the source said.

He also saw the 7.20% notes due 2012 closing around 110.

Still, the source said he thought the bonds did not have "as big a showing as I would have thought," given that the stock trading volume was nearly "10 times the normal amount."

In a letter dated Feb. 8, Simon Property proposed the deal to Glenn Rufrano, lead director, and Adam Metz, chief executive officer. The letter was also sent to members of the company's unsecured creditors committee.

"We are prepared to acquire General Growth Properties, Inc. in an all-cash transaction which will result in a favorable outcome for all of GGP's creditors and shareholders, and a prompt conclusion to GGP's reorganization proceedings," the letter said.

Simon would give a full cash recovery to unsecured creditors, trust preferred holds, credit facility lenders and holders of the 3.98% exchangeable senior notes due 2027. Stockholders would meanwhile get $6.00 per share in cash.

"We believe the current trading value of GGP's common already includes a takeover premium, and given its high percentage of insider ownership and the fact that the stock trades in an over-the-counter securities market, reflects a price that cannot be realized in a stand alone reorganization," Simon said in the letter.

"We are convinced that a transaction with Simon is superior to any proposal you may be contemplating. We trust that when considering our proposal, you will take into account the many benefits of having GGP's equity holders receive full and fair compensation for their interest versus the uncertain value in any other scenario. The fact that the proposal is all cash and pays unsecured creditors in full will bring certainty to the reorganization process and accelerate its completion which will have the added benefit of eliminating GGP's significant bankruptcy related expenses."

Simon also noted in its letter that the proposal was not "open-ended."

Late in the day, GGP issued a response to the unsolicited bid, in which the company said that it "concluded based on discussions with other interested parties that it is not sufficient to preempt the process we are undertaking to explore all avenues to emerge from Chapter 11 and maximize value for all the company's stakeholders."

Lyondell settlement helps CAM

LyondellBasell's pre-petition CAM finished the session better as the company revealed that it had reached an agreement with the unsecured creditor's committee regarding the settlement of claims against the parties who financed the 2007 leveraged buyout of Lyondell by Basell, according to traders.

As a result of the agreement, the company expects that it will be able to complete approval of its disclosure statement and plan of reorganization soon.

However, the proposed agreement with the creditors is still subject to court approval, final internal approval and final documentation.

Following the news, LyondellBasell's CAM was quoted by one trader at 67½ bid, 68¼ offered, up from 65½ bid, 66½ offered, and by a second trader at 66 bid, 68 offered, up from 65½ bid, 67½ offered.

In the bonds, a market source said there was "a little bit" going on, "just people asking." He saw the 7 5/8% notes due 2026 trade around 20.

Under the proposed agreement, LyondellBasell will distribute $450 million to the holders of general unsecured claims, the millennium bonds and 2015 notes, up from $300 million.

The additional $150 million will be paid in the form of reorganized equity, which will be funded by a reduction in distributions to the holders of senior secured credit facility and bridge loan claims.

The unsecured creditor's committee, substantial holders of the company's senior debt and bridge debt and the 2015 notes trustee have all agreed to support the proposed plan.

LyondellBasell is a Netherlands-based polymers, petrochemicals and fuels companies.

Realogy debt gains on numbers

Realogy's strip of term loan and letter of credit facility debt gained some ground in trading after the company came out with fourth-quarter results, according to a trader.

The strip of bank debt was quoted at 87 bid, 89 offered, up from 86¾ bid, 88¾ offered, the trader said.

The bonds were also better, according to a market source.

The source saw the 10½% notes due 2014 trade up at least 2 points to 82 bid, 82½ offered, in active trading. The 12 3/8% notes due 2015 finished about a point better at 64 bid, 65 offered.

For the fourth quarter, Realogy reported a net loss of $46 million, versus a net loss of $1.703 billion in the prior year. The loss before income taxes and minority interest for the fourth quarter of 2008 included an impairment charge of $1.789 billion.

Revenues for the quarter were $1.048 billion, compared with $944 million in the fourth quarter of 2008.

Realogy's EBITDA for the fourth quarter was $89 million, or $104 million before restructuring and other items. This was an increase of $70 million year over year, which the company said was primarily a result of executed cost efficiencies.

"The macroeconomic challenges of the past two years have been unprecedented, and our business model has proven its resiliency throughout," said Richard A. Smith, president and chief executive officer, in a news release.

"EBITDA before restructuring and other items has remained essentially flat during 2008 and 2009 despite substantial revenue declines we have experienced since 2007. The resulting increased efficiency of our operations has positioned us to outperform when the recovery occurs," Smith added.

Realogy also pointed out in its earnings release on Tuesday that, as of Dec. 31, 2009, its senior secured leverage ratio was 4.66 to 1, which is below the 5.0 to 1 maximum ratio required to be in compliance with its credit facility.

The company's senior secured net debt at year-end was $2.89 billion.

In addition, as of Dec. 31, 2009, the company had $219 million of readily available cash and no outstanding balance on its revolving credit facility.

Realogy is a Parsippany, N.J.-based provider of real estate and relocation services.

Broad market mixed

Elsewhere in the world of distressed debt, Catalyst Paper Corp.'s 8 5/8% notes due 2011 were unchanged and on the quiet side, sources reported, even as the company extended its tender offer yet again.

One source quoted the issue at 84½ bid, 85 offered, while another placed the debt at 85.

A trader said there were "a few trades" in Harrah's Entertainment Inc.'s 10% notes due 2018 at 74½ bid, 75 offered.

With the bonds ending a little better, the trader said he didn't think the gain was "much more than a market move or something trading off the bottom."

Also, a market source opined that iStar Financial Inc.'s release of its quarterly results on Wednesday could attract some investor attention. The results will be released before the market opens and a conference call will be held at 10 a.m. ET.

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