Cooper bonds zigzag, end softer; Six Flags debt holds on to gain; Lyondell loan oversubscribed

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., March 22 - The distressed bond market ended Monday's session largely mixed, as new issues remained the focus.

"New issues are coming again, which is not going to help [the distressed market] much," a trader said.

The trader noted that total volume in the secondary world hit "just over $1 billion. That's not too good and it's skewed because of the new issues."

Away from new issues, Cooper-Standard Automotive Inc. was the distressed nom du jour. The company filed an amended plan of reorganization, which lowered the recovery senior noteholders would receive. As a result, the senior bonds traded off.

The subordinated bonds - in which the bulk of trading occurred - meantime zigzagged throughout the session, but still ended softer than levels seen last week.

Elsewhere, Six Flags Inc.'s bonds held their ground during Monday trading. The bonds had gained as much as 7 points on Friday following news of a new bankruptcy plan.

Also, market sources reported that Lyondell Chemical Co.'s new term loan, which launched last week, was already oversubscribed.

Cooper zigzags, ends softer

Cooper-Standard Automotive bonds gyrated through the session, following the filing of the company's amended plan of reorganization.

A market source said there was "a bunch of trading" in the 8 3/8% subordinated notes due 2014. They "ran up after the plan came out," he said, "4 or 5 points right out of the shoot." However, later in the day, the issue "got pummeled," dropping from levels in the high-60s to end at 61 bid, 62 offered.

The source also saw the 7% notes senior notes ending around 108 from levels around 115 previously.

"They opened up lower right away," he said. "They were definitely softer because they are worth less [in the new plan]."

At another desk, a source saw the sub-notes open higher around 75, then slip into the high-60s. By the end of business, the source saw the bonds quoted at 62 bid, 63 offered, versus 66½ bid, 67 offered Friday.

The source meantime pegged the senior paper at 108 bid, 109 offered, down from 113 bid, 114 offered.

Amended reorganization plan

The Novi, Mich.-based automotive parts supplier filed an amended plan of reorganization on Monday. Under the terms of the plan, bondholders agreed to commit up to $355 million in equity to the new company. The proceeds form the investment would be used for the sale of new common and preferred shares, as well as warrants. The company could also use the funds to backstop a rights offering for senior subordinated noteholders.

"The proposed $355 million equity investment is a strong vote of confidence in Cooper Standard and significantly improves the recoveries to the company's stakeholders over those of the original plan," said James S. McElya, chairman and chief executive officer, in a press release. "The company is now positioned to emerge from bankruptcy in the near term on a consensual basis with a strong balance sheet while maintaining our leadership position in the industry."

Additionally, senior noteholders will receive principal plus accrued for their debt. Bondholders were originally slated to receive 18.75% of the new equity in the reorganized company.

Holders of the sub-debt, however, will receive 8% of new equity, along with warrants for another 3% of stock. Under the original plan, subordinated noteholders would have received only 6.25% of stock, and warrants for another 5% of common shares.

Cooper intends to exit bankruptcy with about $480 million in debt still on its books. That is a reduction of more than $650 million.

Six bonds hold on to gains

Six Flags' debt was maintaining levels seen Friday after the company announced it had agreed to a bankruptcy exit proposal created by a group of bondholders.

The New York-based amusement park operator's bonds had jumped 6 to 7 points on the news, and held at those levels during Monday trading.

"People are all sniffing about for it," a trader said of Six Flags' bonds. He placed the bonds generically at 35 bid, 36 offered.

Another trader said there was "some trading" in the name, "still in the mid-30s."

On Friday, the New York-based amusement park operator said it had agreed to a proposal in which a Stark Investments-led group of bondholders would get control of the company post-bankruptcy.

According to the terms of the deal, the Stark group will invest $725 million in new equity. Bondholders also plan to borrow $1.1 billion to pay off creditors and provide working capital.

Current management will receive warrants and options for up to 15% of the new equity in the reorganized company. The Stark group will get the remaining 85%.

The Stark plan will negate a previous plan filed with the court. That plan - led by Avenue Capital Group - would have given control over to ACG in exchange for about $420 million in debt.

The new plan still allows for ACG to be paid in full.

A hearing on the new plan is scheduled for April 16.

Lyondell loan oversubscribed

Lyondell Chemical's $1 billion six-year senior secured term loan B (Ba3) has received so much interest since launching at the start of last week that it is already oversubscribed, according to a market source.

Price talk on the term loan B is in the Libor plus 425 bps area with a 2% Libor floor and an original issue discount that is still to be determined.

Covenants under the term loan B include a maximum first-lien leverage ratio and a minimum interest coverage ratio.

UBS, Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, JPMorgan, Morgan Stanley and Wells Fargo are the joint bookrunners on the term loan B, and they are asking for commitments by late this week.

Proceeds from Lyondell's credit facility, $2.25 billion of 71/2-year senior secured notes, a new European securitization facility and a $2.8 billion rights offering will be used to repay and replace existing debt, including the company's debtor-in-possession facilities and an existing European securitization facility and to make related payments, when the company exits bankruptcy.

The $2.75 billion credit facility also includes a $1.75 billion ABL revolver that is being talked at Libor plus 375 bps with a 2% Libor floor.

Citigroup is the left lead on the ABL revolver.

The confirmation hearing on the company's plan of reorganization will begin on April 23.

Lyondell is a U.S. subsidiary of LyondellBasell Industries AF SCA, a Netherlands-based polymer, petrochemicals and fuels company.

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