Vought active on Triumph news; Rite Aid debt ends mixed; Lyondell Chemical alters loan, bonds

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., March 23 - Despite a glut of cash in the market, the distressed debt arena ended with a firm tone, traders reported on Tuesday.

"The [distressed] market was better as the equities got better," a trader said. "Money got spent, mostly toward the offer side."

However, the trader also noted that "there's too much cash around...[and] too few places to put your money to get a return on it."

Some cash got spent on Vought Aircraft Industries Inc.'s bonds, however. The company announced it had agreed to be bought by Triumph Group Inc. for nearly $1.5 billion in cash and stock. The bonds responded by trading actively and somewhat better.

Meanwhile, Rite Aid Corp.'s notes finished the session mixed, according to market sources. The company is expected to release quarterly results next week.

And the market learned that Lyondell Chemical Co. had downsized its new term loan and upsized a planned bond offering. On Monday, market players told Prospect News that the new loan was oversubscribed, but come Tuesday, it seemed the company wanted more "fixed-rate" debt.

Vought active on Triumph news

Vought Aircraft Industries announced that it had inked an agreement with Triumph Group Inc. to be acquired in a cash-and-stock transaction valued at $1.44 billion.

As a result of the news, the company's bonds traded actively and better.

A trader said that the 8% notes due 2011 saw a "reasonably busy day for a bond that doesn't trade that active." He quoted the bonds at 100¼ bid, 100½ offered, up slightly.

Another source pegged the issue at par bid, 101 offered.

According to the terms of the deal, Triumph will buy Dallas-based Vought from the Carlyle Group. The purchase price includes the retirement of some of Vought's debt.

"Our announced combination with Triumph is an exciting development for Vought," said Elmer Doty, president and chief executive officer, in a press release. "The resulting publicly traded company will possess the scale and resources to confidently address the opportunities and challenges of today's aerospace market."

The new company will operate as Triumph Aerostructures -Vought Aircraft Division, LLC. Upon closing, Carlyle is expected to own 31% of Triumph's outstanding equity.

The deal is expected to be completed sometime in July.

Following the news, Standard & Poor's placed Vought's ratings on positive watch.

In related names, Hawker Beechcraft Acquisition Co. LLC's 8½% notes due 2015 inched up half a point to 781/2, according to a source.

Rite Aid bonds mixed

Traders gave mixed reports on Rite Aid's debt during Tuesday trading.

One trader said that, while the "rest of the bonds were up" some, the 9½% notes due 2017 "look lower," at 833/4.

The trader also saw the 8 5/8% notes due 2015 around 85 - which he deemed unchanged - and the 7½% notes due 2017 at 94.

Another source, however, saw the 8 5/8% notes slipping half a point to around 85.

At another desk, a trader said the 8 5/8% notes improved from opening levels, ending at 85 bid, 85½ offered, versus opening levels of 84½ bid, 85 offered. He also saw the 9½% notes gaining about a point to close at 84 bid, 84½ offered.

According to Rite Aid's web site, the Camp Hill, Pa.-based pharmacy chain plans to release its March sales report, as well as its fourth-quarter results, next Wednesday.

Lyondell alters loan, bonds

Lyondell Chemical revised its six-year senior secured term loan B (Ba3) by reducing the size and eliminating the financial covenants, according to a market source.

The term loan B was cut to $500 million from $1 billion and the covenants that were removed include a maximum first-lien leverage ratio and a minimum interest coverage ratio.

In addition, the original issue discount on the term loan B was set at 99, whereas before it was simply labeled as still to be determined, the source said.

Pricing on the term loan B was left unchanged at Libor plus 425 basis points with a 2% Libor floor.

Commitments toward the term loan B are due on Wednesday at 4 p.m. ET.

As before, Lyondell is also getting a $1.75 billion ABL revolver that is talked at Libor plus 375 bps with a 2% Libor floor.

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, with UBS the left lead. Citigroup is the left lead on the ABL revolver.

Upsizing notes offering

Proceeds from the now $2.25 billion - down from $2.75 billion - credit facility, plus new 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.

One market source told Prospect News that the term loan B size was reduced because the company wanted to go for more bonds.

"They were talking about cutting it all the way to zero because they wanted more fixed-rate stuff," the source added about the term loan B.

Following the term loan B downsizing, the company's 71/2-year senior secured euro and U.S. dollar notes offering was increased to $2.75 billion from $2.25 billion, a second source added.

In the company's existing bonds, a trader called the 8.1% notes "about unchanged from yesterday" at 90 bid, 91 offered.

Another source deemed the 10¼% notes due 2010 "up a couple of points" at 87 bid, 88 offered.

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

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