Hovnanian steady despite weak builder report; Caesars active, softer; Travelport loan gains

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Sept. 19 - Distressed debt traded down slightly in sympathy with the equity markets, but overall volume was muted.

One trader said that just $763 million worth of bonds traded in the secondary space - which includes both distressed and high yield.

"It looks like everybody tried to move things down," he said, noting that there were more buyers than sellers, making it even more difficult to get anything done.

"It's very quiet on the distressed side," said another seasoned veteran of the distressed debt world, adding that there are "not a lot of interesting plays."

Additionally, he said that the lack of action in the distressed realm was also due to the fact that distressed supply has already been "picked over."

Of the day's goings-on, Hovnanian Enterprises Inc.'s notes were holding their ground despite a new report that showed homebuilder sentiment on the decline.

Caesars Entertainment Corp.'s bonds remained active but weakened with the rest of the market.

Perhaps the bigger news of the day was Travelport Ltd. The company announced that it launched an amendment to its credit facility that would allow it to restructure some of its other debt. The news gave the bank debt a boost, but not so much in the bonds.

Hovnanian holds steady

A trader said Hovnanian's 10 5/8% notes due 2016 were "quoted the same" as they were on Friday at 85 bid, 86 offered.

Another market source called the notes down 1½ points at 85½ bid.

On Wednesday, the National Association of Home Builders said its NAHB/Wells Fargo Housing Market index had slipped a point to 14 in September.

"Very little has changed in terms of housing market conditions so far this year," NAHB chairman Bob Nielsen said in a statement. "Builders continue to confront the same challenges in accessing construction credit, obtaining accurate appraisal values for new homes and competing against foreclosed properties that they have seen for some time."

Hovnanian is a Red Bank, N.J.-based homebuilder.

Caesars slides

Caesars Entertainment's 10% notes due 2018 experienced "good volume" in an otherwise subdued day, according to a trader.

Still, he saw the paper slide "almost a point" to 71 7/8.

Another market source placed the issue at 72 bid, down half a point.

There was no fresh news out on the Las Vegas-based casino operator.

Travelport amends loan

Travelport's extended U.S. institutional bank debt was better on Monday as the company launched an amendment to its senior secured credit facility to facilitate the restructuring of Travelport Holdings Ltd.'s roughly $715 million unsecured PIK term loan due March 27, 2012, and the PIK loan posted positive returns in trading as well, according to traders.

The strip of extended U.S. institutional bank debt was quoted by traders at 92 bid, 93 offered, up from 90 bid, 91 offered, while the PIK loan was seen at 60 bid, 65 offered, up from 45 bid, 50 offered.

But while the bank debt was faring better, the 9 7/8% notes due 2014 were treading water, according to a trader. He said the bonds were moderately active, trading between 79 and 81.

"They were up as high as 81," he said, but then the notes fell to 79, about unchanged from Friday levels.

Under the amendment, the company would be allowed to get a new $342.5 million second-lien loan, the current accordion feature would be terminated, the total leverage ratio would be increased and a first-lien leverage ratio would be added.

The amendment would also add a minimum liquidity requirement, revise restricted payments capacity and the general basket for investments, increase the excess cash flow sweeps and provide additional collateral.

Travelport's new second-lien term loan due Dec. 1, 2016 would be priced at Libor plus 600 basis points PIK toggle, with the condition that if first-lien leverage is greater than or equal to 3.0 times, cash interest cannot be paid.

Of the total second-lien loan amount, $207.5 million would be issued in exchange for PIK debt and $135 million would be used to guarantee a $135 million PIK tranche that would be extended to Sept. 30, 2012 at pricing of Libor plus 600 bps PIK.

The company would push out the maturity on another $287.5 million of the outstanding PIK debt to Dec. 1, 2016 at pricing of Libor plus 1,350 bps PIK.

Also, PIK lenders are being offered an $85 million pro rata cash repayment and equity of the parent company equal to 15%, which may increase over time to a maximum of 44% if the PIK loans are not repaid or a refinancing transaction has not been announced.

In addition to permitting the restructuring, Travelport's amendment would extend its revolver to April 28, 2014 from Aug. 23, 2012 at pricing of Libor plus 450 bps, an increase of 175 bps over current pricing, with a 75 bps unused fee, up from 50 bps.

As part of the extension, the company would voluntarily reduce revolver commitments by 20%, subject to a minimum extension of 50% of the facility.

Extended revolver consents are due by 5 p.m. ET on Sept. 28, while amendment consents are due by 3 p.m. ET on Sept. 23.

Revolver lenders are being offered a 200 bps amendment fee, plus an additional 200 bps if they extend their commitments. Term loan and non-extended synthetic letter-of-credit facility lenders are being offered a 400 bps fee.

Credit Suisse Securities (USA) LLC and UBS Securities LLC are leading the amendment.

Travelport also said on Monday that, along with this solicitation process, it is asking for consents on a consensual plan of reorganization, which would require less approvals from PIK loan lenders than the unanimous approval rate need for the proposed restructuring.

If the restructuring does not pass, Travelport Holdings plans to proceed with a consensual plan of reorganization through a Chapter 11 filing. Travelport Ltd. would not be a party to the plan.

Pro forma for the proposed out-of-court restructuring, net leverage would be 6.7 times, gross leverage would be 7.2 times, total secured leverage would be 3.3 times and total first-lien term loan leverage would be 2.7 times.

Travelport is an Atlanta-based provider of transaction processing services to the travel industry.

NewPage DIP loan in demand

NewPage Corp.'s $250 million debtor-in-possession second-out term loan has seen a lot of demand, and, as a result, pricing was reduced on Monday morning to Libor plus 650 bps from Libor plus 700 bps. Lenders had until the close of business to provide recommitments, according to a market source.

As before, the loan includes a 1.5% Libor floor and an original issue discount of 99.

Talk that the deal is going well has been around since launch based on the fact that at the bank meeting, price talk came out lower than expected. Prior to launch, talk on the loan had been circulating at Libor plus 750 bps with a 1.5% Libor floor and a discount that was still to be determined.

The company's $600 million 18-month debtor-in-possession facility also includes a $350 million first-out ABL revolver that is priced in line with talk at Libor plus 325 bps with no Libor floor.

J.P. Morgan Securities LLC and Barclays Capital Inc. are the lead banks on the term loan and the revolver. Wells Fargo Securities LLC is a lead on the revolver as well.

Proceeds from NewPage's DIP deal will be used to repay outstanding revolver debt and for general corporate purposes during the company's Chapter 11 process.

The company announced its bankruptcy filing early this month, saying that the goal is to facilitate a debt restructuring and position the overall business for long-term success.

Investors weren't exactly surprised by the bankruptcy news because the company had already warned that the step could have to be taken back in mid-August. At that time, it was revealed in a filing with the Securities and Exchange Commission that there are issues with the maturity of the company's revolver due to its floating-rate and 10% second-lien senior secured notes not being refinanced.

NewPage is a Miamisburg, Ohio-based producer of printing and specialty papers.

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