Neiman Marcus debt gains strength; Hawker Beechcraft stays firm; GMAC paper ends session mixed

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., June 10 - Traders were seeing "more rally" in the distressed debt arena Wednesday, though the gains were not sector-specific.

In the retailing world, Neiman Marcus Group Inc.'s debt got a boost despite a swing to net loss for the quarter. Word is that the retailer is planning a new credit facility to refinance an existing credit line.

Meanwhile, Hawker Beechcraft Acquisition Co., LLC's bonds remained firm, traders reported. News out Wednesday indicated that the company's parent was looking into purchasing an American International Group Inc. subsidiary.

In the financial realm, GMAC LLC's paper closed the day out mixed. The bank holding company received a rating upgrade, largely due to support from the U.S. government.

Neiman debt gains strength

Neiman Marcus Group's debt headed for higher ground Wednesday, despite a swing to net loss.

Neiman's bonds "pretty much led the retail sector," a trader said, who saw the 9% notes due 2015 gaining 3.5 points to 64, while the 10 3/8% note due 2015 moved up almost 4 points to 64.25.

At another desk, a trader quoted both issues at 63 bid, 64 offered. However, he said the notes hit a high of 66 before settling back in.

"Looks like they went up and then backed off," he said.

One other trader quoted the 10 3/8% notes at 63.5 bid, 65.5 offered.

"Up 2 on the day, were as high at 67-68 and gave some back at the end of the day," he said.

Neiman's term loan was also stronger, according to traders.

The Dallas-based high-end specialty retailer's term loan B was quoted by one trader at 77½ bid, 79 offered, up from 75 bid, 76½ offered, and by a second trader at 78¼ bid, 79¼ offered, up from 76 bid, 78 offered.

For the third quarter of fiscal 2009, Neiman had a net loss of $3.1 million, compared with net earnings of $55.4 million in the third quarter of fiscal 2008.

Operating earnings for the quarter were $50.3 million, compared with $148.6 million in the comparable period last year.

Total revenues for the quarter were $810.1 million, compared with $1.06 billion in the prior year.

And, adjusted EBITDA for the quarter was $105.3 million, compared with EBITDA of $202 million in the third quarter of fiscal 2008.

During the company's conference call, Stacie Shirley, vice president of finance, said Neiman was comfortable with its current level of liquidity - the company had $229 million in cash as of May 2 - and that the focus remained preserving financial flexibility.

"Although we still have a significant amount of work to do, we are pleased with our progress to date," Shirley said.

In more Neiman happenings, information surfaced on Wednesday that the company will be coming to market with a $500 million asset-based revolving credit facility to refinance its existing $600 million asset-based revolver that matures on Oct. 6, 2010, according to a market source.

The new revolver will be launched with a bank meeting on Thursday via Bank of America and Wells Fargo.

Price talk on the revolver is Libor plus 425 basis points with an unused fee that can range from 75 bps to 100 bps based on availability, the source said.

The existing revolver that will be replaced through this new deal has pricing that can only reach a high of Libor plus 175 bps and an unused fee that can range from 25 bps to 37.5 bps.

As of May 2, the company had no borrowings outstanding under its existing asset-based revolver, and had more than $500 million of unused borrowing availability, after giving effect to $30 million used for letters-of-credit.

Among other retailers, Rite Aid Corp.'s bonds were "not as active" as they have been of late, a trader said, but they were seen closing the day firmer.

The trader called the notes anywhere from half a point to three-quarters of a point better, the 9½% notes due 2017 at 67.25 and the 9 3/8% notes due 2015 at 68.25.

The modest gains come after Fitch Ratings affirmed its rating on the drugstore chain, but revised its outlook to stable from negative.

Also, Burlington Coat Factory Warehouse Corp.'s 11 1/8% notes due 2015 were "again up," according to a trader. He saw the notes hitting a new high of 84, compared with levels around 81 to 82 on Tuesday.

"Earlier in the year they were in the 30s," the trader commented.

Hawker remains firm

Hawker Beechcraft's notes continued to fly higher, according to market sources. News reports indicated that one of the aircraft manufacturer's parent companies, Onex Corp., was considering making a bid for an AIG subsidiary.

A market source pegged the 8½% notes due 2015 at 46 bid, a gain of more than 2 points on the day. But another called the paper unchanged, also at 46.

Yet another source placed the 8 7/8% notes due 2015 at 30 bid, 32 offered, up a point on the day.

Hawker's parent company is reportedly making a play for International Lease Finance Corp., the world's largest aircraft leasing company.

GMAC notes mixed on upgrade

GMAC paper ended the session mixed after receiving a rating upgrade from Moody's Investors Service.

One trader pegged the 6 7/8% notes due 2012 at 79 bid, 81 offered, unchanged. Another trader called the 7¾% notes due 2010 up a touch at 98 3/8, while the floating-rate notes coming due June 15 fell half a point to 42.25. The floaters due Nov. 11 were steady at 71.5.

The rating agency upped GMAC's senior unsecured rating to Ca from C, citing the company's support form the U.S. government. However, Moody's said it was reviewing other parts of the company's structure, as concerns remained regarding GMAC's ability to raise additional liquidity, as required by the current bank "stress test."

"Capital inflows, partial government ownership and GMAC's importance to reviving GM and Chrysler point to a lower probability of near-term default," wrote Moody's senior analyst Mark Wasden in a statement. "However, the challenges GMAC faces in executing its business strategy and the resultant uncertainties for bondholders remain a constraint on GMAC's credit."

Casinos mixed, autos better

Elsewhere in the world of distressed debt, Isle of Capri Casinos Inc.'s 7% notes due 2014 gained 3 points to 82.5 bid, 84.5 offered. The gains came after the company released its quarterly earnings.

Also in the gaming sector, a trader said MGM Mirage's subordinated paper, like the 8 3/8% notes due 2011 fell a point to the 85.5 to 86 range, "leaving them offered."

In the autosphere, General Motors Corp.'s 8 3/8% notes due 2033 inched up to 11.5 bid, 12.5 offered, while Ford Motor Co.'s 7.45% notes due 2031 improved by a point to 69 bid, 71 offered.

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