Lear rises with earnings; GM rallies; MGM Mirage dips on pressure; Warner Music strengthens

By Sara Rosenberg

New York, May 14 - Lear Corp.'s term loan had a pretty nice run up during Thursday's market hours after quarterly results were announced, even though those results showed an increase in net loss and a decrease in net sales.

Also in trading, General Motors Corp.'s term loan jumped higher on no specific news, MGM Mirage's term loan slipped lower as there was some profit taking after the previous day's rally, Warner Music Group Corp.'s term loan was better with an amendment proposal and the LCDX 12 index softened.

Lear loan heads higher

Lear's term loan gained a few of points in the secondary market after earnings came out, despite the results looking pretty negative, according to traders.

The term loan was quoted by one trader at 60½ bid, 62½ offered, up from Wednesday's levels of 58½ bid, 60½ offered, and by a second trader at 59½ bid, 61½ offered, up from previous levels of 53¼ bid, 55¼ offered. The first trader remarked that he saw the loan in that 53 to 55 context on Tuesday, but that it started moving up from there on Wednesday.

For the first quarter, Lear reported net loss of $264.8 million, or $3.42 per share, compared with net income of $78.2 million, or $1.00 per share, in the same period last year.

Net sales for the quarter were $2.2 billion, down 44% from $3.9 billion in the first quarter of 2008.

And, cash flow was negative $219 million for the quarter, compared with free cash flow of negative $21.2 million last year.

Lear cash declines

Lear also said on Thursday that as of April 4, cash and cash equivalents were about $1.2 billion, down from about $1.6 billion as of Dec. 31.

According to the company, the decline in cash reflects negative free cash flow in the first quarter, as well as the termination of its accounts receivable factoring facility in Europe.

"Given the adverse economic conditions and dramatic slowdown in automotive demand at the end of last year, many of our major customers had extended plant shutdowns in the first quarter," said Bob Rossiter, chairman, chief executive officer and president, in a news release.

"As a result, production was down sharply in North America and Europe. In this difficult environment, we are minimizing our operating costs and accelerating our restructuring efforts," Rossiter added.

Lear waiver stops interest payment

In addition, along with its 10-Q on Thursday, Lear filed its recently completed waiver extension agreement, which outlined that the company can not make interest payments on its bonds during the waiver period.

The waiver is in effect through June 30, and it covers existing defaults and extends the amendment of financial covenants.

The agreement also expands the company's ability to participate in the U.S. Department of Treasury's automotive supplier support programs.

JPMorgan is the administrative agent on the credit facility.

As previously reported, the company remains in active discussions with lenders regarding further modifications to the facility in light of existing and projected industry conditions.

Lear is a Southfield, Mich.-based supplier of automotive seating systems, electrical distribution systems and electronic products.

GM skyrockets

General Motors' term loan saw a big rise in levels during the afternoon, although traders were stumped as to what was pushing the paper higher.

One trader was quoting the term loan at 66 bid, 68 offered, up from 58½ bid, 60½ offered and another trader was quoting it earlier in the day at 62 bid, 64 offered, up from 59 bid, 61 offered.

The second trader was also quoting the revolver higher at 57 ½ bid, compared to 54 bid in the morning.

"Had a couple of people try to come in and buy the term loan and revolver. Don't know why," the second trader added.

General Motors is a Detroit-based automotive company.

MGM Mirage softens

MGM Mirage's term loan posted some losses on Thursday because a couple of sellers came in to take advantage of the gains that the debt experienced on Wednesday, according to traders.

The term loan was quoted by one trader at 76 bid, 79 offered, down from Wednesday night's levels of 79½ bid, 81½ offered, and by a second trader at 78 bid, 80 offered, down from 80 bid, 82 offered.

On Wednesday, the company disclosed an amendment to its credit facility that provides for a number of repayment scenarios, and following this news, the term loan traded up to the low-80 context from around 74 bid, 75 offered.

In order for the amendment to become effective, MGM Mirage had to raise at least $2.5 billion from certain offerings - a feat which was accomplished as the company announced on Thursday the completion of a $1 billion public offering of common stock and the pricing of $1.5 billion senior secured notes that were sold in a private offering.

Of the total amount of notes, $650 million are 10.375% notes that priced at 97.184% and $850 million are 11.125% notes that priced at 97.344%.

MGM amendment details

As already reported, under MGM Mirage's amendment, $750 million of the credit facility borrowings will be permanently paid down with proceeds from stock sale and private placement, allocated between the term loan and the revolver on a pro rata basis.

The amendment also provides that the company must use 50% of the net proceeds from any future asset sales to permanently reduce the term loan and revolver on a pro rata basis, and that the company can incur up to $500 million of additional unsecured debt, but only if 50% of the net proceeds are used to permanently reduce the term loan and revolver on a pro rata basis.

In addition, pricing on the company's credit facility was raised by 100 basis points to Libor plus 400 bps, the total leverage and interest charge coverage ratios were eliminated and any prior non-compliance with the ratios for the quarter ended March 31 was permanently waived, and a quarterly minimum EBITDA test was added.

MGM Mirage is a Las Vegas-based gaming, hospitality and entertainment company.

Warner Music trades up

Warner Music's term loan pushed higher on Thursday as investors continued to react to an amendment that was presented during the previous session, according to sources.

The term loan was quoted at 96¾ bid, 97¾ offered, up from Wednesday's closing levels of 96¼ bid, 97¼ offered, sources said.

Under the proposal, the company is looking to extend the maturity of the term loan to January 2014 from February 2011 in exchange for higher pricing and a paydown, according to sources.

A lender call to launch the amendment was held on Wednesday, and following the call, the term loan gained about a quarter of a point in trading, one source remarked, adding that the loan "saw more activity today."

Warner Music is a New York-based music content company.

LCDX lower

Also in trading, the LCDX 12 index weakened despite equities being a little stronger on the day, according to a trader.

The index was quoted at 81.70 bid, 82 offered, down from 82.30 bid, 82.60 offered, the trader said.

Nasdaq closed up 25.02 points, or 1.5%, Dow Jones Industrial Average closed up 46.43 points, or 0.56%, S&P 500 closed up 9.15 points, or 1.04%, and NYSE closed up 66.98 points, or 1.18%.

Discovery closes

In other news, Discovery Communications Holding LLC closed on its new $500 million term loan C due May 2014 (Baa3) on Thursday, according to an 8-K filed with the Securities and Exchange Commission.

The term loan C is priced at Libor plus 325 bps with a 2% Libor floor, and it was sold to investors at an original issue discount of 98.

During syndication, pricing firmed up at the low-end of original guidance of Libor plus 325 bps to 350 bps.

Bank of America and JPMorgan acted as the lead banks on the deal, with Bank of America the left lead.

Proceeds were used to repay some existing bank debt.

Discovery Communications is a Silver Spring, Md.-based nonfiction media company.

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