Ford gains ground on tender offer update; MGM slips on Dubai World lawsuit; Hertz loan, bonds improve

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., March 23 - Despite what one trader called a "ridiculous" rally in the equities, the distressed bond market seemed "hesitant" to follow, traders reported.

"With the stock market up so ridiculously much, the bond market took a back seat," a trader said. "We didn't even crack a billion in high yield."

"The stocks rallied huge, but I think our market is somewhat hesitant to rally as well," said another trader.

Still, good news from Ford Motor Co. helped the company's debt structure gain some ground. The company revealed new terms regarding its term loan tender offer, which included final pricing. Ford's term loan got as good as 5 points better, wile the bonds gained at least 2 points on the day.

However, the bad news kept piling up for MGM Mirage. On top of declining revenues and liquidity concerns, MGM took another hit when its fellow CityCenter investor Dubai World filed a lawsuit against the company, citing a breach of contractual obligations. Traders saw the casino operators' bonds fall as much as 5 points on the day, though trading was light.

News of a debt amendment helped Hertz Global Holdings Inc.'s debt move higher. Both the term loan and bonds ended the day with a positive tone and traders called Hertz's bonds one of the day's most active issues.

Ford gains ground

Ford Motor's term loan gained a couple of points in trading as the company came out with an update on its term loan tender offer that revealed not only the final pricing, but a planned increase in the amount of debt that would be bought back, according to traders.

The Dearborn, Mich.-based automaker's term loan was quoted by one trader at 43 bid, 48 offered, up about 4 to 5 points on the day, and by a second trader at 45 bid, 46 offered, up from Friday's levels of 38 bid, 40 offered.

The second trader remarked that the term loan was trading all over the place on Monday, starting the day at 44 bid, 46 offered and reaching a high of 45¼ bid, 46¼ offered.

In the bonds, a trader saw Ford's paper gaining a couple points, though he added that activity in Ford - as well as that of is rival General Motors Corp. - was "not as much as you would have thought."

The trader placed the 7 7/8% notes due 2010 at 84 and the 7¼% notes due 200 at 72.

In GM's debt, a market source called the 7 1/8% notes due 2013 2 points better at 21 bid, while its GMAC LLC arm's 6 7/8% notes due 2012 gained 1.5 points to close at 61 bid.

On Monday morning, Ford announced that its $500 million Dutch auction cash tender offer for senior secured term loan debt was oversubscribed and that the tender price was 47.

As a result of the strong reception, the company is increasing the cash it will use for the tender offer to $1 billion, which would result in the repurchase of $2.2 billion of the $6.9 billion term debt outstanding.

The final tender price ended up at the high end of the company's scale. Term loan lenders had been invited to submit bids to sell their paper in a price range of 38 to 47 by March 19.

Also on Monday, Ford provided some additional information on the $1.3 billion cash tender offer for its unsecured non-convertible debt securities, of which $8.9 billion is outstanding.

As of the early tender date of March 19, approximately $3.4 billion principal amount of convertibles had been validly tendered, resulting in an aggregate purchase price of approximately $1.1 billion.

The notes tender offer is scheduled to end on April 3, which is also the expiration date for the company's previously announced conversion offer for its $4.88 billion 4.25% senior convertibles due Dec. 15, 2036.

"We are very pleased with the results to date of our debt restructuring initiatives," Neil Schloss, treasurer, said in a news release.

"With these tenders, we have taken significant steps towards reducing Ford's long-term debt and strengthening our balance sheet," Schloss added.

MGM slips on lawsuit

MGM Mirage's debt continued to trade lower, as it was pushed further downward on the back of news that its CityCenter partner, Dubai World, had filed a lawsuit against the casino operator.

Still, traders commented that trading was thin despite the news.

One trader called the 8½% notes due 2010 5 points weaker at 41. Another trader called that issue "moderately active," falling to the low-40s.

Another market player pegged the 6 5/8% notes due 2015 at 35.5 bid, a 2.5-point decline.

Infinity World, a unit of CityCenter investor Dubai World, filed a lawsuit with the Delaware Chancery Court on Sunday, alleging that MGM had breached its obligations under the project agreement. Infinity said that MGM's recent admissions that its future was murky constituted a breach of the joint venture agreement and put the entire project at risk.

The project has struggled since the economy began to tank, as MGM and Dubai World have failed to secure the funds needed to complete the project.

"MGM has mismanaged the CityCenter project, resulting in costs significantly over budget despite downsizing certain of the facilities," Dubai World stated in a court filing.

Following word of the lawsuit, Fitch Ratings cut MGM's rating further into junk territory.

Hertz debt firms

Hertz Global Holdings' strip of term loan letter-of-credit facility debt was stronger on Monday as news of a recently launched amendment proposal became more widespread, according to a market source.

The strip of debt was quoted around 67¾ bid, 68¼ offered, up from Friday's levels of 67 bid, 68 offered, the source said.

Prior to chatter on the amendment hitting last week, the paper was quoted around the mid-60s, the source remarked.

Meanwhile, a trader called Hertz's 8 7/8% notes due 2014 "definitely a little bit better" at 54.25, with about $20 million changing hands.

Another trader quoted the bonds at 53 bid, 54 offered, versus 50 bid, 51 offered previously.

Under the amendment, which was launched this past Friday, Hertz would be allowed to use up to $500 million in cash to repurchase term loan debt through tender offers for a period of one year.

The company would only be allowed to execute four tenders during that one-year period and there would be a minimum tender size of $10 million.

As part of the amendment proposal, Hertz would be allowed to draw on its revolving credit facility to fund any term loan buybacks, the source said.

However, the company would have to meet a minimum liquidity test of $1 billion between cash and its revolver before it could approach the market with a tender offer. Currently, the company has $1.8 billion of liquidity.

Deutsche Bank is leading the amendment and responses are due from lenders this coming Friday.

In return for their consents, lenders will be paid a 5 basis points fee.

Hertz is a Park Ridge, N.J.-based car rental company.

Broad market 'hesitant'

Freeport-McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 were deemed the "number one traded bond in America" by one jovial trader. "I think they will win the American Idol contest this year."

The trader said that about $25 million of the bonds traded at 92.25, which was "exactly where it has been."

At another desk, a trader saw OPTI Canada Inc.'s 8¼% notes due 2014 and its 7 7/8% notes due 2014 gain 3 to 4 points to close at 38 bid, 39 offered. The trader speculated that the move was due to news that SunCor was buying out fellow oil company PetroCanada.

A "variety of issues" of American International Group Inc.'s debt traded, a trader said, but movement-wise, it was "all kind of sideways." He placed the 3 7/8% notes due 2009 at 72.25 and the floating-rate notes due 2011 at 41.

Blockbuster Inc.'s 9% notes due 2012 closed unchanged at 46 bid, 47 offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.