Clear Channel debt exchange pressures bonds; Dex One warns of pre-pack filing, debt ends mixed

By Stephanie N. Rotondo and Sara Rosenberg

Phoenix, Oct. 25 - The distressed debt market was leaning toward the softer side Thursday, though there were a few credits that managed to move higher.

That could not be said, however, for Clear Channel Communications Inc. The company completed a bank debt-for-bond exchange on Thursday, which included the issuance of $2 billion 9% notes due 2019. The older bonds, and even the new issue, ended the day weaker.

Meanwhile, it was a mixed bag for Dex One Corp., as its bonds dipped but its bank debt firmed. The movements came as the company reported its third-quarter earnings, also stating that it was considering a prepackaged bankruptcy filing in order to complete its merger with SuperMedia Inc.

Clear Channel fizzles

A trader said Clear Channel Communications' bonds were lower as the company wrapped a loan-for-bond exchange Thursday.

The trader saw the 9% notes due 2021 fall 2 to 3 points to 88 bid, 89 offered, while the 10¾% and 11% notes due 2016 dipped to levels in the mid-70s.

The trader also noted that the new issue - the 9% notes due 2019, which were issued in exchange for term loan debt - also traded off, pegging them at 91 bid, 91½ offered.

Another trader said about $44 million of the 2021 maturity changed hands, dropping 1¼ points to 881/2.

On Monday, Clear Channel received lender approval of its credit facility amendment that allowed for the exchange of up to $5 billion of any of its term loans for new bonds.

Because of the strong demand, the amount of each lender's term loans that will be accepted in exchange for notes will be reduced on a pro rata basis.

Dex mixed on filing warning

Dex One bonds came under pressure on Thursday as the company said it was considering a bankruptcy filing in order to facilitate its merger with SuperMedia Inc.

The company also reported third-quarter results.

"DEXO has been quiet for awhile, but traded down today to 30," a trader said. Another trader also placed the 12% PIK notes due 2017 around 30, which he said could be down as much as 7 points.

However, Dex's bank debt got a shot in the arm.

Dex's subsidiaries Dex West, Dex East and R.H. Donnelley Inc. saw trading levels rise as third quarter financial results were announced, according to a trader.

Dex West was quoted at 67 bid, 68½ offered, up from 66½ bid, 67½ offered, Dex East was quoted at 65½ bid, 67 offered, up from 65 bid, 66½ offered, and R.H. Donnelley was quoted at 62½ bid, 64 offered, up from 62 bid, 63½ offered, the trader said.

For the third quarter, Dex One reported a net loss of $12.7 million, or $0.25 per share, compared to net income of $22.2 million, or $0.44 per share, in the prior year.

Net revenue for the quarter was $319.7 million, down from $360.1 million in the third quarter of 2011.

Furthermore, adjusted EBITDA for the quarter was $137.1 million, versus $145.7 million last year.

With third quarter numbers, Dex One narrowed the range on full-year guidance for net revenue, adjusted EBITDA and adjusted free cash flow.

Net revenue is now estimated at $1.275 billion to $1.3 billion, versus prior guidance of $1.25 billion to $1.3 billion.

Adjusted EBITDA is expected at $535 million to $565 million, compared to prior estimates of $525 million to $575 million.

And, adjusted free cash flow for the year is guided at $320 million to $350 million, versus $310 million to $360 million previously.

Dex One also said that the credit facilities amendments being proposed in connection with its merger with SuperMedia Inc. are still being negotiated with the steering committee.

However, it is currently thought that the parties may not be able to obtain sufficient approval from the senior secured lenders to any proposed amendments, and therefore, alternatives are being considered to the current transaction structure to obtain the necessary lender consents, the company disclosed in an 8-K filed with the Securities and Exchange Commission.

These alternatives include a prepackaged restructuring of the parties' senior secured debt through a Chapter 11 filing.

The expectation is that a bankruptcy proceeding may result in the implementation of possible amendments that may garner sufficient, though not unanimous, support from lenders, while otherwise maintaining the basic economic terms of the merger agreement.

Under the amendment launched in September, R.H. Donnelley's loan due Oct. 24, 2016 would be extended to Dec. 31, 2016 at pricing of Libor plus 625 bps with a 3% floor initially, stepping up to Libor plus 650 bps with a 3% floor. Current pricing is Libor plus 600 bps with a 3% floor.

Dex East's loan due Oct. 24, 2014 would be extended to Dec. 31, 2016 at pricing of Libor plus Libor plus 250 bps with a 3% Libor floor, versus current pricing of Libor plus 250 bps with no floor. The spread on the extended debt will then step up to Libor plus 300 bps with a 3% floor.

Dex West's loan due Oct. 24, 2014 would be extended to Dec. 31, 2016 at pricing of Libor plus 425 bps with a 3% Libor floor initially, stepping up to Libor plus 450 bps with a 3% floor. Current pricing is Libor plus 400 bps with a 3% floor.

And, SuperMedia's loan due Dec. 31, 2015 would be extended to Dec. 31, 2016 at pricing of Libor plus 800 bps with a 3% floor, unchanged form current pricing.

Despite the amendment update, SuperMedia's term loan was flat at 64½ bid, 65½ offered, the trader continued.

Through the proposed merger, Dex One and SuperMedia shareholders will exchange their shares for shares in the new company, Dex Media. Dex One shareholders will get 0.2 share for each Dex One share they own, and SuperMedia shareholders will get 0.4386 share for each SuperMedia share they own.

Dex One shareholders are anticipated to own about 60% and SuperMedia shareholders will own about 40% of the combined company.

Closing is expected this quarter, subject to the amendment of the credit facilities.

Dex One is a Cary, N.C.-based marketing services provider. SuperMedia is a Dallas-based directory publisher.

More upside for AMD, Supervalu

Advanced Micro Devices Inc. continued to rise Thursday, with one trader seeing the 8 1/8% notes due 2017 trading at 92 bid, 93 offered.

Another trader called the issue up "a solid 3¼ points" at 921/2.

Meanwhile, Supervalu Inc.'s 8% notes due 2016 were "still up there in the top 10 [most actively traded high-yield issues]," deeming the paper up nearly a point at 941/2.

A second trader pegged the notes at 95.

Market ends mixed

Elsewhere in the distressed realm, a trader said ATP Oil & Gas Corp.'s 11 7/8% notes due 2015 were "very active," but unchanged at 16 bid, 16½ offered.

The trader also saw AMR Corp.'s benchmark 6¼% convertible notes due 2014 ending stronger at 67½ bid, 68 offered.

Overseas Shipholding Group Inc.'s 8 1/8% notes due 2018 meantime held in at 30½ bid, 31 offered.

And, MF Global Holdings Ltd.'s 7¼% notes due 2016 inched up to 593/4.

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