Hawaiian bonds dip, loan gains; Bon-Ton weaker; Calpine higher, NRG mixed; tender helps Rescap loan

By Stephanie N. Rotondo

Portland, Ore., May 22 - Hawaiian Telcom Communications Inc. was denied a request to increase its revolver Thursday and in response the company's bonds fell.

However, the denial boosted the company's bank debt, as trader said the news was good for holders of the term loan.

Meanwhile, Bon-Ton Stores Inc.'s bonds weakened after the company posted a wider loss for the first quarter. The company attributed the lower figures to a softer retail environment and said it expected that trend to continue throughout the year,

Calpine Corp.'s stubs saw some action after it was announced that NRG Energy Inc. had made an unsolicited offer for the power producer. Calpine's term loan was buoyed as well.

But NRG corporate debt fell on the news. Its bank debt was only mildly better by the close of business.

In the financial sector, Residential Capital LLC released early results of its recent tender offer, which showed that the company had already received three-quarters of the bonds in the exchange. The news gave the company term loan some power to climb, but the bonds did not fare as well.

Hawaiian Telcom bonds dip, loan better

Hawaiian Telcom's bonds ended the day weaker after the company was denied a request to increase its revolver.

One trader said there was "a little trading" in the 12½% notes due 2015 around 26.

"They haven't traded in a while, but that would be lower," he said. "They had been in the 30s."

Another trader said there were "better buyers" of the 12½% notes, as well as the 9¾% notes due 2013. He quoted the debt at 24 bid, 26 offered, 38 bid, 40 offered, respectively.

Another trader joked that he had traded "a whole bunch of Hawaiian Telcom paper to a lot of happy buyers" - back when the 12½% notes were in the 70s.

"They are not so happy now," he said.

Investors were not so pleased back in April when the company reported its full-year results for 2007 - and the bonds fell 20 points in one day.

Earlier this month, the company posted its first-quarter results, which showed an increased loss of $40.1 million on revenue of $112.4 million.

However, the company's term loan was stronger in trading, a trader said.

The term loan was quoted at 80½ bid, 82½ offered, up from 79 bid, 80½ offered on Wednesday, the trader said.

The trader explained that the inability by the company to upsize its revolver is actually a good thing for the term loan because it means less senior secured debt will be borrowed by the company, which gives the term loan better recovery prospects.

Hawaiian Telcom asked the Public Utilities Commission in Hawaii to allow it to increase its borrowing capacity to $150 million from $90 million under its senior secured revolving credit facility. However, the Commission chose to disallow the increase.

The company's right to elect to increase the revolver borrowing capacity expires on June 1.

Last week, Hawaiian Telcom revealed that it drew down its $90 million revolver in full due to uncertain conditions in the financial markets.

Based on this draw, lenders seemed to believe that if a revolver increase was obtained, the company would draw down those funds as well, the bank trader added.

Hawaiian Telcom is a Honolulu-based telecommunications provider.

Bon-Ton slips on numbers

Bon-Ton reported a wider loss for the first quarter, hurt by the softening retail environment. In response, the company's bonds ended the day slightly weaker.

One trader called the 10¼% notes due 2014 "down a little bit" at 73 bid, 73.5 offered. Another trader said the debt was actively trading in the morning, "then died." He pegged the bonds at 73.5 bid, 74.5 offered.

"They tried to pop," he said, noting that the bonds traded up to 74.5 before coming back down. He deemed the debt "basically unchanged" to maybe a tad weaker.

At another desk, a trader saw the bonds at 73 bid, 74 offered.

For the first quarter ending May 3, Bon-Ton reported a wider loss of $34.1 million, versus a loss of $29.3 million the year before. Sales slipped 5.1% to $700.2 million, while same-store sales dropped 4.6%. The company attributed the weaker results to the current turmoil in the economy.

In a press release, Bud Bergren, president and chief executive officer, stated: "Our financial results continue to be impacted by the macro economic environment."

Bergren went on to add that the company has responded by reducing inventory and is reviewing its expenses in an effort to reduce costs. He also said that Bon-Ton has managed to reduce debt levels and increase borrowing capacity under its credit facility.

"Looking ahead to the remainder of 2008, we will manage our business under the assumption that the difficult macro economic environment will continue. While we are prepared to implement the necessary measures to deal with the current environment, we remain confident that we have a solid strategic plan in place and we will benefit from our efforts as the macro environment improves," he said.

Given the issues the company believes it will continue to face throughout the year, Bon-Ton also lowered its earnings forecast to 0 to 30 cents per share, versus prior levels of 20 to 45 cents per share.

Bon-Ton is a York, Pa.-based department store chain.

Elsewhere in the retail environment, Blockbuster Inc.' s 9% notes due 2012 closed at 82 bid, 84 offered.

Calpine up, NRG mixed

Calpine stubs - the pieces of paper issued to holders of the company's old debt - traded up on the news that power wholesaler NRG Energy Inc. had made an $11.3 billion offer for the company.

A trader said the stubs gained about 2 points to 23 bid, 24 offered. Another trader, however, said the debt was not trading actively enough to quote accurately.

Another trader saw the stubs trading around 21.

But the news sent NRG's bonds down 1½ to 2 points, a trader said. He said the 7 3/8% notes due 2016 traded around 99, while another market source saw the bonds at 99.25 bid.

Calpine's term loan was also noticeably higher during the session as investors reacted to news that NRG Energy Inc. is proposing a combination of the two companies, but NRG's institutional bank debt was only slightly up on the bid side, according to traders.

Calpine's term loan was quoted by one trader at 96¾ bid, 97¼ offered, up from around the 93½ bid, 95 offered area, and by a second trader at 96 7/8 bid, 97 5/8 offered, up from around the 95 bid, 96 offered context. According to the second trader, the term loan was quoted at 93 bid on Wednesday afternoon, but after chatter of an NRG merger proposal hit the market late in the day, levels inched a little higher.

Meanwhile, NRG's strip of institutional bank debt was quoted at 96¼ bid, 96¾ offered, compared to Wednesday's levels of 96 bid, 96¾ offered, the first trader added.

Calpine released details of the all-stock offer Wednesday. NRG made the unsolicited offer on May 14 - less than four months after Calpine merged from Chapter 11 protection.

The news prompted Standard & Poor's to reevaluate its ratings on both companies, stating that NRG may face a downgrade, while Calpine could be boosted. Fitch Ratings placed NRG on evolving watch,

Calpine is a San Jose, Calif.-based power producer. NRG is based in Princeton, N.J.

ResCap loan boosted

Residential Capital's term loan inched its way higher on Thursday after the company revealed that about three-quarters of its bonds had already been tendered by the early delivery time on Wednesday.

The term loan was quoted at 97½ bid, 98½ offered, up from 97 bid, 98 offered, a trader said.

But the company's bonds did not necessarily fare as well. A trader saw the 6½% due 2013 trading down 3 points at 48 bid, 50 offered.

However, another trader saw those bonds up 1½ points on the day at 53.5 bid, 55.5 offered, while its 8 1/8% notes coming due later this year were at 88 bid, 90 offered, which he called up another point on the day.

Yet another saw ResCap's 6 3/8% notes due 2010 trading at 54.5 bid, which he said was unchanged from their most recent round-lot trades two days earlier.

By 5 p.m. ET Wednesday, $2.6 billion of ResCap's notes that mature in 2008 to 2009 had been validly tendered, approximately the U.S. dollar equivalent $6 billion of notes that mature in 2010 to 2015 had been validly tendered, and $853.4 million of floating rate notes due June 9 were tendered for cash.

All told, the company is tendering for about $14 billion in notes. The note offers will expire on June 3.

In the offers, ResCap is offering to issue new 8.5% senior secured guaranteed notes due 2010 in exchange for existing 2008 and 2009 notes, and new 9.625% junior secured guaranteed notes due 2015 in exchange for existing 2010 through 2015 notes. The company is also tendering for any and all of its outstanding $1.199 floating-rate notes due June 9.

Holders participating in the exchange offer are able to elect to receive cash in place of the new notes that they would otherwise receive under a modified Dutch auction process.

The offers are conditioned on ResCap entering into a new first-lien senior secured credit facility, providing for at least $3.5 billion of commitments on terms acceptable to the company.

To this end, ResCap has been negotiating a new $3.5 billion first-lien revolver with GMAC LLC as the lender.

Pricing on the revolver is expected to be Libor plus 275 basis points and the company is expected to pay an upfront fee of 50 bps, according to filings with the Securities and Exchange Commission.

Covenants include a minimum cash balance and a minimum consolidated tangible net worth.

The revolver will mature on the earlier of May 1, 2010 if the offers are completed in a manner satisfactory to the lender, otherwise March 31, 2009, and the date on which the maturity of the new notes issued in connection with the previously announced tender offers is accelerated due to an event of default.

Proceeds from the revolver will be used to fund the cash required for the note offers, to repay the company's term loan maturing in July, to replace its $875 million 364-day revolver and to replace its $875 million three-year revolver.

ResCap, an indirect wholly owned subsidiary of GMAC Financial Services, is a Minneapolis-based real estate finance company focused primarily on the residential market.

Broad market mixed

Trump Entertainment Resorts Inc.'s 8½% notes due 2015 ended around 59, a trader said. Initially, he called that a smidge lower, but added, "They were kind of in that zip code yesterday to tell you the truth."

After gaining on the news of an asset sale in the previous session, a trader called Spectrum Brands Inc.'s 11% notes due 2010 "a bit better" at 88 bid, 89 offered, though he called the 7 3/8% notes due 2015 weaker around 70.

Another trader placed the 11% notes at 89 bid, 90 offered and the 7 3/8% notes at 70 bid, 71 offered.

Swift Transportation Co. Inc.'s 12½% notes due 2017 ended unchanged around 36.

Sara Rosenberg and Paul Deckelman contributed to this article.

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