Delphi considers term loan revisions; Rite-Aid, Burlington Coat push higher

By Stephanie N. Rotondo

Portland, Ore., Feb. 1 - Friday's session in the distressed debt market offered "not a ton of action," a trader said, as investors took a break from a volatile week.

Typically, the last day of the week in the distressed arena is a day to lay low. Combine that with it being the first day of the month - with some still finishing up month-end pricing - and the result is a lack of volume.

"It was pretty quiet," the trader said.

What was not quiet was the rumor mill.

Talk that Delphi Corp. will make some changes to part of its exit facility made its way into circulation Friday. According to one trader, it is not unreasonable to think that Delphi might have to revise its exit financing - especially if it wants to emerge from bankruptcy by the end of March.

The trader noted that Dana Corp. made similar changes to its exit facility in an effort to find financing. As that company emerged from bankruptcy Friday, revisions could prompt investors to take part in the company's quest to exit Chapter 11 protection.

However, the company's corporate debt - which had steadily gained over the week - closed the week out quietly, ending unchanged to just slightly better.

Rite-Aid Corp.'s bonds were called one of the more active names during the session. The drugstore's debt moved higher, along with several other retail names, such as Burlington Coat Factory Warehouse Corp.

Delphi considers term loan changes

Market talk is that Delphi is contemplating revisions to its exit financing first-lien term loan, although nothing official has been announced as of yet, according to a buyside source.

"They are working on some changes, [including a] possible Libor floor. Everything else right now is the same, but I think it will change," the source added.

Currently, the $3.7 billion first-lien term loan (Ba3/B+) is talked at Libor plus 450 bps, with an original issue discount of 96 and call protection of 102 in year one and 101 in year two.

Delphi's $6.125 billion facility also includes a $1.6 billion ABL revolver talked at Libor plus 250 bps and an $825 million second-lien term loan (B3/B-).

Of the total second-lien term loan amount, $750 million will be issued to General Motors Corp. in connection with plan of reorganization distributions.

Originally, the second-lien loan was going to be sized at $1.5 billion, but it was downsized prior to launch as a result of a permanent improvement in liquidity as the company generated cash flow during the second half of 2007 in excess of the amount projected in its revised business plan.

As Delphi continues its efforts to secure exit financing so that it can emerge from bankruptcy by the end of March, a trader said revisions to the facility are not out of the question.

"I would suspect that they would have to do some rejiggering," he said. "If Delphi could do some tweaking, that would be good."

The company's reorganization plan was confirmed just over a week ago.

JPMorgan and Citigroup are the lead banks on the deal that will be used to repay the company's debtor-in-possession financing facility, to fund other payments required upon emergence from Chapter 11 and to conduct post-reorganization operations.

A trader said the Troy, Mich.-based company's bonds were quiet Friday after a week of relatively active gains. The trader called the bonds - which now trade on top of one another - unchanged at around 40. Another market source saw the bonds get slightly better, also at 40 across the board.

Retailers gain momentum

The retail sector pushed higher during the last trading day of the week, a trader said.

Rite-Aid's 9½% notes due 2017 were "up a couple points" to around 77, the trader said, while another source quoted the 8 5/8% notes due 2015 up half a point to 75.5.

Meanwhile, Burlington Coat Factory's 11 1/8% notes due 2014 were "not very active, but probably a little better," a trader said, at 79.5 bid, 80 offered.

Bon-Ton Stores Inc.'s 10¼% notes due 2014 were also up slightly at around 70. A trader said Linens n'Things' debt was - and has been - "very quiet."

There was not much news to drive the sector up, however. Rite-Aid, the only one with fresh news, reported a 2% increase in January same-store sales.

But there has been some discussion pre-Super Bowl that while consumers fear a recession, their spending related to the big game day has not decreased. Therefore, even distressed retailers could benefit from Sunday's showdown.

Broad market better

Charter Communications Inc.'s bonds were "inching up," a trader said, its 13½% notes due 2014 boosted a few points to 69.

With no fresh news out, Residential Capital LLC's bonds were up as well, though "not very active," a trader said. He deemed the 6 3/8% notes due 2010 up a point to 67. The 5.65% notes due 2008 were likewise a point better at 87.

Another trader, however, called the name active and unchanged, the 6½% notes due 2012 and 2013 "pretty much the same" at 63.25 bid, 64.25 offered

A trader said Tembec Inc.'s 8 5/8% notes due 2009 gained 4 points to 42 bid, 43 offered. He said he was unaware of any specific developments but said that the bonds rose on "just a lot of language that goes with it" on such things as who is considered a holder of record and other covenant provisions. He said the bonds were trading flat, or without the accrued interest.

Swift Transportation Co. Inc.'s 12½% notes due 2017 "moved up nicely," a trader said. The debt had been around 41 bid earlier in the week, then dropped as low as 37 bid, 39 offered. Come Friday, they came back to around the 42 bid, 43 offered, pushed upwards by investors "looking for yield."

He said that overall, "the Triple-Hooks (i.e., the CCC-rated bonds) did better."

Sara Rosenberg and Paul Deckelman contributed to this article.

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