Pilgrim's moves up on improved numbers; Ply Gem results hurt bonds; Hawker gains on tender news

By Stephanie N. Rotondo and Paul Deckelman

Portland, Ore., May 19 - Pilgrim's Pride Corp.'s debt moved higher in trading Tuesday after the company posted what one trader called "great" monthly operating figures.

Also, an analyst told Prospect News that Pilgrim's situation - though in bankruptcy - is looking rosier.

But Ply Gem Industries Inc.'s debt did not fare as well on the back of its quarterly earnings release. Market sources saw the building products company's bonds close 1 to 2 points weaker.

Meanwhile, Hawker Beechcraft Acquisition Co., LLC's bonds gained as much as 5 points on the day following news regarding the company's tender offer. The company increased the amount of the tender to $150 million.

Pilgrim's moves up on numbers

Pilgrim's Pride's bonds were seen mostly better after the bankrupt poultry producer posted improved monthly operating numbers.

A trader said the bonds were "trading higher," pegging the senior debt, such as the 7 5/8% notes due 2015, at 83.5 bid, 84 offered and the subordinated paper, such as the 8 3/8% notes due 2017 at 70 bid, 71 offered.

Another trader quoted the seniors at 84 bid, 85 offered and the juniors at 72 bid, 73 offered.

Yet another trader saw the company's 7 5/8% notes at 83.25 bid, up from 77 on Monday, terming it "an impressive move," and noted that the bonds had gotten as good as 84.75 during the session, before coming down a little from that peak level. He saw some $16 million of the bonds changing hands.

But at another desk, a trader said the junior issues were "definitely going lower," placing them at 70 bid, 71 offered, down from opening levels of 72 bid, 74 offered. He also saw a 77.5 bid in the 7 5/8% notes, but added "that might be a little low."

Analyst Aqeel A. Merchant of Knight Libertas LLC in Greenwich, Conn., noted that because Pilgrim's Pride is in reorganization, it files monthly operating reports with the U.S. Bankruptcy Court for the Northern District of Texas, in Fort Worth, in addition to the regular quarterly reports filed with the Securities and Exchange Commission - and the latest monthly numbers, which came out late Monday for the month of April, show continued improvement.

Merchant, who follows the food, beverage and restaurant industries for Knight Libertas, said that in the month ended April 25, Pilgrim's Pride was calculated to have racked up EBITDA of $54.7 million, up from $45.1 million for the month ended March 28 and $21.6 million for the month ended February 21. For the entire quarter ended March 28, it was calculated to have generated EBITDA of some $81.2 million.

Merchant told Prospect News that Pilgrim's Pride has had its ups and downs over the past year - the 7 5/8% bonds, which had been trading in the low 30s in early November, lost half their value and plummeted down to around the 15 area in December as some investors probably reasoned that "with the amount of secured debt that [Pilgrim's Pride] had, and the conditions in the DIP market, the company was probably going to be liquidated and go away, leaving bondholders with a de minimus recovery."

However the company confounded its critics by lining up a $450 million debtor-in-possession financing facility arranged by Bank of Montreal as lead agent. Under the leadership of its newly installed president and chief executive officer, Don Jackson, Pilgrim's Pride moved aggressively to shed certain assets and cut costs, selling its Farmerville, La. chicken complex to Jackson's former company, Foster Farms, for $80 million, losing its Dalton, Ga. processing plant and indefinitely idling several other facilities as well.

Merchant noted that this year, "chicken prices have only moved higher, while corn" - the main feedstock for commercial poultry operations - "has not appreciated as much. Given the declines in broiler eggs-set and broiler chickens placed" - i.e. common poultry industry measures of eggs placed in incubators and chicks earmarked for meat production, which act as leading indicators for future poultry inventory trends - poultry inventory "is expected to decline further, aiding prices and consequently profitability. So it's probably going to get better from here," the analyst concluded.

Pilgrim's pride filed for Chapter 11 protections on Dec. 1, 2008 after suffering from higher feed prices and lower consumer costs for poultry.

Ply Gem results hurt bonds

Ply Gem Industries' notes finished the day unchanged to weaker after reporting its quarterly results.

A market source quoted the 9% notes due 2012 at 20 bid, 21 offered, a loss of about 2 points on the day. The 11¾% notes due 2013 were meanwhile 1.5 points softer at 57 bid, 58 offered.

But another source pegged the 11¾% notes at 57 bid, 59 offered, "about where they have been."

The Cary, N.C.-based manufacturer of exterior building products reported net loss of $62.6 million for the first quarter of 2009. That compared with a net loss of $21.8 million in the same period of 208.

Net sales dropped 28.7% to $182.8 million from $256.4 million the year before. Adjusted EBITDA was negative $13.3 million, versus positive $5.2 million in 2008.

"Ply Gem's first quarter sales and EBITDA results reflect the challenging market conditions that continue to exist in the housing market today," said Gary E. Robinette, president and chief executive officer, in a press release. "We continue to pursue the initiatives that are helping us compete effectively in this historic housing slump. We continue to realign our cost structure for current and future market demand. At the same time, we are focused on maximizing cash flow and outperforming the market place in all business units, allowing us to emerge stronger when the housing market recovers."

Hawker gains on tender news

Aircraft manufacturer Hawker Beechcraft saw its bonds jump as much as 5 points during the session on fresh news regarding the company's tender offer.

A trader deemed the 8½% notes due 2015 stronger by 1 to 2 points at 41 bid, 42 offered. But another called the issue up by more than 5 points at 42.5 bid.

The Wichita, Kan.-based company increased its tender offer to $150 million of the 8 7/8% - 9 5/8% in-kind - senior pay-in-kind notes due April 1, 2015, 9¾% senior subordinated notes due April 1, 2017 and 8½% senior fixed-rate notes due April 1, 2015. The company had originally said it would spend up to $100 million, excluding interest.

The early tender deadline as also extended to midnight ET on June 2 from 5 p.m. ET on May 18.

For each $1,000 of notes tendered, Hawker will pay $300 for the PIK notes, $340 for the 9¾% notes and $420 for the 8½% notes. The payment includes an early tender premium of $30 for each note.

Also, the notes are listed in order of acceptance priority level. If the offer is oversubscribed, notes with a higher priority level will be accepted before notes with a lower priority level.

Auto loans begin to show softness

General Motors Corp. and Ford Motor Co. came in a little on Tuesday as there appeared to be some sellers with not a lot of buying interest, while Chrysler Financial Services LLC was steady to slightly weaker, depending on who was asked.

General Motors, a Detroit-based automotive company, saw its term loan quoted by one at 68 bid, 69½ offered, down from 69¼ bid, 70¾ offered, and by a second trader at 69½ bid, 70½ offered, down from 70 bid, 71½ offered.

And, Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted by one trader at 64½ bid, 65½ offered, down from 65 bid, 66 offered, and by a second trader at 64 bid, 64¾ offered, down from 65 bid, 66 offered.

Meanwhile, Chrysler Financial, a provider of financial services for vehicles, which also experienced a run-up last week, saw its first-lien term loan quoted by one trader as flat on the day at 84½ bid, 85½ offered. However, a second trader said that the paper was down with levels of 84¼ bid, 85¼ offered, compared with 85 bid, 85½ offered on Monday.

According to the trader, the retreat in General Motors' term loan levels is somewhat surprising given that there was a news story out on Tuesday that made mention of the company's bank debt possibly getting repaid at par by the government in a bankruptcy scenario.

Speculation over this potential par paydown had first surfaced last week, which is why the rally in the name started to begin with (and probably pushed the other auto names higher with it), and now with this news story, the trader said he thought that levels would at least have held steady.

"Still have sellers coming in. Not sure why. Hasn't really traded [but] a lot of selling interest. Maybe it's buy the rumors, sell the story," the trader added.

In April, General Motors launched offerings to exchange 225 shares of its common stock for $27 billion of its unsecured public notes.

Around that time, the company said that if, prior to June 1, it does not receive enough tenders of notes to consummate the exchange offers, it expects to seek relief under the U.S. Bankruptcy Code, with a sale being the most likely outcome.

Broad market mixed

Among other distressed issuers, Rite Aid Corp.'s 10 3/8% notes due 2016 were seen as the retailer's "most active" issue, while the 7½% notes due 2017 were the "second most active," according to a trader.

The trader quoted the former at 84.5 bid, 85 offered and the latter at 73.5 bid, 74 offered. He also saw the 8 5/8% note due 2015 at 60 bid, 62 offered.

Another trader saw MGM Mirage's 7½% notes due 2016 trade at 63 bid, 63.25 offered.

The second trader also said he traded some R.H. Donnelley Corp. 6 7/8% notes due 2013 around 5. However, he said the note later inched up some to 5.25 bid, 6.25 offered.

Sara Rosenberg contributed to this article.

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