Rite Aid bond better, loan dips; Ford Motor, GMAC debt mixed; Smurfit Stone notes slip on sale

By Stephanie N. Rotondo

Portland, Ore., June 8 - Rite Aid Corp.'s bonds traded actively Monday, in what traders otherwise deemed a lackluster trading session.

The drugstore chain's bonds were seen moving higher after the company announced a new senior secured notes deal, part of its overall refinancing plan. But the news did not seem to help the company's new term loan.

Meanwhile, both Ford Motor Co. and GMAC LLC saw their various issues ending the day mixed. The movements - or, in some cases, lack thereof - came as Ford was reportedly expressing concern to lawmakers regarding potential cost advantages to GMAC.

Smurfit Stone Container Enterprises Inc. asked the bankruptcy court overseeing its case to sell one of its shutdown properties on Friday. Come Monday, traders said the paperboard and packaging manufacturer's debt was dipping.

'"It was a not much volume day," a trader said following the market's close. He said that less than $1 billion traded in the secondary world, well below the recent average of about $1.5 billion.

"I don't know if it's Monday or summer," he said of the muted session. "Who the heck knows?"

Another trader characterized the day at "pretty quiet, pretty mellow."

Rite Aid bonds better

Rite Aid "was interesting," a trader said, as the company's bonds inched upward on the back of fresh refinancing news.

The trader said the 9½% notes due 2017 and the 9 3/8% notes due 2015 moved up to 66 bid, 67 offered, while the "old" 10 3/8% notes due 2016 closed "around 90."

Another trader called the 9½% notes one of the day's most active traders, with about $13 million changing hands. He placed the issue at 66.75.

Yet another source quoted the 9½% notes at 66 bid, 67 offered, versus 65 bid, 66 offered on Friday.

Meanwhile, Rite Aid's new $525 million term loan (B3/B+) was a touch weaker in the secondary market as news emerged that the company would be selling $400 million of senior secured notes due 2016, a trader told Prospect News.

The term loan was quoted at 99¼ bid, 99¾ offered, down from Friday's closing levels of 99 3/8 bid, 99 7/8 offered, the trader said.

The loan had first freed up for trading on Friday at 99¼ bid, 99¾ offered, but had moved up by an eighth of a point before the day ended.

According to the trader, the term loan softened on the bond news on Monday because investors who received small term loan allocations may have been looking to sell their positions so they could get involved in the new notes.

As was previously reported, Rite Aid's new term loan (B3/B+) is priced at Libor plus 650 basis points with a 3% Libor floor, and it was sold at an original issue discount of 96.

There is call protection of 105 in the first year, 103 in the second year and 101 in the third year.

During syndication, the loan was upsized from $400 million as a result of strong demand and the original issue discount firmed at the midpoint of guidance of 95½ to 961/2.

Citigroup, Bank of America, Wells Fargo and GE Capital are the joint lead arrangers on the new deal, with Citi the left lead.

Proceeds from the new term loan, which is scheduled to close on June 10, will be used to refinance the $145 million tranche 1 term loan also due September 2010, and repay and cancel a portion of the commitments outstanding under the existing $1.75 billion revolver due September 2010.

As part of the plan to refinance 2010 debt maturities, Rite Aid is also currently seeking to get a new $1 billion senior secured revolving credit facility due September 2012, according to an 8-K filed with the Securities and Exchange Commission on Monday.

The company revealed that, so far, it has received $900 million in commitments from lenders toward the revolver.

If the new revolver is in an amount less than $1 billion, Rite Aid may seek to offer additional notes or other debt.

Proceeds from the new revolver and the new notes will also be used to repay amounts outstanding and replace the company's existing revolver.

The notes sale is not contingent upon the entry into the new revolver, which is subject to successful syndication and satisfaction of customary closing conditions.

On June 5, Rite Aid successfully amended its existing credit facility to allow for the new debt and the completion of the refinancing plan, and to provide greater flexibility to complete asset sales.

The amendment also permits the company to refinance its existing accounts receivable securitization facilities with on-balance sheet debt secured on a senior or second priority basis.

Under the amendment, if the company has less than $150 million of revolver availability, it will be subject to a fixed charge coverage ratio maintenance test.

In addition, the amendment restricts Rite Aid from accumulating cash on hand in excess of $200 million at any time when revolving loans are outstanding and from borrowing revolving loans in excess of $100 million over three consecutive business days.

Rite Aid is a Camp Hill, Pa.-based drugstore chain.

Ford, GMAC mixed

Ford Motor and GMAC bonds ended the day mixed, as news reports published during the session indicated that Ford was concerned about the potential for preferential treatment toward the federally supported auto lender.

A trader saw Ford's benchmark 7.45% notes due 2031 gaining nearly 2 points to close at 69, while the 6½% notes due 2018 ended unchanged at 68.

In GMAC's debt, the 6 7/8% notes due 2011 were seen falling almost a point to 89.25, while the floating-rate notes coming due Oct. 10 remained steady at 84. The floaters of 2012 meanwhile moved over half a point higher to 61.625.

At another desk, a trader saw the benchmark Ford's "more like 69," compared with levels around 67 on Friday. He saw no change in GMAC's 6 7/8% notes - which he called the name's "most active" - at 89.

"GMAC was very quiet except for the 6 7/8%," he said.

On Monday, several news outlets reported that Ford was approaching lawmakers regarding what it sees as an unfair advantage for GMAC. Because the Obama Administration has said it would help the lender as it becomes the No. 1 loan provider for Chrysler LLC, Ford is concerned that the company is receiving an unfair cost advantage, i.e., cheaper borrowing costs.

The situation will likely be addressed on June 10 when the Senate banking committee meets.

"Ford is the healthiest company in the intensive-care unit right now, and you don't want to push them over the edge," said Representative Mike Rogers, a Michigan Republican, in a Bloomberg article. "I don't want the third company to go into bankruptcy because the government put them there by making them artificially uncompetitive."

Elsewhere in the world of automobiles, General Motors Corp.'s notes, such as the 9.4% notes due 2021, remained in the 10 to 11 range, traders reported.

Smurfit slips on sale

Bankrupt Smurfit Stone Container saw its bonds slipping slightly as the company requested permission to sell off its Fullerton, Calif. property.

A trader said the bonds "maybe moved down a bit," quoting the debt generically at 36 bid, 37 offered. Another market source echoed that market.

The Chicago-based paperboard manufacturer asked the bankruptcy court overseeing its case on Friday to allow for the $8.25 million sale to Western Realco LLC. The site was once home to a box manufacturing plant. The plant closed in June 2008.

Since the plant's closure, Smurfit has spent about $25,000 per month to maintain the property and to pay for property taxes.

Sara Rosenberg contributed to this article.

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