Tribune bonds active, unchanged; Smithfield boosted by stock upgrade; GM, Ford bank debt weakens

By Stephanie N. Rotondo

Portland, Ore., Dec. 9 - The distressed bond market closed out Tuesday's session rather sideways, traders reported, as the equity markets' decline stamped out any forward momentum.

"The market wanted to go up, but then the stock market crapped out and so it couldn't," one trader said.

Tribune Co.'s bonds remained active following the company's bankruptcy filing Monday. One source said about $17 million of the company's debt traded hands, though the bonds were considered unchanged.

Smithfield Foods Inc. saw its stock upgraded by an analyst late Monday. That news, coupled with the company's statements last week that it had sufficient liquidity and that consumers were buying pork more and more, helped give the company's bonds a boost in Tuesday trading.

As the country waited to hear what lawmakers would decide in regards to bailout funds for the Big Three, General Motors Corp. and its sector peer, Ford Motor Co., saw their bank debt slip. Traders said the losses came as lenders were concerned what a bailout might mean for them.

Meanwhile, Harrah's Entertainment Inc.'s bonds ended the day better following the company's amended tender offer terms being announced. Sprint Nextel Corp.'s debt, however, fell as a news report stated that the company was looking to trim costs.

Tribune bonds active, unchanged

Tribune's bonds remained active after the company filed for bankruptcy on Monday, traders said.

But the bonds, already in the single-digits, were seen largely unchanged as the Chicago-based media company laid out its unconventional bankruptcy financing.

A trader quoted the bonds, which are trading all around the same levels, at 5 bid, 7 offered. Another called the bonds 6 bid, 7 offered.

In the bank debt, the term loan B was softer as there was some selling pressure post-bankruptcy news, according to a trader.

The term loan B was quoted at 28½ bid, 29½ offered, down from 32 bid, 34 offered on Monday, the trader said.

"People realized they're probably not going to pay current in bankruptcy so saw a lot of CLOs selling today," the trader explained.

On Monday, Tribune announced that it filed for bankruptcy so that it can restructure its debt.

Tribune also revealed on Monday that it has negotiated an agreement with Barclays to maintain post-filing its existing securitization facility and that Barclays has agreed to provide a letter-of-credit facility.

According to Tribune, these agreements with Barclays are meant to supplement its cash availability in the event of even more significant declines in operating results.

Following in Fitch Ratings' footsteps, both Moody's Investors Service and Standard & Poor's downgraded Tribune's ratings Tuesday.

Smithfield boosted on upgrade

Smithfield Foods' debt got a boost Monday on a stock upgrade from Deutsche Bank, and that momentum moved into Tuesday trading.

A trader said the pork producer's 7¾% notes due 2013 hit 49, up from its previous low around 45. Another trader saw the 8% notes due 2009 at 90.5 bid, 91.5 offered.

Late last week, the company surprised investors by stating that it had shown a 76% drop in its second-quarter profit but that buyers - already cash strapped - were turning away from higher-priced meats to "the other white meat."

In a research note to clients, Deutsche analyst Christina McGlone wrote, "Pork is the least consumed protein in the foodservice sector and its value-positioning (i.e. hot dogs) within retail suggest out-performance vs. more expensive proteins in an economic downturn."

Like others in the sector, like Pilgrim's Pride Corp., which filed for Chapter 11 protections last week, Smithfield struggled as feed prices skyrocketed.

"Everybody got crushed because of where commodities went," a trader said.

But as the price of grains like corn stabilizes, the belief that more consumers will turn to the cheaper pork products is encouraging for Smithfield's bottom line. The company has also said that its liquidity position is good, another positive sign for investors.

GM, Ford loans weaken

General Motors and Ford Motor both saw their term loans drop on concerns over what the proposed government bailout would mean for lenders, a trader reported.

General Motors, a Detroit-based automaker, saw its term loan quoted at 44 bid, 46 offered, down from 50 bid, 53 offered, the trader said.

And, Ford, a Dearborn, Mich.-based automaker, saw its term loan quoted at 41½ bid, 44 offered, down from 46 bid, 47 offered, the trader continued.

There is "doubt in peoples' minds [about] how the government can be number-one claim, if there's ways to get around the covenants in the loans. Loan holders are trying to figure out if there's a way for this to happen without being taken out," the trader explained.

"Also, [there is] some profit taking there too," the trader added.

As was previously reported, Congress is working on a rescue plan for the auto companies that would provide around $15 billion in short-term financing, with most of that going to General Motors and Chrysler LLC, who appear to be in the most immediate danger of possibly filing for bankruptcy.

Last week, the auto companies all presented plans to Congress, pleading cases for government aid so that they could hopefully return to profitability.

General Motors had requested access to $18 billion in funds, comprised of a $12 billion bridge loan - of which it wants $4 billion this month - and a $6 billion revolving line of credit; Chrysler asked for $7 billion in loans from the government, and, Ford, requested access to an up to $9 billion bridge loan in case the current economic crisis worsens or there is a bankruptcy of a major competitor.

Harrah's inches up

Harrah's Entertainment's 10¾% notes due 2016 got a late-day boost, traders said, as the company modified some of the terms of its recently announced tender offer.

One trader called the issue "up pretty good today" at 28 bid, 30 offered. Another saw the bonds at 26.5 offered early on and then saw them jump to 27.5 bid, 28.5 offered shortly before the market closed.

"They won't get primed as much as they were," a trader said of the modified terms. "A lot of people tendered so that meant [the bonds] were not getting primed near as much."

In a press release, Harrah's said that it was increasing the amount of cash paid for each $1,000 principal amount of notes maturing in 2010 and 2011 tendered. The company also elected to forgo the Dutch auction process in favor of a fixed price.

Sprint bonds slip

A trader called Sprint Nextel's bonds unchanged to 1 to 2 points weaker following a Bloomberg news report that said the company was looking at cutting costs.

The trader called the 8 3/8% notes due 2012 the most active of the company's issues and unchanged around 71. But the 7 5/8% notes due 2011 slipped some to end around 76 from 77 bid, 78 offered previously.

Another trader quoted the 6 3/8% notes due 2009 at 98.25 bid, 98.75 offered, the 8 3/8% notes around 71 and the 8¾% notes due 2031 at 57.5 bid, 58.5 offered.

The Bloomberg piece said that the company - ranked the worst in customer satisfaction for two years straight - was considering closing as many as 20 call centers as service improvements have reduced the number of incoming calls.

Broad market mostly sideways

A trader saw GMAC LLC's 5.85% notes due 2009 "not much changed" at 94.

Hovnanian Enterprises Inc.'s 11½% notes due 2013 were likewise unchanged at 73.5.

Nova Chemicals Corp.'s 7.4% notes due 2009 were unchanged at 93 bid, 93.5 offered, according to a trader. But another source deemed the 6½% notes due 2012 2 points softer at 52 bid.

Realogy Corp.'s 12 3/8% note due 2012 "looks kind of lower," a trader said, at 12. He said the bonds were at 15 bid, 16 offered previously.

Despite a downgrade from Fitch, Bon-Ton Stores Inc.'s 10¼% notes due 2014 inched up to around 17, market sources said. But it was noted that there was only one trade in the name.

Primus Telecommunications Group Inc.'s 14¾% second-lien notes were quoted at 13.5 bid, 14.5 offered.

Washington Mutual Inc.'s senior holding company paper, like the 4% notes due 2009, "seemed to be up a little," a trader said, at 64.5 bid, 65.5 offered.

Idearc Inc.'s 8% notes due 2016 "traded a bunch" at 7.75 bid, 8.5 offered, according to a trader. He called that level "all in that same zone" as it had been.

Sara Rosenberg contributed to this article.

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