Texas Competitive slides on write-downs; Freescale dips; Ford, GM inch higher

By Sara Rosenberg

New York, Feb. 23 - Texas Competitive Electric Holdings' term loan B debt headed lower on Monday as the company revealed to it is going to write down a lot of goodwill charges in the fourth quarter as a result of its buyout transaction.

In other secondary happenings, Freescale Semiconductor Inc.'s term loan softened, and Ford Motor Co. and General Motors Corp. were both a little higher on the day.

Texas Competitive falls with buyout charges

Texas Competitive's term loan B debt lost some ground during the trading session as news emerged that the company would be writing down a hefty amount of charges because of its acquisition in October 2007, according to a trader.

The term loan B debt was quoted at 63¾ bid, 64½ offered, down from Friday's levels of 65½ bid, 66 offered, the trader said.

For the 2008 fourth quarter, Energy Future Holdings Corp., parent company to Texas Competitive, expects to see a non-cash goodwill impairment charge of $8.9 billion, according to an 8-K filed with the Securities and Exchange Commission.

This $8.9 billion is out of the about $23 billion of goodwill arising from purchase accounting for the buyout of the company.

The estimated goodwill charge will consist of impairments of about $8 billion related to Energy Future Holdings' Competitive Electric segment and about $900 million related to its Regulated Delivery segment.

More charges hit Texas Competitive

In addition to the charges related to the its buyout, Energy Future Holdings also expects that its fourth quarter 2008 results will include a non-cash impairment charge of about $500 million related to Texas Competitive's trade name intangible asset.

The goodwill and the trade name intangible asset impairments resulted from an assessment of the carrying value of these assets triggered by the recent declines in market values of debt and equity securities of comparable companies and the dislocation in the capital markets.

Energy Future Holdings will likely also have a non-cash impairment charge of about $200 million in the fourth quarter related to Texas Competitive's natural gas-fueled generation fleet.

This impairment was triggered by a determination that based upon current and forecasted market conditions, it was more likely than not that certain natural gas-fueled generation units would be retired or idled earlier than previously expected.

Texas Competitive to stay in compliance

The 8-K filing on Monday went on to say that even with all these impairment charges, Texas Competitive will still remain in compliance with its debt covenants.

Energy Future Holdings and Oncor are also expected to be incompliance with their debt covenants as well.

Furthermore, the charges are not anticipated to have any material impact on Energy Future Holdings' liquidity, the filing added.

Texas Competitive is a Dallas-based energy company.

Freescale weakens

Freescale Semiconductor's term loan was lower on Monday, with one trader pointing to general market heaviness as the reason behind the move.

The term loan was quoted at 44½ bid, 45½ offered, down from Friday's levels of 46 bid, 47 offered, the trader said.

Late in the day Friday, the company announced that none of its existing credit facility lenders delivered cash commitments to participate in its proposed $1 billion incremental term loan that will be used to refinance bonds.

The incremental term loan due Dec. 15, 2014 will carry pricing of 12.5%, and will be guaranteed by the same guarantors under the company's senior secured credit facility.

Freescale turning to bondholders to raise loan

As a result of bank lenders not participating in the proposed incremental term loan, Freescale is now offering the full $1 billion to noteholders through an exchange offer.

Eligible participants include holders of the company's senior floating-rate notes due 2014, 9 1/8%/9 7/8% senior PIK-election notes due 2014, 8 7/8% senior fixed-rate notes due 2014 and 10 1/8% senior subordinated notes due 2016.

Up to $250 million of the senior PIK-election notes, which are priority one, and up to roughly $746 million of the senior subordinated notes, which are priority two, can be swapped for the new term loan debt.

The senior floating-rate notes are acceptance priority three, and the senior fixed-rate notes are acceptance priority four. Maximum amounts for swaps of these notes are not available.

According to the company, the purpose of the transaction is to improve its financial flexibility by reducing overall debt and related interest expense.

Each note invitation will terminate at midnight ET on March 10.

Freescale is an Austin, Texas-based designer and manufacturer of embedded semiconductors for the automotive, consumer, industrial, networking and wireless markets.

Ford, General Motors rise

In more trading news, both Ford and General Motors saw their term loan levels climb a little higher during market hours, according to a trader.

Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 31¾ bid, 32¾ offered, up from 31 bid, 32 offered, the trader said.

And, General Motors, a Detroit-based automotive company, saw its term loan quoted at 36½ bid, 38½ offered, up from 36 bid, 38 offered, the trader added.

On Monday, Ron Gettelfinger, president of the United Auto Workers union, announced that an agreement was reached with Ford on modifications to the Voluntary Employee Beneficiary Association, the union's health care trust for Ford retirees.

Any changes to the contract are subject to approval of the union's membership at Ford.

In addition, the proposed health care trust changes will require court approval.

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