Bankruptcy filing trips up Tribune; autos up as bailout beckons; market eager for El Paso five-year deal

By Paul Deckelman and Paul A. Harris

New York, Dec. 8 - Tribune Co.'s bonds were mostly multiple points lower after the Chicago-based media giant - struggling to deal with a giant-sized debt load left over from last year's buyout of the company by real estate tycoon Sam Zell - announced that it had sought protection from its junk bond holders and other creditors via a Chapter 11 bankruptcy filing.

General Motors Corp.'s bonds, and those of its 49%-owned auto financing arm, GMAC LLC, were seen better by several points in busy trading on signs that at least a temporary bailout of the ailing automaker would likely be approved, now that Capitol Hill Democrats have dropped their insistence that money from the TARP Treasury bailout fund be used and will go along with a White House plan to use funds already earmarked for Detroit's efforts to convert to more fuel-efficient technology.

Freeport McMoRan Copper & Gold Inc.'s bonds, which had been hard hit last week after the Phoenix-based metals mining company announced planned copper output cuts and anticipated sales declines because of recently falling copper prices and lagging demand, were solidly higher in busy trading, in line with a big jump in its stock and those of many other commodity producers, spurred on by the hopes that the incoming Obama administration's massive stimulus package will boost industrial demand for what it produces.

Chesapeake Energy Corp., whose bonds fell on Friday as shareholders reacted with disdain to the company's plan to issue up to 50 million new shares to bolster its capital, were seen coming back, helped by a morning conference call

The long-dormant high yield primary market actually showed signs of life, as participants said that El Paso Corp.'s planned $500 million issue of five-year notes - expected to price with a fat coupon and at a steep discount, to get the transaction done - could come to market as early as Tuesday.

Ahead of that deal, the company's established 7% notes due 2017 were seen down as much as 2 points, in an otherwise mostly higher market, at the 68.5 bid level.

El Paso seen Tuesday

Meanwhile, although sources roundabout the market are putting up "closed" signs on the 2008 high-yield primary market, it appears that at least one more deal is about to get done.

El Paso Corp. is expected to price a $500 million issue of 15% five-year notes (existing ratings Ba3/BB-) at a discount on Tuesday, market sources say.

Morgan Stanley and Banc of America LLC are joint bookrunners.

A significant portion of the deal is already spoken for, according to a sell-side source not in the deal.

Word of the offering first surfaced on Friday afternoon, with a sell-side source, not in the deal, suggesting that the discount could come around 90, resulting in a yield of between 17% and 18%.

If indeed El Paso managed to place 15% notes on Tuesday, that coupon would be greater than twice as high as that on the $600 million of 7¼% senior bullet notes the company priced at par, just last May.

Should the deal clear it will represent the first corporate issue - i.e. issuance unrelated to the backlog of LBO legacy deals - since MGM Mirage priced a restructured $750 million issue of 13% five-year senior secured notes (Ba1/BB/) at 93.132 to yield 15% on Oct 30.

Exchanges

The Monday session produced very little news on the debt restructuring exchange deals presently in the market.

Station Casinos, Inc. extended the consent date on its exchange deal that offers new 10% senior secured and junior secured term loans due 2016 for five outstanding issues - two tranches of senior unsecured notes at $0.54 on the dollar and three tranches of subordinated notes at $0.20 on the dollar.

The exchange offer began on Nov. 25 and will expire at midnight ET on Dec. 23.

Although more news is expected on the restructuring front during the week ahead, including new deals, nothing else surfaced on Monday.

Bondholders continue to size up the deals on the table, from GMAC, Harrah's, Neff Corp. and others, a buy-sider said, adding that as the restructuring deals proceed through the market concessions are expected from the companies and their dealers, relative to the terms of the deals originally announced

Market indicators point higher

The widely followed CDX High Yield 11 index of junk bond performance, which was unchanged on Friday, was seen to have firmed smartly on Monday, with a market source quoting a mid-bid-asked level of 741/4, up more than a point from Friday's close. The KDP High Yield Daily Index meantime rose by 24 bps to 47.75, while its yield tightened by 7 bps to 17.58%.

In the broader market, advancing issues led decliners by a five-to-three margin. Overall market activity, reflected in dollar volumes, was down around 8% from the pace seen in Friday's session.

A trader said that Monday was "really an odd day in the bonds. Equities were all the rage," with the bellwether Dow Jones Industrial Average notching its second convincing advance in as many sessions, climbing 298.76 points, or 3.46%, to end at 8,931.18, pushed northward by investor belief that a compromise would be reached to prevent one, some or even all of Detroit's traditional Big Three carmakers from sliding into bankruptcy, as well as by their hopes that the massive stimulus package that president-elect Obama talked up over the weekend, largely centered on infrastructure improvements, will jump-start the moribund U.S economy.

Other, broader indexes followed suit, with the Standard & Poor's 500 ending up 3.84% and the Nasdaq composite up by 4.14% on the day.

Stocks take focus

With so much attention focused on the rebounding stock market, the trader said, "there weren't a whole lot of names moving around. It was a sort of boring day."

A second trader said that "although there was a very positive feeling from the strength of the equity market, I really didn't see high yield rallying or having an increased volume."

Another trader described Monday's session as a case of "same story, different day," likening it to the sessions last week which saw attention being paid to what was happening in Washington with the auto industry bailout - but explosive equity trading not really translating into a lot of activity in Junkbondland.

"There was a focus on the autos - everyone keeping an eye on what's going to happen there. Things were better pretty much across the board" - but he said that volume seemed constrained. "We made it to $1 billion," he said, "and I didn't think we were going to make it to $1 billion." However, a lot of the activity he saw came in Freeport McMoRan and GM to the exclusion of most other issues.

All told, "it was a typical Monday. Overall, I didn't see much drastically happen. The broader market was better anywhere from a half-point to a point, depending on the sector."

He said that if the junk market shows signs of strength,' I would expect to see accounts selling into relative strength going into the end of the year. That should clean things up."

"It's no surprise, given that it's December, that volumes are light," added a syndicate source.

"And that certainly holds true for December 2008."

This official said that a lot of accounts are requesting not to be contacted again until 2009.

Elsewhere a trader from a high-yield mutual fund said that with big rallies in the U.S. stock markets - the S&P 500 was up 3.84% - high yield definitely traded up on Monday.

"A lot of people were covering shorts, but it was definitely an 'up'-day," the trader said.

Tribune takes a tumble

The not-unexpected news that Tribune Co. - the corporate parent of the venerable Chicago Tribune and Los Angeles Times, broadcast properties such was WGN-TV in Chicago and WPIX-TV in New York, as well as the Chicago Cubs baseball team - had become the latest major U.S. corporation to head for Wilmington, Del., and duck under the Bankruptcy Code umbrella in hopes of surviving its debt deluge, pushed its bonds mostly lower Monday.

A trader saw Tribune's 4 7/8% notes due 2010 trading at bid levels between 4 and 10, down 5 points on the day and trading flat, or without accrued interest, after the company's Chapter 11 filing.

Another trader saw Tribune's bonds like its 5¼% notes due 2015 around 3 bid, 5 offered earlier in the session, but then saw them trading at 6.25 bid, 6.75 offered, up 2½ points. He said Trib's 4 7/8% notes due 2010 had "been everywhere" during the session, from a low of 2, which he said to "throw out" as unrepresentative, to a high of 13, before seeing $1 million of the bonds trading at 7.75 late in the day.

At another desk, a trader said the Tribune 10's were "definitely off their highs," and "banging around a 4-6 neighborhood after the filing;" he saw the 4 7/8s at a late level of 5 bid, 7 offered.

He said that "the one big thing that everyone was wondering about" was what Tribune would do about its $69.5 million of 5.67% medium-term notes that were to have matured and been retired Monday; those bonds were trading as high as 88 bid in odd-lot trading last week as investors gambled that the company would be able to make good on the notes - but the fact that they had not moved all the way up to par, the likely level for a bond slated to mature and be paid off in a couple of days, was a signal that some in the market feared that the bonds would not be paid.

Apparently, their fears were well-founded.

The trader said that he had heard earlier in the day "that the [notes' indenture] trustee did credit [some of the holders] the money first thing in the morning," theorizing that since such disbursements are usually handled by computerized programs set well in advance to fund disbursements on a certain date, absent a specific order cancelling the transaction, it might be possible that some such payments did take place, until someone at Tribune realized what was happening and specifically notified the trustee to slam on the brakes in light of the bankruptcy filing.

He said that he had not heard since then "what had transpired there, if that had since been retracted or not" - but said that such a retraction, if any funds had actually been disbursed, was likely what had in fact happened, especially since a bankruptcy judge scrutinizing such a transaction later on could well order the payment cancelled and the money restored to the bankruptcy estate out of which all of the creditors, and not just those specific noteholders, would be paid.

In fact, the Chicago Tribune, put in the unusual and rather awkward position of having to report on the insolvency of its own parent company, said that the latter "had more than enough cash on hand to make a payment of $70 million due today on money borrowed before [Tribune owner] Zell's deal, but it was unable to convince lenders to embrace a broader restructuring of its debt."

The trader said that at some point, the market must have woken up to what had occurred - because that maturing MTN paper tumbled to bid levels as low as 1 cent on the dollar in trading later Monday, with several large-block trades taking place down there.

"Initially, when they filed, and everyone was quoting 1 bid, I'm sure someone just hit the bid and moved on. I don't think that [any MTN holders who were actually paid] were able to hold their cash. But that was the one thing I saw that people were scratching their heads on."

Not all Tribune debt was down - while a market source was pegging the 10s down nearly 6 points at around 7.375 with over $21 million having traded, making it one of the day's most active junk issues, and saw the 6.61% bonds due 2027 originally issued by Times Mirror Co., now a Tribune subsidiary, at 6 bid, down a point from recent levels - and down a whopping 14 points from territory it held just a couple of weeks ago - the company's 5.25% notes due 2015 were actually up a couple of points at just under 7 bid, on volume of some $12 million.

In its filing with the U.S. Bankruptcy Court for the District of Delaware, Tribune reported $7.6 billion in assets and $12.79 billion in liabilities - much of the latter debt incurred by last year's mostly debt-fueled buyout of the company by real estate magnate Sam Zell, who now serves as the chairman and chief executive officer of the privately-held company.

Autos get in gear as bailout hopes rise

A trader said that autos "caught a little bid - not on the announcement" that Congressional Democrats had hammered together a draft bailout plan to send to the White House for review, in hopes of voting on it this week, "but even before that" in anticipation that a bailout of some sort will be approved.

He saw General Motors's benchmark 8 3/8% bonds due 2033 up 2 points on the session at 19 bid, 21 offered, while its 7.20% notes due 2011 were 2½ points ahead at 24 bid, 26 offered.

He saw GM financing affiliate GMAC's 8% bonds due 2031 "pretty much unchanged" at 26 bid, 29 offered, while its 5.85% notes coming due on Jan. 14 were at 87 bid, 90 offered, up 2 points. He noted that GMAC's current exchange offer for the 8s and its other bond issues is scheduled to expire on Tuesday.

He further saw Ford Motor Co.'s 7.45% bonds due 2031 as "probably the only one that didn't show a significant increase today," quoting them at 22.5 bid, 24.5 offered, up "perhaps 1/2" point.

Another trader said that GMAC had done "a little better," seeing the 8s up a point at 29 bid, explaining that "everyone thinks a bailout is coming." He also saw the GM benchmark issue up a point at 19 bid, 20 offered., but saw the Ford long bonds "still" 25 bid, 26 offered, which he called unchanged to up ½ point.

At another desk, a trader said GM's benchmark bonds had moved up to 20 on a round-lot basis, well above 17 bid on Friday, with $15 million changing hands. He saw less activity in its 7.20s which moved up to 24.5 bid from 22.25 on Friday. He saw GMAC's 8s firm 1 ½ points to 29, though on just $3 million, but saw the 5.85% notes make "quite a move" all the way up to 94.25 from 88 on Friday, on $13 million traded.

On the Ford side of the fence, he saw the 7.45s at 25 bid on a round-lot basis, up from 23.5 on Friday, though only on $3 million traded. But on more substantial volume of $8 million, he saw Ford Motor Credit Co.'s 7 3/8% notes coming due next October at 73.5 bid, versus 69 on Friday, while its 5.80% notes maturing on Jan. 12 pushed up 3 points, to 98.5 bid, on $7 million traded. "They had quite a move in response to the bailout news," he said, adding "now, that's some number."

GM's New York Stock Exchange shares rose as much as 25% in intraday-dealings, before ending up 85 cents, at 20.13%, at $4.93. Volume of 66.8 million shares was nearly two times the norm. Ford's NYSE-traded shares meantime jumped as much as 30.1% during the session, going out up 66 cents, or 24.26%, at $3.38. Volume of 268.4 million shares was over triple the usual level

Among the parts suppliers, a trader saw ArvinMeritor Inc.'s 8¾% notes due 2012 fairly actively traded, with over $10 million changing hands on a round-lot basis at 47.25, down a point from levels early last week.

However, another market source saw the bonds little changed at 48, on $10 million traded.

News reports said late Monday that the congressional leadership had drawn up a draft plan to extend the carmaker's $15 billion to $17 billion in immediate loans to carry them over into next year, when the new administration and the next Congress - both houses solidly controlled by the Democrats - will take up the question of more permanent fixes for the troubled industry.

Miner Freeport glitters again

A trader said the Freeport McMoRan's 8 3/8% notes due 2017 traded at 66 bid, "better by a couple" of points.

Another said that "there was some bounceback, on good volume," in the company's bonds - although he noted that as recently as last week, "they were just getting hammered" after the company announced plans to cut its copper mining output and its expected copper sales. He attributed Monday's gains to "bottom-fishers, or short-covering taking place there."

He saw the company's 8 3/8s last trading on a round-lot basis at 66.5 bid, up from 63 on Friday on some $24 million traded.

Even busier was its 8¼% notes due 2015, which saw some $29 million changing hands at 68 bid, up a point on the day

Freeport's NYSE-traded shares - which had "gotten killed' last week on the lowered output and sales guidance for the next two years, a trader said - came roaring back on Monday, zooming as much as 24.7% intraday before going out up $3.21, or 19.11%, at $20.01. Volume of 36.6 million shares was about a third larger than normal.

Freeport McMoRan - whose copper is a key component in such industrial goods as wiring and piping - was seen getting a boost, along with a number of other commodity producers, from market expectations that the huge infrastructure plan being put together by the incoming Obama administration will spur the economy, leading to renewed sales of their products.

Obama announced that he will create the largest public works construction program since the inception of the interstate highway system five decades ago in order to revive the economy."We will create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s," the president-elect declared.

Chesapeake changes plans, bonds better

Another commodity company that was being pounded last week but which was coming back Monday was Chesapeake Energy.

A trader saw its 6 7/8% notes due 2020 - which was a substantial loser late last week - having "gained it all back" Monday, up 3 to 4 points at 57 bid, 59 offered.

He also saw its 7 5/8% notes due 2013 a point better at 74 bid, 76 offered.

A market source at another desk saw the Oklahoma City-based independent oil and gas producer's 6¼% notes due 2018 up 3 points to the 59 bid level.

The bonds rose in tandem with the company's NYSE-traded shares - which had fallen sharply last week, because of investor fears of dilution stoked by its announced plans to sell up to 50 million new shares. After Chesapeake said over the weekend - and reiterated on a morning conference call - that it will cut the planned share issue in half to no more than 25 million shares.

CEO Aubrey McClendon also denounced what he said were "false rumors" making the rounds of the market last week that Chesapeake was having liquidity problems and could be forced into bankruptcy.

Also on that conference call, company executives outlined their plans to production cutbacks, to save money, and their drive to increase the company's cash holdings - it has $1.5 billion on hand and expects to close the year with $2 billion to $2.5 billion with almost no senior debt due for five years.

Despite that seemingly positive message, another trader said, it appeared to him that "bondholders did not really appreciate" McClendon's projections; he quoted the most heavily traded issue, the 7¼% notes due 2018 , up 1 point at 62. "I would have expected it to be up more," he said," and also noted that Chesapeake's 7½% notes due 2013 last traded on a round-lot basis at 77.75, down from 79.5 last week.

Benchmark Community Health issue up

Elsewhere, a trader saw Community Health Systems Inc.'s 8 7/8% notes due 2015 - sometimes seen as a something of a market proxy because of the issue's large size, widespread distribution and easy tradability - were up 1 1/8 point at 80.125 bid. Some $11 million of the Franklin, Tenn.-based hospital operator's bonds changed hands.

Sector peer HCA Corp.'s 9¼% notes due 2016 meantime firmed to 78.25 bid from 77 previously, a trader seeing "a bounceback in the hospital sector."

However, Vanguard Health Systems Inc.'s 9% notes due 2014 were behaving more anemically, down more than 2 points at 78.5 bid.

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