Vertis action goes 'wacky'; Visteon higher; ILFC moves up; Spansion to hold exit loan meeting

By Stephanie N. Rotondo

Portland, Ore., Jan. 8 - Distressed bonds continued to climb up during Friday's session, leaving one trader to speculate about the coming weeks.

"We have had such a run, it will be interesting to see how it plays out," he said.

In the near future, market players might be keeping an eye on Vertis Inc. as the company attempts to exchange some of its debt for equity. Vertis announced the plan Friday and as a result, its bonds went all "wacky."

Visteon Corp. continued to see some action, gaining nearly 10 points on the day. Still, there has been little credit-specific news to explain the recent surge.

Also, International Lease Finance Corp. bonds remained on an upward ascent. One trader said the bonds have been gaining ground since getting hit hard with a downgrade last month. And, recent news of a takeover offer might also be pushing the debt higher.

Vertis action goes 'wacky'

A trader called Vertis "an interesting one, kind of wacky," after the company announced a debt-for-equity exchange.

The trader said the 13½% notes due 2014 - which are the subject of the swap - were "initially quoted lower," even trading around 30, well down from previous levels in the low 40s. However, then the bonds traded back up to their prior levels, with the trader estimating them going out in the low 40s.

Another trader also saw the bonds trade around that 30 mark in round lot trading. Odd-lots, however, were in still around 40.

"I don't know what to make of that," he said.

The trader also saw the 18½% notes due 2012 "up a couple" at 87 bid, 88 offered.

Yet another source quoted the 18½% notes at 87 bid, 88 offered, compared with 85 bid, 85.5 offered previously.

The Baltimore, Md.-based marketing company said it would exchange its 13½% notes for common shares, an attempt "to improve Vertis' capital structure by reducing its overall debt approximately $220 million and annual non-cash interest expense by more than $30 million," the company said in a press release.

"Vertis believes consummation of the exchange offer and consent solicitation will better position Vertis to enter into value enhancing transactions, while simultaneously mitigating future refinancing risks," the company said. "In addition, Vertis believes consummation of the exchange offer and consent solicitation will provide suppliers, customers and employees with more confidence in Vertis as a result of an improved capital structure."

Under the terms of the exchange, Vertis will give noteholders 838.37 common shares for every $1,000 validly tendered. Those that participate early will receive a $5.00 consent fee for every $1,000 tendered.

Vertis said that approximately 61% of noteholders have already agreed to participate in the swap.

The early deadline for the tender is 5 p.m. ET on Jan. 21. The tender ends at 5 p.m. ET on Feb. 5.

Visteon drives higher

Visteon's debt continued to be among the more active issues trading - in fact, one trader called the credit "by far the most active bond."

That trader pegged the 7% notes due 2014 at 47 bid, 48 offered, up from opening levels of 38 bid, 39 offered and levels around 35 on Thursday.

"That paper has been ramping up," said another trader, placing both the 7% notes and the 8¼% notes due 2010 in the mid 40s, while the 12¼% notes due 2016 ended in the low 80s.

Traders had no explanation for the gains and there was no news that would have acted as a catalyst. However, the automotive sector in general has been moving higher since the start of 2010.

Visteon is a Van Buren township, Mich.-based automotive parts supplier.

ILFC moving on up

International Lease Finance, the aircraft leasing division of insurance giant American International Group Inc., saw its bonds trading rather actively, according to a trader.

The trader said about $80 million of the various issues under that moniker traded, though he was not sure about pricing.

Another trader saw the 5.65% notes due 2014 at 81 bid, 83 offered, the 4¾% notes due 2011 at 90 bid, 91 offered and the 5 5/8% notes due 2013 at 83 bid, 84 offered.

At another desk, a trader said the "shorter-dated stuff" was "up into the very high-90s," while the 5¾% notes due 2011 ended around 95.

"They have been moving back up ever since getting downgraded [on Dec. 18]," the trader said.

Just after New Year's AIG reportedly received an unsolicited bid for the ILFC unit for $12 billion. However, AIG nor ILFC has responded or commented on the offer, according to various news reports.

Spansion to hold loan meeting

News emerged on Friday that Spansion Inc. will be holding a bank meeting on Tuesday morning in New York to launch its proposed $450 million five-year term loan, according to a market source.

Price talk on the term loan is not yet available.

Barclays and Morgan Stanley are the lead banks on the deal, with Barclays the left lead.

Proceeds will be used to help fund the company's exit from Chapter 11.

In addition, the company will be getting a new $65 million asset-backed loan revolver for exit financing as well, the source added.

Under its plan of reorganization, Spansion will distribute substantially all of the equity interests in the reorganized company to unsecured creditors.

Holders of the company's floating-rate notes will receive cash, $237.5 million in new senior notes and $237.5 million of new convertible notes.

The plan also gives the company the option to conduct a rights offering under which some unsecured creditors can get new common stock and additional debt, and proceeds from this offering would be used to reduce the new senior notes and the new convertibles.

If the company receives enough proceeds from the rights offering, the floating-rate noteholders would be paid in full in cash instead of receiving the new notes.

Spansion is a Sunnyvale, Calif.-based maker of flash memory products.

Broad market remains strong

Elsewhere in distressed territory, a trader said about $15 million of R.H. Donnelley Corp.'s bonds traded, pegging all of the notes at 11 bid, 11.25 offered.

"That's kind of right where they have been," he said. "They might be a little better because of where Idearc [Inc.] got valued."

Another trader saw the 8 7/8% notes due 2016 and the 6 7/8% notes due 2013 at 11 bid, 12 offered, up from 10 bid, 11 offered earlier in the week. He also saw the 8% notes due 2013 around 30.

Meanwhile, Ply Gem Industries Inc.'s new 13 1/8% notes due 2014 finished at 102 bid, 102.5 offered, according to a trader. As for the "old ones, who cares now?" the trader said, speaking of the company's plan to refinance its existing debt.

Tronox Worldwide LLC's 9½% notes due 2012 were "up a good bit," a source said, around 93. He deemed that a 6- to 7-point gain on the day.

There was no news out that would have explained the jump.

Sara Rosenberg contributed to this article.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.