Auto, energy, airline sectors under pressure; investors get an early peek at Wrigley

By Sara Rosenberg

New York, May 27 - The auto sector fell on Tuesday on the back of General Motors Co.'s news about how much the American Axle & Manufacturing Holdings Inc. strike is costing the company, energy names dropped as oil prices sank and airlines continued to slip on sector concerns.

In other news, some potential lenders are being given an early look at the Wrigley Co. multi-billion credit facility that is still months away from officially launching.

The auto sector was weaker in trading primarily because investors were reacting to General Motors' news regarding the cost of the American Axle strike, which, although the details came out on Friday, because of the holiday weekend, the market didn't really respond until now, according to a trader.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 89 1/8 bid, 90 1/8 offered, down from 89½ bid, 90½ offered, the trader said.

Ford Motor Co., a Dearborn, Mich.-based automotive company, saw its term loan quoted at 86¼ bid, 87¼ offered, down from 87¼ bid, 88¼ offered.

Chrysler Corp. LLC (Chrysler Auto), a producer and seller of Chrysler, Dodge and Jeep vehicles, saw its term loan quoted at 64½ bid, 65½ offered, down from 65½ bid, 66½ offered, the trader continued.

Chrysler Financial Services LLC, a provider of financial services for vehicles in the NAFTA region, saw its first-lien term loan quoted at 90 bid, 91 offered down from 90¾ bid, 91¾ offered, and its second-lien term loan quoted at 80¾ bid, 82¾ offered, down from 82¾ bid, 84¾ offered.

And, Accuride Corp., an Evansville, Ind.-based manufacturer and supplier of commercial vehicle components, saw its term loan quoted at 96 3/8 bid, 97 3/8 offered, down from 96¾ bid, 97¾ offered, the trader remarked.

On Friday, General Motors said in an 8-K filing that in the second quarter, the American Axle strike is expected to result in the loss of an additional 230,000 production units, which is estimated to have an earnings before tax impact of about $1.8 billion.

Only a portion of this lost production will be recovered, due to the current economic environment and to the market shift away from the types of vehicles that were impacted by the strike.

In the first quarter, the American Axle strike resulted in a loss of about 100,000 production units, which had an estimated impact on earnings before tax of about $800 million.

The strike is now over as of May 22, and the final United Auto Workers local union ratified a new labor agreement with American Axle.

In addition, General Motors said that several other of its plants have been idled by work stoppages associated with finalizing local United Auto Workers agreements. These work stoppages are expected to result in the loss of about 33,000 production units in the second quarter, which are estimated to have an earnings before tax impact of about $0.2 billion.

"I think most of it was on GM and how badly they've been hurt by the strike," the trader said regarding the softening in autos on Tuesday. "There was a New York Times article today saying there's enormous pressure on the auto industry, lower consumer demand. Nothing really new in the article, though.

"Ford down partially on GM and partially on continuation of its downslide last week. They lowered their outlook," the trader added.

Last Thursday, Ford said that it was lowering its production plans to 690,000 vehicles in North America during the second quarter, a further reduction of 20,000 units from previously announced planned production levels and a decline of 15% from the second quarter of 2007. The company plans to produce between 510,000 and 540,000 units in the third quarter, down 15% to 20% from the same period last year and fourth-quarter production is expected to be between 590,000 and 630,000 units, down 2% to 8% from year-ago levels.

The lower overall production, dramatic model mix shifts and substantially higher commodity costs forced a change in Ford's near-term financial outlook.

The company does not currently expect to be able to meet its 2009 North American profitability goal, but rather it now just anticipates being about break-even.

Furthermore, Ford said that cash outflows associated with operating losses and employee separations now are projected to be between $14 billion and $16 billion for 2007 to 2009. This is a deterioration compared with previous guidance but remains better than the original $17 billion outflow projection.

Energy names weaken

The energy sector also headed lower during the trading session on the back of oil prices dipping below $129 a barrel on indications that fuel consumption is dropping, according to a trader.

Dynegy Inc., a Houston-based producer and seller of electric energy, capacity and ancillary services, saw its institutional bank debt quoted at 94¼ bid, 95¼ offered, down from 94½ bid, 95½ offered, the trader said.

Texas Competitive Electric Holdings, a Dallas-based energy company, saw its term loan B-2 quoted at 94 1/8 bid, 94 5/8 offered, down from 94 3/8 bid, 94 7/8 offered, and its term loan B-3 quoted at 94 bid, 94½ offered, down from 94¼ bid, 94¾ offered.

NRG Energy Inc., a Princeton, N.J.-based owner and operator of a diverse portfolio of power-generating facilities, saw its term loan quoted at 96¼ bid, 96¾ offered, down from 96 3/8 bid, 97 1/8 offered, the trader continued.

And, Enterprise GP Holdings LP, a Houston-based midstream energy company, saw its term loan quoted at 97¼ bid, 98¼ offered, down from 97¾ bid, 98½ offered, the trader added.

Airlines drop some more

In more secondary news, the retreat in the airline sector continued into Tuesday's market as Delta Air Lines Inc., Northwest Airlines Corp., UAL Corp. and American Airlines Inc. all traded lower once again, according to a trader.

Atlanta-based Delta Air Lines saw its first-lien term loan quoted at 83¾ bid, 85¾ offered, down from 84½ bid, 86 offered, and its second-lien term loan quoted at 75 bid, 77 offered, down from 75½ bid, 77½ offered, the trader said.

Eagan, Minn.-based Northwest Airlines saw its term loan quoted at 77½ bid, 79½ offered, down from 78 bid, 80 offered.

Chicago-based UAL saw its term loan quoted at 76½ bid, 78½ offered, down from 77 bid, 79 offered, the trader continued.

And, Fort Worth, Texas-based American Airlines saw its term loan quoted at 89½ bid, 91 offered, down from 90 bid, 92 offered, the trader.

"It's a continuation of flight cancellations, scaling back capacity and soaring gas prices. Just all the issues that are facing the industry," the trader added.

Cash unchanged, LCDX up

In general, the cash market ended the day pretty much unchanged after bouncing back from being down in the morning, while LCDX 10 was a touch better, according to a trader.

The index was quoted at 98.75 bid, 98.85 offered, up from 98.65 bid, 98.75 offered, the trader said.

"Volumes still pretty light. People are still out from the holiday weekend," the trader added.

Wrigley doing some early marketing

Over in the primary, Wrigley's proposed $5.7 billion senior secured credit facility is currently being shown around to some investors, and those guys are being offered a ticking fee for getting involved in the transaction months before the actual retail bank meeting will take place, according to a buyside source.

No date has been scheduled for the retail launch, with the source saying that it could come as early as after Labor Day to as late as the end of this year.

The facility credit consists of a $250 million revolver, a $1 billion term loan A and a $4.45 billion term loan B.

Rumor has it that the term loan B is expected to carry pricing of around Libor plus 400 basis points, and ratings on the deal are speculated in the four-Bs area, the source continued.

Goldman Sachs is the lead bank on the deal that will be used to help fund Mars Inc.'s acquisition of Wm. Wrigley Jr. Co., repay certain Wrigley debt and for ongoing working capital and general corporate purposes.

Under the transaction agreement, Mars will pay $80 cash for each share of Wrigley common stock and class B common stock in a transaction valued at about $23 billion.

Wrigley Co., a confections company, will be operated as a separate, stand-alone subsidiary of Mars, keeping its headquarters in Chicago.

As part of the deal, Mars, a McLean Va.-based producer of confectionery, food and petcare products, has received a commitment for a $12 billion senior unsecured credit facility that, according to the source, is expected to be investment grade.

The Mars facility consists of a $1.5 billion revolver, an $8.5 billion term loan and a $2 billion bridge loan.

Rumor is that the Mars term loan is expected carry pricing of around Libor plus 200 bps, the source added.

JPMorgan, Bank of America, BNP Paribas, Citigroup, Deutsche Bank, Lloyds TSB Bank and RBS Securities are the lead banks on the Mars facility, which will be used to finance the equity contribution from Mars, repay certain Mars debt and for general corporate purposes.

Also, Berkshire Hathaway has agreed to provide $4.4 billion in subordinated debt financing to the surviving corporation in the merger and to invest $2.1 billion in equity securities.

The transaction is expected to close later this year or in the first quarter of 2009, subject to customary closing conditions, including stockholder approval and certain governmental regulatory clearances.

Performance Food Group closes

Blackstone Group and Wellspring Capital Management completed their acquisition of Performance Food Group Co. in a transaction valued at about $1.4 billion.

Performance Food Group is being merged with a wholly owned subsidiary of Vistar Corp., a Centennial, Colo.-based specialty foodservice distributor controlled by affiliates of Blackstone and Wellspring.

The newly combined company, known as Performance Food Group, is expected to have revenues approaching $10 billion and more than 10,000 associates.

To help fund the transaction, Performance Food got a new $1.1 billion asset-based revolver priced at Libor plus 225 bps - in line with original price talk.

Wachovia, Credit Suisse and GE Capital acted as the lead banks on the deal.

Performance Food is a Richmond, Va.-based restaurant food distributor.

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