Lear up with skipped bond payment; Western Refining gains on paydown; GM firm on filing

By Sara Rosenberg

New York, June 1 - Lear Corp.'s term loan was stronger during Monday's market hours as the company revealed plans to forgo bond interest payments, keeping its loan amendment and waiver in effect and creating the expectation amongst some that a bankruptcy filing may be coming.

In more secondary happenings, Western Refining Inc.'s term loan was higher on repayment news, General Motors Corp.'s bank debt was unchanged to a little higher following the company's bankruptcy filing, Chrysler Financial Services LLC's first-lien term loan was better and the LCDX 12 index moved up by a few points.

Lear trades up

Lear's term loan gained some ground over the course of the trading session following news that the company is skipping interest payments on its notes that were due on Monday, according to traders.

The term loan was quoted by one trader at 70 bid, 71 offered, up from 65½ bid, 66½ offered on Friday, by a second trader at 70 bid, 72 offered, up from 65½ bid, 67 offered, and by a third trader at 71 bid, 73 offered, up about a point and a half on the day.

The third trader explained that the bank debt was higher on the news because now people think the company may file for bankruptcy and "the collateral package is good."

Lear using grace period

On Monday, Lear was supposed to make about $38 million of semiannual interest payments with respect to its 8.5% senior notes due in 2013 and 8.75% senior notes due in 2016, but instead decided to utilize a 30-day grace period.

The company said that during the grace period, it will continue discussions regarding a capital restructuring with its lenders and others.

By not making the interest payments, the company was able to keep in place a loan amendment of financial covenants and waiver of existing defaults that was entered into on May 13.

Lear is a Southfield, Mich.-based supplier of automotive seating systems, electrical distribution systems and electronic products.

Western Refining strengthens

Western Refining's term loan was a few points better in trading after the company said that it expects to repay a good portion of the debt, according to a trader.

The term loan was quoted at 97½ bid, 98½ offered, up from 94 bid, 95 offered, the trader said.

On Monday, the company announced plans to sell 14 million shares of its common stock for net proceeds of around $189.1 million, about $100 million of convertibles, and about $600 million of senior secured notes through a private placement.

Proceeds from all of these offerings will be used to repay term loan borrowings.

As of March 31, there was roughly $1.28 billion outstanding under the term loan.

Western Refining is an El Paso, Texas-based refining and marketing company.

General Motors flat to better

General Motors' bank debt was unchanged to a little stronger as the company announced that it filed for Chapter 11 bankruptcy protection, a move that has been expected by the market for a little while now, traders told Prospect News.

The term loan was quoted at by one trader at 94½ bid, 95½ offered, basically unchanged on the day, and by a second trader at 96½ bid, 97½ offered, up from 96 bid, 96¾ offered.

In addition, General Motors' revolver was quoted by one trader at 92½ bid, 93½ offered, pretty much flat on the day, and by a second trader at 95 bid, 96 offered, up from 94 bid, 95 offered.

According to the first trader, the company has to pay off the bank debt within 55 days and lenders will get paid down at par.

He went on to explain that the term loan and the revolver are not quoted closer to par because for the 55 days, they're not accruing interest and "people are afraid that something could always happen."

General Motors selling assets

Under the bankruptcy plan, General Motors will sell substantially all of its global assets to a separate and independent company called New General Motors, and the new company will execute the key elements of the April 27 viability plan, along with additional initiatives.

The new company is expected to be built from only General Motors' best brands and operations, and it will be supported by a stronger balance sheet due to a significantly lower debt burden and operating cost structure than before.

The company will incorporate the terms of General Motors' recent agreements with the United Auto Workers and Canadian Auto Workers unions and will be led by General Motors' current management team.

New General Motors structure

The capital structure of New General Motors is expected to be much improved from that of the current General Motors.

Upon closing of the sale, the new company will have about $17 billion in total consolidated debt, including $6.7 billion of debt owed to the U.S. Treasury, $1.3 billion of debt owed to the Canadian and Ontario governments, $2.5 billion of notes issued to the new Voluntary Employee Beneficiary Association, and about $6.8 billion of other, primarily international debt, but excluding Europe.

By comparison, on March 31, General Motors reported consolidated debt of $54.4 billion, along with additional liabilities, including an estimated $20 billion obligation to the UAW VEBA.

The new capital structure will also include $9 billion of perpetual preferred stock, common equity divided into 60.8% owned by the U.S. Treasury, 11.7% owned by the Canadian and Ontario governments, 17.5% owned by the VEBA, and 10% for unsecured bondholders and other unsecured creditors, and warrants.

General Motors getting DIP

As part of the bankruptcy, General Motors will get an about $33 billion debtor-in-possession financing facility.

Proceeds from the DIP, along with cash on hand, will be used to ensure an uninterrupted supply of goods and services and provide for other cash requirements prior to closing of the asset sale, fund liabilities to secured lenders, and provide contingency funding to handle any potential unexpected needs.

Pending approvals, New General Motors is expected to launch in about 60 to 90 days. The plan already has the support of the U.S. Treasury, the UAW and a substantial portion of unsecured bondholders.

General Motors is a Detroit-based automotive company.

Chrysler Financial gains

Chrysler Financial's first-lien term loan was seen a little bit higher in the secondary market with a number of things possibly contributing to the rise, according to a trader.

The trader said that the debt could have been pushed up by the overall cash market being stronger by at least a half a point, or it could have risen with General Motors, or it could have been because Chrysler LLC is closer to exiting from bankruptcy.

On Monday, news emerged that Auburn Hills, Mich.-based automaker Chrysler LLC received approval from the U.S. Bankruptcy Court to sell most of its assets to a new entity involving the U.S. and Canadian governments, Fiat SpA and the United Auto Workers.

By the end of the day, Chrysler Financial's first-lien term loan was quoted at 89½ bid, 90½ offered, up from 89¼ bid, 90¼ offered on Friday, the trader said.

Chrysler Financial is a provider of financial services for vehicles.

LCDX better with stocks

The LCDX 12 index was stronger by more than two points on Monday as equities had an up day, according to a trader.

The index was quoted at 86.50 bid, 86.75 offered, up from 84.30 bid, 84.60 offered, the trader said.

As for stocks, Nasdaq closed up 54.35 points, or 3.06%, Dow Jones Industrial Average closed up 221.11 points, or 2.6%, S&P 500 closed up 23.73 points, or 2.58%, and NYSE closed up 165 points, or 2.75%.

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