Adesa slides after earnings; Harrah's dips; GM recoups losses; Masonite rises; LCDX up with equities

By Sara Rosenberg

New York, March 4 - Adesa Inc.'s term loan B headed lower during Wednesday's trading session as the company came out with quarterly results that fell below investors' expectations, especially on the EBITDA side.

Also in trading, Harrah's Operating Company Inc.'s bank debt weakened, General Motors Corp.'s term loan regained the ground it lost during the previous session, Masonite International Inc.'s term loan was a touch stronger and LCDX 10 headed higher in sympathy with the stock market.

Adesa drops on numbers

Adesa's term loan B softened up in the secondary market following the release of fourth-quarter results that showed a fairly large drop in EBIDTA, according to a trader.

The term loan B was quoted at 65 bid, 67 offered, down from previous levels of 67 bid, 68 offered, the trader said.

On Tuesday night, KAR Holdings Inc., the holding company for Adesa, came out with fourth-quarter financials that showed a 34.1% drop in adjusted EBITDA to $57.8 million from $87.7 million in the comparable period in the prior year.

Adesa loss widens

Also as part of the earnings release, Adesa' parent company said that it posted a net loss for the quarter of $49.3 million, compared to a net loss of $34.3 million in the previous year.

Revenues for the quarter were $396.2 million, down 0.6% from $398.4 million in the fourth quarter of 2007.

As of Dec. 31, cash and cash equivalents was $158.4 million, compared to $204.1 million at the end of 2007.

And, at year-end, total long-term debt was $2.523 billion versus $2.601 billion at the end of the prior year.

Adesa is a Carmel, Ind.-based provider of wholesale used vehicle auctions.

Harrah's falls

Harrah's bank debt was down on the day, with levels coming in even before Moody's Investors Service came out with its downgrade announcement, according to traders.

One trader had the term loan B-1 quoted at 56 bid, 56¾ offered, down from 56¾ bid, 57¾ offered; the term loan B-2 quoted at 56½ bid, 57¼ offered, down from 57¼ bid, 58¼ offered; and the term loan B-3 quoted at 56¼ bid, 57 offered, down from 57 bid, 58 offered.

Meanwhile, a second trader had the term loan B-2 quoted at 57 bid, 57½ offered, down from 57½ bid, 58 offered.

Both traders agreed that the bank debt had softened before the ratings cut surfaced, although there was no specific reason for the move prior to the news.

Harrah's downgraded by Moody's

On Wednesday, Moody's said that it lowered Harrah's corporate family rating to Caa3 from Caa1 and senior secured bank debt to Caa1 from B1. The outlook is negative.

"The downgrade reflects the high probability of default given the continuing decline in gaming demand across HET's largest markets [Las Vegas and Atlantic City] that is eroding the company's liquidity cushion," said Peggy Holloway, Moody's senior credit officer, in the rating release.

In addition, Moody's believes there is a risk that Harrah's may need to seek covenant relief in 2009 under its credit facility.

Harrah's is a Las Vegas-based casino company.

General Motors inches up

General Motors' term loan strengthened a little on Wednesday to gain back what it lost during the previous day's activity when February sales numbers were announced, according to a trader.

The term loan was quoted at 35 bid, 39 offered, up from 34 bid, 38 offered, the trader said.

On Tuesday, General Motors' term loan had dropped a point as the company revealed that for the month of February, total sales were down 52.9% to 127,296 from 270,423 in February 2007.

The company's total car sales were 53,813, down 50% from 107,592, and total truck sales were 73,483, down 54.9% from 162,831.

General Motors is a Detroit-based automotive company.

Masonite trades higher

Masonite's term loan was trading at better levels after falling off by a few points on Tuesday after news of a proposed pre-packaged bankruptcy emerged, according to a trader.

The term loan was quoted at 37½ bid, 39½ offered, up from 37 bid, 39 offered, the trader said, adding that it was a "firmer day generally." Prior to the reorganization announcement, the term loan was being quoted in the area of 42 bid, 46 offered.

On Tuesday, Masonite said that it reached an agreement in principle with members of a steering committee representing senior secured lenders and representatives of an ad-hoc committee for holders of its senior subordinated notes due 2015 on a restructuring.

The company plans on filing for Chapter 11 if the requisite number of lenders and bondholders approve the pre-negotiated restructuring plan that would reduce total funded debt by almost $2 billion and create a better capital structure.

Masonite plan details

As was previously reported, under the terms of the agreement in principle, Masonite's existing senior secured obligations would be converted on a pro rata basis, subject to the election of each existing holder, into debt and/or equity.

Senior secured lenders will be offered a new up to $200 million senior secured term loan, a new up to $100 million second-lien PIK loan and/or 97.5% of the common equity of the company, subject to dilution for warrants issued to the senior subordinated noteholders and management equity and/or options.

Senior subordinated notes would be converted to 2.5% of the common equity plus warrants for 17.5% of the common stock of the company, subject to dilution for management equity and/or options.

Masonite is a Mississauga, Ont.-based manufacturer of residential and commercial doors.

LCDX better

In more trading happenings, LCDX 10 saw levels rise during the session as stocks were higher on the day, according to a trader.

The index was quoted at 72.55 bid, 72.95 offered, up from Tuesday's levels of 71.85 bid, 72.15 offered, the trader said.

Nasdaq closed up 32.73 points, or 2.48%, NYSE closed up 130.19 points, or 3%, S&P 500 closed up 16.54 points, or 2.38%, and Dow Jones Industrial Average closed up 149.82 points, or 2.23%.

As for the overall cash loan market, that seemed to be a bit harder to read, with one trader saying that some things were stronger, depending on the name, while other things were unchanged.

However, a second trader remarked that he couldn't really tell if the market was up or down.

"Feels like it's sideways. It was really slow today. Seemed like it was busier in the morning and then tapered off towards the end of the day," the second trader added.

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