Primary Energy Holdings breaks; Delphi stronger on analyst upgrade; Blockbuster trades up

By Sara Rosenberg

New York, Aug. 19 - Primary Energy Holdings LLC allocated its credit facility Friday, with the term loan freeing up for trading in the pars.

In other secondary news, Delphi Corp.'s bank debt headed higher as the company's' stock received an upgrade from Lehman Brothers and as people focused more on the probability of a Delphi deal with General Motors Corp. rather than any potential Chapter 11 filing by Delphi.

And, Blockbuster Inc.'s bank debt also gained some ground during Friday's session essentially on market technicals.

Primary Energy Holdings' $135 million term loan freed up for trading during market hours, with the paper said to have hit the secondary "above par," according to a trader. No other quotes were really seen by market sources during trading hours.

The term loan is priced with an interest rate of Libor plus 275 basis points. Originally the tranche was talked at Libor plus 325 basis points but was reverse flexed during syndication on strong demand.

Primary Energy Holdings' $150 million credit facility also contains a $15 million revolver with an interest rate of Libor plus 275 basis points. This tranche was also reverse flexed from Libor plus 325 basis points during syndication.

The facility is being obtained in connection with taking a portion of the company public through an Enhanced Income Securities offering in Canada that priced this past Monday.

Royal Bank of Canada and CIBC are joint bookrunners on the Primary Energy Holdings deal, with Royal Bank of Canada the left lead.

Separately, Primary Energy Finance LLC - as was previously reported - has wrapped up syndication of its $150 million term loan B (Ba2/BB-) that carries an interest rate of Libor plus 200 basis points. The term loan was recently increased from $135 million and reverse flexed from Libor plus 300 basis points. The lower pricing reflects the deal receiving better-than-expected ratings.

Lehman Brothers is the lead bank on the Primary Energy Finance deal, with Royal Bank of Canada acting as the documentation agent.

Proceeds from the Primary Energy Finance term loan will be used to refinance debt at the portion of the Primary Energy company that is remaining private.

Primary Energy is an Oak Brook, Ill.-based developer, owner and operator of on-site combined heat and power and recycled energy projects.

Delphi revs on stock upgrade

Delphi's bank debt was once again stronger, with levels moving up by about a quarter to a half a point as a Lehman analyst upgraded the company's stock and market players became more confident in the idea that a deal can be reached with General Motors.

One trader had the term loan quoted at 103 bid, 103½ offered and the revolver quoted at 95½ bid, 96 offered, while a second trader had the term loan quoted even higher at 103¼ bid, 103¾ offered and the revolver quoted slightly wider at 95½ bid, 96½ offered.

"People are just getting more comfortable with the idea that there may be a GM bailout," the first trader said.

"And, a Lehman equity analyst took up the stock rating," the first trader added - which helped push the stock up significantly as well.

On Friday morning, Lehman Brothers raised its stock recommendation on Delphi by two notches to overweight from underweight because of the anticipation and probability given to a bailout by GM.

Investors began to worry about Delphi's future earlier this month when the company announced that it drew down $1.5 billion under its revolving credit facility in order to have cash readily available to finance operations if needed.

After the draw was announced, all three rating agencies downgraded the company's loans - Moody's Investors Service to B3 from B1, Standard & Poor's to B- from BB- and Fitch Ratings to B from BB-.

However, shortly after all this drama, the company assured investors that it was and is working toward making a deal with its major unions to seek modifications required to implement its restructuring plan, as well as with GM to seek related financial support.

There was some talk of a potential Chapter 11 filing if negotiations with the unions and GM do not work out, but as time has passed and people have gained more confidence in the much talked about bailout, the fear of a bankruptcy reorganization has been diminishing.

Delphi is a Troy, Mich., supplier of vehicle electronics, transportation components, integrated systems and modules, and other electronic technology to vehicle manufacturers.

Blockbuster heads north

Blockbuster's term loan was up about a half to three quarters of a point over the course of Friday's session, with levels quoted at 98 bid, 98½ offered, according to traders.

No specific news was seen sparking the paper's upward momentum, leaving some to speculate that the negative numbers Blockbuster announced earlier this month helped bring more attention to the name, both on the bank and the bond side, and with this newly directed focus, some market participants have decided that the loan is a relatively safe and favorable investment. This increase in demand is in turn pushing the bank debt levels higher.

The financial numbers referred to above were second-quarter results that included total revenues of $1.4 billion, down 1.6% from $1.42 billion for the second quarter of 2004, and a net loss of $57.2 million, or $0.31 per share, compared with net income of $48.6 million, or $0.27 per diluted share, last year.

Blockbuster is a Dallas-based provider of in-home movie and game entertainment.

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