Crown Holding sets meeting for $1.3 billion facility; Blockbuster, Delphi firm; Lear trades off

By Paul A. Harris

St. Louis, Oct. 19 - Crown Holdings Inc. set a Thursday bank meeting for its $1.3 billion credit facility during an otherwise quiet Wednesday session.

Meanwhile, in a secondary market that saw very little trading, movie rental firm Blockbuster Inc.'s bank loan paper firmed while in the automotive sector Delphi Corp.'s loans improved but Lear Corp.'s paper dipped.

"Some prices have cooled off a little bit, but the market is still pretty hot," a trader said late in the morning.

Crown plans $1.3 billion facility

Crown Holdings Inc. will hold a bank meeting Thursday for its $1.30 billion equivalent credit facility via Deutsche Bank and Lehman Brothers.

The facility will be comprised of an $800 million revolver and a $250 million term loan, both talked at Libor plus 150 basis points, and a €250 million term loan talked at Euribor plus 150 basis points.

According to a Tuesday press release, the company also plans to sell new senior unsecured notes. However no information emerged Wednesday on the bond deal.

The Philadelphia packaging firm will use the proceeds to support its tender for Crown European Holdings SA's outstanding notes.

Mixed day for automotive names

An investor reported seeing Lear Corp. bank debt in a 98 bid, 99 offered context on Wednesday, and remarked that the below-par range is "interesting."

The trader added that the company's stock price has also been knocked down a lot lately.

"It suggests that someone at the top of heap is a little worried," the source said "There is not much bank debt on that structure, and I think they have $2 billion of market cap in the equity market."

The investor further commented that Lear had been an investment-grade name until recently, with its bank debt pricing at Libor plus 150 basis points, "when 150 was right at the edge of high quality."

The market learned Tuesday that the Southfield, Mich., auto parts maker, in conjunction with financier Wilbur Ross, plans to bid for bankrupt automotive interior trim company Collins & Aikman Corp.

The move is part of an overall plan to acquire other companies.

Ross has a leg up in the deal, the investor added, because he already owns most of Collins & Aikman's outstanding bank debt.

The investor said that Lear's troubles, in part, stem from the misfortunes of General Motors Corp.

"Lear built up its interior parts business pretty much because GM told them to," the source recounted.

"A month and a half ago GM said, forget it, we're thinking about doing interiors ourselves."

The investor said that Lear spent a lot of money building up the interior parts business, and that GM decision "really shocked the market and angered Lear."

The source added that the dip in Lear's loan price is perhaps even more interesting when contrasted with the fortunes of its target, Collins & Aikman.

"When Collins & Aikman dipped below par it was a sign that people were not willing to step up to the top of that capital structure, and bad things followed," the investor added.

Delphi paper firms

Sources reported a different trading scenario Wednesday for another automotive sector name that is reportedly in the cross hairs of Lear and Ross, Troy, Mich.-based Delphi Corp., the supplier that filed for bankruptcy Oct. 8.

One trader said that news the company's chairman and chief executive officer, Robert Miller, decided to cut his own pay to a dollar a year, and that other company executives will take pay cuts until the supplier emerges bankruptcy, appeared to register favorably with loan investors.

The trader said that Delphi paper had improved on the day.

Meanwhile another trader spotted the Delphi revolver firmer Wednesday at 100.375 bid, 100.625 offered.

Blockbuster buoyed

Another name seen firming in the mid-week market was that of video rental company Blockbuster, which has thrown down the gauntlet in front of rival Netflix Inc. by entering the online DVD rental business.

An investor spotted Blockbuster trading either side of 98.

A trader, meanwhile, confirmed that level, saying that the company's loan paper was trading at 97.75 bid, 98.25 offered, and felt better.

Refco holds in

Elsewhere, the lately roller-coastering loan paper of scandal-ridden brokerage firm Refco, Inc. held in on Wednesday.

One market source spotted it at 91 bid, 93 offered, trailing news of the sale of Refco's futures business to J.C. Flowers.

A trader, meanwhile, gave the same levels and added that on Monday the bank loans traded up to the low 90s and have been there ever since.

"The news of the sale is good news if it actually happens," the trader commented, adding that people seem to be tweaking their strategies according to the perception that the proceeds of the sale will go to pay off the bank debt, and lenders will be made whole.

"There is a lot to be seen with these guys," the trader added. "They filed Chapter 11. Nobody really knows what's going on with the foreign subsidiaries. And with all the accounting fraud who knows what's going to pop up next?"

When pressed the trader admitted to being "shocked" by the fact that Refco was holding in the low 90s.

"People are taking a simplistic view that [Flowers] has offered to pay $768 million for this unit. And there is $644 million of senior debt outstanding.

"That simple math puts this bank paper at par," the trader added.

"People are discounting it approximately 10 points for the uncertainty."

Refco's troubles started when it disclosed an approximately $430 million receivable owed to the company by an entity controlled by Phillip R. Bennett, now ex-chief executive officer and chairman of the board of directors.

Bennett was said to have repaid the receivable in cash, including all accrued interest.

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