GM, Ford take beating in heavier market; UAL, Delta inch lower; Michael Foods OID emerges

By Sara Rosenberg

New York, April 21 - The overall cash market was weaker on Tuesday, but autos seemed to get hit a little harder with General Motors Corp. and Ford Motor Co. down a few points. Also, UAL Corp. and Delta Air Lines Inc. softened after earnings came out. It, however, looked more like the debt was affected by the overall market tone rather than the financial news.

In more secondary happenings, the LCDX 12 index retreated despite equities closing out the day higher.

Meanwhile, over in the primary market, Michael Foods Inc. came out with original issue guidance on its credit facility in connection with the deal's launch, and price talk on PharmaNet Development Group Inc.'s proposed credit facility has been circulating as the transaction is getting ready to launch to investors on Wednesday.

GM, Ford fall

General Motors and Ford both experienced some decent losses in trading, coming in more than the average cash name on Tuesday for no particular reason, according to a trader.

General Motors, a Detroit-based automotive company, saw its term loan quoted at 55 bid, 56 offered, down from 56 bid, 57 offered, and its revolver quoted at 43 bid, 45 offered, down from 45 bid, 47 offered, the trader said.

And, Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted at 55 bid, 55¾ offered, down from 56 bid, 57 offered, and its revolver quoted at 40½ bid, 42½ offered, down from 42 bid, 43 offered, the trader continued.

There wasn't much news specific to the auto industry on Tuesday, except for reports that General Motors will be getting up to $5 billion more from the government to get it through May.

General Motors already borrowed $13.4 billion from the U.S. Department of Treasury under an agreement that was reached on Dec. 31.

UAL bid retreats

UAL's term loan was lower on the bid side on Tuesday after the release of first-quarter numbers, but given that the rest of the market was down by about half a point to a point on the day, it appeared as if the loan was just reacting to the overall softness, according to a trader.

The Chicago-based airline company's term loan was quoted at 50 bid, 52 offered, versus 50½ bid, 52 offered on Monday, the trader said.

For the first quarter ended March 31, UAL reported a net loss of $382 million, or $2.64 per share, compared to a net loss of $549 million, or $4.55 per share, in the previous year's first quarter.

Revenues for the quarter were $3.691 billion, down 21.7% from $4.711 billion in 2008.

And, operating expenses were $3.973 billion, down 22.9% from $5.152 billion in the comparable period last year.

UAL raises new liquidity

During the first quarter, UAL closed several financing transactions that raised close to $500 million in new liquidity.

The company completed an aircraft sale-leaseback for $94 million and an engine financing transaction for $134 million, raised $62 million from equity issuances, and received $160 million from Chicago's O'Hare airport associated with the relocation of its cargo facility and $35 million from Los Angeles International Airport as part of an agreement to vacate certain facilities.

At the end of the quarter, the company had an unrestricted cash balance of $2.5 billion, a restricted cash balance of $255 million and total cash of $2.7 billion.

"We have continued to demonstrate success raising cash, with $500 million in new liquidity in the first quarter - and with $1.7 billion in unencumbered assets, we have the ability to do more," said Kathryn Mikells, senior vice president and chief financial officer, in a news release.

"We are dramatically reducing our costs, even as we make significant capacity reductions, saving over $1.1 billion in total expense this quarter compared to a year ago," Mikells added.

Delta also slides

Delta's bank debt was also seen lower during the trading session, but like UAL, market tone was blamed more than earnings results, according to a trader.

The Atlanta-based airline company's first-lien synthetic revolver (commonly referred to as the first-lien term loan) was quoted at 79 bid, 81 offered, down from 79½ bid, 81½ offered, and the second-lien term loan was quoted at 46 bid, 49 offered, compared to 46½ bid, 49 offered on Monday, the trader said.

For the quarter ended March 31, Delta had a net loss of $794 million, or $0.96 per share, compared to a net loss of $6.39 billion, or $16.15 per share, last year.

Revenue for the quarter was $6.684 billion, up 40% from $4.766 billion in the comparable quarter in 2008.

And, operating expense was $7.167 billion, down 35% from $11.027 billion last year.

Delta liquidity holds steady

As of March 31, Delta had $5 billion in unrestricted liquidity, which was unchanged from the balance at Dec. 31, including $4.5 billion in cash, cash equivalents and short-term investments and $500 million available under an undrawn line of credit. In addition, net cash collateral posted with hedge counterparties was about $400 million.

During the quarter, the company paid about $540 million related to debt and capital lease obligations.

"Delta's operations generated more than $600 million in cash during the quarter, reflecting our employees' continued focus on liquidity preservation, productivity improvements, and achieving our targeted synergy benefits," said Hank Halter, chief financial officer, in a news release.

"Despite a decline in our expected revenue outlook, we continue to project a profit for the year, as well as grow our unrestricted liquidity to more than $6 billion by the end of the year," Halter added.

LCDX declines

The LCDX 12 index was lower on Tuesday even though stocks ended the day better, according to traders.

One trader had the index quoted at 78.35 bid, 78.65 offered and a second trader had it quoted at 78.25 bid, 78.75 offered. On Monday, the index went out around 79.20 bid, 79.30 offered.

As for stocks, Nasdaq closed up 35.64 points, or 2.22%, Dow Jones Industrial Average closed up 127.83 points, or 1.63%, S&P 500 closed up 17.69 points, or 2.13%, and NYSE closed up 119.47 points, or 2.29%.

Michael Foods OID surfaces

Moving to the primary market, Michael Foods released original issue discount guidance on its $525 million credit facility (Ba3/BB) as the deal was launched primarily to existing lenders with a bank meeting on Tuesday, according to a market source.

The original issue discount on the revolver and the term loan A is being talked in the area of 98, and the discount on the term loan B is being talked in the area of 95 to 96, the source said.

Tranche sizes on the deal are a $75 million 31/2-year revolver and $450 million in term loans that will be divided into term loan A and term loan B debt. The 31/2-year term loan A can be up to $275 million or the five-year term loan B can be up to $275 million.

Michael Foods pricing details

As was previously reported, price talk on Michael Foods' revolver and term loan A is Libor plus 400 basis points, and price talk on the term loan B is Libor plus 450 bps.

All three tranches carry a 2% Libor floor.

Bank of America is the lead bank on the deal that will be used to refinance the company's existing credit facility.

The source remarked that Tuesday's bank meeting went well. "Lot of interest in the name given legacy positions," he added.

Michael Foods is a Minnetonka, Minn.-based food processor and distributor.

PharmaNet price talk

Pricing guidance on PharmaNet Development Group's $95 million five-year credit facility has been making its way around the market ahead of the Wednesday morning bank meeting that will kick off syndication on the transaction, according to a market source.

Both the $20 million revolver and the $75 million term loan A are being talked at Libor plus 600 bps with a 3% Libor floor and an original issue discount of 97, the source said.

Jefferies and CIT are the co-lead arrangers and co-bookrunners on the deal, with Jefferies the left lead.

Proceeds will be used to refinance convertibles.

PharmaNet is a Princeton, N.J.-based drug-development services company.

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