American Axle to restructure out of court; Kodak bonds gyrate; Blockbuster still higher

By Stephanie N. Rotondo and Sara Rosenberg

Portland, Ore., Sept. 17 - Many new bond deals came to market Thursday, which took some attention away from the distressed debt arena, traders reported.

"Most of the focus was on new issues," a trader said, pointing to new deals from MGM Mirage, Blockbuster Inc. and NewPage Corp.

Restructuring news was what helped American Axle & Manufacturing Inc.'s debt, however. The company - which had secured a fourth waiver extension on its credit facility to Thursday from Tuesday - announced that it had in fact inked a deal with its lenders to restructure its debt.

On top of that, the company received a loan from one of its biggest customers, General Motors Corp. The loan had been announced previously but was contingent upon American Axle reaching an agreement with its lenders.

Meanwhile, a proposed new debt issue gave Eastman Kodak Co.'s bonds a boost. Traders said the company's existing bonds jumped up as much as 5 points since early Wednesday on the back of the news.

Blockbuster's bonds were also seen better as its new issue hit the market. The existing debt continued its climb upward, and the new debt quickly gained momentum during Thursday's session.

MGM's new issue was also helpful, leading its bank debt up about 2 points. The proceeds from the new issue will be used to pay down its term loan.

American Axle to restructure out of court

American Axle & Manufacturing's bonds moved higher on news that it had finalized a restructuring plan with lenders and had received a loan from General Motors Corp., a trader reported.

The trader quoted the bonds generically at 72 bid, 73 offered, calling that "up a little bit."

But at another desk, the notes were seen largely unchanged. A source saw the 5¼% notes due 2014 open around 73, only to come back to around 70 bid, 71 offered, essentially unchanged on the day.

The company's term loan was also seen unchanged.

The term loan was quoted at 92 bid, 93 offered, unchanged on the day, a trader said, adding that the news was already priced into the loan.

According to an 8-K filed with the Securities and Exchange Commission on Wednesday, American Axle received the $110 million payment from GMfor cure costs associated with contracts assumed and/or terminated by Motors Liquidation Co. in its Chapter 11 bankruptcy cases, resolution of outstanding commercial obligations, and adjustment of installed capacity levels reserved for existing and awarded programs to reflect new estimates of market demand.

GM also provided the company with an up to $100 million second-lien term loan on Wednesday.

Plans for the payment and the second-lien loan had already been announced in August.

Pricing on the second-lien loan is Libor plus 1,200 bps with a 2% Libor floor.

The loan allows for multiple borrowings with a minimum draw size of $25 million through Sept. 30, 2013. The loan matures on Dec. 31, 2013 and can't be terminated before June 30, 2011.

In addition, American Axle announced that it amended and restated its term loan and revolver, modifying financial covenants related to secured debt leverage and cash interest expense coverage, and requiring the maintenance of an average daily minimum liquidity of $85 million until June 30, 2010.

Under the amendment, pricing on the class A revolver due December 2011 is Libor plus 600 bps and pricing on the class B revolver due April 2010 is Libor plus 250 bps. Pricing on the term loan due June 14, 2012 is Libor plus 700 bps with a 3% Libor floor, according to an 8-K filed with the SEC on Thursday.

The amendment and restatement was completed on Sept. 16.

JPMorgan and Bank of America are the joint lead arrangers and joint bookrunners on the bank debt, and JPMorgan is the administrative agent.

American Axle also disclosed some third-quarter numbers on Thursday, including that it expects to report a consolidated net profit, and sales are estimated to be about $400 million.

Third-quarter financial results are expected to include the favorable impact of net pension and postretirement benefit curtailment gains. These gains, which will be actuarially determined at the end of the quarter, are estimated to be about $30 million to $40 million.

The company went on to say that it has sufficient liquidity to operate its business and meet its financial obligations as they come due. As of Sept. 30, the company expects to have more than $300 million of liquidity, consisting of available cash, short-term investments and committed borrowing capacity under U.S. credit facilities, including the new second-lien loan.

American Axle is a Detroit-based producer of driveline and drivetrain systems and related components and chassis modules for the automotive industry.

Elsewhere in the autosphere, Lear Corp.'s 8½% notes due 2013 and 8¾% notes due 2016 closed at 65 bid, 65¾ offered, according to a trader.

Kodak bonds gyrate

Eastman Kodak's bonds gained about 5 points over the last couple of sessions as the company announced it would raise about $700 million in debt and then use proceeds to tender for existing issues.

One trader said the 7¼% notes due 2013 traded "all over the map" between 84 and 86, up from early Wednesday levels around 79. However, he noted that the bonds had closed around 84 on Wednesday.

Another source deemed the issue up nearly 6 points at 84¾ bid, while another pegged the notes at 84 bid, 85 offered.

On Wednesday, the Rochester, N.Y.-based camera equipment company said it would raise as much as $700 million through a "series of financing transactions," according to a press release. The financing includes a $400 million new issue of senior secured notes due 2017.

The company said Kohlberg Kravis Roberts & Co. LP had committed to the financing.

In addition, Kodak will give KKR warrants equal to 53 million common shares. Kodak also has an option to issue KKR another $300 million of the new notes, but by doing so, the amount of warrants issued would decrease to 40 million.

Proceeds from the transaction will be used to tender for Kodak's existing 3 3/8% convertible notes due 2033, "a move that will bolster the company's balance sheet and free up capital for core investments," the company said in the release.

"We believe KKR's investment is a validation of our strategy and our team," said Antonio M. Perez, Kodak's chairman and chief executive officer, in the statement. "KKR has a long, successful record of working with, and investing in, companies with significant value-creation potential. We look forward to working with the KKR team to accelerate the growth of our portfolio of high-margin annuity businesses."

Blockbuster driving higher

Blockbuster's bonds continued to move higher following the release of the company's new issue into the market.

The 9% notes due 2012 were seen trading "pretty active," according to trader, between 73 and 75. Another trader quoted the notes at 74 bid, 75 offered, up 1 point.

The new issue, an upsized $675 million 11¾% notes due 2014, priced at 94 on Thursday and quickly traded higher, according to traders. One trader saw the notes at 96 bid, 97 offered around lunchtime, while another saw them around 97½ by the end of the day.

The Dallas-based movie rental chain will use proceeds to pay down its bank debt. The notes also contain a provision that allows for the debt to come due sooner if the company is not able to refinance the 9% notes by a certain date.

MGM loan better on news

MGM Mirage's term loan posted some gains on Thursday as investors are now anticipating that some of the debt will be repaid, according to a trader.

The term loan was quoted at 92½ bid, 93½ offered, up from 90½ bid, 91½ offered on Wednesday, the trader said.

Early on in the day, MGM Mirage revealed that it will be selling $350 million of senior unsecured notes.

Proceeds from the notes will be used to reduce debt under the company's senior credit facility and for general corporate purposes.

MGM Mirage is a Las Vegas-based gaming, hospitality and entertainment company.

Among other casino operators, Foxwoods Resort Casino's 8½% notes "got bid up a little," a trader said, following a conference call that had been postponed from the day before.

The trader placed the debt at 34 bid, compared to 31 bid, 35 offered previously, However, he said he did not see any offers and was not sure what happened during the call.

"I don't think much came of it," he said. "I think people are still figuring out who is going to do what for whom."

GateHouse loan shakes off downgrade

GateHouse Media Operating Inc.'s term loan was a little stronger in the secondary market even though Moody's Investors Service downgraded the company's senior secured debt and corporate family rating to Ca from Caa1, according to a trader.

The term loan was quoted at 31½ bid, 33½ offered, up from 31¼ bid, 33¼ offered, the trader said.

Moody's said that it views the company's "over-leveraged capital structure to be unsustainable. This, in conjunction with a weak forward liquidity profile and continued adversity in operating and financial market conditions, renders increasingly likely the prospect of a near-to-intermediate term comprehensive balance sheet restructuring."

According to Moody's estimates, GateHouse is likely to incur free cash flow losses over the intermediate term, challenging its ability to fund scheduled debt service requirements beyond 2010, absent further lender relief.

Moody's added that GateHouse's management may conclude that more fundamental measures, including a distressed exchange or pre-packaged bankruptcy filing, may represent the optimal solution to provide longer term liquidity relief while addressing the capital structure.

GateHouse is a Fairport, N.Y.-based publisher of local newspapers and related publications.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.