Harrah's upsizes loan, debt breaks higher; Visteon bonds motor northward; Blockbuster steadies

By Paul Deckelman and Sara Rosenberg

New York, Sept. 23 - Harrah's Operating Co. Inc. increased the size of its incremental term loan to $1 billion from $750 million. When it was freed to trade, market sources meantime saw the Las Vegas-based casino giant's new paper having moved up solidly from where it had priced.

Bond traders saw Visteon Corp.'s notes trading several points higher, in line with the Van Buren Township, Mich.-based automotive parts supplier's over-the-counter-traded shares, in the wake of the company's request for additional time to file a bankruptcy reorganization plan - and its assertions that it has presented a business plan to key creditors and agreed on milestones with its lenders.

Blockbuster Inc.'s new and existing bonds were seen mostly steady on the day, at the lower levels to which they had fallen after sliding off the highs reached last week, when the video rental company priced a big new bond deal that initially moved up smartly.

Harrah's upsizes term loan

Harrah's. upped the size of its incremental term loan (Caa1/B-) to $1 billion from $750 million - a move that was not totally unexpected, a market source said, as the loan was launched with the disclaimer that it could grow from the original amount.

In addition, the original issue discount on the loan finalized at 97½ -- smack in the middle of initial talk that was in the 97 to 98 context, the source remarked.

Pricing on the loan stayed the same throughout the quick syndication process at Libor plus 750 basis points with a 2% Libor floor.

Bank of America and Citigroup are the joint lead arrangers and joint bookrunners on the deal that was launched with a conference call on Tuesday, and JPMorgan, Credit Suisse and Deutsche Bank are also bookrunners.

Harrah's incremental loan has call protection against optional redemptions. The deal is non-callable for two years, then at 105 in year three, 103 in year four and par thereafter.

The loan, due in October 2016, is being obtained under the accordion feature of the company's existing credit facility.

Proceeds will be used to refinance existing debt and to provide additional liquidity. Also, a portion of the net proceeds will be used to fund note tender offers.

Harrah's announced on Tuesday that it is tendering for up to $175 million of its 5.5% senior notes, 7.875% senior subordinated notes, 8% senior notes and 8.125% senior subordinated notes.

The tender offers will expire on Oct. 21.

Harrah's breaks

After firming up the size and pricing details, Harrah's incremental term loan allocated and then hit the secondary market, the source continued.

The loan was quoted at 97¾ bid, 98¼ offered on the break, the source said.

As the day went on, the loan steadily ticked up until it reached 99 bid, 99½ offered where it seemed to stabilize, the source added.

Later, a second market source saw the new loan quoted as high as 99 ¼ bid, 99 ¾ offered.

A bond trader said that while Harrah's bank debt was "quoted actively," the company's bonds, like its 10 ¾% notes due 2016 were "about where they have [recently] been, at 83½ bid, 84½ offered.

Visteon bonds push upward

Elsewhere in the junk and distressed bond market, "Visteon was a mover today," a trader said, quoting the company's 7% notes due 2014 up 3 or 4 points to around the 26 bid level.

"There was not a lot of trading in it," he said, "but that's where they got up to."

Visteon's Pink Sheets-traded shares meantime jumped as much as 9 cents, or 45%, to 29 cents, early in the session, before falling back from that peak to end up 2 cents, or 10%, at 22 cents per share. Volume of 17.3 million shares traded was over eight times the norm.

There was no immediate fresh news on the former Ford Motor Co. unit, which filed for Chapter 11 protection from its bondholders and other creditors in May - but in a late-Monday filing with the U.S. Bankruptcy Court in Wilmington, Del., which is overseeing the company's reorganization, Visteon requested an extension to its exclusive periods to file a plan of reorganization and solicit votes on the plan, seeking to extend its exclusive plan-filing period to Feb. 22 from the current deadline of this Friday, and likewise enlarge the allowed solicitation period until April 23 from the current from Nov. 24.

The court scheduled an Oct. 7 hearing on that request.

In its filing, Visteon declared that it had spent currently expiring 120-day exclusivity period in "complex" debtor-in-possession financing negotiations, as well as developing a business plan to serve "as a platform for emergence," and implementing "initiatives to streamline operations and reduce their cost basis," and warned that "a hasty filing of a plan or solicitation process could be detrimental for all parties-in-interest, as it will reduce the likelihood of a consensual plan."

Visteon said that it had presented its business plan to key constituents, including its term loan lenders, unsecured creditors and former corporate parent Ford, which has pledged at least $125 million in financing.

Visteon further said that it has also agreed with the term lenders on certain milestones, including having a Chapter 11 plan filed with the court by Nov. 2.

Viseton's bonds - which not so long ago were trading in the single-digits - have moved up to their current levels in the 20s over the last several weeks as details have emerged here and there on how the company - which has been unprofitable ever since its spinoff from Ford, which is still its biggest customer, nearly a decade ago - plans to turn things around.

In another filing, last week, Visteon said that it had reached a tentative agreement with another one of its customers, General Motors Corp., under which Visteon will relinquish its less-profitable supply contracts for fuel tanks, climate controls and lighting systems to the automaker.

GM also agreed to pay $8 million in cash surcharge payments above the parts purchase order price for component parts produced by some of Visteon's interior and fuel tank product groups, to pay up to $10 million to fund the consolidation of some of Visteon's Mexican facilities, and to reimburse Visteon for $4.425 million in up-front engineering, design, and development support costs - payments totaling nearly $23 million.

On its continuing supply contracts with GM, the parties agreed to push up payment terms to 15 days after shipment - versus the traditional 45-day lag.

The bilateral agreement must be approved by the court to take effect.

Little Lear, American Axle, impact

While Visteon's bonds were clearly doing better, a trader said that sector peers Lear Corp.'s bonds, like its 5¾% notes due 2014 and 8¾% notes due 2016, were little changed on the day. The Southfield, Mich.-based automotive interior parts maker's bonds held in a 65-66 context, with the last trade at 65¾ bid, on "not much activity."

He also saw Detroit-based drivetrain components builder American Axle & Manufacturing Holdings Inc.'s 5¼% notes due 2014 idling around 70, which he called unchanged, and on not much activity.

Also in the automotive parking lot, a trader saw GM's benchmark 8 3/8% bonds due 2033 up ¼ point at 15¾ bid, 16¾ offered, while domestic arch-rival Ford's 7.45% bonds due 2031 were likewise ¼ point better at 82 bid, 84 offered.

But another market source saw the GM benchmarks up as much as ¾ point on the day at 16¼ bid, in "somewhat active" dealings

Blockbuster slide bottoms

A trader saw Blockbuster's 9% notes due 2012 "have some activity," quoting them around a 67-69 context, which he said was largely unchanged, while the Dallas-based DVD, Blu-Ray and video game rental company's new 11¾% senior secured notes due 2018 "are the ones that are trading."

He saw those new bonds at 95½ bid, 961/2, which "was about where they ended up [Tuesday] too."

Both levels are well below the peaks hit last week, when the company priced its $675 million issue of the '18s on Thursday - sharply upsized from the originally planned $340 million -and they shot up to levels as high as par bid from their 94 issue price, only to come down from the early aftermarket peaks to end around a 97-98 context and to keep retreating this week.

The 9s, meantime, had started firming into the 70s from prior levels in the upper 60s, peaking around 75-76 after the new deal priced, but then also coming back down, back to where they started from in the upper 60s.

Another trader, who also saw the 9s having retreated back to the upper 60s, while the new bonds had given up most of their gains to return to the mid-90s, said that his opinion is that Blockbuster "is a prime example of the fact that yes, it's good that these companies can come to market - but nobody has yet to demonstrate that they've come up with any better way to make money or to make their businesses more viable, and until that happens, it's that short-term shot in the arm."

Blockbuster is struggling to avoid the fate of rival Movie Gallery Inc. - which was driven into bankruptcy earlier in the decade after struggling with falling revenues from its traditional brick-and-mortar video stores - and hoping to move away from that declining business model and into more profitable areas like its more successful mail and internet-based competitor Netflix Inc.

However, the trader opined that "I haven't seen anything great come out of them for three or four years. So why anyone thinks that raising money is going to change the business plan doesn't make a lot of sense to me."

He said Blockbuster is just "one of 50 other companies that are in that same sort of ilk - it's terrific, they can buy themselves some time" by doing a new deal and raising capital, "but away from that, it doesn't seem like a whole lot has actually changed."

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