AMR bonds stay in focus, gaining ground; Nortel arbitration issues pressures debt; Kodak slips

By Stephanie N. Rotondo

Phoenix, Feb. 15 - AMR Corp. remained the notable name in the distressed debt realm Friday, just one day after the bankrupt airline officially announced its merger with U.S. Airways.

The bonds were also continuing to gain strength, ending up about 2 points from Thursday's levels.

A trader meantime said that Nortel Networks Corp.'s bonds were drifting lower as the company wades through arbitration issues.

But overall, activity in the distressed market was light, as investors zoomed in on new issues. A long holiday weekend was also playing a role.

"Everything closed up around lunchtime," one trader said.

AMR posts more gains

AMR's 6¼% convertible notes due 2014 continued to gain altitude on Friday after announcing a merger with U.S. Airways the day before.

One trader said the issue was "relatively strong" and "very active," trading around 106.

Another trader said the name "continues to be a little bit of a focus," seeing the bonds at 106½ bid, 107 offered.

The merger - valued at $11 billion - will create the world's largest airline and is expected to produce annual savings and new revenue of over $1 billion within two years.

Both companies are aiming for the deal to be completed by September.

AMR creditors will receive 72% of the new equity in the combined company, with U.S. Airways shareholders receiving the remaining 28%. AMR bondholders are expected to be made whole.

U.S. Airways' chief executive, Doug Parker, would be appointed CEO of the merged entity and AMR's CEO Tom Horton would stay on as non-executive chairman.

The bankruptcy court overseeing AMR's case still needs to approve the deal, as do U.S. Airways' shareholders.

Nortel notes weaker

A trader said that Nortel Networks' 10¾% notes due 2016 were "drifting lower," due to ongoing arbitration issues and payout delays.

He placed the issue around 110.

But another trader said the bonds were "still" in a 110-110½ ZIP code, though he added that the paper was "softer on the week, no question."

Kodak drifting down

Eastman Kodak Co.'s bonds were again on the weak side, according to traders.

One trader said there wasn't much trading in the name, though he saw the debt quoted lower.

He saw the 9¾% second-lien notes due 2018 at 77 bid, 78 offered and the 7¼% notes due 2013 at 12 bid, 13 offered.

Another trader also quoted the second-liens at 77 bid, 78 offered.

Beechcraft facility begins trading

Beechcraft Holdings LLC's (Hawker Beechcraft Inc.) credit facility broke for trading, with the $425 million seven-year term loan B (B1/BB-) quoted at 99 5/8 bid, par 1/8 offered on the open and then it moved to par bid, par ½ offered, according to a trader.

Pricing on the term loan B is Libor plus 450 bps with a 1.25% Libor floor, and it was sold at an original issue discount of 99. The debt has 101 soft call protection for one year.

During syndication, the B loan was upsized from $375 million, pricing was lowered from talk of Libor plus 475 bps to 500 bps and the discount was tightened from 981/2.

The company's $600 million senior secured credit facility also provides for a $175 million five-year ABL revolver that was downsized from $225 million when the term B was upsized.

According to court documents, interest on the revolver will depend on available credit, with pricing ranging from Libor plus 175 bps to 225 bps.

Beechcraft's exit financing credit facility will be used to pay all outstanding amounts under its $400 million debtor-in-possession facility, make specified settlement and cure payments, and for working capital and general corporate purposes.

And, the amounts raised through the term loan B upsizing will be used to add cash to the balance sheet.

J.P. Morgan Securities LLC is the lead bank on the deal.

Beechcraft is a Wichita, Kan.-based manufacturer of business, special mission, light attack and trainer aircraft.

Sara Rosenberg contributed to this article.

© 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.