American Airlines up on new financing; MGM better with repayment; Northwest, Delta soften

By Sara Rosenberg

New York, Sept. 17 - American Airlines Inc.'s term loan headed higher on Thursday after the company announced actions that enhanced liquidity and MGM Mirage's term loan strengthened on news of a paydown.

Also in trading, Northwest Airlines Inc. and Delta Air Lines Inc. both saw levels come in a little on their term loans, and GateHouse Media Operating Inc.'s term loan was a touch better despite a ratings downgrade.

American Airlines rises

American Airlines' term loan was better during the trading session as its parent company, AMR Corp., said that it has obtained a total of $2.9 billion in additional liquidity and new aircraft financing, according to a trader.

The $2.9 billion consists of $1.3 billion in new liquidity - including $1 billion in cash from the advance sale of AAdvantage frequent flyer miles to Citi and $280 million in cash under a loan facility from GE Capital Aviation Services secured by owned aircraft - and $1.6 billion in sale-leaseback financing commitments from GE Capital Aviation for Boeing 737s previously ordered by the company.

In addition, the company revealed plans to strengthen its network by reallocating capacity to hubs in Dallas/Fort Worth, Chicago, Miami and New York, and will enhance its fleet to better serve customers.

"Today's announcement positions our company well to face today's industry challenges and allows us to remain focused on the future and on returning to profitability," said Gerard Arpey, AMR's chairman and chief executive officer.

Following the news, American Airlines' term loan was quoted at 97¼ bid, 98¼ offered, up 1½ points on the day, the trader said.

AMR is a Fort Worth, Texas-based scheduled passenger airline company.

MGM Mirage trades up

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 and then later on, the offering was upsized to $475 million.

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.

Northwest, Delta slide

Northwest and Delta both saw term loan levels weaken during the session, with one trader speculating that maybe there was some push back and some profit taking after the loans were pushed higher over the course of the week.

Northwest's term loan was quoted at 99¼ bid, 99¾ offered, down an eighth on the day, the trader said. On Tuesday, the loan had been seen at 96½ bid, 97½ offered and on Monday the loan was 96¼ bid, 97¼ offered.

Delta's first-lien term loan was quoted at 91¼ bid, 92¼ offered, down an eighth on the day, and its second-lien term loan was down a half a point at 84½ bid, 86½ offered, the trader continued.

On Tuesday, the first-lien had been around 90½ bid, 91½ offered, and the second-lien had been around 85¼ bid, 86¼ offered, and on Monday, the second-lien had been around 81¼ bid, 82¼ offered.

Northwest loan getting repaid

On Wednesday, Delta held a bank meeting for a new $500 million four-year term loan (Ba2) that will be used, along with $500 million of senior secured notes, to repay borrowings under Northwest's senior corporate credit facility.

Price talk on the term loan is not currently available, but it is known that the tranche will have a 2% Libor floor.

The company's proposed $1 billion credit facility also includes a $500 million 31/2-year revolver that is not being marketed.

Citigroup and Deutsche Bank are the joint lead arrangers and bookrunners on the deal.

Delta is an Atlanta-based airline company. In 2008, the company acquired the Northwest airline company in an all-stock transaction.

GateHouse inches up

GateHouse Media'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.

NewPage firm with bond increase

In other news, NewPage Corp.'s term loan remained at 98½ bid, 99½ offered on Thursday despite news that the company increased its senior secured notes offering to $1.7 billion from $1.2 billion, according to a trader.

Proceeds from these notes will be used to repay a portion of the company's term loan.

NewPage is a Miamisburg, Ohio-based coated paper manufacturer.

American Axle holds steady

American Axle & Manufacturing Holdings Inc.'s term loan stayed firm in trading as the company said that it received the previously announced payment and second-lien term loan from General Motors Corp., a trader told Prospect News.

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

According to an 8-K filed with the Securities and Exchange, on Wednesday, American Axle received the $110 million payment from General Motors for 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.

General Motors 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.

American Axle amends and restates

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 basis points 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 reveals guidance

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.

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