Michaels up with numbers; Clear Channel, Ford soften after run-ups; Lear steadies; LCDX dips

By Sara Rosenberg

New York, June 3 - Michaels Stores Inc.'s term loan B was stronger by a couple of points in trading following the release of first-quarter earnings that showed an improvement in net income, sales and adjusted EBITDA.

Also in the secondary, Clear Channel Communications Inc.'s term loan B gave up some of its gains on the back of rallying by a couple of points during the previous session and Ford Motor Co. also retreated a little after having an up day Tuesday.

Meanwhile, Lear Corp.'s term loan, which bounced around earlier this week on news of missed bond interest payments, held firm on Wednesday, despite a ratings downgrade from Moody's Investors Service, and the LCDX 12 index was a little lower in sympathy with the stock market.

Michaels rises on earnings

Michaels Stores' term loan B saw a strong gain on Wednesday after the company came out with numbers for the first quarter of fiscal 2009, according to a trader.

The term loan B was quoted at 78 bid, 83 offered, up about four points on the day, the trader said.

For the quarter, Michaels reported net income of $4 million, an improvement of $24 million from a net loss of $20 million in the first quarter of fiscal 2008.

Total sales for the quarter were $852 million, a 0.6% increase from last year's sales of $847 million.

And, adjusted EBITDA for the quarter was $107 million, or 12.6% of sales, compared to $97 million, or 11.5% of sales, for the same period in the prior year.

Michaels reduces debt

Michaels also said that its total debt levels totaled $3.957 billion, down about $22 million from the prior year.

During the quarter, the company made a $5.9 million amortization payment on its term loan.

At the end of the quarter, the company had $32 million in cash and about $539 million of availability under its revolver. As of June 2, availability under the credit facility was about $530 million.

Michaels is an Irving, Texas-based specialty retailer of arts, crafts, framing, floral, wall decor, and seasonal merchandise for the hobbyist and do-it-yourself home decorator.

Clear Channel slides

Clear Channel's term loan B fell during the trading session as some selling pressure hit the debt because investors were looking to take advantage of Tuesday's almost five point jump, according to traders.

The term loan B was quoted by one trader at 65¾ bid, 67½ offered, down from 66½ bid, 68½ offered, an by a second trader at 63½ bid, 65 offered, down from 66 bid, 69 offered.

On Tuesday, the loan had moved up from the 61¼ bid, 63¼ offered context when the company's subsidiary, Clear Channel Outdoor Holdings Inc., announced that it is actively pursuing alternatives to address the maturity of an intercompany note payable to Clear Channel Communications.

Clear Channel Outdoor said that the alternatives could include an offering of new senior or senior subordinated notes for cash or an exchange of new senior or subordinated notes for outstanding debt.

Clear Channel is a San Antonio-based media and entertainment company. Clear Channel Outdoor is an outdoor advertising company.

Ford gives up ground

Another name to experience some backing up after running up was Ford, with its term loan weakening by a half a point to three quarters of a point, depending on which trader was asked.

One trader had the term loan quoted at 72 bid, 72¾ offered, down from 72¾ bid, 73¼ offered, while a second trader had it quoted at 72¼ bid, 73¼ offered, down from 72¾ bid, 73¾ offered.

On Tuesday, the loan had improved from 71¾ bid, 72¾ offered following the release of May sales numbers.

For the month of May, Dearborn, Mich.-based automaker reported total sales of 161,531, down 24.2% from 213,238 in the same period last year.

Ford, Lincoln and Mercury sales totaled 155,954, up 20% versus April and the highest sales for any month since July 2008. Compared to May 2008, Ford, Lincoln and Mercury sales were down 24.3% from 206,000.

Total car sales for the month were 63,697, down 25.5% from 85,542 in the prior year.

And, total truck sales were 92,257, down 23.4% 120,458 from May 2008.

Lear holds firm

Lear's term loan was steady on Wednesday, shrugging off a downgrade from Moody's and ending its two day rollercoaster that began when the company revealed that it is skipping interest payments on its notes that were recently due, according to a trader.

The term loan was quoted at 65½ bid, 66½ offered, compared to 65½ bid, 67 offered during the previous session, the trader said.

On Monday, the term loan rose to 70 bid, 72 offered from around 65½ bid, 67 offered on Friday as Lear said that it decided to utilize a 30-day grace period instead of making about $38 million of semiannual interest payments with respect to its 8.5% senior notes due in 2013 and 8.75% senior notes due in 2016.

The company said that during the grace period, it will continue discussions regarding a capital restructuring with its lenders and others.

By not making the interest payments, the company was able to keep in place a loan amendment of financial covenants and waiver of existing defaults that was entered into on May 13.

Lear downgraded by Moody's

On Wednesday, Moody's announced that it lowered Lear's corporate family rating to Ca from Caa2 and senior secured term loan to Ca from Caa1. The outlook is negative.

Moody's said that the downgrades reflect the increased risk of a potential distressed debt exchange or bankruptcy filing by the company.

Standard & Poor's already came out with cuts to Lear's ratings on Tuesday, moving the senior secured debt rating to CC from B and the corporate rating to D from CCC+.

Like Moody's, S&P explained that it is not confident that Lear will make the payments within the grace period and said that, among other outcomes, the company might pursue a distressed exchange or file for bankruptcy under Chapter 11.

Lear is a Southfield, Mich.-based supplier of automotive seating systems, electrical distribution systems and electronic products.

LCDX down with stocks

The LCDX 12 index headed downwards on Wednesday as equities had an off day, according to a trader.

The index was quoted at 86.60 bid, 86.90 offered, the trader said. He had the index closing out Tuesday at 87.25 bid, 87.45 offered, while Markit had the index closing at 87.60.

As for stocks, Nasdaq closed down 10.88 points, or 0.59%, Dow Jones Industrial Average closed down 65.63 points, or 0.75%, S&P 500 closed down 12.98 points, or 1.37%, and NYSE closed down 148.97 points, or 2.41%.

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