DirecTV better with upgrade; Oshkosh rise progresses; MetroPCS, Huntsman Travelport move

By Sara Rosenberg

New York, Aug. 6 - DirecTV Group Inc.'s institutional term loan debt headed higher on Thursday as the company's corporate rating was moved to investment-grade status and earnings results showed year-over-year improvements.

Also in the secondary market, Oshkosh Corp.'s term loan continued to gain ground as investors were still reacting to the company's recent paydown news, MetroPCS Communications Inc.'s and Huntsman Corp.'s term loans softened on disappointing quarterly results, and Travelport Ltd.'s term loan B gained on positive numbers.

DirecTV trades higher

DirecTV's term loan B and term loan C were both stronger during the trading session following an upgrade by Standard & Poor's to an investment-grade level and the release of decent quarterly results, according to a trader.

The term loan B was quoted at 98¼ bid, 99 offered, up from 98 bid, 98¾ offered, and the term loan C was quoted at 101 bid, 101¾ offered, up from par¾ bid, 101½ offered, the trader said.

"Probably more the upgrade. Investment grade so people who buy investment-grade stuff are taking a look," the trader added.

On Thursday, S&P raised DirecTV's corporate credit rating to BBB- from BB and the secured debt rating at BBB-.

"This action follows the company's announcement in its public earnings release for the second quarter of 2009 that it is embracing a more moderate financial policy," said Naveen Sarma, credit analyst at S&P, in the rating release.

According to the rating agency, DirecTV said that it is targeting a leverage ratio of 2.5 times debt-to-EBITDA. This leverage target is a tightening from the 3.0 times to 3.5 times range.

DirecTV income rises

In its second quarter earnings release, DirecTV revealed that it had net income of $407 million, or $0.40 per share, compared to net income of $455 million, or $0.40 per share, last year.

Revenues for the quarter were $5.218 billion, up 9% from $4.807 billion in the second quarter of 2008.

Operating profit before depreciation and amortization increased 2% to $1.38 billion while operating profit decreased 12% to $702 million from $801 million in the previous year.

And, cash flow before interest and taxes grew 9% to $785 million, while free cash flow increased 47% to $550 million compared to last year's second quarter.

DirecTV is an El Segundo, Calif.-based provider of digital television entertainment services.

Oshkosh still going strong

Oshkosh's term loan was once again better in trading as lenders continued to react to the company's late Wednesday news that it will be repaying some of the debt with equity proceeds, according to traders.

The term loan was quoted by one trader at 99 7/8 bid, par 7/8 offered, up about an eighth of a point on the day, and by a second trader at 99 7/8 bid, par 3/8 offered, up from 99 5/8 bid, par¼ offered.

"Everybody was expecting a bond or an equity deal, so not much of a surprise. Rumors that they are going to bump up against a covenant coming up, so people figured they were going to do something," the first trader said, adding that the paydown will help keep the company in compliance.

The company's bank debt has also been moving higher lately as a result of the July 31 announcement that it received an additional $1.06 billion delivery order for 1,700 more MRAP All Terrain Vehicles to be delivered to the U.S. Armed Forces by February 2010.

This order follows an initial $1.05 billion delivery order the company received for 2,244 M-ATVs on June 30.

Oshkosh on positive watch

As a result of Oshkosh's planned 13 million share common stock offering and repayment of term loan borrowings, the company's ratings were put on CreditWatch with positive implications by Standard & Poor's on Thursday.

"Headroom under covenants, which the company and lenders reset in March 2009, would increase moderately following the anticipated debt repayment," S&P noted.

"In addition, the company received more than $2 billion in delivery orders from the U.S. government to build 3,944 M-ATV, which has meaningfully improved the company's near-term prospects," the rating agency added.

The CreditWatch listing is expected to be resolved after the company completes the stock offering, and through a review of the capital structure and operating prospects for the company.

Any upgrade is anticipated to be limited to one notch.

Oshkosh is an Oshkosh, Wis.-based designer, manufacturer and marketer of specialty access equipment, commercial, fire & emergency and military vehicles and vehicle bodies.

MetroPCS slides

MetroPCS' term loan lost some ground on Thursday following the release of numbers that fell short of expectations, according to traders.

The term loan was quoted by one trader at 96 bid, 96½ offered, down from 96 5/8 bid, 97 1/8 offered, and by a second trader at 95 7/8 bid, 96 3/8 offered, down from 96½ bid, 97 offered.

For the second quarter, the company's net income was $26 million, or $0.07 per diluted share, compared to net income of $50 million, or $0.14 per diluted share, in the prior year's second quarter.

Total revenues for the quarter were $860 million, up from $679 million last year.

Consolidated adjusted EBITDA for the quarter was $234 million, up from $210 million in the comparable 2008 period.

"On a consolidated basis, we reported the highest Adjusted EBITDA in company history and, across all our markets, we saw strong gross additions during the quarter," said Roger D. Linquist, chairman, president and chief executive officer, in a news release.

MetroPCS reaffirms guidance

In addition on Thursday, MetroPCS reaffirmed its guidance for the full year that was originally provided on Nov. 5, 2008.

The company continues to expect net subscriber additions in the range of 1.4 million to 1.7 million on a consolidated basis in 2009.

Capital expenditures are anticipated to be in the range of $700 million to $900 million on a consolidated basis for the year.

The company believes its will reach unlevered free cash flow positive on a consolidated basis in late 2009.

And, consolidated adjusted EBITDA for the year is expected to be in the range of $900 million to $1.1 billion.

MetroPCS is a Dallas-based provider of unlimited wireless communications service for a flat-rate with no signed contract.

Huntsman trades lower

Another name that was seen retreating in the secondary market was Huntsman as it, too, posted quarterly results that fell short of expectations, according to a trader.

The term loan was quoted at 93 bid, 94 offered, down from 93¼ bid, 94¼ offered, the trader said.

For the second quarter, Huntsman had net income of $406 million, or $1.51 per diluted share, compared to net income of $24 million, or $0.10 per diluted share, for the same period in 2008.

Adjusted net loss from continuing operations for the second quarter was $64 million, or $0.27 per diluted share, compared to adjusted net income from continuing operations of $20 million, or $0.09 per diluted share, in the previous year.

Revenues for the quarter were $1.866 billion, a decrease of 36% from $2.896 billion in the comparable period last year.

Huntsman EBITDA declines

Huntsman also reported on Thursday that adjusted EBITDA from continuing operations in the second quarter was $96 million, compared to $210 million for the same period in 2008.

As of June 30, the company had $2.301 billion of cash on hand, and during the second quarter, it generated positive cash flow of about $165 million.

On June 22, the company reached an agreement with Credit Suisse and Deutsche Bank to settle claims against them in Texas state court for, among other things, fraud and tortious interference in connection with the terminated merger agreements with Basell and Hexion Specialty Chemicals Inc.

Under the terms of the settlement agreement, Credit Suisse and Deutsche Bank provided Huntsman with $632 million in cash, a $500 million seven-year senior secured term loan at Libor plus 225 basis points and a $600 million seven-year unsecured note at 5.5%.

On July 23, the company redeemed all of its outstanding 11.625% senior secured notes due 2010 and on Aug. 3, it redeemed all of its outstanding 11.5% senior notes due 2012. This debt reduction eliminated all meaningful debt maturities until 2013.

Huntsman is a Salt Lake City, Utah-based manufacturer and marketer of differentiated chemicals.

Travelport up with earnings

Meanwhile, Travelport's term loan B strengthened during market hours as the company's second quarter results came in better than expected even though they showed reductions when compared to last year's numbers, according to traders.

The term loan B was quoted by one trader at 90 bid, 91 offered, up from around 88 bid, 89 offered on Wednesday, and by a second trader at 90 bid, 91 offered, up from 88 bid, 89½ offered.

For the second quarter, Travelport's net income was $39 million, compared to $59 million in the previous year's second quarter.

Net revenue for the quarter was $592 million, down 16% from $703 million last year and adjusted net revenue was $593 million, down from $704 million.

EBITDA for the quarter was $183 million, down 2% from $187 million in the 2008 second quarter, and adjusted EBITDA was $179 million down 12% from $203 million.

Also, during the quarter, the company repaid $263 million in borrowings under its revolving credit facility.

Furthermore, from January 2008 through July 2009, the company repurchased, in the aggregate, over $1 billion of debt at a discount.

Travelport is a Parsippany, N.J.-based travel distribution services company.

Windstream holds steady

Also coming out with earnings on Thursday was Windstream Corp., and the company's term loan B held firm on the news, according to a trader.

The term loan B was quoted at 97 3/8 bid, 98 1/8 offered, unchanged on the day, the trader said.

For the second quarter, Windsteam reported net income of $90.8 million, or $0.21 per share, compared to net income of $102 million, $0.23 per share, in the second quarter of 2008.

Revenues for the quarter were $752.9 million, a 5.9% decrease from $799.9 million last year.

Operating income was $244.4 million, a decrease of 15% from $288.9 million year over year.

And, OIBDA was $379.1 million, down from $416.8 million.

Windstream generates cash

In addition, during the second quarter, Windstream had free cash flow of about $208 million.

Net cash provided from operations was $284 million, a 3% decline from the comparable 2008 period.

During the quarter, the company paid off the $150 million balance in its $500 million revolving credit facility and ended the period with $245 million in cash and cash equivalents.

The company also announced on Thursday that it received approval from the Federal Communications Commission for the acquisition of D&E Communications. The transaction is expected to close in the fourth quarter subject to approvals from D&E shareholders and the Pennsylvania Public Utilities Commission.

Windstream is a Little Rock, Ark.-based provider of phone, high-speed internet and high-definition digital TV services.

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