Delta bonds sell off amid exit OK; Bally notes steady on forbearance news; Salton steady

By Stephanie N. Rotondo

Portland, Ore., April 25 - Delta Air Lines Inc. is set to emerge from Chapter 11 protection after receiving approval from a bankruptcy court Wednesday of its reorganization plan.

As the company prepares for its Monday exit, a trader saw the airline's bonds sell off, though another source called the notes unchanged.

New shares of the carrier's stock started trading on a when-issued basis Wednesday and are expected to go to full-scale trading on May 3.

Meanwhile, Bally Total Fitness Holding Co. announced it had entered into a limited waiver and forbearance agreement with its noteholders, but the news prompted little price movement in the company's debt.

News that Jarden Corp. would acquire another company shook off any remaining speculation that it was interested in Salton Inc. Salton has seen little activity, with one trader calling action in the paper "very weak trading."

Time is of the essence for Hines Horticulture Inc., as it announced earlier this week that it had received a non-compliance letter from the Nasdaq Global Market index. The company has failed to file its 10-K since first delaying it in early March, then delaying a second time come the end of March. The bonds have stayed relatively stable since the second delay, but a source noted that Wednesday saw a "fair amount" of trading in the paper.

Delta bonds sell off

Delta's bonds "sold off a bit," according to one trader, who saw the 8.3% notes due 2029 at 59 bid, 60 offered, though he said a lot of trades were under 60.

A buyside source, however, called the notes unchanged at 59.25 bid, 60.25 offered.

The Atlanta-based company received approval from the bankruptcy court overseeing its case on its reorganization plan. The plan, which allows the company to exit bankruptcy as a stand-alone carrier, was approved by 95% of its creditors.

The airline expects to emerge from Chapter 11 protection on Monday, estimating it will be worth $9.4 billion to $12 billion upon emergence.

Under the plan, unsecured creditors will receive between 62% and 78% of the value of their allowed claims as shares of new Delta stock. Existing stock will become worthless.

Delta's new stock, which will be seen under the ticker symbol DAL, began trading on a when-issued basis Wednesday and is expected to start openly trading May 3.

In other news, Delta's exit financing credit facility freed for trading, with the first-lien term loan quoted atop par and the second-lien term loan quoted atop 101.

More specifically, the $600 million five-year first-lien term loan A (B+) was quoted at par 3/8 bid, par ¾ offered throughout the session, according to a trader.

And, the company's $900 million seven-year second-lien term loan B (B-) was quoted at 101 bid, 101½ offered on the open and then moved up to 101¼ bid, 101¾ offered, where it closed the day, the trader added.

The first-lien term loan A is priced at Libor plus 200 bps, and the second-lien term loan is priced at Libor plus 325 bps.

During syndication, the first-lien term loan A was upsized from $500 million and pricing firmed up at the low end of original guidance of Libor plus 200 bps to 225 bps, and the second-lien term loan B was downsized from $1 billion and pricing was reduced from original talk at launch of Libor plus 350 bps.

Delta's $2.5 billion credit facility also includes a $1 billion five-year revolver (B+) that is priced at Libor plus 200 bps - also the low end of original guidance of Libor plus 200 bps to 225 bps.

JPMorgan, Goldman Sachs, Merrill Lynch, Lehman Brothers, UBS and Barclays Capital are the lead banks on the deal, with JPMorgan the left lead on the first-lien debt and Goldman Sachs the left lead on the second-lien debt.

Security will be substantially all of the first-priority collateral in the existing debtor-in-possession facility.

Proceeds will be used to repay the Atlanta-based airline company's $2.1 billion DIP facility led by GE Capital and American Express, to make other payments required upon exit from bankruptcy and to increase its cash balance.

Northwest up

In other distressed airline paper, a trader saw Northwest Airlines Corp.'s bonds initially fall 1.5 points possibly on the rise in oil prices triggered by the news that U.S. gasoline stockpiles fell to their lowest levels in 18 months - a harbinger of likely greater demand and higher prices for oil going forward. However, by day's end, he said, the bonds had rebounded from their early lows and were actually up a point on the day, with the 10% notes due 2009 at 86 bid, 87 offered.

At another desk, a source said that Northwest's 7 7/8% notes due 2008 were down a point at 86.

Bally's stable on agreements

Upon hearing that Bally's had entered into a limited waiver and forbearance agreement with its noteholders, a trader quipped that it was "quite good news. It's amazing how many people went for it."

Still, the news did little to move the fitness club operator's debt, according to the trader. The trader called both the 10½% notes due 2011 and the 9 7/8% notes due 2007 unchanged, with the 9 7/8% notes seeing an 82 bid.

"Maybe they are bid for, but I can't tell if they are really moving," he said.

At another desk, however, a trader saw the 10½% notes up a point at 95.5 bid, 96.5 offered.

The Chicago-based company announced April 12 that it was in discussions with its noteholders to obtain a forbearance agreement. A coupon that came due April 16 would not be paid, the company had said in a press release, which could be viewed as a default. However, if the bondholders agreed to a waiver and forbearance, then no default would occur.

The previous announcement came with the news that the company had entered into an agreement with lenders of its senior secured credit facility.

As previously announced, the waivers relate to Bally's inability to file its 2006 10-K with the Securities and Exchange Commission in a timely matter, as well as the non-payment of interest on its senior subordinated notes. Under the agreements with the bondholders and lenders of its credit facility, the company has until July 31 to make good on its debt obligations.

Salton steady

The announcement that Jarden Corp. will purchase sporting goods maker K2 for $765 million has quelled rumors that Jarden wanted to get its hands on distressed consumer goods manufacturer Salton.

That rumor was written off as wishful thinking anyway, one trader said.

Salton's bonds were little moved on the news, in any case. A trader quoted the 12¼% notes due 2008 in the 95 levels, but added that the bonds see "very weak trading."

Hines Horticulture unchanged

The wait continues as investors and other market participants are looking for nursery supplier Hines Horticulture to release its fourth-quarter and annual earnings.

The earnings release was postponed twice in March, the second time due to audits not being completed.

However, as time has dragged on, the company has fallen out of compliance and is in danger of being delisted from the Nasdaq Global Market unless the company requests a hearing with the index's qualifications panel.

In a press release announcing the news, the company said it was trying to file its 10-K "as soon as practicable."

Calls made to the company were not returned.

Le-Nature's zooms

A trader saw the 9% notes due 2013 of Le-Nature's Inc. jump on Wednesday to 48 bid, 50 offered from prior levels at 35 bid, 38 offered after having "been dead for a while" but said he did not know what was going on with the bankrupt Latrobe, Pa.-based soft-drink producer.

While the bonds zoomed, he said the company's bank debt was only up a point, at 64 bid, 68 offered.

Another trader saw the bonds at 48 bid, which he called a 10-point rise on the day. He said the gain was "based on news of the company's planned liquidation, with a recovery range on the bonds of 39 cents to 89 cents." That liquidation plan was filed by Le-Nature's unsecured creditors, lenders and noteholders.

The company slid into bankruptcy last year after revelations of massive accounting irregularities, which later escalated into claims of fraud by the company's now-ousted former top management.

Broad market mixed

Interstate Bakeries Corp.'s 6% convertible senior subordinated notes due 2014 were seen at 90 bid, 94 offered, a source familiar with distressed bonds said.

The Kansas City, Mo.-based Twinkies maker posted a loss for the four weeks ended March 10 of $4.3 million, according to a filing with the SEC on Wednesday. That compared with a loss of $12.8 million for the prior four-week period.

Fedders Corp.'s 9 7/8% notes due 2014 were called a point better by a trader, who pegged the notes at 47 bid, 49 offered. He said the preferred paper also came in, but on small trades.

At another desk, a market participant said Scotia Pacific Co. LLC's 7.11% notes due 2028 were "a touch lower," coming in at 93 bid, 94 offered.

The source also saw Technical Olympic USA Inc.'s 10 3/8% notes due 2012 "right in the 80 range," at 80 bid, 81 offered. He said the notes were essentially unchanged and "there's no great shakes there."

Sara Rosenberg and Paul Deckelman 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.