Realogy slides as exchange talks end, may up second lien; Simmons firm on restructuring plan

By Sara Rosenberg

New York, Sept. 25 - Realogy Corp.'s strip of institutional bank debt softened on Friday as the company revealed that talks with some noteholders to exchange the debt have been terminated. Also possibly affecting the bank debt was the overall weaker tone in the secondary market.

In more Realogy news, the company is considering the increase of its in-market second-lien term loan and modified call protection and maturity on the deal.

Back in the secondary market, Simmons Co.'s term loan D held steady at near par levels as the company announced a prepackaged bankruptcy plan that would result in loan lenders getting paid down in full.

Realogy trades down

Realogy's bank debt was weaker during the trading session after the company announced that talks of a potential exchange of notes for equity and new debt were terminated, according to traders, who added that an overall heavier secondary may have been to blame as well.

The strip of institutional bank debt was quoted at 86¼ bid, 87¼ offered, down from 86¾ bid, 87¾ offered on Thursday, traders said.

The exchange talks were going on with Apollo Management LP and certain institutional holders of the company's 10.5% senior notes due 2014, 11%/11.75% senior toggle notes due 2014 and 12.375% senior subordinated notes due 2015.

During these discussions, Apollo advised the company that it held about $875 million in aggregate principal amount of the existing notes as of Sept. 25.

After giving effect to the consummation of the incremental second-lien term loan, if consummated, and the related exchange transaction with Icahn Partners LP, Apollo's ownership of existing notes will increase to about $970 million in aggregate principal amount.

Realogy second lien

As was previously reported, Realogy is currently trying to syndicate an incremental second-lien term loan (Caa3/C) that will be used to refinance a portion of its existing bank debt.

This loan was originally talked at a size of $325 million, but chatter on Friday was that the deal may be upsized to $500 million.

In addition, the second-lien loan is now set to mature in October 2017 as opposed to in January 2014 as was initially proposed.

Also changing is the call protection, which has gone to non-callable for three years from non-callable for two years.

Price talk on the loan is a fixed-rate in the 13½% area with an original issue discount of 98, sources said.

JPMorgan is the lead bank on the deal.

Realogy, Icahn to swap debt

If Realogy's second-lien loan or an alternate second-lien transaction is successfully completed, Icahn Partners LP has agreed to exchange about 70% of the company's $311 million of 11%/11.75% senior toggle notes due 2014 held by it for $150 million of new second-lien term loan debt.

The $150 million second-lien loan would be in addition to the potential $500 million second-lien loan and would carry the same terms.

Furthermore, concurrently with the exchange, Icahn has agreed to sell the balance of the senior toggle notes held by it for cash to Apollo Management LP.

Realogy is a Parsippany, N.J.-based provider of real estate and relocation services.

Secondary heavy

The secondary market in general felt softer on Friday, according to traders, and volume was pretty light.

"Very heavy day. Everything is down today. Bad durable goods number. Any excuse for people to take some profits maybe. Down half to three-quarters, but depends on the name," one trader said.

Orders for durable goods dropped 2.4% in August. People were expecting the number to be in the positive range.

A second trader, however, felt that while there was a weaker tone, things were not down that much. This trader felt that things were more or less unchanged to down maybe a quarter of a point on the day.

"I didn't really see enough to know it was lower. Weaker tone but on low volume," the second trader added.

Simmons holds steady

Simmons' term loan D held in at levels that are close to par following news that the company has decided to file for Chapter 11 in order to complete a restructuring plan that calls for bank debt holders to get repaid in full, according to a trader.

The term loan D was quoted at 98 bid, par offered, unchanged from Thursday's levels, the trader said.

Under the company's plan, not only will senior bank lenders be paid in full, but so will its trade vendors, suppliers and employees.

Each holder of the company's senior subordinated notes will be entitled to receive its pro rata share of $190 million in cash and each holder of its discount notes will be entitled to receive its pro rata share of $15 million in cash.

As part of the restructuring, the company will reduce its total debt to about $450 million from about $1 billion.

The company has arranged for a $35 million debtor in possession revolving credit facility with Deutsche Bank the lead arranger, bookrunner and administrative agent.

Simmons to solicit votes

Simmons said in a news release on Friday that it expects to launch a formal process to solicit votes for its prepackaged plan from the senior bank lenders and the holders of the senior subordinated notes and discount notes as soon as solicitation materials are ready. The solicitation process is expected to be completed within 30 days after launching.

A significant majority of noteholders have already agreed to support the plan, including holders of 75.4% of the $200 million of 7.875% senior subordinated notes and 72.6% of the 10% discount notes.

Following the solicitation period, the company will commence a Chapter 11 filing and seek confirmation of the prepackaged plan.

In addition, as part of the restructuring, Ares Management LLC and Teachers' Private Capital will acquire Simmons.

The transaction is comprised of total consideration of about $760 million, including equity from the purchaser and certain of Simmons' current lenders as well as debt commitments from some current lenders.

Simmons is an Atlanta-based mattress manufacturer.

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