Blockbuster loses big; MGM weaker again, Station unchanged; NXP holds steady; Masonite loan lower

By Stephanie N. Rotondo

Portland, Ore., March 3 - As the overall distressed bond market closed another session weaker, Blockbuster Inc. was dubbed Tuesday's "biggest loser."

The company's debt dropped as much as 12 points on the news that the company had hired bankruptcy advisors. The news also gave volume in the name a boost, with about $16 million changing hands.

Meanwhile, MGM Mirage's debt once again led a retreat in the gaming sector. The casino operator's bonds have dropped several points in the last few sessions as worries over the company's cash position and overall financing level have warmed up. In the rest of the sector, Station Casinos Inc.'s debt was little affected by news that the company had secured a forbearance agreement and had also rejected a buyout bid from Boyd Gaming Corp.

NXP BV announced a debt exchange aimed at decreasing its debt load by about $1 billion. Still, investors seemed little phased and the company's bonds remained steady.

Masonite International Corp.'s term loan ended softer, traders reported. The weakness came on the back of bankruptcy chatter.

In the autosphere, General Motors Corp.'s bank debt was seen softer, while Ford Motor Co.'s loan held in there, after February sales figures came out.

Blockbuster loses big

Blockbuster's bonds were the day's "biggest loser," according to one trader who saw the debt fall 12 points on news that the company had hired bankruptcy advisors.

The trader placed the 9% notes due 2012 at 40, flat with due bills. Another trader said the bonds were trading at 52 before the news emerged, then they fell to 40 before rebounding some to close around 45.

Blockbuster has reportedly hired Kirkland & Ellis LLP to evaluate its restructuring options, including a pre-packaged bankruptcy.

Though fourth-quarter results have yet to be released, the company saw its revenue decline 2.2% to $157.6 million during the first nine months of 2008. Blockbuster will report earnings on March 19 after the market closes.

Following the news, Gimme Credit revised its rating on Blockbuster to deteriorating. In an afternoon comment, analyst Kim Noland said that the agency had previously advised buying the company's debt if it fell below 50.

"It is difficult to predict a possible turnaround for the slumping in-store rental business," Noland wrote. "Although Blockbuster had done a decent job recently of containing costs and bolstering liquidity, we are concerned that the company's recent quarter was much worse than we expected. While guidance still looked attainable in December, the news about a bankruptcy filing suggests actual results fell significantly short."

Blockbuster is a Dallas-based movie rental store chain.

MGM retreats again, Boyd, Station mixed

The gaming sector was seen largely lower overall, with MGM once again leading the retreat.

A trader said the casino operator's debt "got whacked again," its 7½% notes due 2016 3 points weaker at 34 and its 8½% notes due 2010 3.5 points softer at 43.5.

Another market source saw the 6 5/8% notes due 2015 drop 1.5 points to 37 bid, while another quoted the 8½% notes at 43 bid, 45 offered.

MGM said on Friday that it had drawn down its revolving credit facility. That in turn led to a series of losses in the company's debt, as concerned investors wondered what that meant about the company's liquidity position. Additionally, MGM's CityCenter project - and whether the company will be able to complete it - remains under construction and in need of funds to complete the project.

On Tuesday, the Las Vegas Sun put MGM on the front page, discussing the cash crunch it currently faces. Other news reports speculated that MGM might be close to violating covenants and pondered that the company could have a difficult time getting lenders to negotiate.

MGM currently has about $14 billion in debt, including $7 billion in bank loans and $750 million in new bonds issued in October.

"We had thought that the company would do everything possible to preserve its public equity," wrote Gimme Credit analyst Kim Noland. "But given its total debt of over $14 billion, and fundamentals that likely won't improve until 2010 at the earliest, MGM may have decided its capital structure is unsustainable and/or be unable to fund the cash outflows."

Elsewhere in the sector, Station Casinos announced it had obtained a forbearance agreement from its lenders after missing a coupon payment over the weekend. The company also said that it rejected a bid from Boyd Gaming for some of its assets.

But the news did little to move the bonds, traders reported. One trader pegged the 7¾% notes due 2016 at 32, calling that unchanged.

Boyd's bonds, however, were slightly more active. The trader saw the 6¾% notes due 2014 gain 2 points on the day to end around 53. Another source deemed the 7¾% notes due 2012 3 points better at 76 bid, while another quoted the 6¾% notes at 52 bid, 53 offered.

Following the news, Standard & Poor's cut Stations' rating on its 6 7/8% notes to D from C. Fitch Ratings also lowered Boyd's rating to B+ from BB-.

Meanwhile, Las Vegas Sands Corp.'s 6 3/8% notes due 2015 fell more than 3 points to end around 38.

NXP holds steady

Chipmaker NXP saw its 9½% notes due 2015 hold steady in the 9 to 10 range, traders reported, following news of the company debt exchange.

One trader called the bonds half a point better around 10, while another thought the bonds were half a point weaker at 9.5 bid, 10.5 offered.

The Eindhoven-based company announced Tuesday that it would exchange its existing notes for new notes bearing a shorter maturity and higher ranking within the capital structure. The company expects that the exchange will wipe out about $1.9 billion in debt.

Under the terms of the swap, holders of the 2015 paper will receive 15 cents to 17 cents of the new notes. Holders of the floating-rate notes due 2013 and 2014 will get between 25 cents and 32 cents on the dollar in new notes.

Masonite weakens on pre-pack news

Masonite International's term loan weakened after the company revealed details on a pre-packaged reorganization that it hopes to achieve through a bankruptcy filing, according to a trader.

The company said on Tuesday that it is planning on filing for Chapter 11 if lenders and bondholders approve a pre-negotiated restructuring plan that would reduce total funded debt by almost $2 billion and create a better capital structure for the company.

The term loan was quoted at 37 bid, 39 offered, down from levels that were previously seen quoted in the area of 42 bid, 46 offered, the trader said.

"Maybe not thrilled with the package. [Also] might be first time [levels are] real in the market so it's hard to tell. Seems to be trading on the news," the trader added.

Members of a steering committee representing the company's senior secured lenders have already agreed on Masonite's proposed restructuring plan, as well as representatives of an ad-hoc committee representing holders of its senior subordinated notes due 2015.

"We are very pleased to have reached an agreement in principle on a plan that will allow us to reduce our debt substantially and put Masonite in a stronger, financially healthier position for the future," Fred Lynch, president and chief executive officer, said in a news release.

"With an appropriately sized capital structure and greater financial flexibility, along with our excellent market position, strong brand, and industry-leading products, we believe we will be well-positioned to take advantage of market opportunities and grow our business over the long term," Lynch added in the release.

Under the terms of the agreement in principle, Masonite's existing senior secured obligations would be converted on a pro rata basis, subject to the election of each existing holder, into debt and/or equity.

More specifically, senior secured lenders will be offered a new up to $200 million senior secured term loan, a new up to $100 million second-lien PIK loan and/or 97.5% of the common equity of the company.

The common equity is subject to dilution for warrants issued to the senior subordinated noteholders and management equity and/or options.

Senior subordinated notes would be converted to 2.5% of the common equity plus warrants for 17.5% of the common stock of the company, subject to dilution for management equity and/or options.

Masonite is a Mississauga, Ont.-based manufacturer of residential and commercial doors.

GM loan softer, Ford steady

General Motors' term loan was lower during the trading session on disappointing sales numbers, while Ford Motor's term loan basically held in since its sales, although not great, were still better than General Motors, according to traders.

General Motors, a Detroit-based automotive company, saw its term loan quoted by one trader at 34 bid, 38 offered, down a point on the day, and by a second trader at 36 bid, 38 offered, down a half a point on the day.

Meanwhile, Ford, a Dearborn, Mich.-based automotive company, saw its term loan quoted by one trader at 29 bid, 33 offered, unchanged from previous levels, and by a second trader at 29¼ bid, 31¼ offered, down only on the bid side from 30¼ bid, 31¼ offered.

For the month of February, General Motors' total sales for February were 127,296, down 52.9% from 270,423 last year, total car sales were 53,813, down 50% from 107,592, and total truck sales were 73,483, down 54.9% from 162,831.

Ford's total sales were 99,400, down 48.4% form 192,799 last year, Ford, Lincoln and Mercury car sales were 34,678, down 40.8% from 58,585, and total truck sales were 61,366, down 51.6% from 126,709.

Broad market mostly lower

Aramark Corp.'s 8½% notes due 2015 dropped three-quarters of a point to 88, with $30 million trading, a trader said. Another placed the issue at 87.5.

"It just keeps getting hit," he said.

Energy Future Holdings Corp., better known as TXU, saw its 10¼% notes due 2015 gain 2 points to close at 47.

Freeport-McMoRan Copper & Gold Inc.'s 8¼% notes due 2014 fell a point to 85.25, while its 8 3/8% notes due 2017 fell half a point to 83.

Hexion Specialty Chemicals Inc.'s 9¾% notes due 2014 were seen at 14.

A trader said Neiman Marcus Group Inc.'s 10 3/8% notes due 2015 declined a couple points to 37 from 40 bid, 41 offered.

Capmark Financial Group Inc.'s 5 7/8% notes due 2012 slipped to 18.5 from 20 bid, 21 offered, according to a trader.

Sara Rosenberg contributed to this article.

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