MGM doing better on investment news; GM notes active, Ford moving higher; Hertz bonds rack up gains

By Stephanie N. Rotondo

Portland, Ore., April 7 - Distressed bond traders called Tuesday's session a "mixed bag," as some names were seeing gains and others were not.

In particular, MGM Mirage's bonds continued to post gains after word came out that the company was considering a $750 million term loan from Colony Capital LLC. With the bonds gaining as much as 5 points on the day, one trader speculated that the amount of the investment was more than had been expected.

Meanwhile, General Motors Corp.'s bonds were trading actively, but remained unchanged. Rival Ford Motor Co. saw its bonds moving higher in response to the company's announcement Monday that it had depleted its debt by $9.9 billion.

Also moving higher were Hertz Global Holdings Inc.'s notes. The car rental company's debt has steadily been climbing higher, leading some to believe that the company might soon be making the jump from distressed to high yield.

MGM debt doing better

MGM Mirage's bonds continued to gain ground as news came out regarding the company's investment talks with Colony Capital.

A trader quoted the 8 ½% notes due 2010 at 55 bid, 55.5 offered, up from levels around 55 on Monday and better than the opening price of 53. He added that the issue had been in the high-40s on Friday.

The trader also saw the 6% notes due 2009 around 69.

Another trader called the 5 7/8% notes due 2014 2.5 points stronger at 38 bid, 40 offered.

At another desk, a trader said the 6 5/8% notes due 2015 and the 7½% notes due 2016 got as good as 43 before settling back in at 41, which he said was "still up on the day." He quoted the 6% notes at 69 bid, 70 offered, a gain of 4 to 5 points.

News out Tuesday indicated that Colony Capital was considering a $750 million secured loan to the struggling casino operator. The funds would be used to help the company refinance its existing debt, not to help finance the CityCenter project, sources said.

"I think that was more money that people thought they were working on," one trader said, giving reason for the bonds' gains.

MGM's bonds have gyrated since word first circulated that Colony was interested in investing in the company. One market source told Prospect News that it seemed odd that Colony would want to participate, given that Colony was also having its own financial struggles.

Crown Ltd. is also reportedly considering an investment, though its top executive denied that it was considering a direct investment in CityCenter.

On Monday, MGM's debt gained as much as 5 points on the day on news that the company had hired Morgan Stanley to evaluate bids on some of its properties. Many believe that funds from potential asset sales would be used to reduce debt.

Elsewhere in the sector, Wynn Las Vegas LLC's 6 5/8% notes due 2014 inched up to 77 bid, 79 offered.

GM active, Ford moves up

In the automotive sector, General Motors' bonds traded actively but ended mostly unchanged, while Ford Motor's debt moved higher.

A trader placed GM's benchmark 8 3/8% notes due 2033 at 11.5, while another quoted the issue at 11 bid, 13 offered. The 7 1/8% notes due 2013 slipped a point to 11 bid.

At another desk, GM's 7.20% notes due 2011 were deemed unchanged at 12 bid, 15 offered.

Meanwhile, Ford's 7.45% notes due 2031 were seen gaining 3 points to 37 bid, 39 offered. Another trader echoed that market, but called it up only 2 points on the day.

GM is reportedly fast-tracking a bankruptcy plan, though its board of directors are continuing to look for cost savings to avoid a Chapter 11 filing, according to a Bloomberg report. GM has until June to come up with a better viability plan, after President Barack Obama rejected the company's first proposal on March 30. That also resulted in the ouster of Rick Wagoner as chief executive officer. He was replaced by Fritz Henderson.

Over at rival Ford, the company's admission on Monday that it had trimmed its debt load by $9.9 billion resulted in an upgrade from Moody's Investors Service. Market players said on Monday that the decline in debt has placed the company on better footing than GM or Chrysler LLC.

GM is a Detroit-based automaker. Ford is based in Dearborn, Mich.

Hertz racks up gains

Hertz paper continued on its upward track, traders reported.

"It seems to be moving up half a point a day," one trader said, placing the 8 7/8% notes due 2014 at 63.5 bid, 64.5 offered.

Another trader called that issue up a deuce at 63 bid, 65 offered, while another source deemed the debt a point better at 65 bid.

Fitch Ratings said the Park Ridge, N.J.-based company's credit rating was unaffected by the company's plan to repurchase up to $500 million of its term debt. The rating agency said the number was a small portion of the company's overall debt.

Still, investors have seemed more interested in the name, even more so after news last week that the company had purchased Advantage Rent-A-Car assets for just over $30 million.

Additionally, Hertz announced Tuesday that its subsidiary, Hertz Equipment Rental Corp., had purchased Rent One, a provider of power to event and media companies in Spain.

With the recent acquisitions, some have wondered if the company's bonds will make their way back to high-yield desks, especially given the steady increase in the bonds.

"Right now, they are sort of on the line [between distressed and high yield]," a market source said.

Tribune term loan breaks

Tribune Co.'s one-year accounts receivable securitization facility hit the secondary market on Tuesday after allocations went out, and the bid on the term loan was seen slightly higher than the discount price at which it was sold during syndication, according to a market source.

The $150 million term loan was first seen at 99¼ bid on the break and then it inched up to 99½ bid by the end of the day, the source said.

Pricing on the term loan is Libor plus 600 basis points with a 3% Libor floor and it was issued to investors with an upfront fee of 1 point.

Tribune's $225 million accounts receivable securitization facility also includes a $75 million revolver that is priced at Libor plus 600 bps with a 3% Libor floor as well.

The revolver was sold to investors with an upfront fee of 4 points.

Proceeds from the facility will be used to refinance an interim $300 million accounts receivable securitization debtor-in-possession financing facility that was provided by Barclays back in July 2008 and expires on April 10 - which is when closing on the new deal is scheduled to take place.

Barclays is also the lead bank on the new transaction.

The actual borrower under the proposed deal is a bankruptcy remote special purpose entity.

Tribune is a Chicago-based media company.

Sara Rosenberg contributed to this article.

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