MGM drops on draw; Freescale bid lower with latest exchange results; Calpine dips; LCDX weakens

By Sara Rosenberg

New York, Feb. 27 - MGM Mirage's term loan was quoted lower on Friday after the company revealed that it borrowed the remaining funds under its revolving credit facility as a result of the turbulence in the markets and the economy.

Also in the secondary market, Freescale Semiconductor Inc.'s term loan widened out as the company announced its latest bond-for-loan exchange update that showed, when compared to the last update, a slight increase in the amount of new loan debt that the company will incur.

And, Calpine Corp.'s term loan was a little weaker as earnings were announced, LCDX 10 was slightly softer and the cash market was flat with light activity.

MGM Mirage falls

MGM Mirage's term loan was seen as being down during market hours following news of a revolver draw, a trader told Prospect News, stressing, however, that since the paper was not really trading, the lower levels were just quotes.

The term loan was quoted at 44 bid, 46 offered by the trader who said that he even saw levels as wide as 42 bid, 46 offered. On Thursday, the loan went out around 47 bid, 51 offered.

In an 8-K filed with the Securities and Exchange Commission on Friday, MGM Mirage said that it borrowed the remaining $842 million under its $4.5 billion senior revolving credit facility on Feb. 26.

Proceeds from the draw will be used for general corporate purposes.

MGM Mirage downgraded

Also on Friday, MGM Mirage's ratings were cut by both Moody's Investors Service and Standard & Poor's.

Moody's downgraded MGM Mirage's corporate family rating to B3 from B1 and left the rating on review for further possible downgrade to reflect the difficulty the company faces in shoring up its liquidity profile.

Moody's said that it estimates that internally generated cash, net proceeds from the pending sale of Treasure Island together with the revolver draw and cash on hand will be barely sufficient to fund the MGM Mirage's operations - including its CityCenter obligations - and required bond maturities through year-end 2009.

Meanwhile, S&P downgraded lowered its corporate credit rating on MGM Mirage to B- from B+ and left the rating on CreditWatch with negative implications.

"The downgrade reflects heightened concerns around MGM Mirage's liquidity position and our expectation for meaningful deterioration of credit measures over the next several quarters, given our projection for substantial declines in EBITDA during 2009," said S&P credit analyst Ben Bubeck, in the rating release.

S&P sees covenant violations in MGM's future

In its ratings announcement on Friday, S&P remarked that it anticipates the company's newly announced revolver draw to drive a covenant violation in the current quarter.

"Based on our projection for EBITDA declines of 25% in 2009, and assuming that proceeds from the revolver draw will be sufficient to meet 2009 bond maturities, we project leverage to exceed 10x by the end of 2009 and EBITDA interest coverage to be less than 1.5x on a run rate basis. We are also projecting only a modest rebound in cash flow generation in 2010," S&P explained.

Furthermore, S&P said that MGM Mirage continues to face funding needs for its CityCenter project.

"Given its current liquidity position, MGM Mirage's ability to meet its 2010 bond maturities and continue to fund the development of CityCenter is in doubt, absent a meaningful equity infusion or additional asset sales. Moreover, it is unclear at this point how the bank group will respond to a covenant violation," S&P added.

MGM is a Las Vegas-based owner and operator of casino resorts.

Freescale bid slides

Freescale Semiconductor's term loan saw its bid weaken but its offer strengthen after the company came out with a new update on its exchange offer, according to a trader.

The term loan was quoted wide at 40 bid, 45 offered, compared to Thursday's closing levels of 42 bid, 44 offered, the trader said, adding that there wasn't a whole lot of activity in the name.

"These updates don't really matter. Everyone knows what's going on," the trader concluded.

On Friday morning, Freescale announced that as of the close of business Thursday, it had received commitments with respect to about $2.95 billion aggregate principal amount of the existing notes.

Based on the amount of commitments delivered, the company would get an about $703 million new incremental term loan.

After the initial expiration of the early commitment deadline earlier in the week, the company had received commitments with respect to about $2.89 billion of notes, which translated into a roughly $694 million incremental term loan.

This early commitment deadline had been extended to Thursday and now it has been extended again, this time to March 10, the previously announced termination date.

Freescale exchange offer details

As was previously reported, Freescale has invited holders of its senior floating-rate notes due 2014, 9 1/8%/9 7/8% senior PIK-election notes due 2014, 8 7/8% senior fixed-rate notes due 2014 and 10 1/8% senior subordinated notes due 2016 to exchange their bonds for an up to $1 billion incremental term loan.

The incremental term loan due Dec. 15, 2014 will carry pricing of 12.5%, and will be guaranteed by the same guarantors under the company's senior secured credit facility.

Up to $250 million of the senior PIK-election notes, which are priority one, and up to roughly $746 million of the senior subordinated notes, which are priority two, can be swapped for the new term loan debt.

The senior floating-rate notes are acceptance priority three, and the senior fixed-rate notes are acceptance priority four. Maximum amounts for swaps of these notes are not available.

The company's existing credit facility lenders were invited to participate in the new loan as well, but declined, which is not surprising given that the incremental term loan is dilutive to bank holders.

Freescale is an Austin, Texas-based designer and manufacturer of embedded semiconductors for the automotive, consumer, industrial, networking and wireless markets.

Calpine softens

Calpine's term loan was moderately weaker in trading on Friday following the release of fourth quarter numbers, according to a trader.

The term loan was quoted at 70 bid, 75 offered, down about a half a point on the day, the trader said.

For the fourth quarter, Calpine reported a net loss of $109 million, compared to a net loss of $142 million in the same period in 2007.

Net loss, excluding reorganization items, discontinued operations, other one-time items and non-cash mark-to-market gains or losses, was $146 million in the quarter, compared to $90 million last year.

Operating revenues for the quarter were $1.968 billion, versus $1.924 billion in the fourth quarter of 2007.

And adjusted EBITDA for the quarter was $325 million, compared to $340 million last year.

Calpine provides full-year guidance

Also on Friday, Calpine announced its outlook for 2009, including adjusted EBITDA guidance in the range of $1.6 billion to $1.7 billion.

Adjusted free cash flow guidance for the 2009 year is $400 to $500 million.

These estimates include major maintenance expense of $205 million and capital expenditures of $145 million in 2009.

In addition, the company said in its earnings announcement that during the third quarter of 2008, in light of turbulent economic conditions, it elected to draw $725 million under its revolving credit facility. This draw is expected to be maintained until financial markets have become more stable.

Calpine is a San Jose, Calif.-based energy company.

LCDX loses ground

In more trading happenings, LCDX 10 was a touch weaker by late Friday afternoon, while the cash market was described by a trader as more as unchanged as a result of very light volume.

The index was quoted at 73.70 bid, 74 offered, down from Thursday's levels of around 74.05 bid, 74.30 offered.

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