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Tribune debt mixed on Chapter 11 filing: Freeport remains active; GM, Ford boosted by hope
By Stephanie N. Rotondo and Sara Rosenberg
Portland, Ore., Dec. 8 - Tribune Co. was the "big news story of the day," a distressed bond trader said Monday.
The headlines were that the owner of the Chicago Tribune and Chicago Cubs filed for bankruptcy. A market source said that the media company's bonds "got active after they filed," and traders saw the bonds fall as much as 7 points on the day.
Meanwhile, Freeport-McMoRan Copper & Gold Inc.'s debt remained one of the more active issues, traders reported. The bonds have made the active list nearly every day since last Tuesday. Traders saw the bonds moving higher during Monday trading.
General Motors Corp. and Ford Motor Co. got at least a temporary reprieve as bailout hopes improved. The companies' debt gained on news reports that lawmakers were this close to coming up with a bill that would give the automakers funds during the economic downturn.
As for the general market tone, a trader said it was "definitely an up, up day."
"Everyone started being opportunistic early on," he added.
Still, other traders remarked that the day was a "typical Monday" and that the names being quoted were, for the most part, "more of the same."
Tribune debt mixed on Chapter 11 filing
Tribune, the owner of the Los Angeles Times and the Chicago Cubs, filed for bankruptcy protections Monday, which sent its bonds down as much as 7 points on the day - although its bank debt went in the other direction on hopes of better recoveries.
One trader placed the 4 7/8% notes due 2010 at 6 bid and trading flat, or without accrued interest.
"They don't trade a lot but they are definitely lower from where they had been," he said.
Another trader quoted the bonds generically at 6 bid, 7 offered.
"They pretty much trade the same now," he said of the company's various issues.
Yet another saw the 4 7/8% notes hit a low of 4 bid, 5 offered before they "recovered" to 6 bid, 8 offered. He added that the bonds had been at 11 bid, 13 offered previously.
One trader quoted Tribune's term loan B at 33 bid, 35 offered and by a second trader at 32 bid, 35 offered. Both traders agreed that the paper went out on Friday at 29 bid, 31 offered.
"People might think that recoveries are a little better than where it was," the first trader remarked in explanation of why the loan rose on the news.
The Chicago-based media conglomerate said its hefty debt load - a total of about $13 billion in debt - was partly to blame for the Chapter 11 filing. Weak revenues were also cited.
Tribune, like many other media companies, has suffered as a tightening economy has caused cuts in advertising budgets, the main source of income for many newspapers. With the advent of the internet, readership has also declined as news is more readily available.
In its filing with the Delaware bankruptcy court, Tribune reported $13 billion in debt and $7.6 billion in assets. The company is looking at selling some of its assets, including the Cubs ball team, in an effort to increase liquidity and prepare for a June 2009 interest payment. The company already sold its Newsday publication earlier this year to fund a coupon payment.
But the biggest issue facing the company is its covenants set by the company's lenders. Tribune is required to maintain a certain debt-to-cash flow level, but as revenues have fallen, that has been harder to keep up.
"So, how did we get here?" wrote Tribune owner Sam Zell in a memo to employees. "It has been, to say the least, the perfect storm. A precipitous decline in revenue and a tough economy have coupled with a credit crisis, making it extremely difficult to support our debt. All of our major advertising categories have been dramatically impacted."
The Cubs franchise was not included in the bankruptcy filing and the search for an interested buyer will continue.
Tribune also revealed on Monday that it has negotiated an agreement with Barclays to maintain its existing securitization facility post-filing and that Barclays has agreed to provide a letter-of-credit facility.
According to Tribune, these agreements with Barclays are meant to supplement its cash availability in the event of even more significant declines in operating results.
"Over the last year, we have made significant progress internally on transitioning Tribune into an entrepreneurial company that pursues innovation and stronger ways of serving our customers," said Zell in a news release. "Unfortunately, at the same time, factors beyond our control have created a perfect storm - a precipitous decline in revenue and a tough economy coupled with a credit crisis that makes it extremely difficult to support our debt.
"We believe that this restructuring will bring the level of our debt in line with current economic realities, and will take pressure off our operations, so we can continue to work toward our vision of creating a sustainable, cutting-edge media company that is valued by our readers, viewers, and advertisers, and plays a vital role in the communities we serve. This restructuring focuses on our debt, not on our operations," Zell added in the release.
Freeport remains active
Since its announcement early last week that it planned to cut its dividend and slash production, Freeport-McMoRan's bonds have made the most active list of traded bonds nearly every day.
Monday was no different.
Traders reported that the bonds were both active - one said that at least $20 million changed hands in both the 8¼% notes due 2015 and the 8 3/8% notes due 2017 - and higher during the session.
The 8¼% notes were seen at 68 and the 8 3/8% notes at 66.5 by one source. Another quoted the 8 3/8% notes at 65 bid, 66 offered, versus levels around 64 on Friday.
The Phoenix, Ariz.-based metal producer said last week that falling metal prices - and therefore declining revenues - had caused the company to eliminate its $2-per-share dividend. Job and production cuts were also in the works in an effort to conserve liquidity.
"Our focus now is on protecting liquidity because of the scarcity of financing in the marketplace," said Richard Adkerson, president and chief executive, during a conference call with analysts and investors on Wednesday.
Bailout hopes bail out GM, Ford
General Motors and Ford Motor saw their debt somewhat boosted as a congressional bailout seemed more likely.
One market player called GM's benchmark 8 3/8% notes due 2033 better by 1 to 2 points around 19. But another placed the bonds at 19 bid, 21 offered, calling that mostly unchanged on the day.
At another desk, a source deemed the 7 1/8% notes due 2013 over 2 points stronger at 22 bid.
In Ford's bonds, the benchmark 7.45% notes due 2031 gained 3 points to end at 26 bid. The 7% notes due 2013 moved up only a point to 49 bid.
Traders also saw Ford's term loan quoted at 46 bid, 47 offered, up from 44½ bid, 46½ offered. GM's loan was likewise better at 50 bid, 53 offered, up from 48½ bid, 50½ offered.
The word on the street was the lawmakers had drafted a bill pleasing not only to Congress, but also to president Bush. Under the bill that was being discussed on Monday, the government would provide $15 billion in short-term financing - mostly to General Motors and Chrysler LLC, the companies that appear to be in the most immediate danger of filing for bankruptcy.
Last week, the auto companies all presented plans to Congress, pleading cases for government aid so that they could hopefully return to profitability.
Detroit-based General Motors requested access to $18 billion in funds, comprised of a $12 billion bridge loan - of which it wants $4 billion this month - and a $6 billion revolving line of credit.
Chrysler asked for $7 billion in loans from the government.
And, Dearborn, Mich.-based Ford, on the other hand, only requested access to an up to $9 billion bridge loan in case the current economic crisis worsens or there is a bankruptcy of a major competitor.
Broad market turns positive
A trader saw Charter Communications Inc.'s 10 7/8% second-lien notes due 2014 trade up towards the end of the session at 71.5.
Bon-Ton Stores Inc.'s 10¼% notes due 2014 were called "up a little bit" by another trader at 15.5.
Pilgrim's Pride Corp.'s 7 5/8% notes due 2015 "keep creeping up," one source said. He quoted the bonds at 28 bid, 29 offered, well up from levels of 16 bid, 17 offered when the company filed for bankruptcy last week.
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