Bankruptcy: Ahern Rentals second-lien notes price at par to yield 9.5%; terms

Certain Ahern Rentals noteholders who voted against the company’s proposed reorganization plan earlier this month will be allowed to change their vote and accept Ahern’s newly amended plan, which the company said now “provides for substantially better treatment of claims and equity interests than the noteholder plan.”

Indeed, an ad hoc group of noteholders that originally proposed its own reorganization plan for the company has now signed a plan-support agreement with Ahern, effectively eliminating the competition at a plan-confirmation hearing scheduled for June 5.

U.S. Bankruptcy Judge Bruce Beesley signed a May 24 order allowing new votes for certain Ahern creditors without forcing Ahern to resolicit votes from all creditors.

Ahern and the ad hoc group filed competing disclosure statements in March, both of which were approved by the court. Votes on the plans were due by May 13, and preliminary tabulations show second-lien noteholders rejected Ahern’s plan, according to court documents.

The ad hoc group, which includes Del Mar Master Fund Ltd., Feingold O’Keeffe Capital, Nomura Corporate Research & Asset Management, Och-Ziff Capital Management Group, Sphere Capital, and Wazee Street Capital Management, said at the time that its plan would pay all creditor claims in full, financed by a $450 million exit facility, while exchanging second-lien debt for 100% of the equity in the reorganized company. Under the noteholders’ proposal, the company’s shareholders – Don Ahern, who currently owns roughly 97% of the company, and his brother John Paul Ahern – would receive warrants. The two Aherns are sons of the company’s founder, also named John Ahern.

The company’s own plan, meanwhile, would have paid first-lien lenders in cash, second-lien lenders with a combination of cash and new debt, and leave the two Aherns’ equity interests intact (see “Ahern Rentals rival disclosure statements approved, confirmation set,” LCD News, March 13, 2013).

But following approval of the disclosure statements Ahern continued negotiations with various creditors and ultimately obtained sufficient exit financing to repay its debtor-in-possession credit facility, term loan claims, and to settle second-lien loan claims. Ahern secured nearly $500 million in exit financing – a $350 million asset-backed revolver and a $145 million term facility – and a $415 million senior secured bridge loan to repay its second-lien and term loan debt (see “Ahern Rentals secures new $415M senior bridge loan from Jefferies,” LCD News, May 21, 2013).

Under its latest plan, Ahern said second-lien holders would receive their pro rata share of $268 million (effectively a full recovery, minus post-petition interests and other costs) and the right to an additional $25 million if, among other things, there is a change of control at Ahern within two years of exiting Chapter 11. The second-lien noteholder group will also be paid $10 million in cash to cover legal expenses incurred during the bankruptcy proceedings. The Ahern brothers must now contribute $5 million to the estate in order to retain 100% of the company’s new equity.

The net book value of Ahern’s assets has grown substantially since the company filed for Chapter 11 in December 2011, according to Ahern lawyer William Noall. The net book value of its assets as of Nov. 30, 2011, was about $458.8 million. Ahern and its professionals now believe current fair market value of the company’s assets is more than $750 million, Noall said.

A hearing on the two reorganization plans is scheduled for June 5, in Reno, Nev. – John Bringardner


US: HY edges lower in quiet market while primary wraps up for May

High-yield opened steady to slightly softer this morning in contrast to the weakness that marred the secondary at start of the week. But the market is in summer Friday mode and flows are thin, sources note. Underscoring this, the HY CDX index has pulled back to a 105.125/105.25 context, that’s about half a point lower on the day and 2.25 points off the peak close of 107.375 from May 7, according to Markit.

Active benchmarks this morning include Dish 5% notes due 2023, unchanged at 94.75, and SLM Corp. 5.5% notes due 2023 that have traded around 95, a point lower on the day. The latter is down over four points on the week after announcing it will split into two companies and agencies placed its BBB-/Ba1 split ratings on review for a downgrade. Alpha Natural Resources 6% notes due 2019 have also dropped about one point, to a 91.5 context, and Caesars Entertainment 10% notes due 2018 printed half a point lower, at 62, traded data show.

Among recent new issues, yesterday’s deal for marine-transport company Ultrapetrol is in a 102 context, up from par pricing, according to sources. That’s after the $200 million issue of 8.875% first-preferred ship-mortgage notes due 2021 priced tight to guidance through leads Bank of America and Jefferies. Also, Ingles Markets 5.75% notes due 2023 are indicated at 100.25/100.5, while Meritor 6.75% notes due 2021, which printed at par and broke a quarter of a point higher, changed hands this morning at 99.25, according to market sources and trade data.

There is just one deal left on the calendar to price today, a $415 million issue of five-year second-lien notes for Ahern Rentals to back its exit from bankruptcy and repay debt. Price talk for the Jefferies-led transaction went out this morning at 9.5% area and books close at noon EDT. That will boost May volume to approximately $43.4 billion, the second highest monthly tally on record, according to LCD. The 95 tranches placed during the month is the most ever. – Jon Hemingway


European HY bond prices slip in sixth straight reading

The average bid of LCD’s European high-yield flow names fell 63 bps over the past two trading sessions, to 103.24% of par (according to Bloomberg data). The average yield widened by 32 bps, to 7.18%. It was the the sixth consecutive decline, and the average bid is now down 202 bps from the 2013 high of 105.26, from early May. Still, it is 28 bps higher in the year to date, having ended 2012 at 102.96.

A sell-off in U.S. Treasuries started last week when the U.S. Federal Reserve flagged the potential for tighter monetary policy. A negative bias subsequently seeped into the credit markets – especially high-yield, where bonds across the board lost about a point. Larger declines in high-beta and peripheral-exposed bonds took some of the froth off of a toppy market.

There were two advancers against 10 decliners. Codere bonds continued to recover recent losses, gaining 52 bps, to 67.03. The decliners were led by Europcar, which fell 398 bps, to 96.63, the lowest level since the end of April.

The average spread for the composite was 34 bps wider, at B+674, or E+630, swap-adjusted.

LCD’s European high-yield bond flow name composite consists of Codere 8.25% notes due 2015; Labco8.5% notes due 2018; HeidelbergCement 7.5% notes due 2020; Ineos 7.875% notes due 2016; Campofrio8.25% notes due 2016; Bakkavor 8.25% notes due 2018; Europcar 9.375% notes due 2018; Smurfit Kappa7.25% notes due 2017; UPC 6.375% notes due 2022; Ziggo 8% notes due 2018; Ardagh Glass 7.375% notes due 2017; and Wind Telecomunicazioni 7.375% notes due 2018. – Sohko Fujimoto

The data:

  • Bids fall: The average bid of the 12 bond flow names fell 63, to 103.24% of par.
  • Yields rise: The average yield to worst widened by 32 bps, to 7.18%.
  • Spreads increase: The average option-adjusted spread to Bunds widened by 34 bps, to B+674, or E+630 swap-adjusted.
  • Advancers: There were two advancers, led by Codere, which gained 52 bps, to 67.03.
  • Decliners: There were 10 decliners, led by Europcar, which lost 398 bps, to 96.63.
  • Unchanged: None.

High yield mutual funds, ETFs see largest investor cash outflow in 16 weeks

There was a net outflow of $875 million from high-yield mutual funds and exchange-traded funds in the week ended May 29, according to Lipper, a Thomson Reuters company. This is the largest one-week outflow in 16 weeks, and it was roughly two thirds mutual fund redemption and one third ETF outflow.

The large negative reading drags the four-week trailing average into the red, at negative $28 million, from positive $309 million last week and a recent peak at $506 million three weeks ago.

The outflow in today’s weekly report is the ninth negative reading of the 22 weeks in the year to date. All said, Lipper data show a net year-to-date inflow of $1.6 billion, but that’s based on $2.1 billion of inflow to mutual funds against a $499 million withdrawal from ETFs. Last year at this point, there had been $13.9 billion of inflow almost equally divided between mutual funds and ETFs.

Net assets of the weekly reporter sample were $169.6 billion at the end of the observation period, with ETFs representing about 19% of the total, or $32.4 billion. Net assets are up $7.6 billion in the year to date, or a gain of roughly 5%.

The change due to market conditions was negative $1.7 billion in the week, which is roughly a 1% decrease and the largest one-week decline this year. In fact, not dating to the late September sell-off was there a one-week decline in asset value due to market momentum. – Matt Fuller


Highway Technologies creditors’ committee appointed

The U.S. Trustee overseeing the Chapter 11 proceedings of Highway Technologies appointed an official committee of unsecured creditors today. Current membership and contact information is as follows:

  • Ennis Paint (Ted Navitskas, 800-331-8118)
  • TrueBlue (Albert Kirby Sr., 253-680-8468)
  • Traffix Devices (James King, 949-361-5663)
  • 3M Company (Alan Brown, 651-736-6739)
  • Automotive Rentals (Richard Moyer, 856-914-7555)
  • The Sherwin-Williams Company (216-515-8733)
  • Aspen American Insurance Company (860-656-2936)


Highway Technologies, one of the largest traffic-safety companies in the U.S., filed for bankruptcy protection in Wilmington, Del., on May 22, after shutting down operations and laying off hundreds of employees (see “Highway Technologies, traffic safety co., seeks Ch. 11 liquidation,” LCD News, May 22, 2013).

The company won interim bankruptcy-court approval to use up to $2 million of its proposed $3 million debtor-in-possession credit facility, provided by Abelco Finance, at a May 24 hearing on the company’s first-day motions. A final hearing on the DIP is scheduled for June 10, before Judge Kevin Carey. – John Bringardner


High yield bond prices tumble in trading; biggest slide since November sell-off

The average bid of LCD’s flow-name high-yield bonds fell 93 bps over the past two trading sessions, to 105.32% of par, yielding 6.8%.

The decrease builds on Tuesday’s 39 bps decline, for a net reduction by 132 bps week over week. Most notably, though, this is the largest negative reading in the twice weekly observation this year, and it drags the average further below the 2013 peak, which was 107.64 three weeks ago.

Moreover, this is the largest single decline recorded since Nov 15, when the average fell 107 bps amid the ongoing correction that month. Also the week-over-week decline is the largest since that time frame.

Today’s decline in the third consecutive negative reading, for a decline of 156 bps over two weeks and a decrease of 172 bps over the past four weeks. And at 105.32 for today’s observation, the average is deeper in the red for the year-to-date report, at negative 107 bps.

Weakness has pervaded the secondary market in recent days with outflow from exchange-traded funds evidenced by some small bid-wanted lists circulating in the Street and jitters about the U.S. Treasury market, with the recent sell-off spiking the yield on the 10-year to a 13-month high in the 2.15% context. The negative bias began last week after congressional testimony by Fed chairman Ben Bernanke flagged the potential for tighter monetary policy in the near term if the economy strengthens more rapidly than expected.

Declines amongst constituents were broad based, with 14 decliners, and a sole gainer. That credit was Chrysler Group 8.25% notes due 2021, which recouped three eighths of a point, to 113, even as the paper still sits two points below levels three weeks ago.

With a solid decline in the average, yield-to-worst on the sample spiked 39 bps, to 6.8%. Recall that until the past weeks, recent gains had the average yield-to-worst on the sample below 6% for the first time ever, including a low at 5.86% at the May 9 peak.

And as the average yield surged in today reading, the average spread to worst gapped out a similar amount, widening 38 bps, to T+573, or L+555, swap-adjusted.

For reference, the respective averages at the 2007 market peak were 7.69%, T+290, and L+237. – Staff reports

The data:

  • Bids fall: The average bid of the 15 flow names declined 92 bps, to 105.32.
  • Yields rise: The average yield to worst surged 39 bps, to 6.8%.
  • Spreads widen: The average spread to Treasury gapped out 38 bps, to T+573, or L+555 swap-adjusted.
  • Gainers: The sole gainer was Chrysler Group 8.25% notes due 2021, which edged up three eighths of a point, to 113.
  • Losers: The largest of the 14 decliners was Chesapeake Energy 6.625% notes due 2020, which shed two points, to 111.
  • Unchanged: None.

Clearwire shares surge, bonds gain after Dish ups bid for co

Clearwire shares surged this morning, though the company’s bonds barely edged higher at inflated levels, afterDish Network put forth a higher bid for the company than majority shareholder Sprint Nextel’s increased and final offer last week. CLWR shares rallied roughly 22%, to $4.25 per share, versus the new Dish purchase price, at $4.40 per share and Sprint’s 14% increase, to $3.40 per share last week, which the company said was best and final.

The Clearwire 14.75% first-lien bullet notes due 2019 maintained inflated levels just short of 140, but the 12% second-lien notes due 2017 were marked two points higher, at 116/116.5, according to sources. Elsewhere in the capital structure of the once-distressed issuer, Clearwire first-lien 12% notes due 2015 held just on top of the current call price, at 106, sources add. Recall that both 12% issues are significantly better than respective 40 and low 70s from late in 2011, when the company warned about potential to not make Dec. 1 coupon payments.

Dish upped the ante in a competitive takeover saga dragging over the past six months. “The Clearwire spectrum portfolio has always been a key component to implementing our wireless plans of delivering a superior product and service offering to customers,” said Charlie Ergen, chairman and co-founder of Dish Network in today’s letter to the Clearwire board of directors.

As reported in January, Dish Network upped the takeover ante on Clearwire to $3.30 per share, besting Sprint’s previous offer of $2.97 per share, which itself was up from $2.90 initially. CLWR shares were trading around $3.14 at the time. With Sprint’s final, higher bid last week, the company additionally flagged commitments to the deal from minority shareholders Comcast, Intel, and Bright House Networks to vote their approximate net 26% shares in support of the transaction, filings show.

Recall that prior to the Sprint-Softbank merger rumor in early October – which was soon made official and remains under review as Dish evaluates its counter offer – CLWR share valuation was $1.30, and the 14.75% notes were around 110, trade data show. The latter, a $300 million issue sold in January 2012, at par, is rated CCC/B3. – Matt Fuller



Patriot Coal: bankruptcy court rules it may reject CBAs, cut retiree benefits

Patriot Coal may reject its collective bargaining agreements with the United Mine Workers of America and modify retiree benefits, according to a 102-page opinion released this afternoon by the bankruptcy court overseeing Patriot’s Chapter 11 proceedings.

The ruling is “wrong, unfair, and fails to fully recognize the coming wave of human suffering that will be experienced by thousands of people throughout the coalfields,” said UMWA President Cecil Roberts, whose organization represents more than 1,650 of Patriot’s roughly 4,200 current active employees. “We are disappointed that the Bankruptcy Court failed to see that, and we intend to appeal the ruling to the Federal District Court,” Roberts added.

Although at least one press report earlier this month suggested the UMWA would launch a strike should the court allow rejection of the CBAs, union spokesmen made no mention of such a move following today’s ruling. The UMWA said it plans to continue its public protests against former Patriot parent companies Peabody Energy and Arch Coal – “the architects of this travesty” – with a June 4 rally in Henderson, Ky.

As LCD has reported, the UMWA urged the court not to permit the company to reject its collective bargaining agreements with the union or to terminate the healthcare benefits of retirees, calling the company’s proposals a “cruel joke” on mine workers, and arguing that the company has other avenues open to it to meet its financial goals without hurting these workers and retirees.

Under the company’s proposals, responsibility for union retirees’ healthcare benefits would be transferred to a voluntary employee benefits association (VEBA) that the company would fund with $15 million (see “Patriot Coal ‘exploring’ asset sales to address ‘fragile position’,” LCD, March 15, 2013). The company said the labor pact rejections and benefit modifications would save it $150 million annually.

According to the union, Patriot manipulated its financial goals in order to break the union. The union said that Patriot admitted “that it manufactured its EBITDA and liquidity crises…by setting the DIP covenants at levels that cannot be attained without the relief it demands from labor.”

But, the union said, the company’s assumption regarding coal prices was “probably wrong,” According to the union, coal prices and the company’s cash flow are expected to increase in both 2015 and 2016.

“There is no dispute that for debtors’ survival, concessions are necessary,” Judge Kathy Surratt-States wrote in her opinion. Still, the judge went on, “[t]his court cannot make heads nor tails of where the UMWA believes these additional savings could reasonably come. It appears that at times, the UMWA has merely made arbitrary reductions to debtors’ October 2012 business plan and then determined through self-consultation that those additional savings are ‘achievable.’ It goes without saying that proffers of this nature are insufficient for the court to accept.”

“There are several events that catalyzed [Patriot’s] bankruptcy filing,” Surratt-States wrote. “Above all other reasons however are the liabilities that debtors inherited from Peabody and Arch. [Patriot’s] retiree health care obligations are presently at astronomical levels. The estimated present value of debtors’ retiree benefit obligations exceeds $1.6 billion. Additionally, debtors inherited below-cost coal contracts from both Peabody and Arch whereby the cost to debtors to excavate and prepare the coal exceeds the price at which debtors must sell the coal. Consequently, the cost to debtors to service some of these below-market coal contracts has contributed to the deterioration of debtors’ finances.”

“Was debtor Patriot Coal Corporation created to fail?” Surratt-States asked. “Maybe not. Maybe. Maybe the executive team involved at debtor Patriot Coal Corporation’s inception thought the liabilities were manageable and thus the reality of debtors’ bankruptcy was more attributed to unwarranted optimism about future prospects. Unions generally try to bargain for the best deal for their members, however, there is likely some responsibility to be absorbed for demanding benefits the employer cannot realistically fund in perpetuity, particularly given the availability of sophisticated actuarial analysts and cost trend experts.” – John Bringardner



Regal Entertainment bonds (B-/B3) price to yield 5.75%; terms

Regal Entertainment Group today completed an offering of senior notes via bookrunners Credit Suisse, Bank of America, Barclays, Deutsche Bank, and Wells Fargo, according to sources. Terms printed at the wide end of talk amid heavy market conditions today, but at the target size of $250 million. Proceeds from the SEC-registered deal will be used to redeem or repurchase portions of outstanding 9.125% notes due 2018 and 8.625% notes due 2019. As of March 28, amounts outstanding were $533 million and $393.9 million, respectively, according to an SEC filing. The 9.125% notes are callable beginning August 2014 at 104.56 and are subject to a T+50 make-whole before that date. Likewise, the longer-dated issue, which isn’t callable until July of next year, also has a make-whole. Knoxville, Tenn.-based Regal operates 7,358 screens in 579 theaters in the U.S. and abroad. Terms:

Issuer Regal Entertainment Group
Ratings B-/B3
Amount $250 million
Issue senior notes (SEC Reg.)
Coupon 5.75%
Price 100
Yield 5.75%
Spread T+361
FRN eq. L+345
Maturity June 15, 2023
Call nc5
Trade May 29, 2013
Settle June 13, 2013 (T+11)
Joint Bookrunners CS/BAML/Barc/DB/WF
Px talk 5.5-5.75%
Notes w/ three-year equity clawback for 35% @ 105.75; carries T+50 make-whole call; w/ change-of-control put @ 101.

Otelco exits Chapter 11 following confirmation of prepack plan

Otelco exited Chapter 11 on May 24, following the May 6 confirmation of its reorganization plan, court records show.

Otelco board members Bill Bak, Bob Guth, and Bill Reddersen stepped down on Friday, replaced by private investor Norman Frost, independent consultant Brian Ross, and Gary Sugarman, a managing member of venture fund Richfield Capital Partners, the company announced.

Oneonta, Ala.-based Otelco, a regulated wireline-telecommunications provider with services in Alabama, Maine, Massachusetts, Missouri, Vermont, and West Virginia, filed a prepackaged Chapter 11 in Wilmington, Del., on March 24.

Under the company’s plan, holders of senior term loan claims received their pro rata share of a new senior term loan of up to $142 million, due April 30, 2016; a cash payment of at least $20 million; and 7.5% of new class B common stock in the reorganized company as an amendment fee. The company’s senior secured revolver claims will be amended and reinstated, up to $5 million.

Subordinated noteholders will receive their pro rata share of 92.5% of the new class A common stock in the reorganized company, subject to dilution on account of a management equity plan. General unsecured claims will be reinstated in full, but all existing equity will be wiped out.

The company’s financial problems stemmed from its loss of a material contract to provide services to Time Warner Cable, which the company disclosed in April 2012. The Time Warner contract expired on Dec. 31, 2012, the company said, with the cable giant electing to begin performing services in-house. The company had also said that certain FCC rulings had negatively affected the company. – John Bringardner/Alan Zimmerman