Bankruptcy: Momentive files reorg plan; disclosure-statement hearing set for June 19

Momentive Performance Materials filed its proposed reorganization plan and disclosure statement yesterday with the bankruptcy court in White Plains, N.Y.

The bankruptcy court scheduled a hearing on the adequacy of the disclosure statement for June 19, according to an entry on the court docket.

Under the plan, the company will repay both its first-lien notes ($1.1 billion of 8.875% first-priority senior secured notes due 2020) and its 1.5-lien notes ($250 million of 10% senior secured notes due 2020) in full, in cash, including accrued and unpaid interest, but excluding any make-whole amounts.

Second-lien lenders ($1.161 billion of 9% second-priority springing lien notes due 2021 and €133 million 9.5% second-priority springing lien notes due 2021), are to receive the equity in the reorganized company, along with participation rights in a $600 million rights offering at a price per share determined by using the pro forma capital structure and an enterprise value of $2.2 billion, applying a 15% discount to the equity value.

The disclosure statement did not provide a valuation for the company or, as a result, a recovery value for the second-lien claims.

Holders of the company’s holding company PIK notes will receive remaining cash at the holding company, after payment of administrative expenses, but again, the disclosure statement does not provide a value for this recovery. The company’s senior subordinated creditors, meanwhile, will not see any recovery, and existing equity, needless to say, is to be cancelled.

The plan contemplates up to $1.27 billion in exit financing, comprised of a $270 million ABL and up to $1 billion in a new exit term loan, to be used to repay outstanding amounts under the company’s DIP and to fund distributions under the plan. – Alan Zimmerman


Sabine Pass upsized $2B 10-year high yield bonds (B+/Ba3) price at 5.75% yield

Sabine Pass Liquefaction this afternoon completed its $2 billion offering of ten-year secured notes via a large bookrunner group including RBC, Mizuho, Societe Generale, Morgan Stanley, HSBC, Scotia, Credit Suisse, Lloyds, Mitsubishi UFJ, Credit Agricole, ING, Banca IMI, Standard Chartered, J.P. Morgan, and SMBC, according to sources. Terms were finalized at the midpoint of talk, along with a $500 million upsize. Sabine Pass plans to use the proceeds to pay capital costs in connection with the construction of trains at its facility in Cameron Parish, La. and to repay bank debt. Terms:

Issuer Sabine Pass Liquefaction
Ratings BB+/Ba3
Amount $2 billion
Issue secured notes (144A)
Coupon 5.75%
Price 100
Yield 5.75%
Spread T+314
Maturity May 15, 2024
Call nc-life
Trade May 13, 2014
Settle May 20, 2014 (T+5)
Lead books RBC/Mizuho/SG/MS/HSBC/Scotia/CS/Lloyds/MUFJ/CA/ING/BancaIMI/SC/JPM/SMBC
Jt. Lead Co’s BAML/Santander/CIBC/GS
Co’s. DB
Px talk 5.75% area
Notes Upsized by $500 million

Bankruptcy: Momentive seeks court approval of RSA, backstop agreement

Momentive Performance Materials asked U.S. Bankruptcy Judge Robert Drain to set a June 19 hearing on the company’s restructuring support agreement and a backstop commitment which, together, “provide a blueprint for how the debtors will navigate through the reorganization process,” court filings show.

Momentive filed for Chapter 11 protection in White Plains, N.Y., on April 13, with an RSA in hand supported by holders of about 85% of the company’s second-lien notes. The RSA sets a series of milestones that envision a quick trip through bankruptcy for the company, including approval of the RSA within 67 days of filing – or June 19 – and confirmation of the company’s reorganization plan within 120 days, or Aug. 11.

The proposed RSA would eliminate more than $3 billion of debt and leave the reorganized company with more than $300 million in liquidity, and net debt of about $1.2 billion, Momentive has said. The plan includes a $600 million rights offering and commitments for up to $1.3 billion in exit financing. On Friday, Momentive filed its motion seeking court approval of the RSA and a backstop commitment for the rights offering.

Under the rights offering, $600 million in new common stock will be issued at a price per share based on a $2.2 billion enterprise value with an applied 15% discount to the equity value, court documents show. The RSA contemplates holders of Momentive second-lien claims will receive their pro rata share of 100% of the company’s new common stock, subject to dilution by the rights offering and a management incentive plan representing up to 7.5% of new common stock. Second-lien noteholders will also be allowed to participate in the rights offering.

Under the backstop agreement, the so-called “commitment parties” will receive a backstop premium equal to 5% of the rights offering amount, or $30 million, payable in new common stock. – John Bringardner


Kratos Defense high yield bonds (B/B3) price at 98.97 to yield 7.25%

Kratos Defense & Security Solutions this afternoon completed its first-lien senior notes offering via SunTrust Robinson Humphrey, according to sources. Terms were finalized at the midpoint of talk. Note, the first call is at par plus 75% of the coupon. The deal also includes a 10% call provision at 103 through the non-call period, although this was revised to just one time during the non-call period (from two times). The offering is a first-lien version of the postponed deal from November. Proceeds for the new offering, as with the original attempt, are being used to redeem the borrower’s $625 million issue of 10% secured notes due 2017. Terms:

Issuer Kratos Defense & Security Solutions
Ratings B/B3
Amount $625 million
Issue 1st-lien secured (144A-life)
Coupon 7%
Price 98.966
Yield 7.25%
Spread T+563
Maturity May 15, 2019
Call nc2 @par+75% coupon
Trade May 9, 2014
Settle May 14, 2013 (T+3)
Lead Books STRH
Px talk 7.25% area
Notes First call at par+75% coupon. 10% call provision at 103 revised to just one time allowed during call period.

Retail-cash outflow from ETFs dents high yield mutual-fund inflow this week

Retail-cash flows for high-yield funds reversed direction for a fifth consecutive week, with a net $368 million inflow in the week ended May 7, according to Lipper. The inflow cut away at the prior week’s $631 million outflow and the flip-flop readings over five weeks net out to positive $404 million.

Most notable, however, is that the observation technically reflects a cash infusion of $615 million to mutual funds eroded by a net outflow of $247 million from the exchange-traded fund segment. The last time such a dynamic presented itself was three weeks ago, when a $69 million mutual-fund inflow was wiped out by $292 million of ETF withdrawals.

The trailing-four-week average falls into the red for the first time in 12 weeks, at negative $59 million, versus positive $9 million last week and a peak at positive $844 million in the first week of March.

The full-year reading now shows inflows of $3.7 billion, and it’s roughly 100% tied to mutual-fund inflows, as just $2.6 million of the inflow is ETF-related. In contrast, one year ago at this time, the inflow total stood at $2.5 billion, with a breakdown of $2.2 billion of mutual fund inflows and $200 million of ETF inflows.

The change due to market conditions was positive $310 million this past week, or roughly an immeasurable increase of total assets, at $185.5 billion, of which 20% is tied to ETFs, or $36.8 billion. Total assets are up $6.7 billion in the year to date, reflecting a gain of roughly 4% this year. – Matt Fuller

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, and trading news


Bankruptcy: Momentive Performance unsecured creditor panel amended; full list


The U.S. Trustee for the bankruptcy court overseeing the Chapter 11 proceedings of Momentive Performance amended the membership of the unsecured creditors’ committee in the case to remove Globe Specialty Metals from the panel and replace it with Unimin Corp., according to a May 1 court filing.

Committee membership was otherwise unchanged.

With the change, the members of the committee and their contact information are now as follows:

  • US Bank National Association, as Indenture Trustee (James E. Murphy, (212) 951-8529);
  • BlueMountain Credit Alternatives Master Fund (Mark P. Kronfeld, (212) 905-2186);
  • Aurelius Capital Partners (Dan Gropper, (646) 445-6570);
  • Unimin Corp. (Chris Goodwin, (203) 966-8880 ext. 244);
  • Fischback USA (Kirk Chadwick, (270) 505-1243);
  • Pension Benefit Guaranty Corporation (Thea D. Davis, (202) 326-4070, ext. 3166);
  • IUE-CWA, AFL-CIO (Joseph Giffi, (585) 797-4328).

As reported, Momentive filed for Chapter 11 on April 14 in bankruptcy court in White Plains, N.Y. – Alan Zimmerman


Affinion Group back in private debt swap space: offers PIK toggles for warrants

Affinion Group is back in the private-debt-swap space with an offer to receive equity warrants in exchange for the 13.75% secured PIK toggle notes due 2018 that were put in place just six months ago as part of a prior partially uptiering bond exchange. The exchange agent is D.F. King, according to corporate filings.

The offer for holders of the $292.8 million outstanding in the toggle notes calls for a swap of warrants to purchase 341.4322 of class B common shares for each bond, and participation is due by end of day on June 4, filings show.

The 13.75% notes were pegged around 101 earlier this week, according to sources. The par-for-par placement in November took out 11.625% unsecured notes due 2015, and bondholders were also given an initial slug of equity warrants at that time. See “Affinion bonds extend gains in wake of exchange results, amendment,” LCD News, Nov. 27, 2013).

At the same time, holders of 11.5% subordinated notes due 2015 were offered a swap on a per-note basis into $1,020 of new 13.5% subordinated notes due 2018 at Affinion Investments. This paper, with $360 million outstanding after the swap, is wrapped around 105, according to S&P Capital IQ.

Affinion Group also has a $475 million issue of 7.875% notes due 2018 outstanding. This paper, rated CCC-/Caa2, has been steady this week trading around 93.25, yielding about 9.75%, trade data show.

Also this week, the issuer is in the loan market for an amend-to-extend transaction that would shift the issuer’s senior secured debt to a first- and second-lien structure. (See “Affinion tweaks structure of extension; commitments due at noon EDT,” LCD News, May 7, 2014.)

Apollo Management-controlled Affinion is a direct marketer of membership, insurance, programs, and services to consumers through certain partnership banks. Agencies assigned B/B1 and CCC/B3 ratings to the loan prior to the shift in funds. S&P assigned 1 and 5 recovery ratings, respectively. The Stamford, Conn.-based issuer is rated CC/Caa1. – Matt Fuller/Kerry Kantin

Follow Matthew on Twitter @mfuller2009 for leveraged debt deal-flow, fund-flow, and trading news


Bankruptcy: James River Coal nets final court approval for DIP facility

james river logo

The bankruptcy court overseeing the Chapter 11 proceedings of James River Coal gave final approval to the company’s $110 million DIP facility, after the company resolved several objections to the facility from the unsecured creditors’ committee in the case.

As reported, in an objection filed on May 2, the creditors’ committee called the proposed facility “extraordinarily expensive and unduly restrictive.” Among other things, the committee cited the facility’s mandatory amortization of $20 million of borrowing shortly after the final draw, which would be subject to a 1% prepayment penalty.

Given the timing, the panel said, the company would never have use for the $20 million of borrowing, and “the sole economic impact” of the amortization was to increase fees, interest, and prepayment penalties for the lenders by millions of dollars for “what is, in economic reality, a $90 million financing facility” (see “James River creditor panel blasts ‘extraordinarily expensive’ DIP,” LCD, May 6, 2014).

According to the amended final DIP order entered by the Richmond, Va., bankruptcy court, the prepayment penalty on the mandatory $20 million amortization was reduced to 0.25%, although the prepayment penalty remained at 1% for the remainder of the facility.

The committee had also complained that the DIP facility restricted its ability to challenge the validity of the company’s liens under its revolving credit facility, which has about $64.7 million outstanding in letters of credit. Under the DIP order reflecting the company’s resolution with the creditor panel, the committee will have until June 16 to file an adversary action or other proceeding challenging the liens.

As reported, the bankruptcy court approved the DIP on an interim basis on April 9. – Alan Zimmerman


Radian Group high yield bonds (B-/B3) price at par to yield 5.5%

Insurance firm Radian Group this afternoon completed its offering of five-year senior notes via Goldman Sachs, according to sources. Terms were finalized at the tight end of talk along with a $100 million upsizing at launch. The deal comes alongside a follow-on offering of 15.5 million common shares as part of an effort to fund an acquisition of information-and-analytics firm Clayton Holdings, according to a company statement. Proceeds will also be used to fund an early redemption of Radian 5.375% notes due next year and working capital, the filing shows. Terms:

Issuer Radian Group
Ratings B-/B3
Amount $300 million
Issue senior (SEC Reg.)
Coupon 5.5%
Price 100
Yield 5.5%
Spread T+385
Maturity June 1, 2019
Call nc-life
Trade May 7, 2014
Settle May 13, 2014 (T+4)
Lead Books GS
Px talk 5.5-5.75%
Notes Upsized by $100 million

Bankruptcy: James River creditor panel objects to ‘extraordinarily expensive’ debtor-in-possession loan

james river logo

The unsecured creditors committee acting in the Chapter 11 proceedings of James River Coal objected to final approval of the company’s proposed $110 million DIP facility, calling it “extraordinarily expensive and unduly restrictive.”

“The cost of the DIP financing facility, when you include the interest rate and the excessive fees, is over 21% per annum,” the committee charged.

While the cost of the facility, as stated, amounts to 16.6% (based on the facility’s interest rate of L+850 with a 1% LIBOR floor, an OID of 3.5%, an arranger fee of 2.4%, a prepayment premium of 1%, and agency fees of 0.2%), the committee explained that its 21% figure was, first, annualized, and second, based on a loan amount of $90 million, rather than the stated $110 million.

The committee’s objection pointed to the facility’s mandatory amortization of $20 million of borrowings shortly after the final draw. According to the committee, this amount is to be repaid “well before the debtors could ever conceivably require that same $20 million amount of incremental liquidity, and the debtors’ budget does not contemplate using this incremental liquidity.”

In effect, the committee states, “the sole economic impact” of this $20 million is to increase fees, interest, and prepayment penalties for the lenders by millions of dollars for “what is, in economic reality, a $90 million financing facility.”

As reported, the bankruptcy court approved the company’s proposed DIP facility on an interim basis on April 9. A final hearing is scheduled for tomorrow in Richmond, Va. – Alan Zimmerman