Category Archives: Media/Technology

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at 1:47pm

Bankruptcy: Conexant Systems committee of unsecured creditors appointed; list, contacts

The U.S. Trustee overseeing the Chapter 11 proceedings of semiconductor-maker Conexant Systems Inc. appointed a committee of unsecured creditors March 8. Current membership and contact information is as follows:

  • PRES-4340 Von Karman LP (David Bonaparte, 949-442-5965)
  • Samsung Electronics Co. (Jaishuk Hong, 82-2-2255-8337)
  • STATS ChipPAC Ltd. (Thomas McNaughton, 510-979-8204)

The committee chose law firms Kelley Drye & Warren and Womble Carlyle Sandridge & Rice as co-counsel to represent its interests in the case, according to a notice filed with the court.

Conexant filed for bankruptcy protection on Feb. 28, with a “pre-arranged” reorganization plan that would see the company exit Chapter 11 within 120 days. – John Bringardner

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at 11:27am

Reader’s Digest nets $105M DIP after filing for Chp 11 over weekend

The Reader’s Digest Association said Sunday that it filed for Chapter 11 in U.S. Bankruptcy Court in White Plains, N.Y. – its second bankruptcy filing in less than four years – in a debt-for-equity swap reorganization.

The restructuring has the support of both the company’s secured lenders and an ad hoc committee of senior secured noteholders, comprising GoldenTree Asset Management, Empyrean Capital, and Apollo Management, which hold roughly 70% of the company’s $464 million of senior secured notes that were put in place when Reader’s Digest last exited bankruptcy in early 2010.

The restructuring would convert the secured notes to 100% of the equity of the new company, Reader’s Digest said.

Those notes (L+650 with a 3% LIBOR floor), due 2017, last traded in a round lot Feb. 1 at 40, according to traded data, while odd lots have since changed hands as high as 50.

In addition to the secured notes, RDA’s $534 million in prepetition debt includes a $59.26 million secured credit facility and a $10 million unsecured term loan from Luxor Capital Group and Point Lobos Capital.

The noteholders are providing the company with a $105 million DIP facility, according to a declaration filed in bankruptcy court by Reader’s Digest president and CEO Robert Guth in connection with the Chapter 11 filing. The DIP refinances the roughly $60 million of the company’s prepetition secured credit facility at L+500 with a 3% LIBOR floor, and has $45 million in new money at L+950 with a 1.5% LIBOR floor. The DIP matures on Oct. 31.

The company plans to seek interim access to $11 million of the new money, court documents say.

Under the proposed restructuring plan, upon emergence, the refinancing portion of the DIP would convert to a first out, priority exit term loan, while the new money portion of the DIP would convert to a second out, first priority term loan in an amount equal to the new money DIP outstanding at emergence. Both facilities would be pari passu.

The first out exit term loan would be priced at L+600 with a 3% LIBOR floor, while borrowings under the second out facility would be at L+1,100 with a 1.5% LIBOR floor, court documents show.

The Chapter 11 filing comes after a failed sales effort of the company as a whole, according to sources, though Reader’s Digest did successfully sell off Weekly Reader and Allrecipes.com businesses last year for $3.6 million and $175 million, respectively.

More deals could be on the way.

The company hired FTI Capital Advisors in 2012 as its financial advisor to sell or license the regional components of the company’s international operations, or the businesses as a whole, Guth’s declaration said, adding that Reader’s Digest “received preliminary proposals for most regions, which reflect a mix of upfront cash and royalty income.”

Noting that the company sold its Spain and Portugal businesses on July 31, 2012, Guth said that Reader’s Digest was “currently in negotiations for the sale and licensing of certain international markets, and is considering other alternative dispositions for certain international markets.”

In Sunday’s announcement, the company said it “expects to finalize certain agreements in the coming weeks.”

The Chapter 11 filing only covers Reader’s Digest U.S. businesses.

The company had previously hired Morgan Stanley and Evercore Partners to explore dispositions or a sale, according to sources. Moelis & Co. is advising the ad hoc committee of noteholders.

Under the terms of its restructuring support agreement, Reader’s Digest must file a reorganization plan and disclosure statement within 25 days of the petition date, win confirmation of the plan by July 15, and exit from Chapter 11 by July 31.

According to court documents, Alden Global Capital holds a 17.77% stake in the company, while Point Lobos holds a 13.55% stake in the company. Its other large equity holders include Jefferies High Yield Holdings LLC (9.43%), GoldenTree Asset Management LP (9.22%), General Electric Capital Corp. (8.96%), JP Morgan Chase Bank NA (6.79%), and Goldman Sachs Asset Management LP (5.69%). – Staff reports

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at 3:50pm

Unisys senior notes price at par to yield 6.25%; terms, details

Unisys today completed an offering of senior notes via sole bookrunner Citi, according to sources. Terms printed at the midpoint of guidance and at the target size of $210 million. Proceeds from the deal will be used to redeem $183 million of outstanding 12.75% secured notes due 2014. That paper was issued in August 2009 as part of an uptiering debt-exchange exercise. Blue Bell, Pa.-based Unisys is an information-technology company that provides IT services, software, and technology solutions worldwide.

 

Terms:

Issuer Unisys
Ratings BB-/B1
Amount $210 million
Issue senior notes (SEC-registered)
Coupon 6.25%
Price 100
Yield 6.25%
Spread T+543
FRN eq. L+522
Maturity Aug. 15, 2017
Call nc-life
Trade Aug. 16, 2012
Settle Aug. 21, 2012 (T+3)
Joint Bookrunners Citi
Co-Leads
Co’s. HSBC,RBS
Px talk 6.25% area
Notes carries T+50 make-whole call; w/ change-of-control put @ 101.
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at 3:04pm

Level 3 Financing high yield bonds price at par to yield 7%; terms

Level 3 Financing today completed an offering of senior notes via joint bookrunners Citi, Bank of America, Morgan Stanley, Credit Suisse, Deutsche Bank, and J.P. Morgan, according to sources. Pricing terms came spot on talk after a $375 million upsizing. The provider of fiber-based communication services will use proceeds from the deal to redeem its $700 million issue of 8.75% notes due 2017, which is currently callable at 104.375. Bonds come alongside a two-part loan deal comprised of $600 million tranche due 2016 and an $815 million tranche due 2109, proceeds from which will be used to refinance $1.4 billion of loans that mature in 2014. Terms:

Issuer Level 3 Financing
Ratings CCC/B3
Amount $775 million
Issue senior notes (144A)
Coupon 7.00%
Price 100
Yield 7.00%
Spread T+549
FRN eq. L+530
Maturity June 1, 2020
Call nc4
Trade Aug. 1, 2012
Settle Aug. 6, 2012 (T+3)
Joint Bookrunners Citi/BAML/MS/CS/DB/JPM
Co-Leads
Co’s.
Px talk 7%
Notes w/ three-year equity clawback for 35% @ 107; carries T+50 make-whole call; w/ change-of-control put @ 101; upsized by $375 million.
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at 1:46pm

McClatchy shares, bonds advance after 2Q results blow past estimates

The McClatchy Company shares surged nearly 13%, to $1.89, and the company’s debt advanced after second-quarter results blew past Street expectations. The 5.75% unsecured notes due 2017 traded three points higher, at 82.25, while the secured 11.5% notes due 2017 gained the same amount, with prints at 106.5, according to trade data.

The company’s net income in the second quarter was $26.9 million, or $0.31 per share, versus net income of $4.9 million, or $0.06 per share in the 2011 comparable period, the company statement shows. S&P Capital IQ calculates normalized EPS at $0.19 per share, which is nearly double its consensus mean estimate of $0.10 per share.

Gains in EPS are noted even as net second-quarter revenue slipped 4.8%, to $299.3 million, as compared to the year-ago second quarter, according to the firm. Advertising revenues declined 5.7%, but digital advertising expanded by 4.9%, the company stated. Management noted that advertising trends were deeper in the first quarter, down 6.8%, so sequentially the figure is improving.

The fallen angel issued the 11.5% secured notes in early 2010 as part of a debt repayment effort. Ratings were B-/B1 at offer. S&P briefly upgraded its rating to B+ on improving earnings, but then lowered to the current B/B1 profile a year ago on declining advertising trends.

McClatchy is the third-largest newspaper publisher in the U.S. in circulation, with 30 daily newspapers and 50 non-dailies, including the Miami Herald, the Sacramento Bee, the Fort Worth Star-Telegram, the Kansas City Star, the Charlotte Observer, and Raleigh’s News & Observer. The company trades on the NYSE as MNI with an approximate $162 million market capitalization, according to S&P Capital IQ. – Matt Fuller

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at 3:39pm

High-grade: IBM sets record-low coupon and reoffer yields for 10-year funds

Establishing new record-low coupon and reoffer yields for a 10-year issue, International Business Machinescompleted a $1 billion offering of 1.875% 2022 notes at T+65 talk, or 2.053%, sources said. Terms easily bested the 2% coupon and 2.17% reoffer for 2022 notes placed by similarly rated 3M in June at a tighter T+55 spread, while also coming in more than a percentage point below the coupon rate for its previous 10-year tap last October.

IBM had already established record-low borrowing costs on three occasions earlier this year with shorter-dated issues. The company’s 0.55% 2015 notes placed on Feb. 1 and 1.875% 2019 notes placed on May 8 remain the low coupons and reoffers for those tenors, while the 1.25% 2017 coupon is tied with yesterday’sSchlumberger offering for third lowest on record for a five-year issue, behind 3M‘s recently placed 1% 2017 issue, according to LCD.

Adding to a string of opportunistic taps by high-profile and liquid borrowers over the last two months, IBM will add proceeds to its general-corporate funds, filings show.

The offering is the first for IBM since the company received an upgrade to AA- from A+ by S&P in May.

The company last placed 10-year notes in October in a $500 million offering of 2.9% 2021 notes placed at T+62.5, or 3.01%. For reference, the issue traded last Thursday at 1.91%, or at a G-Spread of 53 bps, down from G-Spread levels in the range of 70-75 bps over the second half of June, according to MarketAxess. Terms:

 

Issuer International Business Machines
Ratings AA-/Aa3
Amount $1 billion
Issue SEC-registered senior notes
Coupon 1.875%
Price 98.398
Yield 2.053%
Spread T+65
Maturity Aug. 1, 2022
Call make-whole T+12.5
Trade July 25, 2012
Settle July 30, 2012
Books BNP/C/DB/UBS
Px talk T+65
Notes proceeds for general corporate purposes
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at 12:22pm

Tribune receives official court OK for reorg plan, creditors immediately appealing

The bankruptcy court overseeing the Chapter 11 proceedings of Tribune on July 23 officially confirmed the company’s proposed reorganization plan, according to a court order.

The confirmation order was expected. Bankruptcy Court Judge Kevin Carey issued a memorandum order on July 13 indicating he would confirm the plan once the company made several final revisions.

As reported, the reorganization plan needs regulatory approval from the Federal Communications Commission before the company can exit Chapter 11. The timeline for that approval is uncertain, but Tribune’s chief restructuring officer has suggested the company could emerge by the end of the third quarter.

Tribune filed for Chapter 11 on Dec. 8, 2008, amid the financial meltdown, but more significantly in the wake of a complex and controversial two-step going private transaction engineered by billionaire financier Same Zell that was completed in December of 2007.

The issues created by that deal and its fallout, particularly potential fraudulent conveyance claims, dogged Tribune’s efforts to reorganize from the get-go. At one point following the expiration of the company’s exclusive period to file a plan, and not to mention the filing of an examiner’s report regarding the fraudulent conveyance claims than ran to the tens of thousands of pages, there were four separate reorganization plans vying for confirmation in the case that sought to unravel the 2007 deal.

Ultimately, the contest came down to two plans – one filed by pre-LBO noteholders in the case led by Aurelius Capital Management, and the plan ultimately confirmed by the bankruptcy court, known as the “DCL Plan,” which was filed jointly by the company, hedge funds Angelo, Gordon & Co. and Oaktree Capital Management, the unsecured creditors’ committee in the case, and J.P. Morgan, one of the arrangers of the company’s LBO debt.

At the end of the day, the core difference between the two plans was that the noteholders’ plan provided for an immediate distribution of some company assets, but left the numerous fraudulent conveyance claims, involving some $8.7 billion of debt, to be litigated by the various parties in the case, leaving a great deal of uncertainty with respect to ultimate creditor recoveries. The DCL plan, on the other hand, reflected a settlement of the lion’s share of fraudulent conveyance claims – those related to step one of the 2007 transaction – while leaving roughly $2.1 billion of potential claims related to the second step of that transaction to be resolved via a litigation trust.

A confirmation hearing for both plans wrapped up June 27, 2011. On Oct. 31, 2011, the Wilmington, Del., bankruptcy court denied confirmation to both plans based on a variety of legal deficiencies, but made clear that the DCL plan had the upper hand when it came to ultimate confirmation because it enjoyed broader support among the company’s creditors.

Tribune and its co-plan proponents filed an amended DCL plan on Nov. 18, 2011, addressing the concerns Carey cited in his Oct. 31 opinion. Before a hearing could be held on the revised plan, however, a dispute needed to be resolved concerning the allocation of recoveries and applicability of subordination provisions among holders of the company’s senior notes, the exchangeable debentures known as the PHONES, and claims held by EGI-TRB, the investment vehicle set up by Zell in connection with the 2007 LBO.

The bankruptcy court approved the company’s supplemental disclosure statement in mid-April, and a confirmation hearing was finally held on June 7.

Given the duration and acrimony that has followed this case to date, whether this plan confirmation order will, in fact, bring the case to a close remains an open question for now. No sooner did the bankruptcy court file its confirmation order that Aurelius filed an appeal challenging, among other things, the bankruptcy court’s approval of the settlement of the step one fraudulent conveyance claims that forms the foundation of the DCL plan. In addition, the indenture trustee for the PHONES filed an appeal challenging the bankruptcy court’s decision with respect to the allocation and subordination dispute among the junior creditors.

Both appeals are seeking to stay confirmation of the plan until the appeals are decided. The bankruptcy court has not yet set a hearing on the matter. – Alan Zimmerman

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at 4:55pm

Bankruptcy: Kodak wins one patent decision, loses another, as sale continues

The International Trade Commission on Friday reaffirmed its May 21 ruling that neither Apple nor Research in Motion has infringed a patent on digital-image-preview technology owned by Kodak, a decision that could hurt the value of the large patent portfolio the company is currently marketing.

But Kodak, in the midst of its own Chapter 11 proceedings, received better news this morning when the U.S. Court of Appeals for the Federal Circuit issued a per curiam decision in a separate case finding that Kodak did not infringe on patents owned by Apple.

The Appeals Court decision will likely come into play at a bankruptcy court hearing in Manhattan on Tuesday, where Kodak is seeking a summary judgment that patent claims by Apple and FlashPoint are time-barred.

No notes have traded on the news today, according to trade data, yet the senior secured bonds have seen a rebound recently off of lows in weeks past. After the news of a negative outcome for Kodak in the ITC patent ruling hit the market in May (See, “Eastman Kodak bonds notch deeper losses after ITC patent ruling,” LCD News, May 22, 2012), the 9.75% notes due 2018 tumbled, hitting lows near 60 in June, down from the 80s a month prior, according to sources. But recently, given a favorable ruling in a contract dispute with Taiwan-based digital camera maker Asia Optical on July 18, when a New York federal judge granted a $33.7 million judgment in favor of Eastman Kodak, the bonds have rebounded to be quoted at 75, according to sources. While the ruling was small, the increase in the value of the 9.75% notes may also be taking into account the expectation of similar rulings in disputes with Altek, another Taiwanese camera maker, and Ricoh, one source speculated.

Also, a round lot of the 7% unsecured notes due 2017 changed hands at 19 on Friday, a one-point increase versus the previous week.

The patent dealt with by the ITC in Friday’s decision relates to a technology invented by Kodak for previewing images on a digital-camera-enabled device that is fundamental to how those devices take pictures, Kodak said.

The ITC launched its investigation on Feb. 23, 2010, based on a complaint filed by Kodak that alleged certain mobile telephones and wireless-communication devices featuring digital cameras infringed one of the company’s patents. On Jan. 24, 2011, the administrative law judge overseeing the case issued an initial determination finding no violation, but on March 25, 2011, the ITC began a review of that ruling. On June 30, 2011, the ITC issued a notice that affirmed in part, reversed in part, and remanded in part the initial decision.

The decision found that devices from Apple and RIM did in fact infringe on one of the claims in Kodak’s patent, but recommended that the specific claim is invalid for obviousness. The Apple iPhone 3G was its only infringing device under the ruling – not the iPhone 3GS or the iPhone 4.

On May 21, ITC Judge Thomas Pender issued his finding that RIM and Apple did not violate Kodak’s patent rights, sending the company’s 9.75% second-lien notes due 2018 falling nearly 10 points, to 72.5/74.5, while its 7% unsecured notes due 2017 fell to the high teens, from the mid-20s prior to the news.

Early this month, Kodak won bankruptcy-court approval to proceed with the auction of its entire digital-imaging patent portfolio, in spite of its continuing dispute with Apple and FlashPoint Technologies (which was spun-off from Apple in 1996). In approving Kodak’s proposed bidding procedures, Judge Allan Gropper overruled objections from Apple and FlashPoint asserting ownership over 13 of the 1,100 patents in the portfolio. (See, “Kodak wins court approval of patent-sale plans, in spite of Apple,” LCD News, July 3, 2012).

Under the schedule laid out in Kodak’s bidding procedures, bids for the portfolio are due by July 30. Kodak will determine the qualified bids by Aug. 2, with an auction to follow on Aug. 8, in the Manhattan office of law firm Sullivan & Cromwell. A final sale hearing to approve the results of the auction is set for Aug. 20. – John Bringardner/Max Frumes

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at 2:17pm

eBay defies market as long bonds feel pinch from curve

Trading in new issues from eBay went against the grain of broad-market spread pressure, while spreads for a new long-bond issue from Morgan Stanley felt the pressure of a sharply flatter underlying yield curve today after the bank reported difficult operating conditions yesterday.

eBay, which placed the biggest deal of the week yesterday, opportunistically tapped the market at historically low costs, completing a $3 billion, four-part issue at rates even lower than the exceptionally low costs garnered by the company in October 2010, including among the lowest borrowing costs on record.

The most active issue on the secondary was the $1 billion of 2.6% notes due 2022, priced at T+110, or 2.62%. The bonds changed hands today in the T+98 area, traders said.

The $1 billion of 1.35% notes due 2017 traded at a weighted average of T+66, significantly though the T+75 issue spread. Average yields have also fallen to 1.24%, from a reoffer yield of 1.36%, according to MarketAxess.

Traders reported indications for the $750 million of 4% notes due 2042 in the T+135 area, from issuance at T+145.

Spreads for the smallest tranche of the eBay offering – the $250 million of 0.7% notes due 2015, which established a record-low reoffer yield for that tenor at 0.7% – contracted to an average of T+33 today, trade data show.

In typical fashion, Morgan Stanley tapped the markets yesterday shortly after releasing disappointing quarterly results, placing $2 billion of 6.375% notes due 2042. As the underlying yield curve flattens substantially at the long-end today in an approach to record-low 30-year Treasury rates, spreads for the long bonds have inched wider since bonds were placed at the midpoint of initial guidance. The 2042 notes are trading at a weighted average today of T+389, or 6.43%, versus reoffer levels of T+387.5, or 6.46%. Trades were reported as wide as T+395, trade data show.

Of note, during the marketing process Morgan Stanley 5.5% notes due 2021 was one of the most-active bonds in the market. During this session, spreads have widened significantly past yesterday’s levels, to T+388, or 5.35%, versus T+364, or 5.15% after yesterday’s equity close. The issue was originally completed in July 2011, with $1.5 billion outstanding, at T+250, or 5.5%. The bank then added $1 billion to the notes in an Oct. 27 reopening, at a wider reoffer spread of T+335, and higher yield of 5.7%. – Gayatri Iyer/John Atkins

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at 5:15pm

Dish add-on high yield bonds price at 100.75 to yield 5.8% with upsizing

Dish Network subsidiary Dish DBS this afternoon completed an add-on offering of senior notes via sole bookrunner Deutsche Bank, according to sources. The BB-/Ba2 transaction printed at the middle of talk, offering roughly a 1.25-point discount to the outstanding series, and it was upsized by $500 million, to $1 billion, bringing the total outstanding to $2 billion and immediately fungible. Proceeds from the satellite-television provider’s return to market after two months support general corporate purposes, sources note. Terms:

Issuer Dish DBS
Ratings BB-/Ba2
Amount $1 billion
Issue fungible add-on senior notes (144A)
Coupon 5.875%
Price 100.75
Yield 5.77%
Spread T+431
FRN eq. L+418
Maturity July 15, 2022
Call nc-life
Trade July 19, 2012
Settle July 26, 2012 (t+5)
Joint Bookrunners DB
Px talk 100.5-101
Notes upsized by $500 million; total now $2 billion; original $1 billion priced in May @ par; w/ three-year equity clawback for 35% @ 105.875; carries T+50 make-whole call; w/ change-of-control put @ 101.