Swift pulls $600 million deal; Sequa up on M&A news; Dura asset-sale bounce continues

By Paul Deckelman and Paul A. Harris

New York, July 9 - It appeared to be "good news-bad news" in the high-yield primary market Monday as drive-by activity flickered to life, with Quebecor Media Inc. announcing plans to price $750 million on Tuesday, while J&F I Finance Co. (Swift & Co.) abandoned its $600 million three-part notes offering - the fifth prospective issuer to pull a notes offer since June 26.

In the secondary market, merger and acquisition transactions continued to exert a hefty influence, with the announced offer by Carlyle Group to acquire Sequa Corp. pushing the latter's bonds higher. There was also renewed takeover buzz about Friendly Ice Cream Corp.

From out of the distressed-debt precincts came word that Thursday's news that Dura Automotive Systems Inc. will sell a division for over $160 million gave its bonds a boost for a second straight day.

However, the official news that Cerberus Capital Management LP was pulling out of the investment consortium slated to pump some $3.4 billion into Delphi Corp. did not affect the latter's bonds.

A high yield syndicate official said that the broad market was perhaps a little better on Monday, as players resumed their places trailing what for many had been an extended recess following the July 4 Independence Day holiday in the United States.

The source added, however, that it had been a quiet day and there had been no real movement in junk.

Quebecor to sell $750 million

Quebecor Media is expected to price a $750 million two-part offering of senior notes (confirmed B2/existing B) on Tuesday.

The company is offering 8.5-year notes with four years of call protection and 10.5-year notes with five years of call protection.

No price talk had been heard as Prospect News went to press on Monday night.

Citigroup, Banc of America Securities and TD Securities will lead the deal for the subsidiary of Montreal-based media conglomerate Quebecor Inc. Proceeds will go to general corporate purposes.

According to Prospect News data, should Quebcor succeed in placing its notes on Tuesday it will be the first quick-to-market deal since June 25.

On that day two wholly owned subsidiaries of Sierra Pacific Resources, Nevada Power Co. and Sierra Pacific Power Co., priced a combined $675 million of 6¾% 30-year general and refunding mortgage bonds (Ba1/BB+/BBB-) at a 155 basis points spread to Treasuries.

The same day OPTI Canada Inc. priced a $750 million issue of seven-year senior secured second-lien notes (B1/BB+) at par to yield 7 7/8%.

Both the Sierra Pacific Resources deal and the OPTI Canada deal were quickly shopped.

Swift makes it five

On the other hand, Monday saw the fifth prospective issuer abandon its plans to sell junk bonds since the day after those last drive-by deals were done - June 26.

On Monday J&F I Finance Co. (Swift & Co.) pulled its $600 million offering of senior notes (B2/B), according to market sources who added that the company has opted for "alternate financing."

One market source said that sponsors HM Capital and Booth Creek Management Corp. would increase the amount of sponsor equity being used in order to help fund the acquisition of the Greely, Colo.-based meatpacker, Swift Foods Co.

JP Morgan and Credit Suisse were joint bookrunners for the notes deal.

The other prospective issuers that walked away from the primary market empty-handed since June 26 were U.S. Foodservice Inc., Catalyst Paper Corp., Magnum Coal Co. and ServiceMaster Co.

With the proposed Swift offering having been comprised of three separate tranches, the abandoned tranche count, since June 26, is nine.

Silverton project financing

The market heard news of a single roadshow start during the Monday session.

Silverton Casino Hotel & Resort will begin a roadshow on Wednesday for its $215 million offering of eight-year second mortgage notes (B-).

The Rule 144A deal, which is being led by bookrunner Banc of America Securities LLC, is expected to price early in the week of July 23.

Proceeds will be used to fund the design, development, construction, equipping and opening of an expansion of the Silverton Casino Hotel & Resort.

The company is headquartered in Las Vegas.

Quebecor existing bonds mixed on new-deal news

The news that Quebecor Media will bring a big new deal to market helped push the company's existing 7¾% notes due 2016 down to around the par level from slightly above 102 previously, a market source indicated.

However, the affiliated Quebecor World Capital Corp.'s 6 1/8% notes due 2013 were seen having firmed about 1½ points to the 88 level.

Sequa better on Carlyle buyout

Sequa's bonds were somewhat better, a trader said, on the news that The Carlyle Group has agreed to buy the New York-based manufacturer of automotive and aerospace parts for some $2 billion.

"People are trying to figure what's Sequa going to do," he said, noting that while "bonds could go one way or another - they actually traded up after [the news], which suggests that there's going to be a tender for the bonds."

He saw the company's 9% notes due 2009 as having firmed to about the 104.5 level. "It's not that they move that much because they trade on a yield-to-call basis," he pointed out, noting that they had been trading at 103.75 bid, 104 offered previously.

Sequa's 8 7/8% notes due 2008 were seen unchanged at 101.25 bid.

Virgin Media pushing upward

Another prospective Carlyle acquisition, Virgin Media Inc., was seen also pushing higher, its Virgin Media Finance plc 9 1/8% notes due 2016 quoted at 110.25 bid, up some 3 points on the day.

The Washington-based private-equity company reportedly offered as much as $11.35 billion earlier this month to acquire the New York-based communications company, formed by the union of the former NTL Cable with Telewest plc and Virgin Mobile wireless. The combined company provides land-line telecom, wireless, internet and cable-TV service in the United Kingdom.

Friendly's firms on LBO talk

The trader said that Wilbraham, Mass.-based Friendly's, which makes and sells ice cream and runs a chain of restaurants, was "the other bond that's trading up again," propelled, he said, by "LBO rumors."

The company's 8 3/8% notes due 2012, he said, "were trading down at 102, with the rest of the market," but have since moved back up to the 103 bid, 103.5 offered area, although he had not seen any news on the company.

No buyout boost for Labranche

One junk issuer not seen trading higher on M&A developments was New York-based Labranche & Co. - even though the Wall Street specialist firm said that it would sell its American Exchange equity specialist operations and would review strategic alternatives, possibly including the sale of the company.

A trader said that Labranche's 11% notes due 2012 "traded down pretty sharply" on the announcement to 103.75 bid, 104 offered, well down from recent levels at 106.

He also saw its 9½% notes due 2009 down ½ point at 103.625 bid in light trading.

"There are just so many rumors around," he said, but the market expectation seems to be that "they're not looking for a tender for the bonds."

Dura rise rolls on

In the distressed-debt market, a trader saw Dura Automotive Systems' 8 5/8% senior notes due 2012 up about 4 points on the session, trading at 68 bid, 70 offered, as the bankrupt Rochester Hills, Mich.-based automotive components company continued to bask in the warm afterglow of the announcement - made during last week's very thin post-holiday market - that it had agreed to sell its Atwood Mobile Products Inc. division for $160.2 million.

The trader also saw the company's 9% subordinated notes due 2009 unchanged at 11 bid, 13 offered.

Another market source had the '12s moving up to around the 68.25 level from prior closing levels last week in the 64 area, to which the bonds had fallen back after an earlier flurry of activity around 68 on the initial news of the Atwood sale. Activity was seen fairly brisk for a relatively quiet market, with several large-block trades around 68 noted. The '09s, meantime, were fluctuating around the same 12 level at which they had opened

Atwood, which Dura acquired in 1999, makes systems and components for recreational vehicles and mobile homes. Dura announced in early May that it was looking into various strategic alternatives for the unit as part of the parent company's reorganization process. Atwood is being sold to Atwood Acquisition LLC, an affiliate of private equity firm Insight Equity.

The sale must be approved by the U.S. Bankruptcy Court in Wilmington, Del., which is overseeing Dura's restructuring. It is subject to auction should competing bids emerge. Dura said that it expects to complete the bidding process and to secure the regulatory approvals in time to close the sale by the end of August.

The sale of Atwood is seen as a key step in the company's efforts to focus on its core automotive systems business, as it restructures in hopes of coming out of Chapter 11 - which it entered last Oct. 30 - by this year's fourth quarter.

Nothing doing with Delphi

Elsewhere, the first trader said that he had seen little or no movement in the bonds of Delphi Corp., even on the news that the bankrupt Troy, Mich.-based auto parts company is scrapping its previously announced agreement with investors who were going to kick in up to $3.4 billion to help it emerge from Chapter 11 bankruptcy protection.

He had last seen Delphi's 6.55% notes due 2006 trading around the 118 level. Most of the company's other bonds have been trading in a similar band around 115-120.

Another source saw the 6.55s unchanged around 118, and its 6½% notes due 2013 unchanged in light trading around the 115 level. There was a little movement seen in the 8¼% notes due 2033, normally not a widely traded issue, which firmed a point or so to around 122, again on light trading.

The formal scrapping of the investment deal by Delphi was not unexpected - it has been an open secret for weeks that lead investor Cerberus Capital Management LP would pull out of the deal to concentrate on other transactions, including its pending purchase of Chrysler Group from DaimlerChrysler AG. A spokesman for Delphi said that a revised agreement is expected later this month.

Other participants in the now-scrapped investment deal, such as co-lead investor Appaloosa Management - Delphi's largest shareholder - and Harbinger Capital Partners are expected to stay on board for the re-written deal, which must be submitted to the bankruptcy court in Manhattan which is overseeing Delphi's restructuring. One possible replacement for Cerberus is Delphi's second-largest shareholder, Highland Capital Management, recently signed a confidentiality agreement with Delphi, giving it access to Delphi's books so it can do due diligence. Ironically, Delphi - at the time still wed to the Cerberus deal - rebuffed a Highland takeover proposal earlier this year.

Delphi's board of directors will meet July 16 - but the company declined comment on whether a new agreement would be voted on at that time.

Movie still movin' around

Outside of the parking lot, a trader saw Movie Gallery Inc.'s bonds "better by a couple of points," its 11% notes due 2012 at 24.5 bid, 25.5 offered.

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