Upsized Plains deal prices; better market tone, but Remy slide continues; funds see $11 million outflow

By Paul Deckelman and Paul A. Harris

New York, March 8 - Plains Exploration and Production Co. was heard to have priced an upsized offering of 10-year bonds on Thursday. Secondary market sources said the new securities were slightly higher in aftermarket activity.

High yield syndicate sources heard that another deal, $325 million for Building Materials Corp. of America, had been withdrawn, with the company electing to instead do bank loan financing for that same amount.

In the secondary sphere, high-yield bonds were up pretty much across the board, as the market continued to take its cue from a resurgent stock market. Among the issues seen posting notable gains were Resorts International Hotel and Casino Inc., and Tembec Inc.

On the downside, though, Remy International Inc.'s bonds kept falling on market speculation that the company could be forced into bankruptcy.

Late Thursday afternoon a buy-side source told Prospect News that the junk market was "up a little," but added that trading was light.

The source added that recently volatile automotive credit default swaps tightened by 30 basis points on Thursday, after having widened by as much as 80 basis points during the volatility which high yield, as well as the global equity markets, suffered starting Feb. 27.

Funds see another outflow

And as activity was trailing off for the day, market participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday $11 million more left those weekly-reporting funds than came into them.

It was the second straight weekly outflow after the eight straight weeks of inflows.

The outflow trims the year-to-date inflow to $827.8 million among funds which report to AMG on a weekly basis.

Meanwhile, funds that report on a monthly basis have seen $869.5 million of inflows for the most recent period, according to AMG.

That cash infusion boosts the year-to-date flows among the monthly reporting funds to $2.359 billion, according to AMG.

Hence year-to-date aggregate flows, which tally both the weekly and monthly reporters, stood at $3.187 billion at Wednesday's close.

Plains hugely upsized

Thursday's sole transaction came from Plains Exploration & Production, which priced a massively upsized $500 million issue of 10-year senior notes (Ba3/BB-) at par to yield 7% on Thursday, at the tight end of the 7% to 7¼% price talk.

JP Morgan and Lehman Brothers were joint bookrunners for the debt refinancing deal from the Houston-based oil and gas exploration and production company.

A buy-side source spotted the notes at 100.125 bid on the break.

Noting that the four-B rated paper came at a 250 basis points spread to Treasuries, the buy-sider suggested that the deal was priced appropriately.

Centene to roadshow $175 million

St. Louis-based multi-line health care enterprise Centene Corp. will start a roadshow on Friday for a $175 million offering of seven-year senior notes (Ba3/BB).

Banc of America Securities is the left bookrunner for the debt refinancing and general corporate purposes deal.

Building Materials abandons bonds

Also on Thursday, the market learned that Building Materials Corp. of America has abandoned its proposed $325 million offering of eight-year senior secured notes (Caa1/B), opting to move the financing to the second-lien bank loan market instead.

During the marketing of the notes offering the company had restructured the deal, eliminating a proposed fixed-rate tranche.

Deutsche Bank Securities, Bear Stearns, JP Morgan were joint bookrunners.

Small gains for new Plains

When the new Plains Exploration 7% notes due 2017 were freed for secondary dealings, they didn't go very far.

A trader said the bonds had firmed to 100.75 bid, 101.25 offered versus their par issue price, before coming off those peak levels to close with a more modest gain at 100.25 bid, 100.75 offered.

The trader said he had not seen any dealings Thursday in any of the issues which had priced on Wednesday - Pioneer Natural Resources Co.'s 6.65% notes due 2017, General Nutrition Centers Inc.'s floating-rate toggle notes due 2015 and OI European Group BV's 6 7/8% euro-denominated notes due 2017. The GNC notes priced at 99 on Wednesday, while the other two deals had priced at par.

Better market tone seen

Back among the established issues, a trader said that "the market was just doing better in general." He said that "we are higher because there's still some real money out there, it seems, and it seems like the 'Chinese crisis' has been quenched, and [the meltdown of] sub-prime isn't really putting much fear into the market."

That having been said, though, he warned that "I would think that [Friday], we fade. It will be a typical Friday fade."

"The market's better," another trader said. He said that over the previous few sessions, following last week's global equity debacle, "there were people shorting paper into the drop of the marketplace. I don't think any real selling came out from investment clients, there were shorts needing to get covered, and there was a willingness on the buy side to start adding to core positions.

"So there was a little bit of natural buying and a little bit of short-covering, and there wasn't any natural selling - I don't think people were forced to sell positions." He said that coming into this week, after last week's equity slide and junk easing, "some accounts might have been afraid that they might be asked to liquidate some positions, especially if there was leverage involved - but that really never materialized. Maybe one or two names saw some selling, but probably most people set themselves up in the market through the index vehicles and didn't need to sell specific names, or did sell them as they saw good bids for them as opposed to having to sell them."

Resorts higher on financing OK

With most names seen on the upside on Thursday - advancing issues outpaced decliners by about a seven-to-five ratio - a few gainers actually stood out. One was Resorts International, whose 11½% first mortgage notes due 2009 gained more than 2 points to close at 106.

The Atlantic City, N.J.-based gaming and lodging company, which operates the Art Deco-themed Resorts Atlantic City gaming palace on the Boardwalk - Atlantic City's first casino - gained on the disclosure in a Securities and Exchange Commission filing by parent Colony RIH Holdings Inc. that the New Jersey Casino Control Commission had approved a comprehensive refinancing of all of Colony RIH'S outstanding debt, and that of its subsidiaries. At the closing of the refinancing - tentatively scheduled for next Wednesday - the 111/2s would be defeased, with cash sufficient to redeem the notes at 106 plus accrued interest to the redemption date, expected to be some 30 days following the closing, to be deposited with the notes' indenture trustee.

The filing also said that the company's outstanding debt with Commerce Bank, CIT Group/Equipment Financing, Inc. and Kerzner International North America, Inc. will be paid in full and terminated at that time.

Six Flags bonds better

Another upsider was Six Flags Inc., whose 9 5/8% notes due 2014 were up 2 points at 96 as investors apparently relished the news, announced earlier in the week, that the New York-based regional theme park and water park operator had inked a multi-year promotional pact with foods giant Sara Lee Corp., making the latter's well-known Ballpark Franks the official hot dog of all of the company's more than 20 parks. The agreement opens the door to a wide variety of promotional activities by the two companies, both in-park and in the supermarkets.

Tembec, Fedders move up

In the volatile distressed-debt market, Tembec Inc.'s bonds were seen better on the session, with a trader quoting its 8½% notes due 2011 up 2 points at 73 bid, 74 offered.

A market source at another desk saw those bonds up 2½ points at 73.5 bid. There was no fresh news out on the Montreal-based forest products company.

Fedders Corp.'s 9 7/8% notes due 2014 - which have been gyrating around wildly in the 50s all week - took an upward bounce Thursday, up 1½ points on the session to end at 55.5 bid, 56.5 offered.

The Liberty Corner, N.J.-based air quality products manufacturer's bonds had zoomed into the upper 50s on Tuesday on the news that it had lined up financing from a unit of Goldman Sachs & Co., only to retreat markedly on Wednesday on probable profit-taking off those gains.

Remy rumors roil bonds, again

Also in the distressed precincts, Remy International's bonds continued to sink like a stone in Thursday's dealings, traders said, pushed down by the bankruptcy rumors dogging the Anderson, Ind.-based automotive electrical systems manufacturer.

A trader saw the company's Delco Remy 8 5/8% senior notes due 2007 fall to 73 bid, 75 offered from prior levels at 77 bid, 79 offered. He saw its subordinated 11% notes due 2009 drop to 15 bid, 17 offered from 20 bid, 22 offered on Wednesday, and its 9 3/8% subs due 2012 plunge to 14 bid, 16 offered, from 18 bid, 20 offered.

Another trader saw the 11s at 14 bid, 15 offered, which he called a 4 point drop, and opined that he didn't think the senior bonds had moved much, estimating them "down a point or so, I guess," at 72 bid, 73 offered.

Remy's bonds have been pushed lower over several sessions, on market buzz that the company is trying to arrange debtor-in-possession financing for an eventual bankruptcy filing.

It has interest payments coming due on its bonds on April 15 and on May 1, which could give some indication about what kind of shape that company is actually in.

Another distressed auto name, Collins & Aikman Corp., was seen unmoved, despite the news that the Troy, Mich.-based automotive interior components maker - which is in the process of selling off its various operations - had signed a letter of intent with Cadence Innovation for the sale of a "significant portion" of its North American plastics business assets and operations. Terms were not immediately released, although the company said that details will be made available when Collins & Aikman notifies the bankruptcy court.

Despite that news, the trader quoted the company's 10¾% senior notes due 2011 unchanged at "3-4 - close the door."

Fremont General off - but not to worry

Fremont General Corp.'s bonds - which got slammed earlier in the week on investor angst over the meltdown of the sub-prime lending business sector but then bounced back solidly on Wednesday - were seen heading back downward Thursday on profit-taking.

A trader saw its 7 7/8% notes due 2009 fall to 90.5 bid, 91 offered, after having zoomed 5 points Wednesday to about the 93 level. But while those bonds came in, the trader said the Santa Monica, Calif.-based financial services company was by no means a basket case.

"There seems to be a lot of buyers out there," he said, "I think there's talk that someone's going to come along and gobble up all of these sub-prime companies"

Fremont itself told its employees Wednesday that some half-dozen potential buyers have expressed interest in its sub-prime unit.

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