Visteon up on takeover buzz, Starwood off on LBO fears; Turning Stone prices eight-year issue

By Paul Deckelman and Paul A. Harris

New York, Sept. 8- Visteon Corp. bonds were seen up at least a point or two on the session Friday traders said, citing vague takeover speculation about the Van Buren Township, Mich.-based automotive parts company, a former unit of Ford Motor Co.

On the other hand, buyout speculation was seen pushing the bonds of Starwood Hotels & Resorts Worldwide Inc. lower, traders said, since the market assumes that the White Plains, N.Y. lodging giant - which was recently upgraded to investment-grade status by Moody's Investors Service - could be the target of a leveraged buyout, which would bring the company's recently diminished debt levels back up.

One high yield syndicate official marked the broad market flat on Friday, while another marked it higher by an eighth of a point, with equities.

Meanwhile an issuance drought which spanned 11 sessions, going back to Aug. 22, ended Friday when Syracuse, N.Y.-based Turning Stone Resort Casino priced a $160 million issue of 10-year senior notes (Ba3/B+) at par to yield 9 1/8%.

The yield came in the middle of the 9% to 9¼% price talk.

Banc of America Securities LLC ran the books for the debt refinancing, distribution funding and general corporate purposes deal from the gaming and hotel operation run by the Oneida Indian Nation.

A long dry spell

In order to find the terms to the junk bond deal that most recently preceded Turning Stone you must turn back the calendar more than a fortnight.

On Tuesday, Aug. 22 - a full 11 market sessions in the past - Enterprise Products Partners LP priced an upsized $200 million add-on to its 8 3/8% 60-year hybrid fixed-rate to floating-rate junior subordinated notes via Wachovia Securities.

However in the interim market sources have quibbled as to whether the Enterprise Products hybrid is a "true" junk bond.

For those searching for a more white-bread deal it is necessary to turn back the calendar more than three weeks - a full 16 sessions - to Aug. 15.

On that Tuesday Xerox Corp. priced $650 million of senior unsecured notes in an upsized, quick-to-market two-part transaction via Goldman Sachs and Bear Stearns.

However, in addition to a Ba2 rating from Moody's and a BB+ from S&P, that issue carried an investment grade BBB- from Fitch Ratings.

Nevertheless the same session saw a straight junk-rated $210 issue of six-year senior secured notes (B3/B-) from Broadview Networks Holdings, Inc., led by Jefferies.

Issuance remains slow

No matter how you slice it, the primary market, which was dead in the water between Aug. 22 and Sept. 8, barely managed to weigh anchor during the four-session post-Labor Day week.

Since the above-mentioned Turning Stone deal was the only one to price during the four post-Labor Day sessions, year-to-date issuance at Friday's close was slightly less than $85.27 billion in 247 dollar-denominated tranches.

Hence on a year-over-year basis 2006 dollar issuance remains well ahead - more than 19% - of 2005. At the Sept. 8, 2005 close $68.79 billion had priced in 269 tranches.

Nevertheless, the extended, pre-Labor Day/post-Labor Day issuance drought has served to narrow 2006's year-over-year issuance margin by two percentage points. It stood at slightly more than 21% one week ago.

A possible $3 billion week

Although expected dollar-denominated issuance for the week ahead is slightly less than $3 billion, high yield sell-side sources who spoke on Thursday and Friday said that the probability of drive-by business hitting the market during the Sept. 11 week is good.

Heading into the week the forward calendar contains two expected dollar-denominated deals from U.S. issuers.

Lyondell Chemical Co. is marketing $1.775 billion of senior unsecured notes in two tranches (B1/B+/BB-): eight-year notes and 10-year notes, sizes to be determined.

JP Morgan, Banc of America Securities LLC, Citigroup, Morgan Stanley are joint bookrunners.

Also Berry Plastics Holding Corp. is roadshowing $750 million of eight-year second-priority senior secured notes (B2/CCC+) in fixed-rate and floating-rate tranches via Deutsche Bank Securities, Credit Suisse, Citigroup and JP Morgan.

One trader commented that even though the LBO deal that will be funded via the bond issue will cause Berry's leverage to go from "a very low leverage to a relatively high leverage . . . the word is that the deal is going to be pretty well received."

Beyond those two, and below the $500 million threshold, China-based Agile Property Holdings Ltd. kicks off its U.S. roadshow for a $350 million Rule 144A/Regulation S offering of seven-year senior notes, being led by Morgan Stanley and HSBC.

Finally, Impress Holdings BV (Impress Metals) is in the market with €1 billion, a €730 million tranche of seven-year senior secured floating-rate notes (B1) and a €270 million tranche of eight-year senior subordinated notes (B3), via JP Morgan.

All of the above, according to market sources, are expected to either price late in the week of Sept. 11 or early the following week.

Turning Stone rises

When the new Turning Stone 9 1/8% notes due 2014 were freed for aftermarket activity, they were seen having firmed to 101 bid, 101.5 offered from their par issue price.

The company's existing 9 1/8% notes due 2010 were seen at 101.375, up 5/8 on the session.

Noting the upcoming deal from Berry Plastics, a trader said that "the rest of the packaging sector has been sort of firm in anticipation of this and trading pretty well."

He quoted Graphic Packaging Corp.'s 8 ½% senior notes due 2011 at 102.5 bid, 103 offered, while the Marietta, Ga.-based paperboard packaging manufacturer's 9½% subordinated notes due 2013 were at 101.25 bid, 101.75 offered. He said the latter issue "is more comparable to the new Berry Plastics deal, trading around in the 9% area."

A source at another desk saw the 81/2s at 102.75 bid, with the 91/2s a point behind at 101.75.

New Nielsen bonds rebound

Among recently priced issues, the first trader said, Nielsen Finance LLC/VNU's 10% senior notes due 2014, which priced at the beginning of August as part of a $1.68 billion multipart mega-deal, "had a tough day two days ago, but are back [to where they had begin the week."

He said that that at the beginning of the week, the Dutch market research company's bonds were trading around 102.75 bid, 103.25 offered. Then, they dipped down to 101.75 bid, 102 offered around mid-week "as somebody came in and hit the bid." On Friday, he said, the bonds were back up to 102.5 bid, 103 offered.

Takeover talk on Visteon

Back among the established issues, Visteon's bonds were seen about a point higher on takeover speculation, traders said.

One trader quoted its bonds "measurably higher," with the 8¼% notes due 2010 up 1½ points at 101 bid, 101.5 offered and its 7% notes due 2014 at 94.5 bid, 95.5 offered, a 2 point gain.

Another trader, also citing the "takeover rumblings," called the 81/4s and the 7s each up 1½ points at 100.5 bid, 101.5 offered and 93.25 bid, 94.25 offered, respectively.

A trader called the bonds "pretty active" and quoted them up a point on the day. He said that "it's just speculation" that the company could be ripe for a takeover, though with no names of potential buyers being bandied about and "nothing confirmed."

The latter trader said "the good news in autos the last couple of days has been kind of propelling the whole sector." He saw Goodyear Tire & Rubber Co.'s bonds up about a point as well. The Akron, Ohio-based tire giant's 7.857% notes due 2011 were seen up a point at 98.25.

Level 3 higher

A trader said that Level 3 Communications Inc.'s notes "traded up, as somebody came out with a recommendation on Level 3 stock, and the bonds and the converts all traded up ½ to ¾ point."

He quoted its 12 7/8% notes due 2010 as having firmed to 103.5 bid, 103.75 offered, while the Broomfield, Colo.-based telecommunications infrastructure company's 11¼% notes due 2010 were at 100.25 bid, 101 offered.

At another desk, a trader said that the company's 10¾% notes due 2011 were up about ½ point at 104.5 bid, 105.5 offered. Its 11½% notes due 2010 were at 101 bid, up ¾ point.

Equity analyst Jonathan Schildkraut at Jefferies & Co. initiated coverage on the company's shares with a "buy" recommendation, saying the fiber optic network operator was poised to generate strong revenue growth as the demand for broadband applications increases. That growth, he said, would allow the company to refinance its substantial debt obligations as they come due, "allowing the business to grow into its capital structure."

Lucent edges up

Elsewhere in the communications area, a trader saw Murray Hill, N.J.-based network equipment provider Lucent Technologies Inc.'s 6.45% notes due 2029 up ½ point at 87.75 bid, 88.75 offered.

A market source at another shop saw the company's 6½% notes due 2028 up as much as 2 points on the day at 86.75

Shareholders of Lucent and of its larger French rival, Alcatel, on Friday approved the $10.8 billion merger of the two companies, which should close by the end of the year.

Starwood off on LBO fears

On the downside, a trader cited market rumors that hotel giant Starwood might be thinking about selling itself to private equity investors via an LBO to explain a 4 point fall in the company's bonds on the day, "and we know that's a negative for bonds," since it implies that the company - which just recently was raised to investment grade by both Moody's and Standard & Poor's as a reward for its debt-cutting efforts - might have to load up on debt once again to finance the buyout.

He saw Starwood's 7 3/8% notes due 2015 as 4 point losers at 102 bid, 103 offered.

Another source saw its 7 7/8% notes due 2012 down 3½ points at 105.

Besides LBO buzz, an alternate scenario being mentioned in some news reports has the company adding on debt to aggressively pursue acquisitions.

Medical imaging names mixed

The first trader meantime saw medical imaging names mixed on the day.

He described Alliance Imaging Inc.'s 7¼% notes due 2012 as up a point at 94.5 bid, 95.5 offered, although he saw no fresh news about the Anaheim, Calif.-based diagnostic imaging company.

He likewise saw no news out on rival operator InSight Health Corp. - although he saw the Lake Forest, Calif.-based company's 9 7/8% notes due 2011 "getting mushed" at 42.5 bid, 43.5 offered, down 3 points on the day.

Homebuilders warn of slowdown

"Homebuilders were down a touch, on Treasury-related kind of weakness, since Treasuries have been heavy the last couple of days," a trader said, as well as Lennar Corp. cutting its third-quarter earnings projections Friday due to a decrease in new orders amid softening in the housing market. The Miami-based builder's gloomy projections followed similar bearish forecasts earlier in the week by KB Home and Beazer Homes USA Inc., while Hovnanian Enterprises Inc. said orders in its most recent quarter ended July 31 fell 26% from a year earlier. "So that's been percolating all week, and continued into Friday."

However, another trader actually saw the sector bouncing a little, with Hovnanian's 8 5/8% notes due 2017 up 3/8 at 97.75 bid, 98.25 offered, while KB's 5¾% notes due 2014 were up ¼ point at 88.5 bid, 89 offered, and its 6¼% notes due 2015 were up 3/8 at 89.75 bid, 90.75 offered.

He saw Beazer's 8 1/8% notes due 2016 up ½ point at 95.75 bid, 96.25 offered, while its 8 5/8% notes were ¼ point better at par bid, 100.5 offered.

Overall, a trader said, "it's been a quiet day, but the market feels definitely firm. [Thursday] was a little soft, but [Friday] was very firm - we saw prices move a quarter- or a half-point higher, pretty much across the board. "

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