Sanmina-SCI prices drive-by, Chesapeake slates add-on deal; GM up on GMAC developments

By Paul Deckelman and Paul A. Harris

New York, Jan. 30 - Sanmina-SCI Corp. swooped in with a sudden $600 million offering of new bonds Monday, high yield syndicate sources said, while Indalex Aluminum Solutions priced a downsized and restructured offering of eight-year notes. Chesapeake Energy Corp. was meantime heard getting ready to bring an add-on offering of 2017 bonds to market. Drummond Co. was seen hitting the road Tuesday.

In the secondary arena, bonds of General Motors Corp. and its General Motors Acceptance Corp. financial arm firmed on the weekend news that Citigroup and Cerberus Capital Management have teamed up to make a bid to buy a controlling interest in GMAC. The news reports also said that a second investor group, headed by Wachovia Bank and The Blackstone Group, was also going to make a bid for GMAC.

That was good news for the recently beleaguered automotive supplier sector, although news later in the day about the possibility of a strike at Tower Automotive Inc. some of the wind out of the sector's sales, traders said.

Overall one market source characterized the high-yield market as "lethargic" on Monday as players waited for the Federal Reserve's Federal Open Market Committee to ring up another 25 basis points hike of the fed funds rate, and for outgoing Fed chairman Alan Greenspan to exit the stage.

Meanwhile Monday's primary market produced news of beefy issuance, some done and some pending.

In terms of new bonds brought to market Monday, the primary saw $867 million in two tranches.

Sanmina drives through

Monday's largest amount of issuance came in the form of a drive-by deal from San Jose, Calif., electronics manufacturer, Sanmina-SCI.

The company priced a $600 million issue of 10-year senior subordinated notes (B1/B/B+) at par to yield 8 1/8%, at the wide end of the 8% to 8 1/8% price talk.

Banc of America Securities, Citigroup and Deutsche Bank Securities ran the books for the debt refinancing deal.

The second of Monday's two transactions came from Indalex Aluminum Solutions of Mississauga, Ont., which had paraded its deal on an investor roadshow.

The company priced a downsized, restructured $270 million issue of 11½% eight-year second-lien notes (B3/B-) at 98.727 to yield 11¾%, 50 basis points beyond the wide end of the 11% to 11¼% price talk.

JP Morgan had the books for the LBO deal, which was downsized from $280 million, with the company funding the $10 million difference by drawing upon its asset-backed revolver.

Second-lien security was added to the notes, which were initially marketed with a senior unsecured structure. Meanwhile a proposed floating-rate tranche was abandoned.

Fiat, Chesapeake Energy coming

Word circulated throughout the opening session of the Jan. 30 week that Italian car-maker Fiat SpA (Ba3) intends to place a benchmark-sized offering of seven-year eurobonds, with the timing and size to be determined pending market conditions. However, one source said that the market anticipates an offering of €1 billion.

Citigroup, Barclays Capital, BNP Paribas and UniCredit Banca Mobiliare are the underwriters.

Another market source said that the pending euro-denominated issue would be Fiat's first since its credit ratings fell below investment grade in 2002. The source added that Fiat's existing bonds currently trade at an approximately 231 basis points spread to Treasuries.

Meanwhile Chesapeake Energy Corp. plans to price a $500 million add-on to its 6½% senior notes due Aug. 15, 2017 (Ba2/BB) in a Tuesday drive-by.

The Oklahoma City independent natural gas producer will hold an investor call at 11 a.m. ET Tuesday morning.

Banc of America Securities, Citigroup, Lehman Brothers, UBS Investment Bank and Wachovia Securities are joint bookrunners for the debt refinancing issue.

Ineos highly oversubscribed

Also expected to price on Tuesday is Ineos Group Holdings plc's downsized, restructured €2.355 billion equivalent two-part offering of 10-year senior fixed-rate notes (B2).

Late last week the company talked the dollar-denominated tranche at a yield in the 8½% area and the euro-denominated tranche at the 8% area.

Tranche sizes remain to be determined.

Merrill Lynch & Co., Barclays Capital and Morgan Stanley are joint bookrunners.

Ineos abandoned proposed dollar-denominated and euro-denominated tranches of floating-rate notes, downsizing the bond offering by €750 million from €3.105 billion equivalent, meanwhile shifting that €750 million amount to its bank facility.

An informed source told Prospect News just before press time Monday that the deal is going well and that the order book is highly oversubscribed.

One for the road

Meanwhile news of one roadshow start circulated the primary market on Monday.

Drummond Co., Inc., an Alabama coal mining company, will begin a roadshow on Tuesday for a $400 million offering of 10-year senior notes (Ba2/BB-).

Citigroup and Merrill Lynch & Co. are joint bookrunners for the debt refinancing deal.

Sanmina up in trading

When the new Sanmina-SCI 8 1/8% notes due 2016 were freed for secondary dealings, a trader saw the San Jose, Calif.-based high-tech company's bonds at 100.75 bid, 101.25 offered, although another said he had seen them get as good as 101.

Indalex Aluminum's 11½% second lien notes due 2014 priced too late in the session for any meaningful secondary activity.

And a trader saw little or no movement in Chesapeake Energy Corp.'s outstanding bonds on the news that the Oklahoma City-based energy company would be bringing a new deal to market soon.

"Ah, it seems like they bring bonds to market just about every month," he said, in quoting Chesapeake's 7½% notes due 2013 unchanged at 106 bid, 107 offered and its 6 7/8% notes due 2016 likewise holding steady at 101.5 bid, 102 offered.

GM jumps on sale hopes

Back among the established issues unaffected by new-deal concerns, GM was seen as clearly the major story of the day, along with GMAC, as it looked like the latter was closer to having a buyer for a majority stake.

A market source pegged the giant carmaker's bonds "up anywhere from 1½ to three points," with its benchmark 8 3/8% notes due 2033 at the low end of that improvement range, moving up to 74.5 bid, from 73 previously, while its 8¼% notes due 2023, its 7.20% notes due 2011 and its 7 1/8% notes due 2013 were all three points better, at bid levels of 73, 80 and 77.5, respectively.

At another desk, a trader saw the 8 3/8s up a point on the day at 73.5 bid, 74.5 offered, although he said they had come down from their day's peak levels. He also saw the GMAC 8% notes due 2031 up three points as the market opened at 102.5 bid, 103 offered, but saw the bonds come off that peak level to finish up at 101 bid, 102 offered, still up two points on the day.

Yet another trader saw the 8s end at 102 bid, 103 offered, and pronounced that up three points on the day. He also saw GMAC's 6¾% notes due 2014 at 94 bid, 96 offered, up a point, and its 6 7/8% notes due 2011 at 95 bid, 97 offered, each up a point.

A source quoted GM's 7 1/8% notes two points better at 78, and GMAC's 6 7/8% notes due 2012 up 1½ points around the 95 level.

Rumors of progress in GM's efforts to sell 51% ownership of GMAC had made the rounds of the junk bond and bank debt markets on Friday afternoon, pushing the bonds of both companies up, although that buzz was sketchy, with no firm names attached. But over the weekend, The Wall Street Journal, and then other news outlets, began reporting that Citicorp and Cerberus were teaming up to make a bid for a controlling stake in GMAC. In short order, there were also reports that another bank - Wachovia - and another private equity shop - Blackstone - would head a rival bidding group.

Ironically, some weeks back, a senior Citicorp executive had been quoted as saying the nation's largest bank wasn't interested in getting involved in the GMAC sale process. It should be noted that as of late Monday, there had been no official confirmation of the weekend stories by any of the parties involved - either the potential bidders or GM itself.

GM said back in October that it would sell a majority stake in GMAC, presumably to a deep-pocketed financial buyer, which would lift GMAC's now-junk level credit ratings back to investment grade, in line with the new majority owner's, allowing it to substantially cut its borrowing costs. Such a transaction would be expected to also put anywhere from $10 billion to $15 billion into GM's coffers; although GM ended 2005 with some $20 billion of cash on hand, it has been feeling the effects of sharply reduced sales and the ocean of red ink in which it has been wallowing.

However, since that optimistic beginning to the sale process nothing has happened other than several potential buyers, such as Bank of America, Wells Fargo & Co. - and Citigroup - publicly distancing themselves from the idea. On GM's fourth-quarter conference call following the release of its quarterly and year-end results Thursday, GM executives had nothing firm to report, other than to say that the company was still working on the sale.

But Friday's rumors and the weekend reports got people to thinking that the long-sought-for sale could take place after all.

Auto sector gains

GM's promising developments helped spur some of the other automotive sector names along. GM arch-rival Ford Motor Co.'s flagship 7.45% notes due 2031 were half a point better at 73 bid, 74 offered.

Among the parts supplier names, "Dana [Corp.] paper was up nicely, the best-performing supplier," a trader said, adding that "it had been the worst performing supplier over the last two weeks," ever since the Toledo, Ohio-based auto components manufacturer reported a giant $1.27 billion fourth-quarter loss amid weakened demand for its systems from GM and Ford, and sharply higher raw materials costs.

Because of that prolonged slide, "I guess it had the best chance to rebound," he said, quoting its 6½% notes due 2009 at 76 bid, 77 offered and the 5.85% notes due 2015 at 68 bid, 69 offered, each up three points on the session.

The whole sector "had a good tone throughout," he continued, observing that Tenneco Automotive Inc.'s 8 5/8% notes due 2014 were a point better at par bid, 101 offered, while ArvinMeritor Inc.'s 8¾% notes due 2012 were up a point as well, at 98.75 bid, 99.75 offered.

Tower drops on strike worries

But casting something of a pall over the sector was Tower Automotive, on the news that workers at a number of the Novi, Mich.-based vehicular frame maker's plants had voted to give their unions strike authorization in the event that a federal bankruptcy judge were to void their contracts, as Tower has asked.

Tower was "volatile," the trader said, describing how the company's 12% notes due 2013 swooned as low as 71 bid, 72 offered on the strike vote news from opening levels at 76 bid, 77 offered. However, he said, "they did regroup a little" in the afternoon, to end at 72.5 bid, 73.5 offered, still down 3 12 points on the session.

At another desk, a trader saw the Tower bonds drop to 72 bid, 74 offered from 76 bid, 78 offered.

Tower's nearly worthless Pink Sheets-traded shares lost a penny - fully 10.45% of their value - and fell to 6 cents, on volume of 794,000, more than triple the norm.

AK Steel steady

Outside of the automotive realm, AK Steel Corp bonds - which had firmed Thursday and Friday amid speculation that the Middletown, Ohio-based specialty steels maker might be an acquisition target in a steel sector suddenly caught up in merger mania, especially in the wake of industry leader Mittal Steel Group's unsolicited bid for rival Arcelor SA - were seen little changed, with its 7 7/8% notes due 2009 seen off 1/8 point at 98.125 bid, 98.875 offered.

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