Ford jump-starts auto sector; Albertson's dives on sale news; NRG deal talk out

By Paul Deckelman and Paul A. Harris

New York, Jan. 23 - Ford Motor Co. reported better-than-expected fourth-quarter earnings and unveiled its long-awaited plan to restructure its North American operations through factory closings and massive headcount reductions. Those factors combined to push the embattled carmaking giant's bonds up solidly on Monday, with other automotive names coming along for the upside ride.

Elsewhere, the news that Albertson's Inc. finally agreed to a $9.6 billion buyout and the assumption by its buyers of more than $7 billion of debt caused the Boise, Idaho-based supermarket and drugstore operator's future fallen-angel bonds to slide, with investors fearful about the sharply increased leverage level that the company buying the bulk of its assets and assuming the bulk of its debt, will be carrying.

A syndicate official commented that high-yield felt "pretty good" on Monday, and marked the market flat on the session.

In the primary arena, price talk was heard on NRG Energy Inc's nearly $4 billion, multi-part mega-deal, which is expected to price around mid-week. Metal tubing maker RathGibson's prospective new deal went into the pipeline, with a roadshow for the offering slated to begin Tuesday.

Meanwhile South Korean cable TV company C&M Finance Ltd. priced an upsized $650 million two-part deal on top of price talk that it had tightened twice while the notes were being marketed.

Big demand for C&M

A source close to the deal told Prospect News that the order book for C&M Finance's $650 million two-tranche offering (Ba2/BB+) was 13-times oversubscribed, based on the original $550 million anticipated amount of issuance.

The source added that demand was intense both in Asia and the United States.

C&M priced a $200 million issue of five-year floating-rate notes to yield six-month Libor plus 250 basis points, on top of price talk which was revised from Libor 262.5 area. Last week that price talk had itself been revised from Libor plus 275 area.

The company also priced a $450 million issue of 10-year fixed-rate notes to yield 8.1%, on top of price talk which was revised from 8 1/8% to 8¼%. Last week that price talk had also been revised from 8¼% to 8½%.

Citigroup and Goldman Sachs & Co. ran the books for Rule 144A for life notes.

NRG talks two of three tranches

News circulated Monday on the only dollar-denominated mega-deal expected to price this week: NRG Energy's $3.6 billion three-part offering of senior unsecured notes (B1/B-/B).

The Princeton, N.J.-based independent power producer is talking a $2.2 billion tranche of 10-year fixed-rate notes at 7 3/8% to 7 5/8%. Meanwhile NRG's $1.1 billion tranche of eight-year fixed-rate notes is talked at 12.5 basis points to 25 basis points inside of the 10-year notes.

However price talk on the proposed $300 million tranche of eight-year floating-rate notes remains to be determined.

A source close to the registered deal said that the tranche sizes, announced Monday in a filing that NRG made with the U.S. Securities and Exchange Commission, could change based upon demand.

The Morgan Stanley and Citigroup-led acquisition deal is expected to price on Wednesday.

One other mega-deal, a euro-denominated offering, is expected to price this week.

Ineos Group Holdings plc is in the market with a €3.105 billion equivalent four-tranche transaction.

The offering is comprised of 10-year senior fixed-rate notes and senior floating-rate notes, expected to be sold in both in dollar and euro tranches (B2/B-) via Merrill Lynch & Co., Barclays Capital and Morgan Stanley.

A sell-side source said that aside from NRG and Ineos neither the confirmed forward calendar nor the "shadow calendar" are particularly massive at present.

Indalex secures eight-year notes

The market also heard on Monday that Indalex Aluminum Solutions has secured its $280 million offering of eight-year notes (expected ratings B3/B-) with a second-lien structure.

The notes, which were changed from a senior unsecured structure, will be offered in two parts: a tranche of fixed-rate notes with four years of call protection and a tranche of floating-rate notes with two years of call protection.

JP Morgan has the books for the LBO deal from the Mississauga, Ont.-based aluminum extrusion company.

RathGibson hits the road

Finally, news of one roadshow start was heard.

RathGibson, Inc. will begin a roadshow Tuesday for its $200 million offering of eight-year senior notes via Bear Stearns.

Proceeds will be used to help fund the LBO of the Janesville, Wis., supplier of tubing and piping by Castle Harlan, Inc.

DRS edges up in trading

DRS Technologies Inc.'s new bonds, which priced on Friday were seen a little firmer than their par issue price, with the Parsippany, N.J.-based technology manufacturer's 6 5/8% senior notes due 2016 at 100.25 bid, 101 offered, and its new 7 5/8% notes due 2018 at 100.75 bid, 101.75 offered.

Ford strong

Back among the established names, Ford stood out in an otherwise slow and sedate market, a trader said, propelled by its earnings and by its operational restructuring. The Dearborn, Mich.-based automotive giant's benchmark 7.45% notes due 2031 were seen by a trader up a point on the session, finishing at 70.5 bid, 71.5 offered. The bonds had gotten as good as 71 bid, 72 offered intra-day, before backing down from that high point to end where they did, a trader said.

However, at another desk, a trader saw the bonds finishing at 70.75 bid, 71.5 offered, which he called up 1½ points on the day. He also saw the company's financial arm, Ford Motor Credit Co., ending 1¼ point better, its 7% notes due 2013 closing at 88.75 bid, 89.5 offered.

Ford reported fourth-quarter net income of $124 million (eight cents a share), up from its year-ago profit of $104 million (six cents a share), and up from Wall Street's expectations of no more than a penny per share. Results were boosted by the sale of the company's Hertz rental car unit and the performance of its luxury brands such as Jaguar, Volvo, Land Rover and Aston-Martin. They make up Ford's Premier Automotive Group, which swung to a profit of $46 million in the period from a year-ago loss of over $255 million.

Ford followed its positive earnings news with the long-awaited announcement on how the carmaker is going to restore its once-profitable North American automotive business by radically cutting unneeded capacity and downsizing its workforce. Ford said it will cut up to 30,000 jobs - about 28% of its domestic workforce - and shut 14 manufacturing plants aimed at saving $6 billion by 2010 and restoring its North America auto operations to profitability by 2008.

Ford boosts auto sector

With Ford leading the way, the other automotive names "went along for the ride," a trader said, including Ford's arch-rival, General Motors Corp.

GM's 8 3/8% notes due 2033 were seen a point better, at 70.25 bid, 71 offered, while its General Motors Acceptance Corp. financing arm's 8% notes due 2031 were up ¾ point at 99.75 bid, 100.5 offered.

GM "was a little better, as things hung in," said another trader, who saw GM's 8 3/8s at 70.5 bid, 71.5 offered.

That strength carried over into the bonds of many of the recently beleaguered automotive supply names, such as the bankrupt Troy, Mich.-based electronics maker - and former GM subsidiary - Delphi Corp. A trader saw Delphi's 6.55% notes, which are scheduled to come due later this year, at 56.25 bid, 57.25 offered, up a point on the day, while its 7 1/8% notes due 2029 were likewise a point better, at 56.75 bid, 57.75 offered.

A trader at another shop saw former Ford unit Visteon Corp.'s 8¼% notes due 2010 at 83.75 bid, 84.75 offered, up 1¼ points on the day, while Dana Corp's 6½% notes due 2009 were a point improved at 72 bid, 73 offered, after having lost 10 points during the previous week. "There was a little bit of recovery in the autos across the board," he said.

Yet another trader, though, saw "not that much" movement in the sector, pegging Visteon's 7% notes unchanged around 76 bid, 77 offered. "You'd think they would be active," on Ford's developments, but they did not budge, he said.

However, he did see Dana "up a couple" of points, bouncing back from its recent weakness, with the Toledo, Ohio-based automotive systems maker's 5.85% notes due 2015 at 65.5 bid, 66.5 offered. And he saw automotive foam rubber applications maker Foamex International's bonds "better on their number," with its 10¾% notes due 2009 at 88 bid, 89 offered, and its 9 7/8% notes due 2007 two points ahead at 14.5 bid, 15.5 offered.

Elan steady

Elsewhere, not too much seemed to be happening on what one trader called a "boring" day. Traders reported little movement in Elan plc's bonds, despite the news that the FDA has scheduled a review for the Irish pharmaceuticals maker's multiple sclerosis drug Tysabri, which had been pulled off the market last year by Elan and partner Biogen Idec, after it was linked to several patient deaths.

Elan's 7¾% notes held steady at 93.75 bid, 94 offered, and its 7¼% notes were also unchanged, at 98.25 bid, 98.75 offered.

Isle of Capri unmoved by guidance

Isle of Capri's bonds were likewise little moved, despite bullish revised guidance issued by the casino company. "There was not a lot of reaction," said a trader.

The company now expects a third quarter profit of nine to 13 cents per share instead of a penny per share loss.

Select Medical slips further

But Select Medical Corp.'s 7 5/8% notes due 2015 - which fell a whopping 10 points Friday on investor fears about what the government's new lower Medicare reimbursement rates will mean for the Mechanicsburg, Pa.-based long-term care provider's finances - were seen down maybe another point, with a trader quoting the bonds at 86 bid, 89 offered.

Another trader saw the bonds at 86.5 bid, 87.5 offered, which he called down another 1½ points on top of Friday's carnage. Speculating on why Select Medical's bonds got clobbered on the reimbursement fears, while the bonds of competitor HealthSouth Corp. were little moved, he said the name had "turned into one of those issues where if you've got it and something happens and you've got to get out, there's no escape - you're screwed."

Packaging gains

A trader saw some strength in packaging issues, notably Constar International Inc., whose 11% notes due 2012 he saw up as much as five points on the session, even though he had seen no fresh positive news that might explain such a move. He also saw Portola Packaging's 8¼% notes due 2012 having "a little appreciation" in firming to 81 bid, 82 offered.

The trader saw Advanced Micro Devices' 7¾% notes due 2012 up three points to 105 bid, 106 offered on the news that the Sunnyvale, Calif.-based computer chip maker plans to sell $500 million of new stock and use much of the proceeds to take out $226 million out of the $600 million of outstanding bonds, or 35% of the issue, at 107.75, under the equity clawback provision in the bonds' indenture.

Albertson's plunges

And traders saw Albertson's nominally (still) investment-grade bonds fall sharply on the news that the company has agreed to be bought out, on the fears that the company assuming most of Albertson's debt - Eden Prairie, Minn-based grocery chain SuperValu Inc. - will be downgraded to junk status after it absorbs $6.1 billion of Albertson's debt and at least $2 billion of additional debt needed to finance the cash portion of the complicated buyout offer (see related story elsewhere in this issue). Albertson's own bonds, which will remain outstanding, are likely to be lowered to deep in junk territory, the major ratings agencies all said.

Albertson's widely quoted 8% notes due 2031 - which had been trading as high as 119 at the end of August before the company announced plans to put itself up for sale - ended in a 99-par context on Friday, and gyrated wildly on the Monday's news that it would indeed be sold; they hit an early intraday high around 102 but then dropped to a midday low around 94, before finally settling in just below 95.

A trader, while seeing those bonds down five points on the day, saw its 7½% notes due 2011 at 102 bid, 103 offered, off a point on the session.

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