Upsized CNH eight-years price; Dana debacle continues amid downgrades

By Paul Deckelman and Paul A. Harris

New York, Feb. 24 - CNH Global NV successfully brought a solidly upsized offering of eight-year bonds to market Friday, closing out a holiday-shortened week that also saw new issues from familiar junk names Station Casinos Inc. and Hovnanian Enterprises Inc.; all were quickly emerging, opportunistically priced drive-by deals that weren't on the forward calendar at the beginning of the week.

For investors in automotive bonds, meantime, the end of the week couldn't come soon enough, with the whole sector pretty much down in the dumps, and Dana Corp. in particular getting absolutely pounded in response to reports it has hired a restructuring advisor, which in turn sparked credit downgrades from the major agencies. The bond fall Thursday and Friday has come in line with a nosedive in the company's shares, which lost more than half of what little remaining value they have.

On the upside, Alliance Imaging Inc.'s bonds moved up by several points after the Anaheim, Calif.-based provider of diagnostic imaging services to hospitals posted better fourth-quarter and full-year earnings figures, helped in part by lower interest costs from several refinancing transactions it did at the tail end of 2004.

A source marked the broad market firmer on Friday but the quiet continued to pervade the primary.

One issue priced, as CNH Global NV, a subsidiary of Case New Holland, Inc., priced an upsized $500 million issue of eight-year senior notes (Ba3/BB-) at par to yield 7 1/8%, in the middle of the 7% to 7¼% price talk.

UBS Investment Bank ran the books for the debt refinancing deal which was upsized from $350 million.

A buy-side source, who spoke Friday afternoon on background, marked the new CNH 7 1/8% notes due 2014 at 100.25 bid, 100.375 offered, and added that the buzz had been that the company intended to raise $500 million all along, and that people were surprised when the Illinois-based agricultural equipment maker initially announced only $350 million.

At that original amount, the investor added, the order book was said to have been 3.5 times oversubscribed.

Insurers buying 4-B deals?

Case New Holland, with its Ba3/BB- rated notes, is among several four B rated names that have tapped the high-yield market during the past six market sessions.

On Feb. 16 Steinway Musical Instruments, Inc. priced a $175 million issue of 7% senior notes due 2014 (Ba3/BB-) at 99.2435 to yield 7 1/8%, also via UBS, and also to refinance debt.

Earlier in the holiday-shortened week of Feb. 20, K. Hovnanian Enterprises, Inc. priced a $300 million issue of 7½% senior notes due 2016 (Ba1/BB), with proceeds slated for debt refinancing and for general corporate purposes including acquisitions.

The investor said that the real buyers of the four-B names are probably insurance companies.

"On the Hovnanian call it was all insurance companies asking questions," the source added.

Four-day week sees $1.4 billion issuance

Sleepy though the primary market may be, the four-day Feb. 20 week trounced the previous week in terms of proceeds raised in the primary market.

The week saw just under $1.4 billion in four dollar-denominated tranches, just shy of a billion better than the previous week's $456 million in three tranches.

In terms of proceeds raised year to date, the new issue market at Friday's close had seen slightly more than $21.7 billion, a nose ahead of the $21.4 billion that had been raised by the Feb. 24, 2005 close, according to Prospect News data.

However in terms of deal volume, 2006, which has now seen 52 dollar-denominated tranches, lags well behind 2005 which had seen 80 tranches price by the Feb. 24 close.

Sarbanes-Oxley lulls new issue market

Throughout the past week sources have told Prospect News that the primary market is dead quiet and does not figure to roar to life anytime soon.

The main reason appears to be that companies are getting their current financial numbers in order relative to the reporting obligations of the Sarbanes-Oxley Act of 2002, which intensified corporate governance in the wake of the early 21st century's wave of corporate scandals.

A source reiterated Friday that prospective issuers are looking to their 10-K filings before setting out to raise money in the 2006 junk market.

A $1 billion week ahead

The market heads into the February-March 2006 crossover week with only three deals totaling an even $1 billion on the forward calendar as business that is expected to price by the Friday close.

Quebecor World Inc. is in the market with a $300 million offering of 10-year senior notes (existing Ba3/confirmed BB-) via Citigroup.

Bon-Ton Stores figures to price a $525 million offering of eight-year senior notes (B2/B-) via Banc of America Securities and Citigroup.

And Dave & Busters Inc. is marketing a $175 million offering of eight-year senior unsecured notes (B3/CCC+) via JP Morgan.

CNH steady in trading

When the new CNH 7 1/8% notes due 2014 were freed for secondary market dealings, they didn't really go anywhere; a trader saw those bonds, which had priced earlier in the session at par, as going home at par bid, 100.5 offered.

The new bonds "traded at a slight premium" to their issue price, another trader said, "but then they settled back in" to close at 99.75 bid, 100.125 offered.

The trader said that he "didn't see much" in the way of aftermarket trading.

In that same vein, he said, the new Station Casinos 6 5/8% notes due 2018 "pretty much stayed right where they were after having priced Thursday at 99.5 bid, and then having moved up to around the same levels they held Friday at 100.25 bid, 100.75 offered. "There was not a lot of trading" going on in the Las Vegas-based casino company's new bonds.

Another trader saw the new Station Casinos at par bid, 100.375 offered.

And he saw the new Hovnanian 7½% notes due 2016, which priced at par on Wednesday, hanging out at that same level of 100 bid, 100.5 offered.

Dana down again

But clearly, the most active name of the day was Dana, taking a tumble for a second consecutive day.

A trader saw the Toledo, Ohio-based automotive systems maker's 6½% notes due 2008 - which on Thursday had fallen at least 10 to 12 points to the low 70s - continuing to skid Friday to a closing level of 64 bid. He further saw the company's 6½% notes due 2009, which on Thursday had dropped nine points to around 70 bid, careening downward to 63.

The trader also saw Dana's longer-dated issues - its 7% notes due 2029, its 7% notes due 2028, and its 5.85% notes due 2014 - all fall to levels around 60 bid from a 63 bid, 64 context on Thursday. At one point, he said, the 7s of 28 got as low as 59.75 bid, 60 offered.

Dana, another trader remarked "was the one that went on a wild ride." He said the 2008s dropped to a closing price of 62 bid, 64 offered, down 10 points from Thursday. The '09s were down about four points on the session to 63 bid, 64 offered.

Dana's New York Stock Exchange-traded shares - which had fallen about 20% on Thursday in response to the news that the company will postpone its scheduled dividend - collapsed another $1.64 (52.06%) to finish at $1.51. Volume of 71.1 million shares was 18 times the average turnover.

Dana's bonds were sliding in the face of the latest bad news about the struggling company, which lost over $1 billion last year. On Thursday, bankruptcy rumors had made the rounds in the debt market as well as talk that the company's efforts to line up new secured financing were in trouble.

A company spokesman on Friday would only acknowledge that the company has, in fact, been in talks with potential lenders on a possible refinancing, but had no comment on anything else being talked about in the market (see related article elsewhere in this issue). That included the Wall Street Journal story which said that Dana had hired the restructuring specialist firm Miller Buckfire & Co. as an advisor.

Also helping to sour debt investors on Dana was the news Friday that Standard & Poor's and Moody's Investors Service had each downgraded Dana's already pretty junky debt ratings.

Other auto names drop

A trader noted that even as Dana was nosediving, "all the other autos got crushed," with bankrupt interior components maker Collins & Aikman Corp.'s 10 3/8% notes due 2011 down about two or three points to 27 bid, 28 offered and bankrupt vehicular frames maker Tower Automotive Inc.'s 12% notes due 2013 also lower at 66 bid, 68 offered. Dura Automotive Systems Inc.'s 8 5/8% notes were around 80 bid, 81 offered, down a couple of points.

"There's a pileup on the turnpike," he declared. "It was definitely an auto day."

Another trader saw interior components supplier Lear Corp.'s 5¾% notes due 2014 down 1¼ points at 78.25 bid, 79.25 offered, while Visteon Corp.'s 8¼% notes due 2010 were ¾ point lower at 81 bid, 82 offered.

GM, Ford unchanged

However, he said, not everyone was being towed lower.

He saw General Motors Corp's 8 3/8% notes due 2033 at 69.75 bid, 70.75 offered, while its General Motors Acceptance Corp. was at 91 bid, 91.5 offered, both unchanged on the day. Also unchanged were Ford Motor Co.'s 7.45% notes due 2031, at 70.75 bid, 71.75 offered, and Ford Motor Credit's 7% notes due 2013 at 88 bid, 88.5 offered.

Delphi gains

And bankrupt Troy, Mich.-based auto electronics maker Delphi Corp. was, "believe it or not, up a point," its 6.55% notes due 2006 and 7 1/8% notes due 2029 each half a point better, at 53.75 bid, 54.75 offered and 54.75 bid, 55.75 offered, respectively.

Imaging names mostly better

Outside of the automotive realm, the imaging names "were bouncing around" at mostly higher levels, a trader said, in the wake of Alliance Imaging's release of quarterly and year-end results (see related story elsewhere in this issue.)

He saw the medical diagnostic imaging provider's 7¼% notes due 2012 get as good as 84 bid, well up from prior levels around 80.5 bid, 82 offered.

The bonds of some of Alliance's competitors were firm as well; the whole imaging sector had gotten stomped upon early in February on fears that coming changes in Medicare reimbursement rates for certain procedures could hurt the companies' fortunes.

On Friday, Insight Health Services Corp. - whose bonds had been soundly shellacked early in the month - was unchanged, with its floating-rate notes hanging in at 92.25 bid, 92.75 offered and its 9 7/8% notes likewise unseen, at 55.75 bid, 56.75 offered.

Also unchanged were Radiologix Inc.'s 10 ½% notes due 2008, at 76.75.

But MedQuest Inc. - another big loser early in the month - rose two points to 75.5 bid, 77.5 offered.

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