Tower Auto firms off lows, other auto names also better; primary side quiet

By Paul Deckelman and Paul A. Harris

New York, Oct. 6 - Tower Automotive Inc. - Tuesday's big loser after the Novi, Mich.-based auto components maker's bonds skidded sharply in response to the company's warning of a larger-than-previously expected quarterly loss - were back on the main highway Wednesday, firming off their apparently oversold lows, and bringing other names in the recently weaker automotive grouping back with them.

In primaryside action, not much was going on, as a Deutsche Bank Securities conference in Arizona was heard to have taken away many of the portfolio managers and other decision makers without whom new deals cannot get done. Among the few tidbits emerging from the sector was price talk on Southern States Cooperative Inc.'s upcoming issue of eight-year notes.

Back in the secondary sphere, the Deutsche Bank conference was also casting a long shadow.

"It was kind of a dull day," said a trader, since a lot of people were away. He said that the relatively thin trading tended to exaggerate the impact of relatively small trades in the market.

The whole auto sector "showed some pop," a trader said, with R.J. Tower Corp. - Tower Automotive's bond-issuing unit - leading the way. Tower bonds, he said, "certainly bounced up."

He quoted the company's 12% notes due 2013 - which on Tuesday had careened down to about 74 bid from prior levels above 80 - as having pulled out of their spin and gotten back up to 78 bid.

Those bonds were crashing on Tuesday, after Tower said that it expects to report a third-quarter net loss of between $22.5 million and $25 million, or 39 to 43 cents per diluted share - more red ink than the previous guidance for the quarter of a net loss of between $10.4 million and $12.8 million, or 18 to 22 cents per share. The net loss and diluted loss per share estimates exclude restructuring charges and certain non-recurring, non-cash charges.

The company also said that revenues have softened for the quarter to a range of $710 million to $720 million, versus previous guidance of between $725 million and $735 million.

Tower, which makes body structures and assemblies, lower vehicle frames and structures, chassis modules and systems, and suspension components, blamed the anticipated lower revenues and bigger losses on lower domestic vehicle production volumes, continued escalation of steel costs and, to a lesser extent, higher launch costs on new business.

Weaker auto names like Tower "are having price problems and raw materials problems," said a trader. Tower, he said, "is squeezed on its top line" by production cutbacks among its customers, including Detroit's Big Three, while its margins are at the same time hurt by increased raw materials and energy prices.

But on Wednesday, he said, it appeared the market had bounced back from its previously oversold condition in the name.

Metaldyne rises

Also among the automotive names, a trader saw Metaldyne Corp. paper up "about four points" on the session, with the Plymouth, Mich.-based automotive metal components maker's 10% senior notes due 2013 at 96 bid, 97 offered, while its 11% senior subordinated notes due 2012 firmed to 81.5 bid, 82.5 offered.

Even Intermet Corp.'s 9¾% notes due 2009 - which had recently fallen as low as the lower 30s from prior levels around 75 on the Troy, Mich.-based auto components maker's warning of a likely third quarter loss and resulting financial covenant breach - continued on the upside, as they have been doing ever since the company's Chapter 11 filing last week.

Those bonds, which had gone from lows around 34 before the filing, to levels above 40 afterwards, were seen Wednesday as having pushed as high as 43 bid, 45 offered in morning dealings, before coming off those highs to end around 42 bid, 43 offered, up another point on the day.

Other automotive names seen better included Collins & Aikman Products Corp.'s notes, its 12 7/8% notes due 2012 at 91 bid, a trader said, while the Troy, Mich.-based components maker's 10¾% senior notes at par bid,

aaiPharma better

Outside the automotive sphere, aaiPharma Inc.'s 11½% senior subordinated notes due 2010 were seen as good as 71 bid, 72 offered. The Wilmington, N.C.-based pharmaceuticals maker's bonds "have firmed up over the past couple of days a trader said, from prior levels around 67 bid, 68 offered.

The company - which said just last week that it would not be able to make the scheduled Oct. 1 interest payment on the notes and would have to seek relief from its noteholders - said Wednesday that it has retained Rothschild Inc. to assist its management in its ongoing evaluation of potential asset divestitures.

The company said that it is evaluating a potential simplification of its operating structure by divesting businesses and assets that it may determine are no longer strategic to its long-term business plan.

"A successful conclusion to this process, if pursued, will enable management to refocus and devote all of its attentions to positioning the company for profitable growth," stated Dr. Ludo Reynders, aaiPharma's president and chief executive officer, in a news release Wednesday.

No dollar pricings

As with the two preceding primary market sessions, Wednesday came and went with no dollar-denominated junk bond transactions pricing.

However Oskar Holdings NV, a mobile telephone company that operates in the Czech Republic, and is a subsidiary of Montreal-based Telesystem International Wireless Inc., priced €325 million right on top of the 7 ½% area price talk.

Distractions

Sources continued to attribute this week's relative quiet in the high-yield primary market to the Deutsche Bank Global High Yield Conference that is now underway in Scottsdale, Ariz.

Also, say sources, the present week will end with an early Friday close in front of the Columbus Day holiday.

However among the investment bankers who spoke to Prospect News on Wednesday, opinions varied as to how the primary market will proceed after the three-day break.

One expressed the belief that with the Deutsche Bank conference and the holiday behind it, the primary market would return to a more purposeful pace.

"We certainly have stuff in our backlog for the next several weeks," said the investment banker. "And I think that other [syndicate desks] are busy too.

"I don't think things have really slowed down all that much."

However another sell-sider wondered, in lieu of the headline news on the financial pages, whether activity would ramp up quickly in mid-October.

"We believe that there is still plenty of cash that needs to be put to work," said the banker.

"But the forward calendar is pretty thin, when you consider the interest rate environment.

"It could be that people are nervous about the jobs numbers and oil prices and the election."

Oskar sells €325 million on top of talk

The only high-yield transaction on Wednesday came from Oskar Mobil, formerly known as Cesky Mobil, a provider of mobile telephone services in the Czech Republic.

The company sold €325 million of seven-year senior secured notes (B1/B) at par to yield 7½%, right on top of the 7½% area price talk.

JP Morgan, ABN Amro and UBS Investment Bank were joint bookrunners for the debt refinancing deal which, according to one source, attracted the interest of both high yield and emerging markets investors.

IT Holdings heads for runway

The only roadshow start heard Wednesday was for a euro-denominated deal from IT Holding SpA, a holding company for fashion brands including Versace, Dolce & Gabbana, and Roberto Cavalli.

The roadshow starts Monday for the Milan, Italy-based firm's €185 million of eight-year non-call-four senior notes, which are expected to price on Monday, Oct. 18.

Merrill Lynch & Co. will run the books for the debt refinancing deal.

Elsewhere in the pipeline, National Waterworks Holdings Inc. announced plans to offer $250 million of 10-year senior PIK notes late Tuesday.

The proceeds from the deal will be used to pay a dividend to sponsors JP Morgan Partners and Thomas H. Lee Partners.

Although rumors flew on Wednesday as to the syndicate and the timing for the deal, real information on National Waterworks was a scarce commodity.

In ratings action Standard & Poor's lowered the Waco, Tex. hydrant and valve company's corporate credit and senior secured debt ratings to B+ from BB- and its subordinated debt rating to B- from B.

Meanwhile Moody's Investors Service downgraded National Waterworks' senior implied rating to B2.

The company was last in the high-yield market in November 2002, when it priced $200 million of senior subordinated notes due 2012 (B3/B) at par to yield 10½%, via Goldman Sachs and JP Morgan.

One sell-side source speculated Wednesday that National Waterworks could be drive-by business, as were recent dividend-funding deals from Michael Foods, PanAmSat and Polypore.

B&G tinkers with EIS dividends

In a move that appears to cushion the company as well as investors in its new income securities, B&G Foods Holdings Corp. late Tuesday announced changes in the dividend-payment structure of its approximately 20.8 million of Enhanced Income Securities (EIS), now in the market.

A key provision specifies a $6 million cash holdback requirement that must be met before dividends can be paid to holders of the company's class B shares, which are not part of the EIS deal (see related story in this issue).

The Parsippany, N.J. based food company is also in the market with a separate $200 million offering of seven-year senior notes (B2/B), via Lehman Brothers. Price talk is 8%-8 ¼%

The offering is coming concurrently with the EIS, and pricing of the bond deal is contingent upon successful completion of the EIS transaction.

Both deals could price as early as Wednesday night, according to an informed source. However, the source added, the transaction is more likely to occur later in the week.

"Because of the changes in the EIS the company has to wait for SEC approval," one informed source said Wednesday.

Talk on Harvest, Southern States

Price talk of 7 7/8%-8 1/8% emerged Wednesday on Harvest Operations Corp. (Harvest Energy Trust)'s $200 million of seven-year non-call-four senior notes (B3/B-), which are expected late Thursday or early Friday, via Morgan Stanley.

And finally, price talk of 10¼% area was heard on Southern States Cooperative Inc.'s $100 million of eight-year senior notes (B3/B), expected to price on Thursday afternoon via Wachovia Securities.

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