Mueller, Hayes price; Lyondell up on takeover buzz

By Paul Deckelman and Paul A. Harris

New York, May 16 - Tight executions and upsizings were the rule, not the exception, in the primary market Wednesday.

Three issuers brought one tranche, apiece. Two of the three were priced tight to talk, while two were upsized.

Mueller Water Products, Inc. brought the only dollar-denominated deal, an upsized $425 million of 10-year senior subordinated notes.

Other pricings during the sessions came on euro-denominated offerings for the European unit of U.S. automotive wheel manufacturer Hayes Lemmerz International Inc., and French issuer SNF, the former upsized somewhat, and the latter an add-on deal.

Elsewhere in the primary sphere, pre-deal market price talk emerged on Rite Aid Corp.'s upcoming two-part billion-dollar-plus deal while Dynegy Holdings, Inc. upsized and restructured its deal.

In the secondary market, bonds of Lyondell Chemical Co. firmed smartly, with a trader attributing the gains to continued takeover speculation about the Houston-based chemical manufacturer.

On the downside, issues posting poor numbers and then paying the price include Keystone Automotive Operations Inc. and Constar International Inc.

Movie Gallery Inc. - whose bonds had tumbled on Tuesday, pushed down by the company's recent poor earnings and a disappointing conference presentation - was seen having bounced back somewhat on Wednesday

Sources were spotting the red hot high-yield market unchanged to up an eighth of a point on Wednesday.

A senior capital markets official, spotting junk an eighth of a point higher, said that right now investors feel good about credit.

Inflation is under control, the official said, adding that growth is moderating, but not coming to an end.

"And in a slow growth economy high yield will do okay," the official added.

The source said that investors also seem awake to the possibility of interest rate reductions.

"There is a lot of money in the market right now, and people are willing to take on risk," the source said, noting that the impacts of the cash and the willingness to shoulder risk are being felt in the bank loan market as well as in the high yield.

Mueller Water upsized

The only dollar-denominated junk transaction to price on Wednesday came from Mueller Water Products.

The Atlanta-based company priced an upsized $425 million issue of 10-year senior subordinated notes (B3/B) at par to yield 7 3/8%, at the tight end of the 7 3/8% to 7½% price talk.

Banc of America Securities LLC was the left bookrunner for the debt refinancing deal. JP Morgan was the joint bookrunner.

An informed source said that the deal was 7.5-times oversubscribed, and added that there were 185 accounts in the order book.

This source also said that lately the "traditional high yield accounts" have been piling into "corporate deals" such as Mueller.

The accounts seem to prefer the structure of such deals to highly leveraged LBO transactions, some of them coming with flexible covenant packages, the source asserted.

In addition to the Mueller Water transaction, United States Steel Corp. was in the market, Wednesday, with a split-rated three-part deal (Baa3/BB+/BBB-) that was upsized to $1.1 billion from $900 million.

However sources told Prospect News that U.S. Steel - which priced its six-year paper at a 103 basis points spread to Treasuries, its 10-year at 135 basis points, and its 30-year at 180 basis points - was of little interest to high yield players, even though it was using some of the proceeds to take out its 9¾% notes.

Hayes Lemmerz tight to talk

The remainder of Wednesday's new issue action was euro-denominated.

Hayes Lemmerz Finance Luxembourg SA priced an upsized €130 million issue of eight-year senior unsecured notes (Caa2/CCC+) at par to yield 8¼% on Wednesday, at the tight end of the 8¼% to 8½% price talk.

Deutsche Bank Securities, Citigroup and UBS Investment Bank were joint bookrunners for the debt refinancing deal, which was increased from €115 million.

SNF taps 81/4s

SPCM SA, owner of SNF Chemical Group, priced a €50 million add-on to its 8¼% senior notes due June 15, 2013 (B3/B) at 108.0 on Wednesday, resulting in a 6 3/8% yield to worst.

The add-on priced on top of the price talk.

Calyon Securities was the bookrunner for the debt refinancing and general corporate purposes deal from the French specialty chemicals company.

The original €175 million issue priced at par on June 22, 2006. The company previously did a €20 million tap which priced at 102.00 to yield 7.822% on July 7, 2006.

The total issue size following Wednesday's €50 million addition is €245 million.

An informed source said that the order book for SNF was four-times oversubscribed. He added that the bonds were trading late in the London session at 108.50 bid, 109.0 offered.

Dynegy upsizes, restructures

Two mega-deals are on deck to price Thursday.

Late Wednesday Dynegy Holdings Inc. upsized its offering of senior unsecured notes (B2/B-) to $1.7 billion maximum from $1.1 billion, and restructured the transaction.

The Houston-based producer and marketer of electricity is offering $500 million to $650 million of eight-year notes. The tranche is talked at 7 3/8% to 7½%.

Meanwhile the company is offering $1.0 billion to $1.15 billion of 12-year notes talked in the at 7¾% area - guidance that is lowered from the 7¾% to 7 7/8% heard previously.

Both tranches are non-callable.

The company had previously been in the market with a single tranche. Earlier in the week Dynegy extended the maturity of that tranche to 12 years from 10 years.

JP Morgan, Citigroup and Credit Suisse are joint bookrunners.

Rite-Aid talks $1.22 billion

Meanwhile Rite-Aid Corp. set price talk for its $1.22 billion two-part offering of senior unsecured notes (Caa1/CCC+) on Wednesday.

The Camp Hill, Pa., drugstore chain company talked its planned 10-year notes at the 9¾% area, and its 8.5-year notes to price 12.5 to 25 basis points inside of the 10-year notes.

The Citigroup-led deal is expected to price on Thursday.

Ford Credit, parent seen mixed

A trader said that he had seen no dealings in the $1.5 billion of new paper priced Tuesday by Ford Motor Credit Co.

The company's existing bonds, meantime, moved inconclusively, though in busy dealings. Its 7 3/8% notes due 2011 were seen down ¼ point at par, while its 5.8% notes due 2009 were up by about the same amount at 98.375.

Parent Ford Motor Co.'s 7 1/8% notes due 2025 were seen up ¾ point at 77, while its 9 3/8% notes due 2020 were also up 3/4, at 93.25. Its benchmark 7.45% notes due 2031 were off ½ point in the 81 area.

Lyondell up on M&A talk

Outside the automotive arena, a trader said that Lyondell's 8¼% notes due 2016 were up 1½ points at 109.5 bid, 110.5 offered. He cited "takeover rumblings."

That followed some active trading in the company's shares the previous two sessions after the disclosure by billionaire investor Leonard Blavatnik disclosed that he planned to buy an 8.3% stake in the company.

In his regulatory filing with the Securities and Exchange Commission, Blavatnik said that a unit of his Access Industries Inc. had bought the rights to 21 million shares at $32.113 each, or $674 million - and may acquire more, depending on the outlook for Lyondell and the chemical industry.

He also said that he might talk to Lyondell about a merger.

Earnings disappointments undermine bonds

Elsewhere, bonds of several issuers were seen lower after those respective companies posted less-than-hopeful quarterly numbers.

Keystone Automotive Operations' 9¾% notes due 2013 were seen down 2 points to the 93 bid level.

That followed the Exeter, Pa.-based specialty automotive parts distributor's first-quarter results, which saw a net loss of $8.5 million - a sharp deterioration from its year-earlier profit of $500,000. Net sales for the quarter were $146.2 million, a decrease of $12 million, or 7.6%, compared to $158.2 million for the same period in the prior year.

The company attributed the setbacks to a decrease in operating income, $6.1 million write-off of deferred financing costs associated with the extinguishment of debt, and incremental interest expense related to the refinancing that was completed in January.

A trader saw Constar's 11% notes due 2010 down 2 points at 97 bid, 98 offered, and attributed the retreat to "poor numbers."

The Philadelphia-based packaging company continued to struggle during the first quarter, although its loss narrowed to $6.30 million (51c per share), from $6.34 million (52c per share) in the year-ago quarter. The company said net sales fell 3.7% to $3.56 million in the first quarter. Constar said that while volumes were "disappointing," the impact of this was offset by improved profitability in Europe, a better customer and product mix and a decline in costs.

Also on the earnings front, a trader saw Lifecare Holdings' 9¼% notes due 2013 tumble 6 points to 70 bid, 71 offered, citing "poor earnings" on the part of the Plano, Tex.-based hospital operator.

Some numbers not so bad

Here and there, issues reporting results were actually seen on the upside. One was Solo Cup, whose 8½% notes due 2014 firmed a point to 86.5 bid. He cited a "soothing conference call" with investors after the release of quarterly results.

Movie Gallery's bonds - which had fallen about 5 points on Tuesday in continued response to poor numbers posted several days ago, as well as what a trader called an uninspiring presentation by company executives at a Credit Suisse conference - was on the comeback trail on Wednesday. The Dothan, Ala.-based video rental company's 11% notes due 2012 rose 2 points to 78.5 bid, 79.5 offered.

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