Sea Containers, Dura miss payments, trade flat; West, CompuCom deals price

By Paul Deckelman and Paul A. Harris

New York, Oct. 16 - Bonds of Sea Containers Ltd. and Dura Automotive Systems Inc. both traded down sharply on Monday, came back off their lows to end not too far from where they had started - but in reality, were both down several additional points when they began trading flat, or without their accrued interest after each troubled company failed to make a scheduled payment on their bonds.

Sea Containers was supposed to redeem $115 million of 10¾% notes that were scheduled to mature on Sunday - but did not. Dura meantime, was facing a Monday deadline for making a $17.25 million interest payment on its 8 5/8% senior notes due 2012 - but did not. Sea Containers announced very early Monday that it had filed for Chapter 11 protection from its creditors.

Dura didn't go quite that far - but there has been considerable speculation in the junk market that the struggling Rochester Hills, Mich.-based automotive parts manufacturer is headed there, sooner or later.

Overall, a high yield syndicate official said that the broad market had been quiet on Monday, and marked it unchanged to perhaps slightly softer.

In the primary market, after a week during which no new deals priced, West Corp. successfully brought a $1.1 billion two-part mega-deal to market. The bonds were well received and firmed smartly when they began trading in the secondary.

Also pricing were dollar-denominated deals from CompuCom Corp. and Mark West Energy Partners LP - the latter an add-on to an existing tranche of bonds - as well as a euro-denominated offering from Hungarian telecommunications operator Invitel Holdings NV.

West Corp. prices $1.1 billion

Monday's big issuer was Omaha, Neb., provider of outsourced communication solutions, West Corp., which priced $1.1 billion of notes (Caa1/B-) in a two-part transaction.

The company priced a $650 million tranche of eight-year senior notes at par to yield 9½%, at the wide end of the 9¼% to 9½% price talk.

West Corp. also priced a $450 million tranche of 10-year senior subordinated notes at par to yield 11%, inside of the 11¼% area price talk.

Deutsche Bank Securities, Lehman Brothers and Banc of America Securities were joint bookrunners for the LBO funding deal.

Compucom completes $175 million

Elsewhere CompuCom Systems priced a $175 million issue of eight-year senior notes (B2/B) at par to yield 12%, at the wide end of the 11¾% to 12% price talk.

Citigroup ran the books for the debt refinancing and dividend funding deal from the Dallas-based provider of outsourced information technology services.

MarkWest taps 8½% notes

In drive-by action on Monday, MarkWest Energy priced a $75 million add-on to its 8½% senior notes due July 15, 2016 (B2/B) at par to yield 8½%.

There had been no official price talk, however the whisper was "par or better."

RBC Capital Markets was the bookrunner for the deal. Proceeds will be used to repay acquisition-related debt, to fund capital expenditures and for general corporate purposes.

The Denver-based natural gas gathering and transmission company priced the original $200 million issue at 98.35 on to yield 8¾% on June 30, 2006.

Hence the notes priced in Monday's tap, which came at par, represent a 25 basis points interest savings for MarkWest Energy relative to the yield on the original notes.

Invitel prices €125 million notes

Also pricing notes via Rule 144A and Regulation S on Monday, was Hungary's Invitel.

The second largest fixed-line telecommunications company in Hungary priced a €125 million issue of three-month Euribor plus 825 basis points 6.5-year senior floating-rate PIK notes (B3/B-) at 99.00, on top of the price talk.

Credit Suisse ran the books for the dividend funding deal.

Berry talks $200 million

Among deals on this week's forward calendar which are expected to price prior to Friday's close, Berry Petroleum Co. talked its $200 million offering of 10-year senior subordinated notes (B3/B) at a yield of 8% to 8¼% on Monday.

Pricing is expected late Wednesday.

JP Morgan, Citigroup, Wells Fargo Securities and Goldman Sachs & Co. are joint bookrunners for the debt refinancing and general corporate purposes deal from the Bakersfield, Calif., petroleum exploration and production company.

Hexion to hit the road

Timing was heard on Hexion Specialty Chemicals Inc.'s $825 million two-part offering of eight-year senior secured second-priority notes in two tranches, set to hit the investor road on Tuesday.

The Columbus, Ohio-based maker of thermoset resins will sell fixed- and floating-rate notes.

Credit Suisse and JP Morgan are joint bookrunners for the deal, proceeds from which will fund a debt recapitalization including the payment of a dividend to sponsor Apollo Management.

Verizon Directories next week

Finally, market sources expect Verizon Directories Disposition Corp., the directories business of Verizon Communications Inc., to launch a $2.85 billion offering of 10-year senior unsecured notes (B2/B+) next week.

JP Morgan and Bear Stearns will run the books the deal which will help to fund the spin-off of Verizon Communications' directories business.

Investors find West is best

When the new West Corp. bonds were freed for secondary dealings, a trader saw the new 9½% senior notes due 2014 having moved up to 101.125 bid, 102 offered from their par issue price - but the 11% senior subordinated notes due 2016 did even better, despite having an additional two years to maturity and being structurally subordinated and moved up to 102 bid, 102.75 from par, propelled, the trader said, by investors' desire for the fatter coupon. This was particularly true, he added, because of the dearth of new paper around.

"Last week, the new-issue market was absolutely dead," he lamented.

However, even though investors were hungering for new paper, that did not translate into any kind of aftermarket demand for CompuCom's new 12% senior notes due 2014, which priced at par. Two different traders said that they had seen no activity in the new bonds following their pricing.

Sea Containers sinks

Back among the more established issues, Sea Containers' bonds gyrated around at lower levels after the Bermuda-based maritime and railroad transportation company - as had been widely expected - failed to pay off its 10¾% notes, which ostensibly matured on Sunday.

"The news on them came out," a trader said, and after bouncing around down at lower levels all day, the bonds came back up to end at 71 bid, 72 offered, which he said was off about 1½ points from where they had begun the day.

The fact of the matter, however, was that in reality, "these bonds were really down about 6 points," since they were trading flat, or without their 5 points of accrued interest, on the news that Sea Containers would not be paying off the 10¾% notes and was instead sailing into bankruptcy.

Another trader saw the company's 10½% notes due 2012 fall from the lower 70s down into the middle to high 60s, before bouncing back upward to close at 69. All three of the company issues, he said - the 101/2s and 103/4s, as well as the 7 7/8% notes due 2008 "all traded within a point of each other." He described the activity level as active.

Yet another trader saw the 101/2s at 69.5 bid, 71 offered, the 103/4s at 70.5 bid, 72 offered, and the 7 7/8s at 69.75 bid, 70.75 offered, all trading flat.

In announcing its filing, Sea Containers disclosed that it had held talks with the holders of the 103/4s, in the hopes of coming to an agreement so that it would not have to go bankrupt - but while some progress had been made, the company had not been able to reach agreement with all of its stakeholders prior to the maturity date on the bonds.

Besides the $115 million of 10¾% notes, it has the 101/2s and the 7 7/8s outstanding, for consolidated debt of $650 million, part of its $1.58 billion in liabilities at the time of its filing, versus $1.67 billion in assets as of June 30.

Dura drops on missed coupon

Also seen falling as an important deadline came and went were Dura Operating Corp.'s 8 5/8% notes due 2012. In this case, the deadline was the Oct. 16 coupon on the $400 million of the bonds, a scheduled payment totaling $17.25 million.

When cash-strapped Dura - its finances hurt by the downturn that has shook the automotive supplier industry, causing several sector peers like Delphi Corp., Dana Corp., Collins & Aikman Corp. and Tower Automotive Inc. to file for bankruptcy - failed to make the coupon payment and instead invoked the standard 30-day grace period, the bonds fell to about 28.5 bid, 29.5 offered, trading flat.

Meantime, its 9% subordinated notes due 2009 were being quoted at 5 bid, 5.5 offered - seemingly up from levels under 2 previously.

But a trader noted that this issue too was trading flat, which translated to a loss of 4 points of accrued interest, in real terms.

Other autos shrug off Dura debacle

Dura's failure to pay its coupon came as no surprise to investors, traders said, noting that it had been long out in the market that the payment would likely not be made. So there was no great rush to the exits among the holders of other automotive-sector bonds as a result.

"No, I really didn't see much going on with, say Dana or Delphi," a trader said in dismissing the idea that Dura might tow other names in the sector lower.

Another trader, looking at specific issues, saw Plymouth, Mich.-based parts maker Metaldyne Corp.'s 11% notes due 2012 actually up a point at 89.5 bid, 90.5 offered.

He also saw Tenneco Inc.'s 8 5/8% notes due 2014 up ½ point at 99.5 bid, 100.5 offered, while Visteon Corp.'s 8¼% notes due 2010 were off ½ point at 95 bid, 96 offered.

Among the bankrupt auto names, he said, Toledo, Ohio-based partsmaker Dana's 5.85% notes due 2015 were down 2 points, at 68 bid, 69 offered, while Troy, Mich.-based components manufacturer Delphi's 6.55% notes that were to have come due on June 15 were a point better at 98.5 bid, 99.5 offered.

General Motors Corp.'s benchmark 8 3/8% notes due 2033 were little changed at 87.5 bid, while GM arch-rival Ford Motor Co.'s 7.45% notes due 2031 were pretty steady at 77.5.

Solo gets crushed

Outside of the automotive realm, traders said, Solo Cup Co.'s bonds were "volatile," in the words of one, falling sharply after the Highland Park, Ill.-based paper cup and plate manufacturer announced that it would be restating its earnings from this year all the way back to 2001 after it found accounting errors in the reports.

"Their financials came out," a trader said of the company's 8½% notes due 2014, "and they dropped 6 points," falling as low as 76 bid, 77 offered from prior levels in the low 80s before coming back off those lows to end at 80 bid, 82 offered, down only modestly on the day.

"There were a lot of the bonds traded," he said, "maybe $60, $70, $80 million."

Another trader saw the bonds open around 82 bid, 83 offered, fall as low as 76, but then come back to finish around 81.25 bid, 82.25 offered, "way off the lows, but only down a point at the end."

The company "is supposed to hold a conference call" Tuesday at which executives are expected to talk about the restatement, Solo's second-quarter loss of $299.4 million, and its consideration of sales of non-strategic assets and alternative financing strategies.

"So maybe [Tuesday] will be just as volatile," he said.

The conference call is scheduled for 11 a.m. ET.

Toys gain on Mattel numbers

On the upside, Toys "R" Us Inc. bonds - recently riding a crest of renewed optimism in the retailing sector - continued to get better, its 7 7/8% notes due 2013 up ¾ point, a trader said, while at another desk, the Wayne, N.J.-based toy retailer's 8¾% notes due 2021 were seen 1½ points better at 96.

The trader suggested that the company's bonds rose on the news that toymaking giant Mattel Inc. posted a 6.1% rise in third-quarter profits, spurred by strong global demand for Barbie dolls and toy cars ahead of the all-important year-end holiday shopping season.

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