Ceridian deal hits the road; TXU price talk emerges; secondary rebounds after initial weakness

By Paul Deckelman and Paul A. Harris

New York, Oct. 22 - Ceridian Corp. was heard by high yield syndicate sources to have taken to the road to market its upcoming $1 billion issue of new bonds - while price talk on another upcoming mega-deal, to finance the leveraged buyout of TXU Corp., made the rounds of the primaryside.

In the secondary arena, a trader said that the day was "slow, with not a lot going on." He said that while "some stuff was heavily traded, there was a lot of lateral trading going on," with little or no price movement.

Another trader said that after some initial weakness, the junk market managed a rebound later in the session.

Among the names seen moving up, a trader said, were General Motors Corp. and its 49%-owned financing affiliate, GMAC LLC, which had been seen on the downside on Friday on a J.P. Morgan report warning of a coming rash of auto loan delinquencies. However, several market sources saw no great rebound in the bonds of GMAC or its erstwhile corporate parent.

Trump Entertainment Resorts Inc. bonds remained actively traded, although little price movement was seen in the Atlantic City, N.J.-based gaming operator's paper.

A high yield syndicate official told Prospect News that as equities staged a late Monday rally a quiet junk bond market started "feeling better."

No issues were priced during the primary market session that kicked off the final full week of October.

Sources told Prospect News that the market is presently focused on TXU Corp.'s massive $4.5 billion LBO deal.

TXU sets talk

On Monday TXU set talk for the combined $4.5 billion of senior cash-pay notes which are part of the LBO financing.

Texas Competitive Electric Holdings set talk for its $2.5 billion tranche of eight-year notes (B3/CCC) at the 10¼% area.

Goldman Sachs & Co., Morgan Stanley, Citigroup, JP Morgan, Lehman Brothers and Credit Suisse are joint bookrunners for the Texas Competitive Electric Holdings notes.

Meanwhile Energy Futures Holdings set talk for its $2.0 tranche of 10-year notes (B3/CCC+) at 50 to 75 basis points behind the Texas Competitive Electric notes.

Morgan Stanley, Goldman Sachs & Co., Citigroup, JP Morgan, Lehman Brothers and Credit Suisse are joint bookrunners.

Both tranches are expected to price on Wednesday.

Ceridian starts roadshow

Elsewhere on Monday a roadshow started for Ceridian Corp./Merger Foundation Sub Inc.'s $1 billion two-part offering of eight-year senior notes (CCC+).

The deal, which is expected to price late this week or early next week, will be comprised of tranches of cash-pay notes and PIK toggle notes. Tranche sizes remain to be determined.

Deutsche Bank Securities, Credit Suisse and Banc of America Securities are the underwriters.

The notes are part of the financing for the LBO of Ceridian by Thomas H. Lee Partners, LP and Fidelity National Financial, Inc.

In an 8-K document filed on Monday with the Securities and Exchange Commission, the company also disclosed plans to sell $300 million of senior subordinated notes, although no further information on the subordinated notes surfaced on Monday.

Originally, the bond deal was expected to be sized at $1.4 billion, comprised of $1 billion of senior notes and $400 million of senior subordinated notes.

Ceridian upsized its credit facility to $2.55 billion from the previously expected size of $2.3 billion.

United Test structure, timing

Details also surfaced on Monday regarding a deal from Singapore's United Test & Assembly Center/Global A&T Electronics Ltd.

The semiconductor testing and assembly company announced the timing and structure for its $475 million equivalent two-part notes.

United Test plans to sell eight-year second-lien notes in dollar-denominated and euro-denominated tranches.

The deal will be marketed this week on a roadshow in Asia, Europe and the U.S. Pricing is expected on Nov. 2.

ABN Amro, JPMorgan and Merrill Lynch & Co. are leading the deal.

Proceeds will be used to fund the buyout of the company by TPG Capital and Affinity Equity Partners.

New bonds trade around

In the secondary market, a trader said he'd seen the new 10½% notes due 2015 of U.S. Investigations Services Inc. "offered up a couple of points," but he'd seen no real two-way flow in the notes, which priced Friday at 95.47.

Elsewhere, a trader saw some other recently priced new issues pretty much unchanged, including Bausch & Lomb Corp.'s 9 7/8% notes due 2015 at 101.25 bid, 101.75 offered, and First Data Corp.'s 9 7/8% notes due 2015 at 94.75 bid, 95.25 offered.

Another trader saw the Bausch & Lomb bonds initially at 101 bid, 101.5 offered, but said that by day's end, they had climbed back up to 102.25, "a nice rebound."

A rebounding market

The trader said that overall, "the market opened with a heavy tone, sort of taking its lead from equities overseas, and the equity futures over here were all showing a lower opening too. Our market was off as well, with the High Yield 9 [index] around 97¼ - but it's going out at 98-981/4, so it's really rebounded a full point from the low. So we've had the market kind of creeping back. Even the names that were offered without are now bid."

For instance, he said, Claire's Stores 9¼% notes were at 76 bid, 77 offered, from 75 bid, 76 offered earlier, while Bon-Ton Stores' 10¼% notes due 2014 pushed up to 89 bid, 89.5 offered from 87 bid, 88 offered at the opening. "So even the dicey stuff is up a point."

He said that the "very nice rebound" was "unexplained" - but so was the market's weakness last week. "You had a lot of continued credit-crunch fears and there was a rumor going round on Friday that Merrill Lynch," which is scheduled to report earnings Wednesday, "will have higher losses than people are anticipating, associated with the writedowns of last quarter."

That investor angst "seemed to blow over." He cited "the relative calm in the equity markets - it opened lower but fought back all day and is now closing the day up modestly. That's a reasonably good sign."

He further opined that "a lot of the fear and loathing has been built around the structured product and mortgage area, CDOs and things like that." He said that "more traditional" investments were not as badly decimated.

"You've had some reasonably priced and good-quality high yield names that have come in the last couple of weeks, and there are buyers for good names, there's no two ways about it. If it's a good name, it trades well. If it's not, if it's a little dicey, it trades at a discount - but it's still trading."

He called the recent high yield retrenchment "a much more orderly sell off than we saw two months ago, and much shallower - it trades off a couple of points, and then comes back."

Trump trades actively

The Trump 8½% notes due 2015 were seen among the most actively traded issues on Monday, just as they had been on Friday. The trader said that the bonds "opened weaker," not on any news, but just "trading around with everything else in the market." The bonds went from 86 bid, 87 offered at the opening to around 87.25 bid, 87.5 offered by the afternoon, although that was down a little from their highs around 87.75.

At another desk, the Trump bonds were seen unchanged at 87 bid.

The bonds have lately been given a boost by takeover speculation surrounding the company, with The Wall Street Journal reporting on Thursday that Baltimore-based Cordish Co. is in "serious talks" to acquire the underperforming Trump.

GM, GMAC gain

A trader saw General Motors' benchmark 8 3/8% notes due 2033 push up to 89.75 bid, 90.75 offered from prior levels at 88.5 bid, 90 offered, and saw GMAC's 8% notes due 2031 two points better at 92 bid, 93 offered.

Another trader also saw the GMAC notes higher, at 92 bid, 93 offered, although the GM bonds were called unchanged at 89 bid, 89.5 offered. GM's 7 1/8% notes due 2013 were seen up about ½ point at 93 bid.

However, another market source quoted the GMAC 8s down about 3/8 point at 90.5 - and pegged its 6% notes due 2011 nearly 3 points lower at just under 91.

GMAC's paper was beaten down on Friday when J.P. Morgan released a research note in which it warned that a coming rise in auto loan delinquencies would harm profits at GMAC and at its arch rival, Ford Motor Credit Co.

Homebuilders mostly higher

In the recently beleaguered homebuilding sector, a trader saw Beazer Homes USA Inc.'s 11 5/8% notes due 2011 up 1 point at 79 bid, 81 offered.

He said Standard Pacific Corp. "looks up a couple of points," its 7% notes due 2015 firming to 73 bid, 75 offered from 68 bid, 70 offered late Friday.

On the other hand, WCI Communities Inc.'s 9 1/8% notes due 2012 lost 1½ points to 77 bid, 79 offered.

Overall, a trader noted that the widely followed CDX index of junk market performance - which fell 1 3/8 points on Friday - gained 3/8 of that back on Monday, to 98¼ bid, 98½ offered.

But among other market gauges, the KDP High Yield Daily Index - which on Friday had slid 0.34 on the day, was down another 0.05 on Monday to 79.64, while its yield, which had ballooned by some 10 basis points Friday, widened by another 1 bp to 7.98%. Declining issues meantime led advancers by a better than five-to-three margin.

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