VWR, United Auto price; GM bonds up on GMAC deal closing; funds see $249 million outflow

By Paul Deckelman and Paul A. Harris

New York, Nov. 30 - VWR International Inc. and United Auto Group Inc. were heard to have successfully priced quickly-shopped drive-by offerings during Thursday's session, as did Finnish issuer

M -Real Corp. - the latter a euro-denominated floating-rate issue.

Chesapeake Energy Corp. meantime upsized its planned offering of 10-year euro-denominated notes, which is expected to price on Friday.

In the secondary market, bonds of General Motors Corp. and its General Motors Acceptance Corp. financing arm were seen firmer, the news that GM had completed its $14 billion sale of a controlling stake in the lucrative financing subsidiary apparently more potent than the news that major equity investor Kirk Kerkorian has again elected to cut his holdings in GM stock - which was followed by later reports indicating that he is washing his hands of GM completely.

Elsewhere in the automotive realm, the bonds of troubled components maker Remy International Inc. pushed upward for a second straight session. Although there was no firm news out on the Anderson, Ind.-based manufacturer of auto electrical and electronics system, the bonds were seen up nonetheless on market speculation there may soon be some news on the company's restructuring effort.

A sell-side source said that the broad market showed considerable strength Thursday morning but was more or less flat at the close.

Funds see second straight outflow

And as activity wound down for the day, market participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday $248.8 million more left the funds than came into them.

It was the second straight outflow the funds had seen, coming on top of the $25.2 million leakage seen in the previous week, ended Nov. 22, which had broken a three-week long winning streak dating back to the end of October, during which $289.2 million of net inflows had been seen, according to a Prospect News analysis of the AMG figures.

That analysis shows that even though a negative trend has been effect so far this year, including the past two weeks, over the past roughly five months inflows have held sway, totaling about $519 million, with 12 such infusions seen in the last 22 weeks.

The latest outflow extends to negative $3.174 billion the net redemptions that have been seen by the funds which report to AMG on a weekly basis, a source said.

As the number circulated through the market late Thursday sell-siders maintained that it is challenging to reconcile these negative numbers with the fact that the high yield primary market is poised to set a new record for issuance in 2006, and by the measures of at least two high yield syndicate desks has already done so.

With regard to the AMG funds flows numbers, it is an altogether different story for funds that report on a monthly basis.

The monthly reporting funds have seen $4.222 billion of inflows for 2006.

Hence aggregate flows, which tally both the weekly and monthly reporters, stands at slightly less than $1.048 billion to Nov. 29.

Angiotech wide of talk

Meanwhile the primary market saw just under $1.045 billion of dollar-denominated issuance.

Thursday's biggest issuer, in terms of dollar amount, was Angiotech Pharmaceuticals, Inc., which priced a $375 million issue of seven-year senior floating-rate notes (Ba3/B+) at par to yield three-month Libor plus 375 basis points.

The yield came 25 basis points beyond the wide end of the Libor plus 325 to 350 basis points price talk.

Credit Suisse and Banc of America Securities were joint bookrunners for the debt refinancing deal from the Vancouver, B.C.-based specialty pharmaceutical and medical device company.

VWR completes restructured deal

Also pricing a dollar-denominated floater on Thursday was West Chester, Pa., distributor of scientific supplies VWR International.

The company priced a restructured $350 million issue of three-month Libor plus 450 basis points five-year senior floating-rate notes (Caa1/CCC) at 98.50.

The notes priced on top of price talk that had been revised from original talk of Libor plus 437.5 basis points area at 99.00 to 99.25.

Banc of America Securities ran the books for the dividend deal.

In addition to the price talk revision, the company also restructured the coupon step-ups. There will be two 50 basis points step-ups, the first to take effect at the earlier of an IPO or 12 months from the date the the notes settle, which was the only step-up under the previous structure. A second step-up will take effect 12 months after the first step-up.

United Auto tight to talk

Thursday's sole fixed-rate tranche came from United Auto Group, which priced a $325 million issue of 10-year senior subordinated notes (B3/B) at par to yield 7¾%, at the tight end of the 7¾% to 8% price talk.

JP Morgan ran the books for the debt refinancing deal from the Bloomfield Hills, Mich.-based automotive retailer.

M-Real prices €400 million floater

Perhaps it bears mentioning that of the four tranches of junk that priced on Thursday - three in dollars and one in euros - three were floating-rate issues.

Finnish pulp & paper firm M-Real Corp. priced a €400 million issue of four-year senior floating-rate notes (B2/B+) at par to yield three-month Euribor plus 362.5 basis points, on the tight end of the Euribor plus 375 basis points price talk.

Deutsche Bank and BNP Paribas were joint bookrunners for the debt refinancing.

Euros for Friday

Heading into Friday, only two deals remain on the forward calendar as business that is expected to be completed by the end of the post-Thanksgiving week.

Chesapeake Energy Corp. has upsized to €600 million from €400 million its offering of senior notes due Jan. 15, 2017 (Ba2/BB/expected BB).

Meanwhile price talk remains at the 6 3/8% area.

The notes are expected to price on Friday morning, London time, via Barclays Capital, Credit Suisse, Deutsche Bank Securities and Goldman Sachs.

Also on tap for Friday is TNT Logistics (Louis No. 1 plc) with a €730 million two-part offer.

Earlier in the week the Amsterdam-based logistics company talked its €430 million tranche of eight-year senior notes (B2/B) at a yield in the 8 % area, and its €300 million tranche of 10-year senior subordinated notes (B3/B-) at the 150 basis points area behind the senior notes.

Credit Suisse, Bear Stearns, Goldman Sachs & Co. and ABN Amro are joint bookrunners.

New VWR bonds straddle issue price

When the new VWR International floating-rate notes due 2011 were freed for secondary dealings, a trader saw them straddling their 98.5 issue price, going home at 98.25 bid, 98.75 offered.

The new United Auto Group 7¾% notes due 2016 priced too late in the session for any meaningful aftermarket activity.

Among issues which had priced on Wednesday, a trader saw Complete Production Services Inc.'s new 8% senior notes due 2016 at 101 bid, up from their par issue price, and Momentive Performance Management's new 9¾% seniors due 2014 at 100.375 bid, also up from a par issue price.

GM, GMAC better as sale closes

Back among the established issues, GM's bonds, and GMAC's, were both seen having firmed on the session in the wake of the completion of the giant carmaker's sale of a controlling stake in its financing arm for about $14 billion - a deal that at one point earlier in the year seemed unlikely to ever get done.

A trader saw GMAC's 8% notes due 2031 up 2 points on the session at 112 bid, 113 offered, and saw parent GM's benchmark 8 3/8% notes due 2033 up a point on the day at 91 bid, 92 offered.

Another trader saw the GMAC 8s at that same 112 bid, 113 offered level, but characterized them as up 1½ points on the day, and pegged the GM benchmarks up ½ point to that 91 bid, 92 offered level.

At another desk, a market source quoted GM's 7 1/8% notes due 2013 up ¾ point at around the 93 level, while GMAC's 6 7/8% notes due 2012 were up 1¼ points to 103.5.

The sale by GM of 51% of GMAC to consortium of investors led by Cerberus Capital Management is seen by market participants as a win-win situation, with GM getting $14 billion to bolster its finances at a time when the carmaker is trying to right itself financially in the face of reduced market share and sizable losses versus years past. At the same time, decoupling GMAC from its parent holds out the prospect that the financial unit might be able to borrow money at better rates, which will also help GM, which retains a 49% stake in GMAC.

While Moody's Investors Service on Thursday affirmed GMAC's Ba1 senior unsecured rating, Fitch upped GMAC a notch to BB+.

Besides Cerberus, a private investment company, other members of the acquiring consortium include Citigroup Inc.'s private equity arm and Aozora Bank Ltd.

Kerkorian steps back - maybe out

The GMAC news more than offset the negative vibes coming from the announcement that billionaire investor Kirk Kerkorian's Tracinda Holdings had cut its stake in GM for the second time in the recent past, selling 14 million shares to bring its holding down to 4.95% from 7.4% previously. Earlier in the month, Tracinda sold shares to slice its investment in the carmaker to 7.4% from 9.9% originally - a move seen by some observers as an expression of the octogenarian tycoon's loss of confidence in GM's management following the failure of GM to strike a deal with foreign peers Renault and Nissan on a three-way alliance, a strategy Kerkorian had been strongly in favor of.

And well after the market had closed, The Wall Street Journal reported on its website on Thursday night that in addition to the widely reported sale of the 14 million shares, Kerkorian had also sold his remaining 28 million shares, completely walking away from GM.

The Journal's website said Tracinda had sold its last GM shares to Bank of America for some $800 million to completely end the cantankerous mogul's often stormy relationship with GM, whose management he had frequently criticized for allegedly not doing enough to turn the carmaker's finances around.

Ford Credit bonds better

Ford Motor Credit Co.'s bonds were seen better, with the 7% notes due 2013 issued by the financing arm of GM arch-rival Ford Motor Co. seen up 1¼ points on the session at 96 bid, apparently helped by an assessment by Standard & Poor's that the extensive new secured borrowing that Ford will be doing to help fund the troubled Number-Two domestic carmaker's restructuring over the next two years will have little or no impact on the safety of the Ford Credit unsecured debt.

That vote of confidence stands in stark contrast to the moves by S&P, Moody's and Fitch last week lowering parent Ford's ratings to reflect the subordination of its bonds to the new debt and the chances of a lesser recovery in the event of a restructuring scenario.

A trader said that it is apparent that Ford, unlike GM, will not be selling a stake in Ford Credit - but he added that there's "plenty of asset coverage" to back the credit arm's unsecured debt.

He also doubted that S&P's endorsement really had that much impact on the bonds' levels, saying that both S&P and Moody's are "always late to the party" - meaning that they report well after the fact what the market has already concluded.

Remy rolls for a second session

The major mover among the auto names Thursday seemed to be Remy International, whose bonds were up big for a second straight session.

One trader - after having seen the company's bonds up 3 points on Wednesday - saw its 8 5/8% notes due 2007 jump to 86 bid, 88 offered, a gain of 7 points on the day, while its 9 3/8% notes due 2012 were up another 2 points at 31 bid, 33 offered, and its 11% notes due 2009 were 3 points better at 36 bid, 38 offered.

Another trader saw the 8 5/8s up 4 points on the day at 85 bid, 87 offered, but said he had "no idea" what was moving those bonds up.

While there was no hard news readily seen on the automotive electrical systems maker, yet another trader - who did not dabble in the bonds but who did watch from the sidelines - said it might have to do with speculation of news forthcoming from the company's refinancing efforts with Rothschild Inc.

"There could be some refinancing news leaking out but we haven't seen anything," the trader said.

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