Terex, ReAble deals price; GM slides on record $39 billion loss; Omnicare continues retreat

By Paul Deckelman and Paul A. Harris

New York, Nov. 7 - Terex Corp. priced an upsized $800 million bond offering Wednesday, after having first restructured the deal from a two-tranche transaction to a single tranche of 10-year notes. Also appearing was ReAble Therapeutics Inc., whose new $575 million issue then went into the secondary market, but quickly lost ground. And there was a smallish add-on offering of 10-year notes for Bristow Group Inc.

Also in the primary sphere, price talk was issued or emerged for a number of upcoming deals, high yield syndicate sources said, including United Rentals Inc.'s $2.5 billion-plus mega-deal, as well as for smaller offerings from Energy and Industrial Utilities Co. LLC (DTE Energy Co.), Novamerican Steel Finco Inc., Mashantucket Pequot Tribe, McMoRan Exploration Co. and Apria Healthcare Group Inc.

In the secondary realm, meanwhile, traders noted the unimpressive initial aftermarket performance of the new ReAble Therapeutics deal. The Terex bonds priced too late in the session for any meaningful secondary trading.

Back among the established issues, General Motors Corp.'s bonds were stuttering along in the breakdown lane after the Detroit giant posted a record $39 billion quarterly loss. That helped drag other automotive-related names lower, including its 49% owned GMAC LLC financing unit and GM's arch-rival in the domestic car industry, Ford Motor Co.

Outside of the parking lot, Omnicare Inc.'s bonds, which were in retreat on Tuesday, continued to head lower Wednesday on intensified investor worries about increased governmental scrutiny of the Covington, Ky.-based provider of pharmaceutical services to long-term care facilities.

One sell-side source told Prospect News that the junk market ended sharply lower on Wednesday, with the index down 7/8 point and cash product down between ½ and 2 points, depending upon the sector.

Another sell-sider tried to keep things on the sunny side, noting that junk outperformed the stock market.

"That's not saying much," the source, a high yield syndicate official, conceded, adding that the Dow Jones Industrial Average, the Nasdaq and the S&P 500 all dropped more than 2½% on Wednesday.

Sources also said that for the first time in recent sessions there was a lot of focus on the secondary market, in part due to General Motors's reported $39 billion third quarter loss.

$1.4 billion day

Nevertheless the primary market session was purposeful.

Three issuers combined to raise $1.426 billion of proceeds with one tranche of junk apiece.

One of Wednesday's three tranches was upsized. One priced richer than talk. One priced at the tight end of talk. And the other priced at the wide end of talk.

Terex massively upsizes

Wednesday's biggest issuer was Terex, which priced an upsized, restructured $800 million issue of 10-year senior subordinated notes (Ba3/B+) at par to yield 8%.

The quick-to-market issue, which was increased from $500 million, priced at the wide end of the 7¾% to 8% price talk.

A planned tranche of eight-year senior subordinated notes was withdrawn.

Credit Suisse was the left bookrunner for the debt refinancing and for general corporate purposes deal. Citigroup and UBS Investment Bank were joint bookrunners.

ReAble tight to talk

Elsewhere ReAble Therapeutics priced a $575 million issue of seven-year senior notes (Caa1/CCC+) at par to yield 10 7/8%.

The yield was printed on the tight end of the 11% area price talk.

Again Credit Suisse was the left bookrunner. Banc of America Securities LLC was the joint bookrunner.

The Austin, Tex., medical device company will use the proceeds to help fund its acquisition of DJO Inc.

Bristow richer than talk

Bristow Group priced a $50 million add-on to its 7½% senior notes due Sept. 15, 2017 (Ba2/BB) at 101.25 to yield 7.285% in a quick-to-market transaction.

The add-on priced richer than the 100.5 to 101 price talk.

Goldman Sachs & Co. was the bookrunner.

The original $300 million issue priced at par on June 7, 2007, so the Houston-based offshore transportation services provider to the oil and gas industry realized 21½ basis points of interest savings relative to the original notes.

Setting the stage

The rest of Wednesday's primary market news set the stage for the final two sessions of the first full week of November, which figure to be busy ones.

United Rentals set price talk for its $2.55 billion offering of seven-year second-priority senior secured notes (B2/B) at 10½% to 10¾%.

The LBO deal, being led by Credit Suisse, Banc of America Securities LLC, Lehman Brothers and Morgan Stanley, is expected to price on Friday.

The Mashantucket Pequot Tribe (Foxwoods) set price talk for its $500 million offering of eight-year taxable notes (Ba1/BB+) at 8¼% to 8½%.

That deal, via Merrill Lynch & Co. and Morgan Stanley, is expected to price Thursday.

McMoRan Exploration talked its $400 million offering of seven-year senior notes (Caa1/CCC+) at 11% to 11¼%.

The JP Morgan and Merrill Lynch deal is expected to price Thursday afternoon.

Talk is 12% to 12¼% on Novamerican Steel Finco's $315 million offering of eight-year senior notes (B3/B-), via JP Morgan and CIBC World Markets.

Pricing is set for Thursday.

Energy and Industrial Utilities a wholly owned subsidiary of Detroit-based DTE Energy Co., set price talk for its $275 million offering of 10-year senior notes (B2/B) at 10½% to 10¾%.

The Morgan Stanley and Barclays Capital-led deal is expected to price before the Friday close.

Finally, Apria Healthcare talked its $265 million offering of 10-year senior subordinated notes (B1/BB-) at 8% to 8¼%.

The deal, via Goldman Sachs and Banc of America Securities, is set to price on Friday.

New ReAble bonds trade off

When the new ReAble Therapeutics 10 7/8% senior notes were freed for secondary dealings, a trader saw then initially trading around 100.25 bid, 100.375 offered, up slightly from their par issue price earlier in the session.

However, it wasn't long before the bonds were being quoted around 99.875 bid, par offered, and they continued to retreat from that point. By the end of the session, the first trader was seeing them having slipped to 99.25 bid, 99.5 offered, noting that the deal traded above its issue price "right off the bat" when it was freed for the aftermarket, but then began to drift down "once we [i.e. the broader junk market] began to slip-slide lower."

Another trader saw the bonds ending at 99 bid, par offered.

No aftermarket activity was seen in either the Terex 10-year deal or the Bristow 7½% add-on offering.

GM runs off the road

Among the established names, GM's widely held benchmark 8 3/8% bonds due 2033 were probably the most actively traded issue on the day, market sources said - and the action was all to the downside, after the Number-One domestic carmaker reported a staggering $39 billion quarterly loss.

A trader saw the bonds down 2½ points to 87.5 bid, 88 offered, while another called that a 2 point loss. Another trader saw the bonds in that 87.5-88 range for most of the day, although at one point, the bonds were observed trading as low as 86 and at another point as high as 92.

Another market source saw even more volatility, quoting a high print of 93 and a low below 86, where the bonds ended up; the source pegged them down some 4 points on the day. At the shorter end of the curve, GM's 7 1/8% notes due 2013 were seen off 1½ points at 91.5 bid.

A trader said that the cost of hedging against a possible default in GM's paper via credit-default swaps contracts widened on Wednesday to 635 bps bid, 650 bps offered, versus 545 bps bid, 560 bps offered on Tuesday - a sign of increased investor unease with the company, since the debt-protection costs move inversely to bond and stock prices.

The bonds tumbled even as Dow Jones Industrial Average component GM's shares stumbled; the equity lost $2.21 on the day, or 6.11%, to finish at $33.95. Volume of some 35 million shares was about double the usual activity level.

The bonds and the shares headed south after the automaker posted a company record $39 billion loss for the third quarter, almost all of that due to a $38.6 billion non-cash charge it took related to accumulated deferred tax credits in the United States, Canada and Germany.

That loss - one of the biggest ever suffered by a U.S. corporation - brought the string of three profitable quarters GM had enjoyed previously to an abrupt stop. Excluding the tax-credit charge and other special items, GM reported an overall loss of $1.6 billion, or $2.80 per share,

It reported a net loss from its core North American automotive operations of $247 million for the latest quarter, although that was an improvement from the $667 million of red ink from those operations seen a year ago.

GM also reported a loss of $757 million from its 49% percent stake in GMAC, due largely to losses at Residential Capital, GMAC's mortgage arm.

GMAC, ResCap seen lower

Not surprisingly, the bonds of both of those companies were also seen being beaten down, with a trader quoting GMAC's 8% notes due 2031 falling to 87.5 bid, 88.5 offered, down 3 points from Tuesday's levels. He also saw GMAC's CDS spread widen out to 695 bps bid, 705 bps offered from 610 bps bid, 630 bps offered previously.

Another trader saw those GMAC bonds fall even further, to 86.5 bid, 87.5 offered, from prior levels around 90 bid.

GMAC's 8 7/8% notes due 2012 were meantime seen down more than 2 points on the day, at 87 bid, while its 6¾% notes due 2014 were also down a deuce to 83.5. As was the case with its erstwhile corporate parent, GM - which sold the controlling stake in GMAC to a private investment group last year - GMAC's bonds were seen by market participants as being among the day's most active issues.

As for Minneapolis-based mortgage powerhouse ResCap, whose difficulties amid the overall mortgage-industry crisis helped to drag GMAC's earnings down for the quarter, as recently reported, its 8 3/8% notes due 2015 were down 2 points at 68, a market source said, while a trader at another desk saw ResCap's 6 1/8% notes due 2008 down 1½ points at 81 bid, 83 offered.

GM sets tone for market retreat

"GM certainly didn't start the market off well," a trader observed. "And it was all downhill from there," with an overall heavier tone seen across the market, and many issues down at least 1 point or more. The trader saw the widely followed CDX junk bond performance index down 7/8 point on the day at 96 bid, 96¼ offered.

Among other market barometers, the KDP High Yield Daily Index lost 0.24 on the day, ending at 79.12, while its yield widened out by 8 bps to 8.21%

Overall, declining issues outpaced advancers by a better-than two-to-one ratio.

Broad market mostly lower

With GM pretty much towing the whole market lower, traders saw Ford's flagship 7.45% bonds due 2031 down accordingly, dropping some 2¾ points to 76 bid, 76.5 offered, one said, while another saw those bonds off at least 1½ points on the day at 76.5 bid, 77.5 offered. Yet another source saw the bonds down 1 point at 76.

However, Ford's equivalent of GMAC, Ford Motor Credit Co., was one of the few names not seen getting hammered, its 7% notes due 2013 ending up around ¼ point at 90 bid.

Outside of the automotive names, another rare upsider was Buffets Inc.'s 12½% notes due 2014. A trader saw them push back up to 50 bid, 52 offered from 46 bid, 48 offered, while another called them up 4 points at 48.5 bid, 50.5 offered.

The Eagan, Minn.-based restaurant chain operator's bonds had swooned some 15 to 20 points earlier in the week on bad numbers and a failure of company executives to calm investor jitters on its conference call.

Solo lower

Back on the downside, Solo Cup Co.'s actively traded 8½% notes due 2014 were seen having lost 1 point to 85 bid, 86 offered, while a second trader saw the bonds at 85.75 bid, 86.25 offered.

Yet another trader saw the Lake Forest Ill.-based paper- and plastic cup, plate and utensil-maker's bonds at 85.5 bid, 86.5 offered, down 3 points on the day, and said that "the whole packaging sector is having trouble because of increased raw materials prices."

Omnicare bonds continue fall

A trader saw Omnicare's 6 7/8% notes due 2015 down another 2 points to 92 bid, 94 offered, this on top of another 2 point loss on Tuesday, when news hit the market that the Justice Department had subpoenaed documents dealing with supposed company efforts to steer Medicare patients to prescription drug plans.

The trader said that the possibility of a second federal probe of the company - on top of an ongoing, earlier inquiry - was continuing to spook investors in both its bonds and its shares, since the story - which had originally been carried by only one news service late Tuesday - was more widely disseminated Wednesday. The shares fell some 6% Wednesday on five times their usual turnover.

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