GM bonds off as B of A bows out of GMAC hunt; Massey Energy deal to hit road

By Paul Deckelman and Paul A. Harris

New York, Nov. 30 - General Motors Corp. bonds, and those of the automotive giant's General Motors Acceptance Corp. financing arm, were seen about two points lower across the board, traders said Wednesday, ahead of the release of November car sales numbers. Also helping pull the bonds lower, several mentioned, were comments by a key Bank of America executive indicating that the nation's second-largest bank is not a potential buyer for a controlling stake in GMAC.

On the upside, Calpine Corp. bonds, which mostly got badly creamed on Tuesday on news of the ouster of the company's chairman/chief executive officer and its chief financial officer, were seen to have steadied and maybe even to have bounced back a little from Tuesday's finish.

A senior official from a high-yield syndicate desk told Prospect News that the broad market advanced one-quarter of a point on Wednesday.

That follows similar advances in both the Monday and Tuesday sessions.

The junk bond primary market meantime remained quiet, with no new deals heard to have priced by the end of Wednesday's session. However, Massey Energy Co. was heard to be preparing to start marketing its planned eight-year note offering via a roadshow, beginning Monday. Out of that same coal producer sector, National Coal Corp. was heard to be bringing a small seven-year deal sometime next week.

GM's bonds were seen down across the board, said a market source who pegged the carmaker's benchmark 8 3/8% notes due 2033 down two points at 68 bid, while its 8¼% notes due 2023 were down almost two points at 66.75 bid.

"It seems like the longer stuff got beat up more," he said, noting that the 7 1/8% notes due 2013 were actually up slightly at 69 bid.

However, a source at another desk was quoting those bonds down a point - although he had them starting out at 71 and dipping to 70. The source also saw GMAC's 6 7/8% notes due 2012 down more than a point, around the 90 bid level.

Yet another trader meantime saw the GM 8 3/8s two points lower at 67 bid, 68 offered, and saw GMAC benchmark 8% notes due 2031 retreat 1½ points on the session to 98 bid, 99 offered, citing the news that Bank of America will likely not be a bidder for a controlling stake in GMAC. GM recently said it wanted to sell a controlling stake in its lucrative financing arm - really the only part of GM's North American operations that actually makes money rather than losing it by the truckloadful - so that GMAC could again enjoy an investment-grade credit rating and be able to borrow money more cheaply.

B of A's chief financial officer, Alvaro de Molina, said that after having spent more than $134 billion on acquisitions since 1998 to become the nation's second-largest bank his company is mostly finished making such big buys. De Molina specifically said that B of A would rather not buy what he called a "GMAC-type entity," preferring to instead form partnerships to avoid taking on added risk.

Besides the loss of so major a potential GMAC stake acquirer as B of A, investors were also anxiously awaiting November vehicle sales figures from GM and other major carmakers, which are expected to come out on Thursday. They are hoping that GM was able to bounce back from a truly terrible October, when sales fell 23% from year-ago levels, particularly in the all-important light truck and SUV category, long a reliable cash cow for GM, but one which has lately fallen out of favor with car buyers due to higher gasoline prices. October sales were badly dented by the lack of customer incentives, which forced GM to recently announce a broad "red-tag sale" promotion on most of its offerings, to try to lure customers back to its showrooms and put them behind the wheel of its Chevrolet, Pontiac, Buick, and GMC models.

Ford lower

Also in the automotive sphere, GM rival Ford Motor Co.'s flagship 7.45% notes due 2031 were seen a point lower at 71 bid, probably in response to Moody's Investors Service's warning Tuesday that it might again cut the Number-Two domestic carmaker's ratings, now at BB+, in light of continued hard times for the U.S. auto industry.

Generally, a trader said, there was "not much" going on. "The market was a little bit firmer, things seemed to be up a little bit, but it's very quiet."

Calpine recovers a little

Certainly, things were a little anti-climactic after Tuesday's sturm und drang revolving around Calpine's executive suite purge, which saw the troubled San Jose, Calf.-based power generating company's founder, chairman, chief executive officer and president, Peter Cartwright, and its chief financial officer, Robert D. Kelley, abruptly shown the door by the board of directors after hundreds of millions of dollars of losses this year and other problems that have many in the market speculating that a bankruptcy filing is not far off. On Wednesday, Calpine was reported to have hired turnaround specialist AlixPartners as its restructuring advisor.

The ouster of Cartwright and Kelly and the renewed bankruptcy buzz helped to beat Calpine's unsecured bonds down into a range of around 27 to 32 - with its 2006 unsecureds falling more than 30 points to finish around 31 or 32 bid, while its longer-dated unsecured issues were seen down anywhere from 8 to 12 points to finish in the upper 20s.

But after Tuesday's massive blood-letting, on Wednesday, Calpine "came back a bit," the trader said, quoting them up about a point from Tuesday's finish. "Everyone's talking about these things potentially defaulting this week, but I don't know if that's going to happen or not."

Calpine, another trader said, "actually traded up a couple [of points]," with its 7¾% notes due 2009 firming to 31.5 bid, 33.5 offered, up from 30 bid, 32 offered.

A market source at another desk saw the 10½% notes due 2006 and the 7 5/8% notes due 2006 - Tuesday's hardest-hit losers, each with a better than 30-point swoon - each up around half a point to a full point, at 34 bid and 33 bid, respectively. He also saw the company's 8 5/8% notes due 2010 a point better at 27 and the 8½% notes due 2010 1½ points better at 75.5. However, Calpine's 8½% notes due 2011 eased slightly to 26.25.

"There were a lot of Calpines trading," yet another trader said, estimating that the 101/2s were up two points to 33.5 bid, 35.5 offered, while its secured 8½% notes due 2010 were a point better at 75 bid, 76 offered.

The secured bonds "looked a little stronger," an market observer pointed out, quoting those 2010 81/2s 1½ points better at 75.5 bid, and its 8¾% notes due 2013 at 75, also up 11/2.

The secured bonds may get a test Thursday when the cash-strapped company has to come up with $19.75 million to make the coupon payment on its $400 million of 9 7/8% secured notes due 2011. There was no word at press time late Wednesday as to whether the company would make the payment or not.

Watching Granite

A trader meantime noted that another company with a $19.75 million coupon coming due Thursday was New York-based television station group Granite Broadcasting Corp., with interest scheduled on its $405 million of 9¾% senior secured notes due 2010.

"That should be interesting," he said. "This is one of those situations where people figure the assets cover the debt, so the bonds are trading at 94," even though, he said, "they're infinitely levered. They've been trying to make some sort of asset sale. There's been no news. The stock is trading at, like 25 cents [actually, it closed at 22 cents Wednesday on the over-the-counter market] - but the bonds are in the 90s. It's very strange."

He noted that "they've got $20 million in cash on the balance sheet, and a nearly $20 million coupon due - and after that, they're out of money."

He said the company made a $150 million asset sale earlier in the year and wants to use $30 million of that for working capital - "but the proceeds, according to the bond indenture, have to go to paying down debt, if they don't use the cash within the specified time frame."

Granite is in talks with its bondholders, but "there's a lot of wrangling going on" over the asset proceeds, "so we'll see what happens."

Domtar higher after cuts

Canadian forest products company Domtar Inc.'s bonds were seen firmer, with its 5 3/8% notes due 2013 quoted up a point at 83 bid, 84 offered, a trader said.

The Montreal-based company announced plans Wednesday to try to return to profitability by closing several of its sawmills and paper mills, getting rid of 17% of its production capacity and downsizing its workforce by 1,800 positions.

Domtar also announced that it had reached agreement with its banks on amending the terms of its revolving credit facility - a deal which company executives say will give Domtar the liquidity and financial flexibility to pursue its turnaround plan (see related story elsewhere in this issue).

No new deals

Meanwhile, for the second consecutive day, no issues were priced in the primary market, which once again turned out only a smattering of news.

That smattering included timing and other details on several deals in the market, as one sell-side source commented that the modest build up seen thus far in the post-Thanksgiving calendar is probably a good thing for those issuers that are actually giving the new issue market a try.

Massey Energy sets start for $725 million

Massey Energy Co., which had been expected to appear after Thanksgiving, announced that it will begin a four-day roadshow on Monday for its $725 million offering of eight-year senior notes.

UBS Investment Bank has the books for the debt refinancing and general corporate purposes deal from the Richmond, Va.-based coal company.

Massey Energy plans to price its deal late next week, as do a couple of issuers in the market with deals being led by Jefferies & Co.

Cleveland Unlimited, Inc. is offering $150 million of five-year senior secured floating-rate notes (Caa1/CCC+).

The Ohio-based privately-held wireless voice and text messaging services provider, better known by its brand name, "Revol," will use the proceeds to repay debt and fund capital expenditures.

Earlier this month the company announced that, in cooperation with CSM Wireless, LLC, Revol service will soon be extended beyond its current core market in the Cleveland/Akron area to the Toledo, Sandusky, Canton and Youngstown markets.

Back in the coal field, National Coal Corp. plans to sell $80 million of seven-year senior secured notes late next week, also via Jefferies. The Knoxville, Tenn., company will use the proceeds to repay existing debt and for general corporate purposes.

Talk on Adaro Coal

With the coal chute apparently open in the high-yield primary, news was also heard Wednesday on the deal from Indonesia's Adaro Finance BV.

The coal producer set preliminary price guidance for its $300 million offering of five-year senior secured notes (Ba3) at 8¾% to 9%.

Goldman Sachs and JP Morgan are joint managers for the debt refinancing deal.

Adaro is one of several deals from Asian issuers presently being marketed to investors via Rule 144A and Regulation S, and heard to be playing to some high-yield accounts.

Also in the market is Thailand's True Corp. PCL, a Bangkok-based fixed-line telecommunications provider, with $225 million of seven-year senior notes (B2/B+). The JP Morgan-led debt refinancing deal is expected to wrap up its roadshow on Friday.

And again from Thailand, pulp and paper producer Advance Agro PCL is marketing a $250 million offering of B3-rated bonds in a debt refinancing being led by ABN Amro and Deutsche Bank. Pricing is expected next week.

The pipeline

Standard & Poor's assigned a preliminary rating BB- to Capital Automotive REIT's proposed $500 million offering of senior unsecured notes on Wednesday. Earlier in the week Moody's assigned its Ba2 rating to those notes.

A buy-side source told Prospect News on Wednesday that the bond deal is in the pipeline, but could furnish no further information. The company did not immediately return a call from Prospect News.

Capital Automotive is also in the market with $1.67 billion credit facility via Lehman Brothers, with proceeds to help fund DRA Advisors LLC's acquisition of the McLean, Va., company, which specializes in financing automotive retail real estate.

Elsewhere in the leveraged loan market, Wednesday, Prospect News learned that U.K.-based specialty petrochemicals company Ineos Group Ltd. is planning to come to the bank loan market in early January with a new credit facility that will be used to help fund the acquisition of Innovene.

Ineos has agreed to purchase Innovene, an olefins, derivatives and refining group, from BP plc for $9 billion.

One informed source said that the company is expected to also bring a bond deal, although the size and timing remain to be determined.

Morgan Stanley, Merrill Lynch and Barclays are leading the bank deal.

The credit facility will be euro based but will have a big U.S. component, a source said.

Okay but not robust

One high-yield syndicate official said Wednesday that right now the primary market looks "okay but not robust."

The source observed that the primary has not been "flooded with post-Thanksgiving deals," although there is Hertz Corp.'s $2.8 billion offering, which began its roadshow Wednesday. The source characterized Hertz as a "mega-transaction."

The official went on to say that the relatively slow build up of the post-Thanksgiving calendar is "probably a good thing for those deals trying to get done."

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