NRG launches 3-part offering, Donnelley also plans multi-part mega-deal; auto bonds continue firming

By Paul Deckelman and Paul A. Harris

New York, Jan. 6 - NRG Energy Inc., as expected, launched its $3.6 billion three-part notes deal Friday and will begin roadshowing the gigantic offering on Monday. And the Princeton, N.J-based energy company - whose credit ratings were also upped to Ba3 from B1 by Moody's Investors Service - apparently isn't the only prospective issuer who will be shopping a supersized, multi-part junk bond placement. Cary, N.C.-based telephone directory publisher R.H. Donnelley Corp. is also heard heady to hit the road to market a three-part offering worth more than $2 billion.

AMC Entertainment Inc. was meantime said to be bringing a subordinated notes deal to fund its prospective acquisition of rival movie-theater operator Loews Cineplex.

Secondary market activity continued along in a mostly subdued vein, although the automotive names and their sector cousins, the parts makers, continued to firm, even in the face of the daunting December sales data released earlier in the week, and Thursday's downgrade of Ford Motor Co.'s bonds and those of its Ford Motor Credit Co. financial arm.

One investor characterized Friday's session as "quiet and firm," and added that junk was up a quarter point to a half point, depending on the names.

"GM is trading up because everybody is convinced they are going to pull a rabbit out of their hat at the auto show," the investor said.

The buy-sider added that market technicals are presently "terrific because people have a little money coming into the new year and there is no new issuance."

But that, the investor reiterated, is about to change.

For now, Friday's "no-bonds-issued" session completed the post-New Year's week's clean sweep: from Tuesday's open through Friday's close, nary a new deal got done.

However sources on both the buy-side and the sell-side suggest that the activity - or lack therof - seen during the first week of 2006 is tantamount to the stillness sometimes reported from the alpine meadow, just before a major eruption.

Indeed one investor who spoke Friday on background asserted that the pipeline is known to contain $20 billion - "deals with names and dollar amounts" - and added that "next week we'll start the engines."

Almost $6 billion announced

If, as the investor asserted, the pipeline contains $20 billion, deals representing nearly one-third of that amount were announced during the Friday session.

NRG Energy Inc. will begin a roadshow on Monday for its $3.6 billion offering of senior unsecured notes (B1/B-) in three tranches.

The offering will be comprised of tranches of eight-year fixed-rate notes, non-callable for four years, 10-year fixed-rate notes, non-callable for five years, and eight-year floating-rate notes, non-callable for two years.

Tranche sizes remain to be determined.

Morgan Stanley and Citigroup are joint bookrunners for the acquisition financing deal from the Princeton, N.J.-based independent power producer.

Next came R.H. Donnelley Corp., which will start its roadshow - a two-team roadshow - on Monday for a $2.1 billion proceeds three-part transaction (Caa1/B+).

The Cary, N.C.-based yellow pages publisher plans to sell $1.2 billion of series A-3 senior notes due 2016 and to raise $600 million of proceeds by placing a tranche of series A-2 senior discount notes due Jan. 15, 2013. Proceeds will be used to fund a dividend to shareholders in connection with the acquisition of Englewood, Colo.-based print directories and internet-based local search services provider Dex Media, Inc., and for general corporate purposes.

R.H. Donnelley also plans to raise $332 million of proceeds by selling a tranche of series A-1 senior discount notes due Jan. 15, 2013. Proceeds from the series A-1 notes will be used to help repurchase outstanding convertibles.

JP Morgan, Bear Stearns & Co. and Credit Suisse First Boston are joint bookrunners for the acquisition deal.

And well below the billion dollar threshold, Inergy Finance Corp. will begin its roadshow on Monday for a $200 million offering of 10-year senior unsecured notes (B1/B), via Lehman Brothers, JP Morgan and Wachovia Securities.

The Kansas City propane company will use the proceeds to repay debt.

Already trailing

By ending the first week of 2006 with zero new issuance, the primary market initially continued its laggard ways of 2005, during which issuance, on a year-over-year basis, lagged that of 2004 by more than 27%.

At the Jan. 6, 2005 close, the market had seen $624 million price in four dollar-denominated tranches.

NRG steady on deal news

In the secondary market, the news that NRG will be selling its huge offering of new bonds was seen having little or no impact on the company's existing paper, with a market source quoting its 8% notes due 2013 at 110.75 bid and its NRG South Central Generating Co.'s 9.479% notes due 2024 at 100.75, both unchanged on the day.

A trader at another shop saw the parent company's 8s likewise unchanged at 111 bid, 112 offered.

Upcoming new-issuer AMC Entertainment's 8% notes due 2014 were seen down a point at 89 bid.

Autos keep gaining

Back among the established issues not impacted by primary market developments, the automotive issues were again king, as the sector continued its recent recovery after having been badly beaten down last year amid the increasingly cloudy fortunes of U.S. auto giants GM and Ford.

The bonds of those two companies continued to push upward, with a market source reporting GM's benchmark 8 3/8% notes due 2033 at 69 bid, up ¾ point, with Ford's flagship issue, the 7.45% notes due 2031, also up ¾ point, at 70.5.

The source also saw GM's 7 1/8% notes due 2013 a point better at 69 bid, while its GMAC 8% notes due 2031 were seen slightly firmer at 100.728.

At another desk, the GM 8 3/8s were seen at 68.75 bid, 69.75 offered, GMAC's 8s were at 100.5 bid, 101.5 offered, and Ford's 7.45s were seen around the 70ish level, up ¼ on the day.

Yet another trader saw all of those bonds around those levels, and pronounced them all up about ¾ point. He saw Ford Motor Credit's 7% notes due 2013 a point better on the session at 88.5 bid, 89.5 offered.

The strength in the GM and Ford bonds is particularly notable because it comes on the heels of that latest setback for the rival Detroit giants.

GM earlier in the week reported a 4% drop in U.S. sales in 2005 versus a year earlier, with total domestic vehicle sales sliding to just under 4.52 million units. Car sales were down 7% and the truck side retreated 2%. For December, GM sales fell 10% from year-earlier levels to 392,041 vehicles, with car sales plunging 19.4% and truck sales off 4.9%. Those December figures were about in line with Wall Street's expectations.

Ford's domestic vehicle sales fell 9% to 267,881 in December from year-ago levels, with car sales off 5.8% and truck sales down 10.2%. Analysts had forecast a sales decline, on average, of 11.2%. On a full-year basis, its overall, U.S. vehicle sales were down 4.9%, to just under 3.17 million. Although its U.S. car sales rose 2% on the year - the first such gain since 1999 - Ford's truck sales fell 8% from 2004 levels, due to higher gasoline prices.

Metaldyne leads parts better

The carmakers' suddenly improved bond price performance was seen helping to tow the bonds of the auto components sector that sells parts to them higher as well, and none more so on Friday than Metaldyne Corp. A trader saw the Plymouth, Mich.-based automotive metal-forming and -machining company's bonds up several points, "but nobody knows why."

Its 11% subordinated notes due 2012 were seen at 80.5 bid, 81.5 offered, a solid three-point gain on the session "on no news," the trader said, "maybe just some rumors," though these were unspecified.

A trader at another shop saw the Metaldyne 11s as good as 81.5 bid, 82.5 offered, well up from 78 on Thursday. He also saw the company's 10% senior notes due 2013 at 93.25 bid, 95.25 offered, up slightly from Wednesday's bid levels around 93. He had seen no activity in the 10s on Thursday, and was also at a loss as to why the 11s might be up three or more points.

Delphi rise goes on

Among other automotive names, the trader saw the bankrupt former GM unit Delphi Corp. - which had been rising all week - continuing to go with the flow on Friday, with the troubled Troy, Mich.-based automotive electronics manufacturer's 6.55% notes due 2009 a point better at 56.5 bid, 57.5 offered. He saw the company's 7 1/8% notes due 2029 also at that level, but unchanged on the day.

A trader at another desk saw the Delphi bonds get as good as 57 bid, 58 offered, which he called a two-point gain on the session.

Federal-Mogul up on restructuring

Bankrupt automotive braking systems maker Federal-Mogul Corp.'s bonds firmed smartly after the Southfield, Mich.-based company announced a three-year restructuring plan that could affect 25 facilities and reduce the company's 44,000-person worldwide work force by about 10%.

A trader saw the company's bonds, such as its 7½% notes due 2009 and 8¼% notes that were to have come due last year, at 34.5 bid, up 1½ points.

Federal Mogul filed for Chapter 11 protection in October 2001, pushed to insolvency by big asbestos liabilities from its purchase some years earlier of a British company having asbestos problems. It said preliminary charges related to the restructuring are likely to be in the range of $125 million to $150 million.

Dura, Dana gain

Back among the non-bankrupt car parts makers, Dura Automotive Systems Inc. was another name seen better during the session, with its 8 5/8% senior notes due 2012 a point better at 84.5, while its subordinated 9% notes due 2009 were 3/8 point better at 52.125.

And the upside rise also continued for Dana Corp., which earlier in the week announced that it had completed previously disclosed restatements of earnings reports running from 2000 all the way up to mid-2005. That in turn caused Standard & Poor's to remove the Toledo, Ohio-based automotive systems producer's ratings from negative CreditWatch.

On Friday, a market source saw Dana's 5.85% notes due 2015 at 73.625 bid, up 3/8 point, while its 6½% notes due 2009 were nearly a full point better at 85.5

Apart from the automotive issues, a trader saw Georgia-Pacific's bonds pretty much unchanged, despite a two-notch downgrade by Moody's Investors' Service, which cut the Atlanta-based paper and forest products company's corporate family rating to Ba3 from Ba1.

The cut "was expected," the trader said, in explaining why G-P's 7¾% notes due 2029 were unchanged at 92.5 bid, 93.5 offered, while its 7.70% notes due 2015 were status quo at 97.5 bid, 98.5 offered.

Moody's cited the likelihood of increased debt at the company following its acquisition by Koch Forest Products Inc., and its lessened access, as a new non-public company, to external sources of financing. The ratings agency also noted Georgia Pacific's substantial debt load, the competitive nature of its industry, and its possible asbestos-related liabilities.

The news that Great Atlantic & Pacific Tea Co. Inc. reported a smaller loss for the third quarter than it showed a year ago, while company executives expressed satisfaction with the venerable Montvale, N.J.-based supermarket operator's progress in turning itself around (see related story elsewhere in this issue) didn't have much impact on the company's remaining outstanding bonds.

A market source saw the company's 7¾% notes due 2007 unchanged at 101 bid, while its 9 1/8% notes due 2011 were likewise steady at 104.5 bid.

Those bonds "are pretty much gone," another trader said, noting that a tender offer last summer, using a portion of the nearly $1 billion of cash proceeds from the sale of A&P's successful Canadian unit, left only token amounts of the bonds in the hands of investors.

A&P reported that as of the end of the 2005 fiscal third quarter on Dec. 3 left just $32 million of the 7 ¾% notes outstanding, and only $13 million of the 9 1/8s.

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