Intrawest two-part deal prices; automotive names skid in wake of Intermet weakness

By Paul Deckelman and Paul A. Harris

New York, Sept. 22 - Intrawest Corp. priced its quickly-shopped two-part offering of U.S. and Canadian dollar-denominated notes Wednesday, the only pricing seen by the market's close. Price talk meantime emerged on several deals waiting in the wings for probable pricing Thursday, including offerings from Jostens IH Corp. and Riddell Bell Holdings Inc. SI Corp. was heard getting ready to take its offering of eight-year notes on the road Thursday.

In the secondary arena, the battered bonds of Troy, Mich.-based automotive components maker Intermet Corp. continued to careen downward for a third straight session, and they apparently dragged the bonds of a number of other automotive names lower, traders said.

On the heels of two back-to-back billion dollar-plus sessions, the primary market took something of a breather on Wednesday as three issues from two issuers, encompassing three different currencies, were priced.

Deutsche Bank Securities figured prominently in each deal.

The largest tranche, $225 million, came as part of a two-piece offering (B1/B+) from Intrawest Corp., a Vancouver, B.C.-based developer and operator of village-centered resorts.

The company priced a $225 million add-on to its 7½% senior notes due Oct. 15, 2013 at 102.5, which was the rich end of the 102-102.5 price talk.

The resulting yield to worst is 7.042%. The sale, led by Deutsche Bank Securities, generated $230.625 million of proceeds.

The original $350 million issue priced on Oct. 1, 2003.

The company also priced a slightly downsized C$125 million of five-year senior notes at par to yield 6 7/8%, right on top of the 6 7/8% area talk. The offering was reduced from C$130 million.

Deutsche Bank Securities and Scotia Capital were joint bookrunners for the Canadian dollar tranche.

Food fight

Shortly after the Intrawest terms rolled out Prospect News asked Mike Difley, vice president and portfolio manager of the American Century High Yield Fund, whether or not he had any color on the deal.

Difley responded that he had no specific information on the book size. However, he added that he did not really need numbers to know how the deal went.

"In this market I'm sure it went well," he commented. "It's a food fight out there."

Difley added that presently a lot of money that is chasing yield is finding its way into the junk bond market.

"I think even investment-grade guys are dipping down into crossover credits, or even lower, trying to pick up yield," he added.

"It feels like everybody is out there stretching for yield.

"You have to be pretty careful what you're buying right now because spreads are coming very tight," the portfolio manager continued.

"The credit markets are in pretty good shape. Defaults are low and people have a lot of cash on the sidelines. So it's simply a supply-and-demand situation: there are not enough bonds to soak up all of the cash."

As the discussion with Difley continued, elsewhere in the universe of fixed income the yield on the 10-year Treasury note broke through the 4% level - one source spotted the 10-year as having closed at 3.989%.

Difley agreed that perhaps the falling yield on the 10-year was a reflection of investors' less-than-sanguine take on the present U.S. economy.

"People seem to be betting that the Fed will continue its measured pace of raising the short term interest rate," he said. "A lot of people right now seem to be of the belief that the Fed will go up to 2% or 2¼% and pause, depending on the data.

"There is some scary data right now, so people seem to be getting comfortable with the idea that rates won't be going too high, or at least that they will be range-bound.

"Recently the market has been sort of tracking Treasuries and maybe tightening a little bit," the investor added. "As Treasury yields have fallen high yield has pretty much kept pace, at least. I don't have any reason to believe that it's going to deviate a whole lot from that pattern.

"If rates back up I think ultimately high yield will probably have to go up in yield and down in price."

Cirsa sells €60 million add-on

Aside from the U.S.-dollar denominated and Canadian-dollar denominated deal from Intrawest, the only other transaction to be completed during Wednesday's session was a euro-denominated deal from Spanish leisure and gaming company Cirsa Business Corp. SA.

Issuer Cirsa Finance Luxembourg SA priced a €60 million add-on to its 8¾% senior notes due May 15, 2014 (existing ratings Ba3/B+) at 102.0, resulting in an 8.387% yield to worst.

The deal, also via Deutsche Bank Securities, came at the low end of the 102.0-102.50 price talk.

Early last May Cirsa priced the original issue, a downsized €210 million, at par.

Hence Cirsa walked away from Wednesday's add-on with substantial savings on its interest rate.

Talk on Jostens, US LEC, Bell Sports

Details circulated the market on three deals that are expected to price on Thursday.

Price talk of 7¾%-8% emerged on Jostens IH Corp.'s $500 million of eight-year senior subordinated notes (B3/B-) via Credit Suisse First Boston and Deutsche Bank Securities.

Meanwhile price talk is six-month Libor plus 825-850 basis points on US LEC Corp.'s $150 million of five-year second priority senior secured floating-rate notes (B3/B-), via Deutsche Bank Securities.

Finally, talk is 8 3/8%-8 5/8% on Riddell Bell Holdings Inc.'s $140 million of eight-year senior subordinated notes (B3/B-), via Goldman Sachs & Co. and Wachovia Securities.

Finally ramping up

One sell-side source who had a ringside seat for much of Wednesday's action told Prospect News that although it took a while, the forward calendar finally seems to be purposefully building.

"We're hearing that a lot of people came out of the summer break with pretty big cash positions," the source said. "And people were expecting the new issue calendar to ramp up after Labor Day and had set aside some cash to take advantage of that.

"The calendar didn't ramp up as quickly as people though it would. It took a week.

"But it looks like that ramp up is happening right now."

SI Corp., Vendex on the road

Word of two roadshow starts circulated the market during the mid-week session.

The roadshow starts Thursday for SI Corp.'s $230 million of eight-year senior secured notes, expected to price on Oct. 1.

JP Morgan and Bear Stearns & Co. will run the books for the debt refinancing deal from the Chikamauga, Ga.-based manufacturer of synthetic fabrics and fibers.

A little further along the way, a roadshow will commence early next week for Victoria Acquisition II BV (Vendex)'s €275 million of senior notes via Citigroup and ING.

Although the structure remains to be determined, the company is expected to sell bonds with a 10-year maturity and to also make an offering of floating-rate notes.

The Netherlands-based department store firm will use the proceeds to finance the acquisition of Vendex KKB, which is being led by Kohlberg Kravis Roberts & Co., Cinven, Permira and AlpInvest.

Intrawest up in trading

When the new Intrawest U.S. dollar-denominated add-on notes were freed for secondary dealings, a trader saw them as having firmed to 103.5 bid, 104 offered, from their 102.5 issue price earlier in the session. He saw the Canadian dollar-denominated bonds meantime trading at 100.5 bid, 101 offered, up a little from their par issue price.

The trader saw Frontier Oil's new 6 5/8% senior notes due 2011 trading at 101.125 bid, 101.625 offered; Chiquita Brands International Inc.'s new 7½% notes due 2014 at 101.75 bid, 102.75 offered.

EchoStar DBS Corp.'s new 6 5/8% notes due 2014 were at 99.625 bid, 99.875 offered, while Coleman Cable's new issue was at 102.125 bid, 102.625 offered. Celeanese AG's zero-coupon 10% discount notes were seen at 61.5 bid, 62 offered, while its companion zero-coupon/10½% discount notes were at 60 bid, 60.5 offered.

Intermet down again

Back among the established bonds, Intermet's 9¾% notes due 2009 were "getting hit again," the trader said, quoting the bonds late in the session as having fallen to an offered level at 39.5, after having traded down to around 40 bid, 42 offered, a two point loss from Tuesday's close and a more than 30 point swoon from where those bonds had started the week. Indeed, traders, noted, those bonds had actually been around par several weeks ago. They nosedived Monday after the company warned that it would likely post a third-quarter net loss in the $19 million to $24 million range, and that this in turn would put the company in violation of credit facility financial covenants

Auto names lower

Bonds of other automotive-related names, in turn, were seen following Intermet lower, and also reflecting the general malaise of a sector that takes its cues from the Big Thee - who have recently been slowing production in response to soft demand and shaky consumer confidence.

The sector "was getting hammered," said a trader, who saw Dura Operating Corp.'s 9% notes due 2009 falling to 90.5 bid, from 94 on Tuesday, while Collins & Aikman's 10¾% notes due 2011 dropped back to 100.5 bid, 101 offered from previous levels at 102.5 bid, 103. He saw Collins & Aikman's 12 7/8% notes due 2012 at 91 bid, 92 offered, while "less than a month ago, they were at par."

Other automotive names shifting into lower gear, he said, included Goodyear Tire & Rubber Co.'s 7.857% notes, which lost half a point to ¾ point to end at 95.5, while Tower Automotive "was another name that got hammered." He saw the company's bonds 81.5 bid, 83.5 offered, while "just two, three weeks ago, they were at 91 bid, 92 offered."

One automotive name which bucked the trend, however was parts maker Mark IV, which hung in at 94.25 bid, 94.5 offered, little changed.

"Those bonds are a different animal," he said, "because it doesn't have that much debt out, and not that many bonds trade, and there's a rumor going round that there's an LBO firm that trying to buy out the company and pay back the debt." That persistent LBO rumor is so far unsubstantiated. "So that bond hangs in there."

At another desk, a trader saw Oxford Automotive's bonds at 38 bid, 45 offered, well down from 47 bid, 50 offered recently.

A market source pegged Intermet's bonds at 40 bid, saw the Collins & Aikman 12 7/8s at 90.5 bid, down from 95.75, and its 103/4s at 98.75 bid, down from 100.75, and saw the Dura 9s dropping five points to end at 89. Dura's 8 5/8% notes due 2012, he said, were two points lower at 98 bid.

However, he saw little impact on the bonds of Tenneco Automotive, whose 10¾% notes due 2013 were half a point lower at 113.5, while its 11 5/8% notes due 2009 were unchanged at 106.5.

The source also saw J.L. French Automotive Casting's 11½% notes due 2009 four points behind, at 75, while Delco Remy International Inc. was in retreat, its 9 3/8% notes due 2012 dropping to 99 bid from 101.5 earlier, its 8 5/8% notes due 2007 at 102, actually up half a point, while the company's 11% notes due 2009, lost a quarter point to 106.5.

At another desk, Delco Remy's 9 3/8% notes due 2012, which had been lower on Tuesday, actually gained a point to 99.

Champion rises

Away from the shell-shocked auto sector, a trader saw Champion Homes recently "on fire," a trader said, with market buzz about the manufactured home company suggesting that it might soon get a ratings upgrade.

He quoted Champion's 7 5/8% notes due 2009 half a point better Wednesday at 99.25 bid, 99.75 offered while its 11¼% notes due 2007 moved up to 109.25 bid, 109.75 offered from 108.5 bid previously.

Amkor Technology Inc. - whose bonds had declined Tuesday, despite a lack of fresh news out on the West Chester, Pa.-based high-tech components manufacturer - was seen heading in the other direction Wednesday, its 9¼% notes due 2008 up a point, at 91.5 bid, while its 7¾% notes due 2013 were nearly a point better at 81.

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