Remy sub bonds zoom on re-org accord; Penn National gets M&A boost

By Paul Deckelman and Paul A. Harris

New York, June 15 - Remy International Inc.'s subordinated bonds - particularly its 11% notes due 2009 - were sharply higher Friday, after the troubled Anderson, Ind.-based automotive electrical systems manufacturer announced that it had reached agreement with its bondholders on a pre-packaged Chapter 11 restructuring - implementing a reorganization plan that will give the subordinated bondholders full ownership of the restructured company.

Also among the vehicular names, Dura Automotive Inc.'s bonds firmed smartly, pushing back up to the around the peak levels they had occupied after hefty gains the prior week - before profit-taking and investor worry about a possible loan default hammered the bonds back down over the previous few sessions.

On the merger & acquisitions front, the news that Wyomissing, Pa.-based gambling concern Penn National Gaming Corp. has agreed to an $8 billion-plus buyout gave that company's bonds a boost, but didn't do too much for other names in that same sector, such as Trump Entertainment Resorts Inc. and MGM Mirage.

And also on the M&A scene, TXU Corp.'s bonds moved down after the company unveiled financing plans for its upcoming leveraged buyout.

Friday passed quietly in the high yield primary market.

Nevertheless, the forward calendar, having swelled by $10 billion during the past week, took aboard one more passenger.

Telcordia Technologies, Inc., will begin a roadshow on Monday for its $555 million offering of five-year first-lien senior secured floating-rate notes (B).

Credit Suisse and JP Morgan are joint bookrunners for the debt refinancing deal from the Piscataway, N.J., software and services provider to communications networks.

Week's issuance: $2.67 billion

With no dollar-denominated issues pricing during Friday's primary market session the June 11 to June 14 week came to a close having seen $2.67 billion of new issuance in six tranches.

That took year-to-date issuance to $92.39 billion in 244 dollar-denominated tranches, as 2007 issuance continued to significantly outpace that of the record-setting year of 2006, on a year-over-year basis.

As of the June 15, 2006 close, the market had seen year-to-date issuance of $58 billion in 174 dollar-denominated tranches.

The week ahead

The Friday session passed quietly in the wake of Thursday's news that high yield mutual funds had undergone their most substantial outflows in a year: negative $399.6 million for the week ended June 13.

High yield observers have been quick to point out that the "outflow" news came across as the junk new issue calendar had built up spectacularly through the course of the June 11 to June 15 week.

At Friday's close the dollar-amount of business believe to be in the market topped $11.4 billion.

One week ago, on the Friday June 8 close, only $750 million was thought to be in the market.

Sources say that in the wake of Thursday's outflow news, which came against the backdrop of volatility in Treasuries as well as in the stock market, it will be interesting to watch as the mega-deals now on the calendar come to the pricing block.

In descending order the deals expected to price during the June 18 to June 22 week include:

• Thomson Learning's $2.14 billion three-part offering via JP Morgan, Citigroup, UBS Investment Bank, RBC Capital Markets and RBS Greenwich Capital;

• U.S. Foodservice Inc.'s $1.55 billion two-part offer led by Deutsche Bank Securities, Citigroup, Goldman Sachs & Co., JP Morgan, Morgan Stanley and RBS Greenwich Capital;

• Hynix Semiconductor's expected $500 million, with the books being run by Citigroup, Credit Suisse, Goldman Sachs & Co., Korea Development Bank and Merrill Lynch;

• Shingle Springs Tribal Gaming's $450 million offering of eight-year senior notes, via Morgan Stanley; and

• Surgical Care Affiliates, LLC's $300 million two-part notes offer, which is being helmed by Goldman Sachs & Co. and JP Morgan.

Codere PIK loans/notes

One issue did surface on Friday in Europe.

Spanish gaming firm, Grupo Codere, issuing via Masampe Holding BV, priced €340 million of PIK loans due Dec. 15, 2015.

The loans, which are also available in the form of notes via a Regulation S repackaging, bear interest at a rate of three-month Euribor plus 750 basis points, and were priced at an original issue discount of 99.00, on top of the price talk.

Credit Suisse ran the books.

Spanish gaming firm, Masampe, the issuing entity, owns a 58.5% stake in Codere.

The Dec. 15, 2015 maturity date is six months outside of Codere's existing senior notes.

Proceeds will be used to refinance Codere's existing PIK debt and pay the April 2007 vendor note installment.

Remy rolls on restructuring

Back among the established issues, a trader saw Remy's Delco Remy 11% subordinated notes jump to 87 bid, 89 offered, which he called up more than 15 points on the session, although he also saw the company's 8 5/8% senior notes slated to come due on Dec. 15 "kind of unchanged" at 98.5 bid, 99.5 offered.

The sub bonds, he said "were clearly the big movers" on the day.

A source at another desk saw an even bigger upside move in the company's subordinated bonds - which had begun the year trading in the mid-40s but which had moved upward on expectations that a deal would be reached.

The source pegged the 8 5/8s actually up as much as 25 points on the day versus Thursday's close, seeing the bonds soar to above 90 from closing levels the previous day at 66.25. While the bonds did open up around 6 points from that mark on apparent anticipation that something was going to happen, the real action came after the company's official mid-morning announcement about the restructuring agreement. The bonds moved up to around the 80 mark, and then continued to climb in busy trading before peaking at 91 towards the end of the trading day.

The company's other subordinated issue, its 9 3/8% notes due 2012, was also quoted substantially higher at around the 85 mark, up from prior levels at 70, but no real trading was seen there.

The source saw the senior bonds go out around 99.5, up slightly more than a point from the previous session, in active dealings, although at one point the bonds broke through the par level, only to come on back down off that peak.

Remy said it had obtained the consent of some 75% of the holders of the 11s, 83% of the 8 5/8% notes, and 94% of the 9 3/8% notes on the restructuring plan, which will be implemented by the filing of a prepackaged Chapter 11 case, and which will cut the company's debt by $360 million.

Among the plan's highlights, bondholder-wise, are the conversion of the two series of subordinated notes into 100% of the reorganized company's common equity, the exchange of the existing senior notes for $100 million of new third-lien pay-in-kind notes and approximately $50 million in cash, and the repayment in full of its outstanding second priority senior secured floating-rte notes.

Remy anticipates raising $75 million in preferred equity through a rights offering to be made to holders of the 8 5/8% senior notes and the two series of subordinated notes. It will also cancel out all outstanding stock.

Remy further announced that in view of the agreement to restructure, it has chosen not to make the coupon payment on the 8 5/8s that was due on Friday.

Dura regains lost ground

Elsewhere in the autosphere, a trader saw Dura Automotive Systems Inc.'s 8 5/8% senior notes due 2015 - which were seen rebounding Thursday, after having been taken down over the previous several sessions - as having continued to climb, up 4 points on the session to 66 bid, 67 offered, while its 9% subordinated notes due 2009 were a point better on the day at 15 bid, 16 offered.

The bankrupt Rochester Hills, Mich.-based automotive parts maker's senior notes are now back around the peak levels they had hit the week before, when they had risen an amazing 15 points that week, pushed up to the mid-60s by market talk about a possible rights offering to raise capital and other positive rumors, only to then give back a lot of those gains over the next few sessions and fall back to the upper 50s on profit-taking, aggravated by investor concern after the company sought changes in the terms of its $300 million bankruptcy loan and warned that it might have to default on the obligation if it did not receive them.

Similar movements were seen in the subordinated notes as well, which gyrated during that stretch between a low of about 13 and a high of about 17.5.

Penn Gaming pushes upward

Penn National Gaming's bonds were firmer on the day on the news that the company had agreed to an $8.9 billion buyout - even though Standard & Poor's downgraded the company's ratings in response to the announcement, and Moody's Investors Service also began evaluating it for a possible downgrade.

A trader saw the company's 6¾% notes due 2015 get as good as 103 bid, 104 offered, before finishing up more around a 102-103 context, mostly on odd-lot trading, and saw its 6 78% notes due 2011 rise as high as 100.75 bid, 101.75 offered, before ending at 100.5 bid.

Another trader called the 6 7/8s half-point gainers on the day at par bid, 101 offered, and saw the 63/4s up 3½ points on the session at 103 bid, 104 offered.

Yet another source saw that latter issue bouncing around all day in very active trading, shooing up to nearly 104 at the opening from around the par bid level, then dropping back and surrendering half of those gains to fall to 102 - but finally surging back upward late in the session to end at 103.5. The source meantime saw the 6 7/8s pretty steady around 100.5.

The company's Nasdaq-traded shares were meantime seen up $10.98 (21.47%) to end at $62.12. Volume of 11 million shares was 10 times the norm.

The company - which operates racetracks in a number of states, some of which also have slot-machine parlors - has over the past several years been an aggressive buyer of some smaller but more familiar gaming names. It operates regular casinos under the Hollywood Casinos brand in Louisiana, Illinois and Mississippi; under the Argosy name in Illinois, Indiana, Missouri and Iowa; and as the Boomtown Casino in Biloxi, Miss.

It agreed to be purchased by funds run by two investment companies Fortress Investment Group LLC, a publicly traded asset management company, and private equity firm Centerbridge Partners LP, who will pay $6.1 billion, or $67 per share, and repay $2.8 billion in Penn National debt.

Although the bondholders seemed to like the deal, the ratings agencies did not. S&P cut Penn National's rating to BB- from BB and said it might cut it further still when financing plans for the deal are announced, if it means the new owners will load up on debt to get the deal done. And even if the deal is not consummated, the agency warned that the ratings could still be cut further because of management's "aggressive" stance.

Moody's cited similar concerns in warning of a possible downgrade for the company's Ba2 corporate credit and B1 senior subordinated note rating, among others.

Also not too impressed were holders of other gaming companies' bonds. A trader saw Trump's 8 ½% notes due 2015 at 102 bid, 103 offered and MGM Mirage's 7 5/8% notes due 2017 at 96 bid, 97 offered, both unchanged on the day.

TXU takes a tumble

A buyout deal which is not very popular with bondholders is TXU's pending acquisition by Kohlberg Kravis Roberts & Co. and Texas Pacific Group. The Texas power company unveiled details about the financing for its buyout, including debt commitments totaling over $37 billion.

A market source saw its 6½% bonds due 2024 fall as low as the 81.625 level from prior levels above 87, before coming off the lows to end still down more than 4 points at 82.625.

Its 6.55% notes due 2034 dropped to just above 80.5, a nearly 2 point decline. Trading was seen as very busy.

Other auto names seen higher

Back among the auto names, a trader saw Cooper Standard Automotive's 8 3/8% notes due 2014 a point better at 96 bid, coinciding with the announcement by the Novi, Mich.-based parts supplier that it has signed a definitive sale and purchase agreement with Automotive Sealing Systems SA providing for the acquisition by Cooper-Standard of Metzler Automotive Profile Systems' sealing systems operations in Germany, Italy, Poland and Belgium, including joint venture interests in India and China, a deal valued at €100 million.

And he saw Metaldyne Corp.'s 11% notes due 2012 up a point at 103.5 bid, 104.5 offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.