Quebecor prices upsized deal; GM bonds rise as strike ends, agencies affirm ratings; Fremont tumbles

By Paul Deckelman and Paul A. Harris

New York, Sept. 26 - Quebecor Media Inc. was heard by high yield syndicate sources to have priced an upsized offering of nine-year notes on Wednesday.

That massively upsized $700 million add-on to its 7¾% notes due March 2016 was the sixth quick-to-market deal to price in as many days.

In the secondary market, the big story of the day was General Motors Corp.'s settlement of its differences with the United Auto Workers union, which brought a quick end to the strike against the giant carmaker by some 73,000 unionized hourly U.S. employees. That gave a boost to GM's bonds, investors relieved that the burden on a long strike has not been thrust upon GM, which, like other domestic carmakers, has enough problems to deal with.

GM's good news was contagious, giving a boost to the bonds of arch-rival Ford Motor Co., to the bonds of GMAC LLC, still 49% owned by GM, and to former GM unit Delphi Corp., which counts GM as its single biggest customer.

Outside of the GM news, a major story was the sudden trouble that a deal lining up a big investment in Fremont General Corp. has run into. That caused the mortgage company's bonds and shares to fall sharply.

A high yield syndicate source said that the broad market traded higher on Wednesday, mainly because of the news that General Motors Corp. and the United Auto Workers union made medicine at the bargaining table, averting a strike.

Quebecor returns

Quebecor Media priced an upsized $700 million add on to its 7¾% senior notes due March 15, 2016 (B2/B) at 93.75 to yield 8.82% on Wednesday.

There was no official price talk.

Citigroup, Banc of America Securities LLC and TD Securities were joint bookrunners for the drive-by deal, which was upsized from $450 million.

The original $525 million issue priced at par in January 2006.

The add-on notes are non-fungible with the original notes.

In July the company postponed a $750 million two-part offering of new senior notes due to market conditions.

An informed source told Prospect News that the deal went very well, and added that there had been significant demand.

The Quebecor deal comes just one day after Range Resources Corp. priced an upsized $250 million issue of 10-year senior subordinated notes (Ba3/B+) at par to yield 7½% in a quick-to-market transaction.

A market source told Prospect News on Wednesday that the Range Resources deal had been driven by reverse inquiry.

Other sources said that reverse inquiry stories are not hard to come by at present, given that the primary market spent most of the summer in the deep freeze.

In addition to Quebecor and Range Resources, the other issuers that have done quick-to-market deals in the past six days include:

• R.H. Donnelley Corp. which priced an upsized $1 billion issue of 10-year senior notes at par to yield 8 7/8%;

• Leucadia National Corp. which priced an upsized $500 million issue of 8 1/8% eight-year senior notes at 98.307 to yield 8.42%;

• American Tower Corp. which priced an upsized $500 million issue of 10-year senior notes at par to yield 7%; and

• Waterford Gaming LLC, which priced a $128.5 million issue of seven-year senior notes at par to yield 8 5/8%.

American Tower up in trading

Traders did not see the new Quebecor 7¾% notes due 2016 trading around in the aftermarket. One did see the new American Tower Corp. 7% notes due 2017 at 100.5 bid, 101 offered, up ¼ point on the day. The bonds had priced at par on Monday.

GM boosted by strike settlement

Back among the established issues, a trader said that "GM, GM, GM, GM, and Ford," was the major focus of the day's activity. "Everything else was really a non-event."

He saw GM's widely quoted 8 3/8% benchmark bonds due 2033 up 2½ points to 89.75 bid, 90.25 offered.

A market source at another desk saw those bonds gyrate around - initially rising to about the 90 level from Tuesday's finish around 86.5, before falling back off that peak to only moderately higher levels. However later in the day, GM began to move back up again, back above the 90 level, no doubt helped by the fact that the major ratings agencies all indicated that they would not be lowering the ratings on GM, now that the UAW strike has ended without causing too many additional problems for the company.

GM's 7 1/8% notes due 2013 were seen up 2 points on the day at 92.5.

Traders also said that the cost of protecting GM debt against a possible default by use of credit default swaps contracts fell by 55 basis points to under 500 bps. Debt-protection costs move inversely to investor confidence in the prospects of the issuer.

The bonds and default-swap spreads got a boost from the news, which hit the tape early in the morning, that the company and its major union had finally settled the outstanding contentious issue that had caused the UAW to strike GM on Monday - the first nationwide strike since the 68-day stoppage that crippled the company in 1970.

This strike - which had the potential, analysts said, of costing the company billions of dollars had it dragged on - will not prove anywhere near as costly. And GM got the added benefit of accomplishing a major goal - unloading $51 billion in retiree health costs onto a new trust, and getting other concessions from the union to improve competitiveness. In return, the UAW won commitments from GM to invest in U.S. plants, pay bonuses and hire thousands of temporary workers - which will boost UAW membership,

Ford, GMAC also up on pact

GM's good news was good enough to give a lift to similar bonds of its major domestic competitor, Ford, with a trader seeing the Number-Two carmaker's flagship 7.45 % notes due 2031 up 2¼ points on the day to 79.5 bid, 80 offered.

The 7% notes due 2013 of Ford's credit division were seen up nearly a point to 91.25 bid. Its 7 3/8% notes due 2009 were also up about ¾ point to 98.5.

Bonds of GM's own financing arm - GMAC, in which GM still owns a 49% stake - were another credit that benefited from the quick end to the strike. Its 8% notes due 2031 jumped 1¾ points to the 99 level, while its 6 7/8% notes due 2012 rose 1½ points to 94. A trader said the rise in GMAC's 8s was "substantial."

Another beneficiary was former GM unit Delphi, currently in the midst of a bankruptcy reorganization. GM remains the Troy, Mich.-based parts maker's single largest customer. In turn, Delphi - which has been involved in three-way negotiations with GM and the UAW on how to cut its own bloated cost structure - is GM's single biggest supplier.

Its 6.55% notes due 2006 were up 3½ points at 93 bid, 95 offered, and a trader saw its other paper up a like amount - the 6½% notes due 2009 to 93.5 bid, 95.5 offered, the 6½% notes due 2013 at 91.5 bid, 93.5 offered, and the 7 1/8% notes due 2029 at 94 bid, 96 offered.

Another trader saw Delphi's 6½% 2013s at 91.5 bid, 92.5 offered, up 4½ points, and the 6½% notes due 2009 likewise up 4½ points, "across the board" to end at 93.5 bid, 94.5 offered.

Yet another trader called Delphi up 3 points on the day, the 6.55s at 93 bid, 94 offered.

Fremont hit as investor eyes scuttling deal

Outside of the automotive names, a trader characterized the session as a "sort of sideways day," with a lot of stuff up and a lot of stuff down."

One of that latter names was Fremont General, whose 7 7/8% notes due 2009 were seen by a trader having fallen to 86 bid from 89.5 previously.

Another market source called them down as much as 6 points on the day at 87 bid.

The Santa Monica, Calif.-based mortgage lender said in a regulatory filing that would-be investor Gerald J. Ford had told the company "he is not prepared to consummate the transactions contemplated by the investment agreement," which was inked earlier this year.

Under the terms of the agreement, Ford will lead an investor group that will infuse about $80 million into the mortgage company. Fremont said it does not agree with Ford's position, but has entered into discussions to revise the terms of the agreement.

The company also said it expects to file its 10-K report for the fiscal year ending Dec. 31, 2006 as well as its quarterly reports for fiscal 2007 in mid-October.

A trader saw the widely followed CDX index of junk market performance up 1/16 at 97 3/16 - 97 5/16. Among other gauges of market performance, the Banc of America Securities High Yield Broad Market up 0.30% on the day to a year-to-date return of 3.25%. The KDP High Yield Daily Index was up 0.17 to 79.87, while its yield tightened by 4 basis points to 7.88%.

Stephanie N. Rotondo contributed to this article

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