Thomson Learning, Shingle Springs lead new-deal parade; Delphi gains; techs easier

By Paul Deckelman and Paul A. Harris

New York, June 22 - Thomson Learning - even downsized and restructured - was clearly the biggest deal of the day on Friday, pricing $1.6 billion of new junk bonds in a two-part offering, although that deal priced too late in the day for any kind of aftermarket activity.

Pricing earlier were credits such as Blaze Recycling & Metals LLC, whose upsized two-part offering was a hot mover in the secondary market, and Shingle Springs Tribal Gaming, which also firmed respectably when the new bonds were freed to trade around.

The same could not be said for AmeriCredit Corp.'s eight-year issue, which spun its wheels once it got into the aftermarket.

Also pricing Friday were upsized euro-denominated deals for Calcipar SA and Swiss packaging company SIG.

Even apart from the pricing, the primary market was humming. Canadian communications operator CanWest MediaWorks LP was getting ready to hit the road Monday to market a $650 million subordinated notes deal, while Swift & Co. was heard preparing a $600 million offering to help finance the big meat-packing company's pending acquisition. U.S. Foodservice restructured its $1.5 billion-plus mega-deal, and issued price talk. Talk was also heard on High Arctic's pending five-year bond issue.

In the secondary market, Delphi Corp.'s bonds were better, as the troubled company announced a tentative agreement on cutting its heavy labor costs after months of negotiations with the United Auto Workers union and with former parent General Motors Corp.

Various high-tech names such as Amkor Technology Inc. and NXP BV were seen down for a second straight session, although nobody had a ready explanation for the sector's retreat.

Thomson Learning downsizes

During a busy Friday session in the primary market nine tranches of junk were priced, generating $2.38 billion and €1.15 billion of proceeds.

TL Acquisitions Inc./Thomson Learning raised approximately $1.6 billion by selling two tranches of junk in a deal that was downsized from $2.14 billion.

TL Acquisitions, the operating company, raised $1.2 billion by pricing its tranche of 7.5-year senior unsecured notes (Caa1/CCC+) at 98.724 to yield 10¾%.

The yield came 25 basis points beyond the wide end of the 10¼% to 10½% price talk.

A planned toggle feature, which would have allowed the company to make in-kind coupon payments in return for an incrementally higher interest rate, was abandoned. The senior unsecured notes tranche was downsized from $1.35 billion.

TL Acquisitions also raised $400.1 million of proceeds by pricing its eight-year senior subordinated discount notes (Caa2/CCC+) at 77.093 to yield 13¼%.

The yield was printed 25 basis points higher than the wide end of the 12¾ to 13% price talk.

The discount notes come with a two-year zero coupon, an option that was added in restructuring which took place earlier in the week. Previously it had been a straight senior subordinated cash-pay tranche.

The subordinated tranche was upsized from $250 million.

In addition to the structural changes, Thomson Education also made modifications to the bonds' debt test and restricted payments covenants.

JP Morgan, Citigroup, UBS Investment Bank and RBS Greenwich Capital were bookrunners for the LBO deal.

The Stamford, Conn., textbook publisher abandoned a $540 million of eight-year senior PIK notes that it had planned to issue via TL Holdings Inc.

Hence the overall transaction was downsized from $2.14 billion, with $540 million of the financing being shifted to a PIK bridge loan.

Throughout the week sources roundabout the market source said that the Thomson deal was struggling, not least because the company ends up more than nine-times leveraged.

Shingle Springs prices $450 million

Elsewhere Friday Shingle Springs Tribal Gaming priced a $450 million issue of eight-year senior notes (B3/B) at par to yield 9 3/8%, in the middle of the 9¼% to 9½% price talk.

Morgan Stanley was the bookrunner for the project financing.

AmeriCredit prices $200 million

Texas-based auto finance company, AmeriCredit Corp., priced a $200 million issue of eight-year senior notes (Ba3/B+) at par to yield 8½%, at the wide end of the 8¼% to 8½% price talk.

Deutsche Bank Securities and Lehman Brothers were joint bookrunners.

Proceeds will be used for general corporate purposes, possibly including the repayment of the company's 1¾% convertible senior notes due 2023, which become callable in November 2008.

Blaze upsizes, restructures

Blaze Recycling & Metals, LLC and Blaze Finance Corp. priced an upsized, restructured $130 million two-part high-yield notes transaction on Friday.

The Georgia-based metal recycler priced an upsized $115 million issue of five-year senior secured notes (B) at par to yield 10 7/8%, in the middle of the 10¾% to 11% price talk. The tranche was upsized from $110 million.

Also, in a restructuring of the deal, Blaze Recycling priced an added $15 million tranche of non-rated senior subordinated notes due Jan. 15, 2013 at par to yield 16½%. No price talk had been set for the subordinated notes issue.

The subordinated notes will pay a cash coupon of 16½%, or a PIK coupon of 18%.

Jefferies & Co. was the bookrunner for the acquisition financing.

SIG upsizes

SIG (Beverage Packaging Holdings (Luxembourg) II SA) priced an upsized €900 million two-part high-yield notes transaction.

The Swiss beverage packaging firm priced an upsized €480 million issue of 9.5-year senior notes (B2/B+) at par to yield 8%, on top of the price talk. The senior notes tranche was upsized from €450 million

In addition, SIG priced an upsized €420 million tranche of 10-year senior subordinated notes (B3/B-) at par to yield 9½%, also on top of price talk. The subordinated notes tranche was upsized from €320 million.

Credit Suisse ran the books for the debt refinancing related to an acquisition.

Calcipar upsizes

Lime producer Calcipar SA priced an upsized €250 million issue of seven-year senior unsecured floating-rate notes (Ba2/BB+) at par to yield three-month Euribor plus 120 basis points, via BNP Paribas and Fortis Securities.

Proceeds will be used to refinance debt and lengthen maturities.

Week's issuance tops $5 billion

With Friday's dollar-denominated deals in the tally, the June 18 to June 22 week came to a close having seen $5.78 billion of proceeds generated by the sales of 17 tranches of junk, making it the biggest week since the May 14 to May 18 week which saw slightly less than $7.15 billion price in 14 tranches.

Friday's primary market action takes year-to-date issuance to just above the $98 billion mark, more than 58% higher than the $61.9 billion that had priced by the June 22 close during the record-setting year of 2006.

U.S. Foodservice restructures

U.S. Foodservice Inc. undertook a restructuring of its high-yield notes offering, in addition to announcing price talk on two tranches of notes on Friday, according to a market source who added that key changes to the notes' covenants have also been introduced.

The Columbia, Md., foodservice distributor now plans to place $1.1 billion of eight-year senior notes (Caa2/CCC), non-callable for four years, in two tranches: $550 million of cash-pay notes, price talk 10% area, and $550 million of toggle notes, price talk 10½% area.

The toggle notes make provision for the company to make in-kind coupon payments up until the first call date.

In addition the LBO financing now includes $450 million of senior subordinated discount notes which will not be marketed.

Previously U.S. Foodservice had been in the market with $1.55 billion in two parts: $1 billion of eight-year PIK for life notes and $550 million of 10-year senior subordinated notes.

The company shifted $100 million of the financing to the senior notes tranches from the subordinated tranche.

Books are set to close at 5 p.m. ET on Monday.

Pricing is expected on Tuesday.

Deutsche Bank Securities, Citigroup, Goldman Sachs & Co., JP Morgan, Morgan Stanley and RBS Greenwich Capital are the underwriters for the LBO deal.

A trio of new deals

Prospective issuers also stepped forward on Friday.

A roadshow will start Monday for Canadian newspaper publisher CanWest MediaWorks LP's $650 million offering of 10-year senior subordinated notes, via Citigroup and Scotia Capital.

Proceeds, together with the proceeds from new credit facilities, will be used to refinance the C$1.3 billion short-term loan facility used for the privatization of CanWest MediaWorks Income Fund and for general corporate purposes including future corporate development initiatives or distributions to CanWest MediaWorks.

Elsewhere J&F I Finance Co. (Swift & Co.) will start a roadshow on Tuesday for its $600 million three-part offering of senior notes (B2/B).

JP Morgan and Credit Suisse are leading the deal.

The offering is comprised of three $200 million tranches of senior notes:

• Eight-year fixed-rate notes with four years of call protection;

• Eight-year toggle notes with four years of call protection; and

• Seven-year floating-rate notes with two years of call protection.

Proceeds will be used to fund the acquisition of Greely, Colo.-based meatpacker, Swift Foods Co., by J&F Participacoes SA.

And High Arctic Energy Services Trust set price talk for its $130 million offering of five-year fixed-rate bonds at 10¼% to 10½% - a deal that it will shop to investors in London on Monday and in New York City on Tuesday.

SEB Merchant Banking and Swedbank, both Norwegian banks, are the arrangers for the notes offering.

Proceeds will be used to repay bank debt and fund capital expenditures.

High Arctic is a Red Deer, Alta., provider of specialized oilfield equipment and services.

Red-hot Blaze bonds burn brightly

When the new Blaze Recycling bonds were freed for secondary dealings, they fairly sizzled, traders said, up several points right out of the chute.

A trader saw the new 10 7/8% senior secured bonds due 2012 at 102.25 bid, 103.25 offered, although another trader saw a tighter 102.5 bid, 103 offered level.

Neither offered an explanation as to the strong level of aftermarket interest in the smallish ($130 million) deal brought by a less-known second-tier issuer.

Shingle Springs a winning hand

Another new deal which traded fairly well after its pricing was Shingle Springs Tribal Gaming, whose 9 3/8% notes due 2015 were seen by a trader at 101.25 bid, 101.5 offered, well up from their par issue price earlier. Another trader quoted the bonds at 101.25 bid, 101.75 offered.

AmeriCredit little moved secondary

While the new Blaze Recycling and Shingle Springs bonds were hot, AmeriCredit's issue went almost nowhere. A trader saw the company's 8½% notes due 2015 at 100.125 bid, 100.375 offered, versus their par issue price.

Another trader saw the bonds at par bid, 100.5 offered .

Delphi news spurs bond rise

Back among the established issues, Delphi's bonds were seen up several points, with traders pointing to the mid-afternoon announcement of a tentative agreement between the bankrupt Troy, Mich.-based automotive parts supplier, former parent GM - which will be greatly helping Delphi with any financing costs associated with the agreement - and the UAW, which represents about 17,000 hourly workers at the company. Those employees have been working under a cost structure Delphi essentially inherited from GM when it was spun off as an independent company in 2000 - a setup which Delphi complains made it impossible to actually earn any money as a stand-alone parts supplier.

A trader quoted Delphi's 6.55% notes that were to have come due last year and its 6½% notes due 2009 both around 120 bid, up a point. He also saw its 6½% notes due 2013 at 117 bid, 118 offered, "quoted higher, but with not a lot of volume trading in that."

The big mover on the day, he said, was the company's 7 1/8% notes due 2029, which moved up to 120.75 bid, 121.75 offered, which he called a 4 point rise.

"That being on the long end, it seemed to move the most, up 4 points, and on decent volume. The short ones didn't move up that much."

A second trader saw the 6.55s at 119 bid, 119.75 offered, which he called up 2 points on the day, while a third agreed that the biggest move came in the '29s, which he saw up a deuce at 121 bid, 122 offered.

A market source at another desk saw those longer bonds rise to about the 121.5 level - up about 2½ points from the opening, but up some 5 points from late levels on Thursday.

Delphi's bonds had actually started moving up earlier in the session on news reports late Friday that presidents of the various locals representing workers at Delphi plants in Troy and elsewhere throughout the country had been summoned to Detroit for a Friday meeting on the talks, reports which suggested that they might be presented with a completed agreement. Earlier in the week, union chief Ron Gettelfinger had advised the Delphi local leaders to prepare for a ratification vote, perhaps in the next few days.

Terms of the accord have not officially been released, pending a ratification vote by the union rank and file. Published reports say that the pact would cut wages for longtime UAW workers from around the present $27 per hour base salary to between $14 and $18.50, and is also expected to include lump-sum payments to longtime employees, who could then either continue working for Delphi at a lower wage, go back to GM or retire.

GM could be on the hook for as much as $7 billion for the lump-sum payments - but it is apparently worth it to the giant carmaker to maintain labor peace at its largest parts supplier. Last year, the UAW threatened to strike Delphi - which would severely affect production at GM, the company's biggest customer, as well as other carmakers - if an acceptable contract were not reached.

While the reported $18.50 top hourly wage is a sharp reduction from the current top salary, it is still more than twice the $9 per hour wage that Delphi first said it wished to impose on its hourly employees, which prompted the strike threat.

In addition to gaining the approval of its UAW-represented workers, Delphi needs the U.S. Bankruptcy Court for the Southern District of New York, which is overseeing its restructuring, to sign off on the plan. Delphi has to also negotiate similar agreements with several smaller unions which collectively represent about 20,000 hourly workers.

The labor pacts are a key condition of a proposed $3.4 billion cash infusion to be provided to Delphi by an investment group headed by top shareholder Appaloosa Management LP and Cerberus, although the latter may decide to drop out since it is occupied with its acquisition of Chrysler from the former DaimlerChrysler AG. Number-Two Delphi shareholder Highland Capital Management has also been in talks with Delphi on an alternative funding plan.

Delphi's Pink Sheets traded shares were unchanged on the day at $2.67, although the 12 million share volume was more than double the average daily activity level.

Automotive names trade actively

Even though the tentative deal between Delphi and the UAW is seen as a positive for GM, since it keeps the peace between the union and Delphi, avoiding a threatened strike that could play havoc with GM's production capacity, the latter's bonds got no big boost.

A trader saw the Detroit giant's benchmark 8 3/8% notes due 2033 down perhaps ½ point to 90.5 bid, 91 offered, while arch-rival Ford Motor Co.'s 7.45% notes due 2031 were off 1/8 point at 80 bid, 80.5 offered.

Another source saw GM's bonds, and Ford's - particularly their respective financing arms, GMAC LLC and Ford Motor Credit Corp., dominating the list of widely traded offerings. GMAC's 6 6/8% notes due 2012 traded busily, but ended little changed on the day, off about 3/16 at just under 97.375, while Ford Credit's 7.80% notes due 2012 were up ¼ point at just below 98.

Tech names continue to struggle

For a second straight session, the high-tech names were seen moving lower as a group, with Chandler, Ariz.-based semiconductor services company Amkor Technology's 7¾% notes due 2013 down a point, at 95.5 bid, while Sunnyvale, Calif.-based chip-maker Advanced Micro Devices' 7¾% notes due 2012 were off by more than a point at 94 bid.

NXP - the former Phillips Semiconductor - was down 1½ points, its 9½% notes due 2015 at about the 99 level. Austin, Tex.-based chipmaker Freescale Semiconductor was also on the downside, its 8 7/8% notes due 2014 off a point at 96.5 bid.

Movie Gallery off, Blockbuster change eyed

Elsewhere, a trader saw Movie Gallery Inc.'s 11% notes due 2012 at 81 bid, 82 offered, and said "there's nothing there."

However, another trader called the Dothan, Ala.-based Number-Two U.S. video rental chain operator's bonds down a point, at 80 bid, 81 offered, and suggested it might have been due to investor angst about news coming from Movie Gallery's bigger rival, Blockbuster Inc.

The Dallas-based Number-One operator announced that its chief financial officer, Larry J. Zine, will leave the company no later than Dec. 31, and although it raised the possibility that he could leave earlier, it laid out provisions for a lump-sum payment to encourage him to stay till then.

Zine becomes the second high-ranking Blockbuster executive to make exit plans; previously, chairman and chief executive officer John Antioco announced plans to step down at year's end.

Blockbuster's 9% notes due 2012 lost ½ a point to 96.5 bid, 97.5 offered.

Market quietly lower, investor wary

A trader quoted the widely followed CDX index of junk bond performance down ½ point at 98 7/16-98 9/16.

But overall, another trader said, "it was a pretty quiet day in general. Stocks were ugly, and that sent people to the sidelines, as they stayed in a summer dead-Friday mode."

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