Axcan Pharma prices eight-year deal, then moves up; Visteon leads auto parts names higher; Six Flags flies

By Paul Deckelman and Paul A. Harris

New York, April 30 - Axcan Pharma Inc. was heard by syndicate sources to have successfully priced its issue of eight-year notes, which were seen by traders to have moved up solidly from the big discount to par at which the bonds had priced in order to get the deal done, not unlike what happened to Ford Motor Credit Co.'s new issue.

That company's new bonds held onto the gains they notched in Tuesday's trading, while its existing issues, which had been in retreat on Tuesday, were in recovery Wednesday.

Former Ford parts subsidiary Visteon Corp.'s bonds drove higher after the Van Buren Township, Mich.-based parts maker reported a smaller-than-expected quarterly loss. Other parts names like Lear Corp. and American Axle & Manufacturing Holdings Inc. were also better

General Motors Corp. posted a huge quarterly loss, versus its year-ago profit - but its bonds rose anyway, investors impressed by what the company's leader called its "very strong" cash and liquidity picture.

Apart from the autosphere, traders saw Six Flags Inc.'s bonds continuing their recent firming trend.

Axcan oversubscribed

The final primary market session of April saw terms emerge on a single high yield deal.

Axcan Intermediate Holdings Inc. priced a $235 million issue of 12¾% eight-year senior unsecured notes (B3/B-) at 98.84 to yield 13%, on top of the 13% area price talk.

A source close to the deal said that it went very well, and added that the order book was three times subscribed.

Banc of America Securities, HSBC and RBC Capital Markets were joint bookrunners for the bridge refinancing deal.

Range Resources sets talk

Range Resources Corp. set price talk for its $250 million offer of 10-year senior subordinated notes (expected ratings Ba3/BB) at the 7¼% area, with pricing set for Thursday.

JP Morgan and Banc of America Securities are leading the debt refinancing deal.

A buy-side source reported hearing talk Tuesday night of 7½% to 7¾%, however there was no word from the syndicate that Wednesday's 7¼% area official price talk represented any kind of revision.

Risk appetite returns

A pair of recently announced debt financing deals make a considerable play for the eye as they seem to fly in the face of the professed tendency toward risk aversion which has taken hold in the leveraged markets since the sell-off got underway approximately 10 months ago.

McJunkin Red Man is in the bank loan market with a $450 million holdco term loan and $50 million revolver add-on, with proceeds earmarked to fund a dividend payment.

Meanwhile Newport Television Holding LLC/NTV Holdings Finance Corp. is marketing a $394.5 million two-piece junk bond deal which features $200 million of 13% senior PIK toggle notes due March 15, 2017 and $194.5 million 13¾% senior discount notes due March 15, 2018.

An official from a high yield syndicate desk characterized these as "legacy" deals - committed financings surfacing at a time when underwriters have some confidence that they can get across the finish line.

This source does not believe that any trend can be read into these structures. Nor is it likely that new high yield business is being pitched with structures such as these.

However a money manager from a mutual fund, whose portfolio includes high yield bonds, said that these deals demonstrate that risk appetite is alive and well

"Monetary tightness and illiquidity was just a bad dream," the investor added, sardonically.

"It looks like we're back to business as usual."

No bad news

This investor said that the technical picture of the present high yield market is a positive one, and added that there has been no material bad news, such as a jump in defaults.

"There have been some positive flows of cash to the high yield mutual funds," the investor recounted.

"And spreads have come in," the source continued, noting that in mid-March, "when the market was petrified," high yield spreads were above 850 bps points, whereas presently they are a little over 700 bps.

"That's been a combination of intermediate Treasury rates moving off their lows," the money manager allowed, spotting the 10-year Treasury at 3.82% late Wednesday afternoon.

"But high yield has narrowed," the buy-sider asserted.

"There has been some actual capital appreciation in high yield."

Looking for a pause

Of the Wednesday move by the Federal Reserve's Federal Open Market committee cutting the fed funds rate by 25 basis points to 2%, the money manager commented that the markets seemed to doing alright before the news of the rate reduction surfaced.

The buy-sider now looks for the Fed to take a breather, and does not anticipate any further easing of the Fed funds rate in the near future.

The investor added that other liquidity measures undertaken by the Fed to relieve stress on the financial sector were of equal or perhaps even greater importance than rate reductions.

"To grant the dealers access to doing repo, as well as having the discount window accepting a broader range of collateral for a longer time period, and not having a stigma attached to the discount window has been much more important, and much more targeted and meaningful with respect to this crisis, than just a broad-brush rate cut," the buy-sider asserted.

New Axcans rise, Ford Credit stays strong

When the new Axcan 12¾% notes due 2016 were freed for secondary dealings, a trader saw the bonds "up 2 points" (technically, up about 1 5/8) at 100.5 bid, versus their 98.84 pricing level earlier in the session.

Call it a case of "deja vu all over again," as the phrase goes.

"You saw that with the Ford deal" on Monday, he said, referring to when Ford Credit sold $1.1 billion of new 12% bonds at a fairly steep discount to par - also with a 98-and-change price - and that issue also moved up to around the 102-102.5 level, as investors jumped in at the cheap initial price. "That was also a 12% [area] deal - so there's money out there, particularly for these bonds that are at a discount."

The Ford Credit bonds meantime held those gains, a market source said, while the financing company's established issues, which had initially been mixed, were seen higher - its 7 3/8% notes due 2009, one of the day's most actively traded issues, gained nearly a full point to finish at about the 97 area, while a source pegged its 7.80% notes due 2012 up almost 3½ points on the day to just below 92. At another desk, the Ford Credit 7% notes due 2013 were seen up a point at 87.5 bid.

Corporate parent Ford Motor Co.'s benchmark 7.45% bonds due 2031 were seen by a trader up a point at 74.5 bid, 76 offered, while another trader had them up ½ point at 75 bid, 76 offered.

Visteon is victorious

But the star of the day at many junk desks was former Ford parts unit Visteon, pushed up for a second straight session. On Tuesday, it was anticipation of the company's numbers, as well as the good feelings about the parts sector generated by strong results from such peers as Lear and ArvinMeritor Inc.; on Wednesday, it was Visteon's own quarterly numbers that were the catalyst.

A trader saw Visteon up "on their better than expected results." He saw the 7% notes due 2014 up 3 points at 67 bid, 68 offered. Another trader said they were "up a couple [of points]," with the 7s at 67 bid and the company's 8¼% notes due 2010 having risen to 87.

One market source saw the bonds get as good as 68 bid, calling that a 2 point gain on the day, and said it was among the 10 busiest issues of the session.

Visteon surprised investors as it reported a first-quarter loss of $105 million, or 81 cents per share - a considerable improvement from the year-earlier red ink of $153 million, or $1.19 per share. Revenue was only slightly reduced from a year ago, at $2.86 billion, a 1% falloff from $2.89 billion, despite a slide in its North American sales triggered by its divestiture of some North American operations, as well as the problems of the domestic carmakers, including former parent (and still biggest customer) Ford.

Visteon was able to make up for most of that lost revenue by increased sales abroad, particularly to Asian-based carmakers, and by cost-cutting back at home.

Visteon took $40 million in earnings charges related to the sale of those North American facilities, as well as $46 million for restructuring expenses. Excluding such special items, the company had a per-share loss of 33 cents - about half of the roughly 65 cents per share of red ink which Wall Street had been expecting.

Lear keeps rising

Visteon led the way for other auto-sector names Wednesday, including Lear, whose bonds had risen solidly on Monday and Tuesday, first on the expectation of good quarterly results for the Southfield, Mich.-based automotive seating and electronic components maker and then on the actual results, which turned out to be stronger than anticipated. On Wednesday, Lear continued to ride that upside momentum; a trader saw its 8¾% notes due 2016 up a point at 93.25 bid, 94.25 offered, while at another desk, the company's 5¾% notes due 2014 were up more than a point to 84 bid.

Another gainer in the automotive realm was American Axle; its 5¼% notes due 2012 gained a point to end at 83 bid, 84 offered.

GM bondholders shrug off loss

A market source saw GM's benchmark bond issue, the 8 3/8% paper due 2033 gain more than 2 points on the day to close at 76.25, in busy dealings, while a trader at another shop estimated them 1½ points higher at 75.25 bid, 75.75 offered. However, another trader had the bonds going the opposite way, off a point at 75 bid, 76.5 offered.

In shorter-dated paper, GM's 7 1/8% notes due 2013 were seen up a deuce at 82.5.

The bonds rose even as the Detroit giant reported a truly giant-sized first-quarter loss of $3.25 billion, or $5.74 per share, versus its year-earlier profit of $62 million, or 11 cents per share.

However, GM fans pointed out that much of that loss was attributed to various charges and other special items that it took, including a $1.45 billion item in connection with its 49% stake in GMAC LLC and another $751 million related to its efforts to assist bankrupt former GM parts unit Delphi Corp. Excluding those items, GM's loss came to $350 million, or 62 cents per share - less than half of the roughly $1.50 per share of red ink that analysts on average was looking for.

While GM continues to suffer mightily from the downturn in sales in its core North American region, its balance sheet was swelled by increased sales in other regions of the world such as Latin America and Asia. Investors were further heartened as the company's chief executive officer, Rick Wagoner, told analysts on a conference call that GM's cash and liquidity position was "very strong," although its cash, marketable securities and other funds fell a little in the quarter to $23.9 billion from $24.7 billion previously.

GM's NYSE-traded shares rose 9% on the day Wednesday, while credit-default swap costs to protect its bondholders against a default narrowed by 20 basis points.

Six Flags continues rise

Outside of the autosphere, a trader noted that Six Flags bonds "have been getting stronger," calling the New York-based theme-park operator's 9 5/8% notes due 2014 up a point at 67 bid, 68 offered. He said that those bonds and the company's other paper have been rising "for the last couple of weeks," ever since company officials revealed better attendance and revenue figures at mid-month and expressed optimism about the company's prospects for this year.

He noted that the 9 5/8s "are up 10 to 15 points in the last couple of weeks." He said that the bonds had been trading 10 points lower, at about the 58 level, on April 15, and had finished up March at around 55 bid.

Another source saw Six Flags' 8 7/8% notes due 2010 up 2 points on the day Wednesday at 85.5 bid.

Amkor up in late move

The trader also saw strength in Amkor Technology Inc., after the Chandler,. Ariz.-based semiconductor services provider released better first-quarter numbers.

Its 9¼% notes due 2016 "were up 2 points at the end of the day after the numbers came out," finishing at 101 bid, 102 offered.

Its net income rose to $72 million, or 36 cents per share, compared with $34.6 million, or 18 cents per share, in the 2007 first quarter

Market indicators seen better

Generally speaking, a trader said, it was "pretty quiet, right up until the Fed announcement" of the quarter-point cut in the benchmark lending rate, which had been widely expected.

A trader saw the widely followed CDX junk bond performance index up perhaps 1/16 point from Tuesday's level at 97½ bid, 97¾ offered. But the KDP High Yield Daily Index rose by 31 bps to 75.94, while its spread tightened by 7 bps to 9.17%

In the broader market, advancing issued led decliners by nearly two to one. Activity, represented by dollar volume levels, was up about 5% from Tuesday's pace.

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