AES prices upsized deal; GM skids as CEO Wagoner walks the plank; junk market mostly lower

By Paul Deckelman and Paul A. Harris

New York, March 30 - AES Corp. was heard by high yield syndicate sources to have successfully priced an upsized issue of seven-year bonds on Monday. However, after initially firming in the aftermarket, the new bonds were quoted late in the day having dropped back to straddle their issue price.

Among established issues in the secondary market, General Motors Corp. bonds fell markedly, in the aftermath of the weekend purge - ordered by the Obama administration - which saw chief executive officer Rick Wagoner forced to resign as a condition of continued federal assistance to the ailing automotive giant.

GM domestic arch-rival Ford Motor Co.'s paper meantime was seen unchanged to better, as the Number-Two domestic automaker was seen less likely to go bankrupt than GM.

Elsewhere, Ply Gem Industries Inc.'s bonds fell after the Cary, N.C.-based building products maker reported fourth-quarter results, including a wider net loss, and even though management asserted on its conference call that Ply Gem has sufficient liquidity to ride out the current economic downturn.

Another big loser was R.H. Donnelley Corp., following Friday's filing of its 10-K report with the Securities and Exchange Commission that includes a "going concern" warning about the company's prospects.

Overall, traders said that junk was on the defensive all day.

AES upsizes

Monday in the primary market AES Corp. priced an upsized $535 million issue of 9¾% seven-year senior notes (B1/BB-/BB) at 93.977 to yield 11% in a drive-by.

The deal went exceptionally well despite the market backdrop on Monday, a syndicate source said, referring in part to a big sell-off in equities in which the S&P 500 dropped by nearly 3.5%.

The yield was printed on top of the 11% area price talk.

The face amount of the deal was upsized from $350 million.

The sale generated $502.777 million of proceeds.

Banc of America Securities LLC, Citigroup, Deutsche Bank Securities, JP Morgan, Morgan Stanley and Credit Suisse were joint bookrunners.

Proceeds will be used for general corporate purposes including, but not limited to, debt refinancing.

BWAY talk expected Tuesday

Meanwhile there is only one high-yield deal being marketed via a roadshow.

Price talk could surface Tuesday on BWAY Corp.'s $200 million offering of five-year senior subordinated notes (B3/B-), according to an informed source.

The deal is expected to price mid-week via joint bookrunners Deutsche Bank Securities and Goldman Sachs.

Lackluster moves for new AES

When the new AES 9¾% notes due 2016 were freed for secondary dealings, a trader said that he heard the bonds had moved up to around 94.5 bid from their 93.98 issue price, but stressed that he was "just hearing that - I haven't seen any trades."

A second trader saw the bonds little changed, around 94 bid, 95 offered.

But a third was quoting them a little later on straddling their pricing level, at 93.75 bid, 94.5 offered. He too qualified that, noting that he had not seen or heard of a trade, "that was just a two-sided market."

He said the new deal was "not doing so great," adding that "in this environment, that's to be expected."

Ironically, he observed, the fact that the deal was solidly increased in size was a factor undermining its attractiveness in secondary.

"When you upsize, like they did, you take away that aftermarket need or angst to add to the issue. They filled everyone on issue, and that left very few people in the aftermarket that needed more bonds to fill their requirement or the amount that they were looking for."

A market source saw AES' existing 8% notes due 2017 fall nearly 4 points to the 86 level, in tandem with the new deal.

Market indicators on the slide

Back among existing bonds without new-deal connections, a trader saw the widely followed CDX Series 12 High Yield index of junk bond performance - which fell ¼ point on Friday, the first day of trading after the scheduled roll to a new series -- down "dramatically," plunging 1¾ points to end at 70 7/8 bid, 71 3/8 offered.

The KDP High Yield Daily Index meantime fell by 19 bps to 53.06, while its yield increased by 2 bps to 13.46%.

In the broader market, advancing issues fell behind decliners, by an 11-to-six margin.

Overall market activity, measured by dollar-volume totals, was down 16.5% from the levels seen in Friday's session.

A trader characterized the market as "quiet and a little bit sloppier, as you can imagine," although he said "nothing sticks out."

He continued that "it was a pretty lackluster day.

"A lot of your commodity [names] like Freeport-McMoRan [Copper & Gold Inc.]" were lower. He saw the Phoenix-based mining company's 8 3/8% notes due 2017 ease to 93.25 bid, 93.625 offered from prior levels around 94.25.

Another trader opined that "it's certainly a down day, no question about that - a majority of the most active names were down."

For instance, he saw the Freeport 8 3/8s at 94 bid - the most actively traded junk bonds, with $35 million turned over - down ½ point at 94.

He also saw Community Health Systems Inc.'s 8 7/8% notes due 2015, frequently considered a junk market bellwether bond, at 94.5 bid, down ¾ point on the day, calling that "a fair generalization of our market - down ¾ to a point." Some $18 million of the bonds changed hands.

GM lower following Wagoner ouster

A trader declared that "General Motors was running for cover today, as you could well imagine," and pegged the carmaker's bonds down about1½ to 2 points.

"Guys were looking to sell more, but they couldn't get to borrow for the shorts," as the company's capital structure was down across the board following the dramatic weekend news out of Detroit that the company's CEO, Rick Wagoner, had resigned under pressure from the Obama administration, which also rejected as inadequate the recovery plans put forward by GM and by Chrysler LLC. GM has been given 60 days to come up with a better plan or else face a cutoff of government aid, while Chrysler has 30 days to arrange a partnership with European carmaker Fiat.

Another saw GM's benchmark 8 3/8% bonds due 2033 down 2 points to 16 bid, on volume of $5 million, and saw GM's 7.20% notes due 2011 slide to 19 bid, down from 26.5 previously, on $5 million traded, as the financial markets reeled from the

A market source saw GM's 7 1/8% notes due 2013 down a full 4 points on the day at 18 bid.

GMAC LLC's 6% notes due 2017 took "a big drop," a trader said, to 77.75 bid from 80 previously, on $20 million traded. However, GMAC's 5 5/8% notes coming due in May were seen having gained more than 2 points to 93.

Ford outpaces GM

A trader meantime saw Ford Motor Co.'s 7.45% bonds due 2031 off ½ point at 31.5 bid, on $3 million traded.

Another trader actually saw the Ford long bonds up a point at 29 bid, 31 offered, but said the GM benchmarks swooned by 4 points to 14 bid, 16 offered.

At another desk, a trader said that while GM was "down points," particularly the 7.20s, "Ford seemed to hold up a little better," on the market assumption that Ford - which has not asked for federal bailout money, unlike GM and Chrysler - is less likely to have to go bankrupt than its traditional "Big Three" rivals.

That kind of thinking helped Ford Motor Credit Co.'s 7 3/8% notes due 2011 firm by more than 2 points on the day to the 77 level.

Ply Gem get hammered

Outside of the autosphere, a trader saw building products maker Ply Gem's 9% notes due 2012 drop to 25.5 bid from 33 on Friday, on volume of $10 million, "so that's a statement." He saw the company's 11¾% notes due 2013 fall to 47.25 bid from 54, on $5 million of turnover.

He dismissed management's assertions on its conference call following the release of its numbers that that the company currently has sufficient liquidity to ride out the economic downturn, noting "doesn't everybody say they have enough liquidity - from Bear Stearns, to Lehman, and now to Ply Gem."

Another trader said that Ply Gem's bonds "moved a lot on bad numbers." He quoted the 113/4s trading in the 45-47 range with the last trade he saw at 46, calling that a 7-point drop from the end of last week.

Ply Gem reported its net loss before unusual items for the fourth quarter was $27.9 million, versus $10 million or red ink a year earlier. Adjusted EBITDA for the fourth quarter was $5.7 million compared with $32.3 million for the fourth quarter of 2007.

Donnelley take a drubbing

Another Cary, N.C., company, R.H. Donnelley Inc., was getting slammed around on Monday.

A trader said the telephone directory publisher's bonds "got hit," notably its Dex Media 9 7/8% notes due 2013, which fell to 20.375 bid from 23 on Friday, on volume of $9 million, and the 9% notes due 2013, which were down a deuce at 13 bid, with $7 million traded.

The most active Donnelly issue, he said, was its 8 7/8% notes due 2017, which dipped to 6 bid from 8 1/8% on Friday, with $12 million traded. He added "someone was selling the whole cap structure today."

He also saw Donnelly's 6 7/8% notes due 2013 sink lower into the single digits at 5.5 bid from 6.5 - the most recent previous round lot trade, back on March 17 - on $1 million traded. He saw no movement in its 8½% notes due 2010, unchanged at 53 bid on $4 million traded, "so no great shakes there."

A market source at another desk saw the Dex 8% notes due 2013 drop nearly 5 points to 11.5 bid.

Donnelley's nearly worthless Pink Sheets-traded shares gained 4 cents, or 17.39%, to end at 27 cents a share, on volume of 1.29 million, nearly 30% more than usual.

Donnelley on Friday filed its annual 10-K report with the SEC - including its not-unexpected acknowledgement that "certain events could impact our ability to continue as a going concern," including its "significant amount" of maturing debt obligations beginning next March, the current global credit and liquidity crisis, and "the significant negative impact on our operating results and cash flows from the overall downturn in the global economy and an increase in competition and more fragmentation in the local business search space."

Chemtura comeback paused

A trader said that Chemtura Corp.'s 6 7/8% notes due 2016, which strengthened all last week as the Middlebury, Conn.-based chemical company's bonds bounced off the lows they hit immediately after Chemtura's March 19 bankruptcy filing, were unchanged on Monday at 45, on volume of just $1 million.

Meanwhile corporate ancestor Witco's 6 7/8% bonds due 2026 were ¼ point lower at 24/75 bid, on $4 million traded.

Some issues are upsiders

But the session was not without its winners. Chandler, Ariz.-based semiconductor industry services company Amkor Technology Inc.'s bonds continued the firming trend that started late last week, after the company issued less negative guidance than recently and announced a $240 million convertible note sale.

A trader saw its 7 1/8% notes due 2011 at 92 bid, up a point from Friday's levels, with $5 million traded.

Its 7¾% notes due 2013 gained 2 points to end at 81 bid, on $3 million traded.

Another gainer was Travelport Inc.; the travel services company's 9 7/8% notes due 2014 moved up a point to 39.5, on volume of $6 million traded, despite a lack of fresh news.

A trader said "who would have figured that a travel services company, of all things, would be up on a down day in this economy?"

He also noted Parsippany, N.J.-based car-rental king Hertz Corp.'s 8 7/8% notes due 2014 - which have been firming steadily since early last week on expectations that the company will buy back term loan debt -- were about ½ point higher at 60, which he called "impressive on a day like today - after all, last week, everything was going higher."

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