Linens 'n Things, Drummond deals price; GM bonds rebound

By Paul Deckelman and Paul A. Harris

New York, Feb. 7 - Linens 'n Things Inc. and Drummond Co. Inc. successfully priced new deals Wednesday, high yield syndicate sources said, between them bringing more than $1 billion of new paper to market.

In the secondary arena, the bonds of General Motors Corp. and its General Motors Acceptance Corp. financial arm remained volatile, with most traders seeing the bonds finishing the day higher, bouncing back from the losses suffered on Tuesday, when the market ignored the struggling Detroit giant's announcement of new cost-cutting moves and instead seemed to focus on the continued lack of progress in the company's efforts to sell a controlling stake in GMAC.

Another gainer was Amkor Technology Inc., after the Chandler, Ariz.-based provider of semiconductor industry test and packaging services reported better-than-expected quarterly results.

Asked to mark the broad high-yield market late Wednesday, one senior syndicate official commented that there were light volumes with a good tone and added that the market had been grinding up.

Meanwhile terms emerged on four issues totaling $1.3 billion Wednesday - and the session actually cleared out the forward calendar, leaving no deals in the market.

Linens 'n Things tight to talk

The session's biggest issue came from Clifton, N.J., home textiles and accessories retailer Linens 'n Things, Inc.

In an acquisition financing, the company priced a $650 million issue of eight-year senior secured floating-rate notes (B3/B) at par to yield three-month Libor plus 562.5 basis points, on the tight end of the three-month Libor plus 575 basis points price talk.

Bear Stearns & Co. and UBS Investment Bank were joint bookrunners.

Drummond mid-talk

Drummond Co. Inc. priced a $400 million issue of 10-year senior notes (Ba3/BB-) at par to yield 7 3/8%, in the middle of the 7¼% to 7½% price talk.

Citigroup and Merrill Lynch & Co. were joint bookrunners for the debt refinancing deal.

Stratos on wide end of talk

Meanwhile Stratos Global Corp. priced a $150 million issue of seven-year senior notes (B2/B) at par to yield 9 7/8%, at the wide end of the 9¾% area price talk.

RBC Capital Markets and Banc of America Securities were joint bookrunners for the acquisition financing from the Canadian global provider of remote telecommunications services.

Canadian Satellite prices $100 million

Finally, terms were heard Thursday for Canadian Satellite Radio Holdings Inc.'s $100 million issue of eight-year senior notes which priced at par to yield 12¾%.

Bear Stearns & Co. ran the books.

An empty forward calendar

Sources confirmed at Wednesday's close that with the session's expected business having been concluded the forward calendar was devoid of deals that are thought to actually be in the market.

Sources have attributed the dearth of new deal announcements to the JP Morgan Annual High Yield Conference underway in Miami.

However sources are also anticipating that February's issuance will likely pale before the $16 billion of issuance seen in January.

Drummond up in trading

When the new Drummond 7 3/8% notes due 2016 were freed for secondary dealings they were quoted at 100.5 bid, 100.75 offered, up slightly from their par issue price earlier in the session, while Linens 'n Things' new senior secured floating-rate notes due 2014 were little changed from their par issue price at par bid, 100.25 offered.

Back among the established issues, traders said that the overall activity level was muted, citing the JP Morgan high yield conference going on in Florida, always a big magnet for portfolio managers and other buyside decision makers at this time of the year.

GM bounces back

That having been said, they noted brisk activity in GM bonds, and GMAC's, as the carmaker's bonds, and those of its financing arm seemed to rebound after having skidded lower Tuesday on Moody's Investors Service's bearish ruminations about GM's lack of success so far in its effort to sell a 51% stake in GMAC to some deep-pocketed investment-grade financial company. That effort is now going on four months and so far the only buyers to emerge have been several investment syndicates led by private equity companies - and Moody's and the other ratings agencies have said that they probably will not up GMAC's Ba1 credit rating back to investment-grade in such a circumstance, which would seem to defeat the whole purpose of selling control of the lucrative unit to someone else.

With the market having had a day to consider whether the selling in GM was overdone, GM and GMAC "were lower in the morning," a trader said, "but now they're up a point to 1½ across the board."

A trader at another desk saw the benchmark GM 8 3/8% notes due 2033 a point better on the day at 72.75 bid, 73.5 offered, while GMAC's most widely traded issue, the 8% notes due 2031, were ending at 97 bid, 98 offered, which he saw as up 1¼ point on the day.

GM "went on a ride," said another trader, who saw the 8 3/8s move up to 72.5 bid, 73.5 offered at day's end from 71 bid, 72 offered earlier. "There was a lot of volume trading, a lot of activity in that name," he said. He also saw the GMAC 8s swinging from 96 bid, 96.5 offered at the opening to 97.5 at day's end, characterizing trading as having "a lot of volatility."

In other less widely traded GMAC issues, he saw its 6¾% notes due 2014 move from 90 bid, 91 offered at the opening to 91.5 bid, 92 offered, while its 6 7/8% notes due 2012 were ¾ point better at 92.75.

However, another trader late in the session pegged the GM '33s down two points at 71.5 bid, 72.5 offered, and said the GMAC '31s at 97 bid, 98 offered, which he saw as down a point. However, he noted that "they were even lower," at 95.5 bid, 96 offered, in the morning, before coming off the lows to end still down a point on the day.

Rest of auto sector mixed

A trader saw other automotive names as pretty much a mixed bag, with GM arch-rival Ford Motor Co.'s 7.45% notes due 2031 better by ¼ point at 72.5 bid, 73.25 offered, while Ford's credit arm's 7% notes due 2013 were half a point better at 90 bid, 90.75 offered.

He saw Lear Corp.'s 5¾% notes due 2014 half a point better at 79.5 bid, 80.5 offered, but saw other names in the sector down. For instance, he said, former Ford unit Visteon Corp.'s 8¼% notes due 2010 were off ¼ at 82.5 bid, 83 offered, while former GM subsidiary Delphi Corp.'s 6.55% notes slated to come due later this year were half a point down at 55 bid, 55.75 offered, as were its 7 1/8% notes due 2029, at 56 bid, 56.75 offered.

Dana Corp.'s 5.85% notes due 2014 were ¼ point off the pace, at 67.5 bid, 68.5 offered.

Amkor gains late on earnings

Elsewhere, a trader noted the rise in Amkor's bonds, attributing the rise to better-than-anticipated numbers that came out after the stock market closed at 4 p.m. ET. That helped the company's 7 1/8% notes due 2011 move up to 91 bid, 92 offered from 89 bid, 90 offered, while its 7¾% notes due 2013 likewise firmed two points to 90.5 bid, 91.5 offered.

Mothers Work higher on results

Also on the earnings front, the trader saw Mothers Work Inc.'s 11¼% notes due 2010 - which on Tuesday had moved up to around 99 bid from 97 previously on strong comparable-store sales for January - continuing to move up, to around 102 bid, 103 offered, after the Philadelphia-based maternity wear retailer reported stronger results for the 2006 fiscal first quarter ended Dec. 31, and upped its earnings guidance for the year.

Company executives commented on a conference call following the release of their numbers that the company had strong free cash flow generation, which they expected to continue through fiscal 2006. They also noted that they had no borrowings outstanding on their revolving credit agreement as of the end of the quarter - a state of affairs they expect to continue - and they acknowledged the possibility of paying down the $125 million of 111/4s, which become callable on Aug. 1, although they added that no decisions had been made yet (see related story elsewhere in this issue).

Land O'Lakes strong

A trader said that "a bond that looks like it's doing very well, post-earnings," was Land O'Lakes Inc. He said the Arden Hills, Minn.-based dairy products producer "may have come out short of earnings [expectations], but it looks like they have a ton of cash and they're focusing on debt reduction.

He saw the company's 8¾% notes due 2011 hovering at 105 bid, 105.5 offered, opining that "by the quotes, you can see that people expect them to take those bonds out because they're trading on a yield-to-call basis."

He saw the company's 9% notes due 2010 at 105 bid, 108.5 offered, while its 7.45% notes due 2028 "are fighting the rise in interest rates" - but at the same time, "most people expect [it] to get upgraded." He said the bonds "got a bite to 'em," closing at 84.75 bid, 85.5 offered, up ¾ point on the day.

Restaurant worries

On the downside, the trader said that "people are starting to get concerned about the restaurant sector, so that was under some pressure."

He said that people were "looking for the borrow" on some names in the sector, such as Friendly Ice Cream Corp., Landry's Restaurants Inc. and Buffets Inc. - in other words, checking to see how many of the bonds they might be able to borrow in anticipation of shorting the bond - a sure sign, he said, that they think those issues will be moving lower. He said he had received several such inquiries on Wednesday.

"I think a lot of people feel the restaurant sector got a little ahead of itself last quarter" - and now it's time to pay the check.

He saw Friendly's 8 3/8% notes at 90 bid, 91.25 offered, Landry's 7½% notes due 2014 at 95 bid, 96 offered and Buffets' 11¼% notes due 2010 at 104.25 bid, 104.75 offered.

He saw another eatery chain, Perkins Family Restaurant Co., at 94.25 bid, 94.75, although "truthfully, I think there was better buying in Perkins, because people think that one is cheap."

By way of contrast, the 9% notes due 2013 of O'Charleys Inc. were trading at 101.75 bid, 102.25 offered. Like the Buffets bonds, O'Charley's coupon "is holding it up," he said, "a nice coupon, and a small [$125 million] float."

Overall, though, he said that at his shop, the equity analyst who watches the restaurateurs "is getting pretty neutral to slightly negative on the sector."

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