NOVA prices upsized $400 million, Calpine remains under pressure, market off ½ to 1 point

By Paul A. Harris

St. Louis, Oct. 26 - The high-yield market was overall off by more than half a point Wednesday as equities slid and the yield on the 10-year Treasury rose to its highest level since March, according to one source, who spotted it closing at 4.59%.

This observer, a source from a hedge fund, had the CDX 100 index closing down 0.625 Wednesday at 98.625 bid, 98.875 offered.

In the primary market one issue priced as NOVA Chemicals Corp. upsized its issue of eight-year floating-rate notes to $400 from $300 million, and priced them in the middle of talk.

High-yield sources also professed an interest in a split-rated $1 billion two-part bond deal from Ford Motor Credit Co., which priced with junk-like interest rates during the session.

And Roundy's Supermarkets Inc., having shopped its bond offering extensively through the choppy aisles of the October junk sell-off, rolled up the awning on Wednesday as the deal was withdrawn from the market.

Playing catch-up with Treasuries?

One buy-side source told Prospect News Wednesday morning that the broad market was very quiet in light of a two-day sell-off in Treasuries.

"That has given people a little bit of a pause," the source said, because investors have not seen high-yield come down in proportion to the sell-off in the Treasury market.

"I think there is a sense that high-yield is going to take a bit of a dip to catch up with Treasuries," the buy-sider added.

NOVA Chemicals upsizes

One straight-out high-yield issue priced during the mid-week session.

Pittsburgh-based NOVA Chemicals upsized to $400 million from $300 million its issue of eight-year senior floating-rate notes (Ba2/BB+) and priced them at par to yield six-month Libor plus 312.5 basis points.

The new floater came in the middle of the six-month Libor plus 300 to 325 basis points price talk.

Citigroup and JP Morgan were joint bookrunners.

At the close on trader had Nova's new par-pricing notes due 2013 trading at 101.125 bid, 101.375 offered.

Ford prices split-rated $1 billion

Elsewhere junk observers were tuned into the fortunes of Ford Motor Credit Co.'s split-rated deal.

The finance unit of Ford Motor Co. priced $1 billion in two tranches (Baa3/BB+/BBB-).

The $500 million issue of two-year floating-rate notes priced at par to yield three-month Libor plus 300 basis points, in the middle of the three-month Libor plus 300 basis points area price talk.

Meanwhile the $500 million issue of 8 5/8% five-year fixed-rate notes priced at 99.135 to yield 8.843%, a 437.5 basis points spread to Treasuries. That was in the middle of the 437.5 basis points area price talk.

Deutsche Bank, Barclays Capita and LaSalle were the bookrunners.

Calpine got smoked

The travails of San Jose, Calif., power producer Calpine Corp. continued in Wednesday trading, according to various sources.

One trader said that the assertions of hedge fund Whitebox Advisors, LLC that Calpine has defaulted on one of its convertible bonds is merely a vestige of the fact that it has not been a great year in convertibles.

Early Wednesday the trader spotted Calpine's 8½% bonds due 2008 trading at 54.50 bid, 55.50 offered, down from Tuesday's 55 bid, 56 offered.

Late in the afternoon another trader asserted that "Calpine got smoked," and spotted the 8½% bonds due 2008 at 54 bid, 55 offered, "down a point or so," while Calpine's 8½% notes due in 2011 were down even further at 45 bid, "down three or four points."

"All of this is trading like they are going to file [for bankruptcy]," the trader commented, recalling the New York Post story which ran last week, reporting that Calpine had retained the services of bankruptcy and restructuring law firm Kirkland & Ellis.

Pulp and paper names under pressure

Throughout the session traders said names in the pulp and paper sector were under some pressure.

One name that came up was Abitibi-Consolidated Inc. which reported a net loss of $0.09 compared to $0.03 in the third quarter of 2004 due to higher manufacturing and distribution costs.

The company plans to use proceeds from its $600 million Asian Paper Co. sale, expected to close in the fourth quarter, to reduce long-term debt

The trader said that the present strength in the Canadian dollar has been hurting Abitibi.

Early in the session one trader had Abitibi's 6% bonds due 2013 marked down half a point at 84.50 bid.

Another trader spotted the same bond at the same level, 84.50 bid, later Wednesday afternoon.

Yet another trader gave a spot on the company's 8 3/8% notes due 2015 at 98.25 bid, 98.50 offered, down a point.

A trader also saw Bowater, Inc.'s 6½% notes due 2013 at 89.50 bid, unchanged to half a point lower.

The Greenville, S.C. company reported a net loss of $9.5 million or $0.17 per share compared to a net loss of $1.8 million or $0.03 per share in the third quarter of 2004.

The trader also spotted the existing bonds of Georgia Pacific under pressure Wednesday.

"Investment-grade paper names have been wider which has pushed down some of the high-yield names," the trader commented.

Auto names under pressure

Traders also said that auto names, conspicuous among them interior systems supplier Lear Corp., had come under pressure Wednesday.

For the third quarter of 2005 Lear posted net sales of $4 billion and a net loss of $750.1 million, or $11.17 per share, including an estimated goodwill impairment charge of $9.98 per share and costs related to restructuring actions and fixed asset impairment charges of $1.09 per share.

Those results compare to net sales of $3.9 billion and net income of $91.7 million, or $1.26 per share, for the third quarter of 2004.

A trader spotted Lear's 5¾% notes at 80.25 bid, 81.25 offered, down half a point to a point.

Another trader, specifying that auto names were "up and down," but generally weaker, spotted the paper of bankrupt Delphi Corp. "down half to a point."

A little later a market source had Delphi's 6.55% notes due 2006 down a point to 67.50 bid, while the 6½% notes due 2013 were also down a point at 68 bid.

The trader also had Dura Automotive's 8 5/8% notes spotted just above 86 bid, down from 88 bid, 89 offered on Tuesday.

Elsewhere the existing 9% bonds of Refco traded off Wednesday, a trader said.

The source had Refco's bonds down two or three points at 64.50 bid, 65 offered.

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