Novamerican, DTE taking to the road; Chiquita active on company revamp news; Teco gains on asset sale

By Paul Deckelman and Paul A. Harris

New York, Oct. 29 - Novamerican Steel Inc. was heard by high yield syndicate sources Monday to be getting ready to hit the road Tuesday to market its $315 million offering of eight-year notes. Also taking to the road on Tuesday, the sources said, is Susser Holdings LLC, to sell an add-on offering to its outstanding 10 5/8% notes due 2013.

And DTE Energy Co. will be on the road starting Wednesday to showcase its $275 million offering of 10-year notes

In the secondary market, Chiquita Brands International Inc.'s bonds were seen gyrating around, initially moving higher on the news that the Cincinnati-based fruit and vegetables importer and processor will restructure some operations, including closing facilities and eliminating over 100 management positions. While the bonds came off their early highs, several traders did call them gainers on the day.

Teco Energy Inc.'s bonds were seen better on the day, after the Tampa, Fla.-based company announced a big asset sale.

On the downside, Novelis Inc.'s bonds were being quoted lower in fairly busy trading, although there was no fresh negative news seen out about the Toronto-based aluminum company.

A high yield syndicate official said that the broad market was quiet and slightly better on Monday.

As the October-November crossover week got underway this source said that the market awaits a decision from the Federal Reserve Bank's Federal Open Market Committee as to whether to follow last month's 50 basis points cut in the Fed Funds rate with another cut when the FOMC's two-day policy meeting concludes on Wednesday.

The official added that a 25 basis points cut, which would reduce the benchmark Fed Funds rate to 4½%, is probably already priced into the high yield market.

Roadshow starts

No deals were priced during Monday's primary market session.

However the new issue market heard timing on three deals that had been expected to surface.

Susser Holdings, LLC will begin a roadshow on Tuesday for a $150 million add-on to its 10 5/8% senior notes due Dec. 15, 2013.

Banc of America Securities is the left bookrunner for the acquisition financing which is expected to price by the end of the week. Merrill Lynch & Co., Wachovia Securities and BMO Capital Markets are joint bookrunners.

The original $170 million issue was priced at par on Dec. 15, 2005.

Novamerican Steel Finco Inc. will also start a roadshow on Tuesday for its $315 million offering of eight-year senior notes (expected ratings B3/B-).

The offering is expected to price on Nov. 8.

JP Morgan and CIBC World Markets are joint bookrunners for the bond offering, proceeds from which will help finance the acquisition of Novamerican Steel by Symmetry Holdings Inc.

Meanwhile there's a Halloween roadshow start for Energy and Industrial Utilities Co., LLC, a wholly owned subsidiary of Detroit-based DTE Energy Co.

That deal, via Morgan Stanley and Barclays Capital, is also expected to price during the Nov. 5 week.

Proceeds will be used to repay intercompany debt, to reimburse DTE Energy Services Inc., also a wholly owned subsidiary of DTE Energy, for pre-formation expenses, and to pay a dividend to DTE Energy Services.

The October-November crossover week got underway with $2.345 billion and €250 million of potential issuance expected to price before Friday's close.

The first new junk from a European issuer since the mid-summer sell-off in the credit markets is among those anticipated deals.

Melrose Resources plc, a U.K.-based oil and gas exploration and production company, is marketing a €250 million offering of eight-year senior subordinated notes (CCC+).

Last Thursday the company set price talk at 10% to 10¼%.

Merrill Lynch is leading the deal, which is expected to price early in the week.

Market sources reported that no news on the deal surfaced during the Monday session.

Ceridian bonds in retreat

Traders saw the new Ceridian Corp. bonds, which had priced at par on Friday but which then failed to move up very far after that, as having retreated a little in Monday's dealings. A trader quoted both the 11¼% cash-pay notes due 2015 and the 12¼% toggle notes, also due 2015, as trading "on top of one another," offered at 99.5.

At another desk, a trader saw both tranches straddling par, at 99.5 bid, 100.5 offered, which he called a loss of ¼ point on the day. And a third trader called them 99.375 bid, 99.625 offered, down from 99.875 bid, 100.25 offered at the opening.

Chiquita up on company changes

Back among the established issues, Chiquita Brands' bonds were moving around in somewhat busy trading following the company's announcement of an operational restructuring of some of its businesses. Depending on whom you spoke to, the bonds either ended higher on the day on the news, or were mixed.

A trader quoted its bonds 2 points better on the day, pegging its 7½% notes due 2014 at 87.75 bid, while its 8 7/8% notes due 2015 were at 91.75 bid.

At another desk, a trader called the latter issue up 1 point on the day, seeing it at 91 bid, 92 offered.

A market source saw the 71/2s, meanwhile up more than a point at 87.75.

However, another market source saw the 7½% notes, which had finished around the 85 mark on Friday, push above the 87 mark in morning dealings on Monday, only to later head back down to around that Friday close. Late in the day, the bonds had firmed a little bit from that finish, to end at 86.

Its 8 7/8% notes due 2015 were meantime seen as high as nearly 94 in Monday's early dealings - well up from Friday levels just under 92, although the bonds at one point bounced down to the mid-87ish area. They rose from those lows to about 93, but then gave back all of their gains and then some, moving below 91, the source indicated.

Chiquita's New York Stock Exchange-traded shares, meantime, rose $2.03 per share, or 11.93%, to $19.04, on volume of 2.1 million shares, about triple the usual turnover.

Chiquita said that it will close certain facilities and get out of certain underperforming business lines as part of a plan to save $60 million to $80 million annually, starting next year, and will cut 160 management jobs. Those headcount cuts represent a 21% reduction at the three highest levels of the company, which employs some 25,000 people worldwide. The reductions are aimed at simplifying Chiquita's organizational structure, which will be realigned by geography rather than by product line, the current set-up.

It has slated facility closings or conversion to other product lines in California, Florida, Pennsylvania, Illinois and Georgia, and could also sell its German fruit and vegetable distribution facility.

The changes will cause Chiquita to take a $25 million earnings charge this quarter.

Chiquita's chairman and chief executive officer, Fernando Aguirre, said in a statement that while the company has "already taken various actions to strengthen our balance sheet, improve our risk profile and diversify" its operations, the company continues to be hindered by "rising industry costs, punitive European banana import regulations and a slower-than-expected recovery in the value-added salads category," forcing it to make the changes outlined Monday.

Teco up on unit sale

Elsewhere, Teco Energy's 7% notes due 2012 were seen by a trader as having gained a point to 104 bid, 105 offered.

That followed the announcement that the Florida energy operator has agreed to sell its Teco Transport Corp. business to an investment group led by an affiliate of private-equity firm Greenstreet Equity Partners for $405 million in cash. Teco estimates net proceeds of about $370 million to $380 million and expects the deal to close before year-end.

In other action, a trader saw American Axle & Manufacturing Holdings, Inc.'s 7 7/8% notes due 2017 gaining 1 point to 97.5 bid, 98.5 offered.

On the downside, Novelis' 7¼% notes due 2015 were being quoted down nearly 4 points on the session at just above 96, although no fresh negative news was seen out on the company.

Overall, traders described the session as very slow, theorizing that participants are sitting on their hands ahead of the mid-week meeting by the Federal Reserve, which is widely expected to cut its key lending rate by another ¼ point.

Advancing issues led decliners by about a five-to-four margin. A trader saw the CDX junk bond performance index down 3/16 point to 98 3/16 bid, 98 5/16 offered. Among market barometers, the KDP High Yield Daily Index was up 0.05 from Friday's close, finishing at 79.81. Its yield tightened 1 basis point to an even 8%.

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