NXP, Peabody deals price; InSight Health continues plunge; funds see $137 million inflow

By Paul Deckelman and Paul A. Harris

New York, Oct. 5- The big deal in the high yield market Thursday was, indeed, a Big Deal - a very big deal - as NXP BV/NXP Funding LLC successfully brought a five-tranche, dual-currency deal worth the equivalent of €4.5 billion to help fund its acquisition of Philips Semiconductor.

Also seen pricing was Peabody Energy Corp., which upsized its two-part offering to $900 million.

Late in the session, Ford Motor Credit Co. was heard to have completed a $250 million sale of five-year floating-rate notes.

In the secondary market, Goodyear Tire & Rubber Co. bonds were seen to have basically shrugged off a strike of 15,000 workers against the Akron, Ohio-based tiremaking giant, which began Thursday after their contract expired.

But the same could not be said of InSight Health Services Corp., which had no strike, but which has been struggling financially. The Lake Forest, Calif.-based diagnostic imaging company's bonds have been cascading steadily downward over the past week, and continued that slide Thursday.

On the upside, traders saw the bonds of The Bon-Ton Stores Inc. - already on a firming trend - get even better still after the retailer released positive September sales figures.

Funds break losing streak

And near the end of the session, market participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday, $136.6 million more came into the funds than left them.

It was the first weekly inflow after three straight weeks of outflows, including the $96 million bleed seen in the previous week, ended Wednesday, 27. During that three-week stretch, outflows totaled $185.8 million, according to a Prospect News analysis of the AMG figures.

The latest week's inflow may spark a revival of a recent pattern of strength in the fund-flow numbers that was interrupted by the three-week losing streak. Including the latest week's inflow, there have now been six inflows and five outflows seen in the last 11 weeks - although, with the recent outflows having been all relatively modest, net inflows in that period have still totaled $493.1 million, according to the Prospect News analysis. Inflows have also still been seen in eight weeks out of the past 14 - a rarity in a fund-flow landscape so far this year that has been almost completely dominated by outflows. In that time, net inflows have totaled $589.9 million, according to the analysis.

However, despite that third-quarter show of strength by the funds, the year-to-date figures continue tell a very different story.

For 2006 to Wednesday the funds have seen negative $3.103 billion of year-to-date flows, a source said.

Meanwhile the funds that report on a monthly basis most recently reported $315 million of inflows, boosting their year-to-date flows to slightly more that $3.112 million.

That was enough to boost the aggregate flows, which tally both the weekly and monthly reporters, to into the black for 2006 to date: $9.6 million.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise 10% to 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and hedge funds.

Market higher

In the face a huge burst of new issuance on both sides of the Atlantic, the high-yield market was up, according to one sell-side source.

It was up, the source added, because the lion's share of trading on Thursday was focused on the dollar-denominated tranches of NXP BV and NXP Funding LLC (Philips Semiconductor)'s record-breaking €4.5 billion equivalent deal which priced during the session, earning the Thursday market session a niche in the history books.

Even excluding the euro tranches from the tally, the day saw $5.208 billion of proceeds raised in seven dollar-denominated tranches from three issuers.

That tops the $4.994 billion seen a little less than three weeks ago, on Sept. 15, which was, itself, the biggest day in the primary market, according to sources, since May 11, 1999's $4.17 billion.

The sell-sider reflected after the close that the Dow Jones Industrial Average and the S&P 500 were both up marginally on the session, and the 10-year Treasury was four basis points off from Wednesday's close.

"But the high yield market felt pretty good, given that a vast majority of the trading was in NXP, which traded up," the source said.

"That seemed to bring the averages up, and brought the day-end tallies up by a few points."

History-making euro deal

Netherlands-based NXP priced €4.5 billion equivalent in a five-tranche transaction representing that largest amount of new high yield issuance ever from a European issuer, according to syndicate and market sources.

The bonds, which priced Thursday morning, came in €3.0 billion equivalent of senior secured notes (Ba2/BB+) in three tranches, and €1.5 billion equivalent of senior unsecured notes (B2/B+) in two tranches.

The secured tranches priced as follows:

• $1.535 billion of seven-year floating-rate notes priced at par to yield three-month Libor plus 275 basis points, on top of price talk;

• €1.0 billion of seven-year floating-rate notes priced at par to yield three-month Euribor plus 275 basis points, also on top of price talk; and

• $1.026 billion of eight-year fixed-rate notes priced at par to yield 7 7/8%, on top of price talk.

The unsecured tranches priced as follows:

• $1.250 billion of 10-year notes priced at par to yield 9½%, at the wide end of the 9¼% to 9½% price talk; and

• €525 million of 10-year notes priced at par to yield 8 5/8%, at the wide end of the 8½% area price talk.

Morgan Stanley, Deutsche Bank Securities and Merrill Lynch & Co. were joint bookrunners for the debt refinancing related to an acquisition.

An informed source said late Thursday that the dollar-denominated transactions were very strong, and said that the 7 7/8% notes due 2014 closed at 101.50 bid, the 9½% notes due 2016 closed at 101 bid, and the Libor plus 275 basis points notes due 2013 closed 101.25 bid.

Peabody upsizes

The upsized $900 million two-part senior notes transaction (Ba1/BB) from Peabody Energy Corp. also went very well, according to informed sources.

The St. Louis-based coal company prices a $650 million tranche of 10-year notes at par to yield 7 3/8%, on the tight end of the 7½% area price talk.

In addition, Peabody priced a $250 million tranche of 7 7/8% 20-year notes at 98.753 to yield 8%, on top of the price talk that had the 20-year notes coming 62.5 basis points over 10-year notes in terms of absolute yield.

Morgan Stanley and Lehman Brothers were joint bookrunners for the acquisition deal that was increased from $825 million.

A source saw the 7 3/8% notes due 2016 closing at 101.50 bid versus the par issue price, while the 7 7/8% notes due 2026 closed at 99.75 bid, versus the 98.753 issue price.

Ford Credit floater

Late Thursday Ford Motor Credit Co. announced that it priced a $250 million issue of floating-rate notes due Dec. 20, 2011 at par to yield three-month Libor plus 405 basis points.

UBS Securities was the underwriter.

No other information was disclosed in the terms that the Dearborn, Mich., company filed with the SEC.

Brazil's Bertin tight to talk

Also pricing a junk-rated Rule 144A deal on Thursday was Brazilian beef producer and exporter Bertin Ltda., which sold an upsized offering of $250 million of 10-year senior notes at par to yield 10¼%, at the tight end of the 10¼% to 10 3/8% price talk. The deal was increased from $150 million.

Credit Suisse, Morgan Stanley and Standard Bank were joint bookrunners for the capital expenditures and general corporate purposes deal.

Another quiet Friday

With Thursday's history-making issuance having cleared the market, Friday's session - which sees an early close out ahead of the three-day Columbus Day weekend - figures to come and go quietly.

Only one deal is expected to price.

Softbank Corp., a Tokyo-based telecom, is expected to price a €500 million offering of seven-year senior unsecured notes (Ba2/BB-), via Deutsche Bank Securities.

Earlier in the week the deal was talked 7 7/8% to 8 1/8%.

New deals trade well in aftermarket

When the new NXP 9½% notes due 2015 were freed for secondary dealings, they moved up to 100.75 bid, 101.25 offered from their par issue price earlier in the session, a trader said, "so they're doing OK."

He also saw the company's 7 7/8% notes due 2014 firm even more, to 101.5 bid, 102 offered, while its floating-rate notes due 2013 ended at 101.25 bid, 101.5 offered, both up from their par issue prices.

A trader said Peabody Energy's new bonds "did well," with its 7 3/8% notes due 2016 pushing up to 101.5 bid, 102 offered from their par issue price.

"They were well received," he said, "and that lent a hand" to the company's older 6 7/8% notes due 2013, which he saw up a point on the day at 99.5 bid, 100.5 offered.

Another trader saw the 7 3/8s at 101.25 bid, 102 offered, and saw the company's new 7 7/8% notes due 2026 quoted at the end of the day offered at 99.5, with no bid seen, versus its 98.753 issue price earlier in the day.

Yet another trader said the NXP bonds were "doing very well," with the 91/2s at bid levels around 101-101.125, while the Peabody 7 3/8s were trading into a 101.75 bid.

Goodyear good despite strike

The news that Goodyear employees had walked off the job at a dozen plants around the United States and four more in Canada around midday didn't seem to bother bondholders very much, traders said.

"They went down and then they went up," one said of the company's bonds. "They bounced like the rubber that they are," he quipped, quoting the company's 7.857% notes due 2011 little changed on the day at 97 bid, 97.5 offered.

"They were down a point earlier," a trader said, "but then they rallied back." He also saw the 7.857s unchanged at the 97-97.5 level, while Goodyear's 9% notes due 2015 finished down ¼ point at 100.75 bid, 101.5 offered.

Members of the United Steelworkers union walked out when their contract expired after months of fruitless negotiation with Goodyear, the largest tire producer in North America and third-largest in the world.

The two sides reached an impasse over Goodyear's plans to shut two of its U.S. production facilities and trim retiree health benefits - steps which the venerable company says that it must be able to take in order to remain competitive with lower-cost overseas rivals.

Other auto names quiet

Apart from Goodyear, not much was going on among the automotive issues, a trader said.

For instance, he saw no further erosion in the bonds of Metaldyne Corp., which had fallen back on Wednesday after the Plymouth, Mich.-based parts maker warned that earnings would be lower going forward because of production cuts by its main customers, Detroit's Big Three.

At another desk, however, a trader saw the company's 11% notes due 2012 down 1½ points at 85.5 bid, 86.5 offered, while its 10% notes due 2013 were half a point lower at 99.5 bid, 100.5 offered.

The 11s had fallen about 3 or 4 points on Wednesday after the lower expectations were announced, on market concerns - acknowledged by Metaldyne's management - that the anticipated lower earnings could affect its pending deal to be bought out for $1.2 billion by Japanese parts manufacturer Asahi Tec Corp.

Elsewhere in the auto names, the second trader saw American Axle & Manufacturing Holdings Inc.'s 5¾% notes due 2014 unchanged at 83.25 bid, 83.75 offered. The Detroit-based partsmaker on Wednesday announced that it would offer incentives of up to $100,000 to about 6,000 unionized hourly workers at five plants to get them to retire, in hopes of cutting its labor costs. The company also said it was withdrawing its 2006 financial guidance of about $1 to $1.10 in earnings per share because of the cost of the buyouts.

No end to InSight slide

InSight Health Systems' bonds "got crushed," a trader said, quoting its 9 7/8% subordinated notes due 2011 at 23 bid, 25 offered, down 4 points on the day.

He noted that the company's bonds had been getting clobbered for a week, ever since it reported a week ago that it lost $186.747 million in the fiscal fourth quarter ended June 30 versus year-ago red ink of $23.286 million, while its full-year loss widened out to a yawning $210.218 million from a $27.217 million loss the previous year.

"The bleeding hasn't stopped," he opined, although he added "but it looks like there was some support down there at the end of the day" that kept the downturn from getting even wider.

InSight's floating-rate notes due 2011 were also seen lower, at 78.25 bid, 79 offered.

Bon-Ton bonds better

The Bon-Ton Stores' 10¼% notes due 2014 were seen trading around the par level on Thursday, up about ¾ point to a full point, traders said.

That rise followed the York, Pa.-based department store retailer's release of same-store sales data which were up 0.2% from year ago levels.

Not included in the figures were sales from its Carson Pirie Scott division, which Bon-Ton bought in March from Saks Inc. Carson's comparable-store-sales jumped 13.8% from a year ago.

Saks bonds were meantime firmer as the Birmingham, Ala.-based retailer blew through Street estimates and posted a 10% year-on-year same-store sales gain for the month.

Saks' 7 3/8% notes due 2019 were quoted up about 3 points, though in light trading, at 90.75. However, its 8¼% notes due 2008 were unchanged around 101.

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