Wynn, Tenneco, CII price; GMAC off on numbers, Cricket on Leap deal demise; funds gain $91 million

By Paul Deckelman and Paul A. Harris

New York, Nov. 1 - Wynn Las Vegas brought a quickly shopped split-rated add-on offering of 6 5/8% notes due 2014 to market on Thursday, high yield syndicate sources said. Also pricing, they reported, was a rapidly-marketed offering for Tenneco Inc., as well as a scheduled calendar deal CII Carbon LLC/CII Carbon Corp. (Rain Calcining). The Wynn deal traded up slightly from its issue price when it moved into secondary, while the other two new offerings showed modest gains, traders said.

Also on the new-deal front, Apria Healthcare Group Inc. launched a $265 million 10-year offering, and details emerged on two upcoming mega-deals out on the horizon, for Alltel Corp.'s $7.7 billion combination of bond and bridge financing and Avaya Inc.'s $1.45 billion of financing, both being undertaken in connection with the pending acquisition of the respective companies.

In the secondary market, GMAC LLC's bonds - which had spiked upward in Wednesday's dealings ahead of the scheduled release of the company's third-quarter financial results - tumbled back down on Thursday after the results were actually released, because the tale was not pretty, with GMAC dragged down to a $1.6 billion quarterly loss by its Residential Capital LLC mortgage unit's woes. However, ResCap's own bonds - which had also firmed on Wednesday - were seen mostly unchanged.

Elsewhere, Blockbuster Inc.'s bonds were lower, after the video rental giant's poor third-quarter numbers, which also pushed smaller and more troubled sector peer Movie Gallery Inc.'s already badly battered bonds further to the downside.

And Cricket Communications Inc.'s bonds were seen off on the news that MetroPCS Communications Inc. had withdrawn its offer to acquire Cricket's corporate parent, Leap Wireless International Inc. MetroPCS' own bonds were also seen lower on the news.

With Thursday's plummet in the Dow Jones Industrial Average, one high yield syndicate official said that the CDX index was down 1 1/8 points.

However this source and others said that cash product, although it eased, seemed to hold firmer than the index.

One investment banker said that buy-and-hold accounts tend to watch capital markets volatility, such as that seen on Thursday, from the sidelines.

Funds back in the black

And as trading wound down for the session, market participants familiar with the weekly high yield mutual fund flows statistics generated by AMG Data Services of Arcata, Calif., said that in the week ended Wednesday $90.8 million more came into the weekly-reporting funds than left them.

It was the fifth inflow in six weeks, a stretch interrupted only by the $33.6 million outflow reported in the previous week, ended Oct. 24. During that six-week stretch, net inflows have totaled $909.6 million, according to a Prospect News analysis of the AMG figures.

Those inflows followed a lengthy string of outflows which had begun around mid-year, which completely wiped out the roughly $1.6 billion cumulative inflow that had built up over the first half of the year and plunged the year-to-date fund flow numbers deeply into the red.

Even with the recent net inflows, that 2007 cumulative total remains decidedly on the downside, at $1.186 billion, although that is down from the prior week's $1.277 billion.

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, most recently, hedge funds.

Tenneco multiple-times oversubscribed

Lake Forest, Ill., auto parts manufacturer Tenneco priced a quick-to-market $250 million issue of eight-year senior notes (B2/B+/BB-) at par to yield 8 1/8% on Thursday.

The yield was printed on top of the price talk.

Banc of America Securities and Citigroup were joint bookrunners for the debt refinancing deal.

A source said that the deal was multiple times oversubscribed, and added that it went well.

Split-rated deal from Wynn

Elsewhere Wynn Las Vegas priced a split-rated $400 million add-on to its 6 5/8% first-mortgage notes due Dec. 1, 2012 (Ba2/BBB-) at 97.25, resulting in a 7.126% yield.

The add-on notes, which were sold in a quick-to-market offering made from the high yield desk, priced at the cheap end of the 97.25 to 97.50 price talk.

Deutsche Bank Securities was the left bookrunner for the capital expenditures deal with Banc of America Securities LLC as joint bookrunner.

The original $1.3 billion issue priced at par on Nov. 22, 2004, so the company's interest expense rose just over half a percent on the notes issued in Thursday's tap.

CII Carbon 25 bps inside talk

In a deal that U.S. high yield market watchers characterized as essentially an emerging markets chemicals corporate play, CII Carbon LLC and CII Carbon Corp. priced a $235 million issue of eight-year senior subordinated notes (B3/CCC+/B-) at par to yield 11 1/8% on Thursday.

The yield was printed 25 basis points beneath the low end of the 11½% area price talk.

Citigroup ran the books.

Proceeds will be used to repay the bridge loan incurred to finance the acquisition of CII Carbon by Rain Calcining.

Both CII Carbon and Rain Calcining are producers of calcined petroleum coke.

CII Carbon is headquartered in Kingwood, Tex. Rain Calcining is headquartered in Hyderabad, India.

A market source told Prospect News that there was strong demand for the deal, and added that it had originally been expected to price either on Friday or on Monday.

Apria Healthcare launches

Elsewhere Apria Healthcare Group Inc. launched its $265 million offering of 10-year senior subordinated notes, which are expected to price on Nov. 9.

Goldman Sachs & Co. and Banc of America Securities are joint bookrunners.

Question marks for Friday

Sources say that there are four deals which, when the week got underway, were expected to price before the Friday close.

Some observers expected to hear terms on the ACE Cash Express, Inc. $175 million offering of eight-year senior notes (B-) on Thursday.

Bear Stearns has the books for the acquisition deal from the Dallas based check cashing and short-term consumer lending services provider.

However, at the Thursday close no terms had been heard, sources said. Nor was there any price talk.

Elsewhere Guitar Center, Inc.'s $750 million two-part offering, via JP Morgan, was expected to price during the present week.

The company is offering $375 million of eight-year senior cash-pay notes (Caa1/CCC) and $375 million of eight-year senior PIK notes (Caa2/CCC).

However market watchers say that it has been "radio silence" as far as the Guitar Center deal is concerned.

One investment banker said that given Thursday's massive sell-off in equities it would be a considerable surprise if terms on the Guitar Center deal emerged on Friday.

Singapore's United Test & Assembly Center/Global A&T Electronics Ltd. is expected to price its $475 million equivalent two-part notes offering on Friday.

However, late Thursday no price talk had been heard.

Finally, the first European issuer to attempt to place high-yield bonds since the mid-summer sell-off in the international credit markets, Melrose Resources plc, is in the market with a €250 million offering of eight-year senior subordinated notes (CCC+), talked at 10% to 10¼%.

The Merrill Lynch deal was expected to price earlier in the week, sources told Prospect News on Wednesday and Thursday.

However, the U.K.-based oil and gas exploration and development company's bonds have apparently not yet been placed.

On Thursday sources in Europe and in the United States said that for a variety of reasons - including a European junk market that has apparently not regenerated nearly to the extent its U.S. counterpart has - it is unlikely that the deal will get done with a yield below 11%.

Tenneco, CII move up on the break

When the new Tenneco 8 1/8% notes due 2015 and the new CII Carbon 11 1/8% notes also due 2015 were freed for secondary dealings, a trader saw both issues move up to 100.75 bid, 101.25 offered from their respective par issue prices. Another trader later saw the Tenneco bonds having firmed to 101 bid, 101.5 offered.

Wynn add-ons slightly better

The first trader meantime saw the Wynn 6 5/8% add-on notes due 2014 trading at 97.5 bid, 97.875 offered, up slightly from their 97.25 issue price. He also saw the existing 6 5/8s at 97.875 bid, 98.25 offered. A market source noted that the Wynn bonds had been trading around 98.625 on Wednesday, dropping below 98 on news of the big new add-on offering.

The first trader said that the deal comes at a strange time, given that "over the last few days, casino stocks have been getting killed" on sudden fears that any pullback in consumer spending in the face of the ongoing mortgage crisis and other economic problems could hurt such discretionary expenditures as gambling trips to places like Las Vegas, Atlantic City or the Mississippi-Louisiana Gulf Coast. "Those stocks have traded off major major major."

On top of negative sentiment among worried consumers, he noted, is the recent spike in oil prices, which will cut even further into such discretionary trips as the price of gasoline continues to push inexorably upward towards and past the $3 per gallon mark.

He noted the sharp fall in Las Vegas Sands Corp.'s shares, particularly in after-hours trading Thursday after the Nevada-based gaming resort operator reported bad quarterly numbers. He said the stock had been trading above $150 just a few days ago - but had dived to $125 on Thursday and continued to plunge to just above $100 in after-hours dealings.

Another trader saw Las Vegas Sands' 6 3/8% notes due 2015 down 1½ points after the company's numbers and its admission that its casino project in Macau "is going to cost a lot more and take a lot longer than expected." He saw those bonds going home at 95.5 bid, 96.5 offered.

GMAC slides on ResCap woes

GMAC's flagship 8% notes due 2031 were among the day's most heavily traded issues, with a number of transactions of at least $1 million or over. Those bonds, which had finished trading Wednesday up 1¼ points on the day to 93.75 bid on anticipation of the earnings report, opened down more than a point at 92.5 and continued to backpedal, finishing at around 91 bid, down more than 2 points on the day, a market source said.

A trader at another desk pegged the bonds at 91.5 bid, 92.5 offered, which he said was a loss of 1½ points on the day, while yet another saw them down a deuce at 91 bid, 92 offered.

Other GMAC issues were likewise on the downside, with the Detroit-based automotive and residential lending company's 7% notes due 2012 declining about ¾ point to 92.5 - and at one point, the bonds actually dipped below 90 - and its 6 7/8% notes due 2012 opening at 90 and slipping to 88.5, down about 3 points from Wednesday's close around 91.625.

That slide followed the big Detroit-based automotive and residential lender and insurance provider's announcement of a $1.6 billion third-quarter loss - mostly due to the continued problems of the mortgage industry and the impact that had on ResCap, the second-largest independent U.S. mortgage lender after Countrywide Financial Corp., which reported a larger-than-expected $1.2 billion loss Last Friday.

GMAC said that on an operating basis, it lost a total of $1.14 billion in the quarter, again, mostly due to the industry weakness affecting ResCap. Excluding ResCap, operating profit rose 51% to $665 million, as the company's results from its core auto finance business soared 62%. But good as that was, it was not enough to offset the heavy drain on its coffers from ResCap - a $2.26 billion net loss, including an operating loss of $1.81 billion and a $455 million goodwill write-down. GMAC's chief executive officer, Eric Feldstein, called ReCap's performance "a major disappointment."

However, the Minneapolis-based mortgage unit's own bonds - which had also gone up on Wednesday - outpaced its parent's, ending mostly little changed on the session, coming back from their immediate post-news lows, although they also backed off from in-session highs. A source pegged its 7 1/8% notes due 2008 as ending at 86 bid in active trading - actually up slightly from the previous session's 85+ bid level. Its 6.80% notes due 2008 ended at 85 bid and its floating-rate notes due 2009 at 78.5, both unchanged.

A trader called its 6 1/8% notes due 2008 actually up 2 points at 85 bid, 87 offered, but that was atypical; a market source at another desk pronounced its 7 7/8% notes due 2015 half a point lower at 72.5.

GMAC was formerly a wholly-owned unit of General Motors Corp., which sold a 51% stake in the company to an investment group last year, and still holds 49%. A trader called GM's 8 3/8% benchmark notes due 2033 down ½ point at 90 bid, 90.5 offered.

Movie rental names lower

Also on the earnings front, Blockbuster's bonds were lower, as investors gave poor reviews to the Dallas-based movie-rental industry leaders' quarterly results. Blockbuster reported a quarterly loss of $37.8 million, or 20 cents per share after preferred dividends, versus a loss of $27.5 million, or 15 cents per share, a year earlier.

A trader saw Blockbuster Inc.'s 9% notes due 2012 at 88.5 bid, 89.5 offered, down nearly 2 points, while another trader saw the Blockbuster bonds off 1¼ points at 88.5 bid, 89.5 offered.

The first trader saw rival video-rental operator Movie Gallery's 11% notes due 2012 unchanged at 28 bid, 30 offered, but the second saw Movie Gallery's bonds down 4 points on the bid side, at 26, but with no offers seen.

Cricket bonds fall on deal demise

Elsewhere, Cricket Communications' 9 3/8% notes due 2014 were seen by a market source off some 3½ points on the day to 98.5, after MetroPCS Communications said it was withdrawing its previously announced $4.7 billion offer to buy Cricket's parent, San Diego-based Leap Wireless.

MetroPCS, a rival regional wireless provider, said that it "has not been able to engage Leap in meaningful negotiations" about a deal. Leap had already rejected the offer as inadequate.

A trader saw MetroPCS' own 9¼% notes due 2014 down 3 points on the session following the news, at 96.5 bid, 97.5 offered.

Overall, trading had a negative tone, with few gainers and many losing issues seen down a point or more. Declining issues outnumbered advancers by a three-to-two margin. A trader saw the CDX junk bond performance index down 7/8 point at 97¼ bid, 97 3/8 offered. Among other market barometers, the KDP High Yield Daily Index fell 0.25 to 79.52, while its yield was 7 basis points wider at 8.08%.

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