Auto erosion continues; Extendicare up on tender; Tribune quietly becomes junk

By Paul Deckelman and Paul A. Harris

New York, Sept. 22 - For about the umpteenth time, automotive names heading to the downside were the main feature in junk market trading Friday, although it seemed to be more a case of continued downward momentum rather than the names falling in response to any specific new developments in the problem-plagued sector.

For a change, it was not a junk-rated parts supplier that was making negative news Friday, but the investment-grade-rated BorgWarner Inc., which said it would cut 850 jobs in response to output cuts by Detroit's troubled Big Three. Even so, it still weighed on the junk auto sector, just adding to the bad karma along with other negative developments over the past week or so, such as ratings downgrades for Ford Motor Co., its Ford Motor Credit Co. financing arm and Dura Automotive Systems Inc., bankruptcy buzz swirling around Dura, a downward outlook revision from Lear Corp. and talk that Metaldyne Corp.'s planned acquisition by a Japanese parts firm might not happen.

Apart from the autos, not much seemed to be going on, traders said, noting that many financial market participants opted for an early exit ahead of the Rosh Hashanah holiday, which began at sundown Friday.

One name, however, which was seen moving around was Extendicare Health Services Inc., which announced cash tender offers for its two series of bonds - the 9½% notes due 2010, and its 6 7/8% notes due 2014.

There was little market response to other news developments such as the completion of Tribune Co.'s fall to full junk-bond status, as both Standard & Poor's and Fitch Ratings downgraded the Chicago-based media conglomerate, whose interests include newspapers, broadcasting and ownership of baseball's hapless Chicago Cubs and their nearly century-old, ivy-covered ballpark Wrigley Field. While the bonds were quoted a bit lower, trading activity in them was sparse.

Primary market players meanwhile reported virtually no activity in the new-deal arena Friday.

Dura, Delphi, Dana drop

Back in the secondary market, a trader said that once again, the auto names were where the activity was concentrated, and "if it had to do with autos - it stalled."

He saw Dura's 8 5/8% senior notes due 2012 "still drifting lower," to 49.5 bid, 50 offered from prior levels around 52 bid, while the Rochester Hills, Mich.-based automotive components maker's

9% subordinated notes due 2009 "stayed down" around the 7 bid, 9 offered level.

Another trader pegged the seniors at 50 bid, 51 offered, which he called a 21/2-point drop from Thursday's close, and said that the 9s were unchanged at 6.5 bid, 7.5 offered.

That trader also saw Delphi Corp.'s 6½% notes due 2009 lower by 1½ points even though there was no fresh news out about the bankrupt Troy, Mich.-based parts maker, a former subsidiary of General Motors Corp. However, he saw Delphi's 7 1/8% notes due 2029 down just ½ point at 81 bid, 82 offered.

And he saw a 2 point drop in Dana Corp.'s 5.85% notes due 2015 to 62.5 bid, 63.5 offered, and in the bankrupt Toledo, Ohio-based parts maker's 7 1/8% notes due 2029, which dropped a deuce to 64.5 bid, 65.5 offered. However, he saw Dana's shorter bonds, like its 6½% notes due 2008, down only ½ point at 67 bid, 68 offered.

The first trader called bankrupt Novi, Mich.-based vehicle frames maker Tower Automotive Inc.'s 12% notes due 2013, which were beaten down during the week to just under the 20 mark, "pretty much unchanged" at 19 bid, 21 offered.

Ford is firmer

He also saw former Ford parts unit Visteon Corp.'s bonds "giving up a couple of points to drift lower," with the Van Buren Township, Mich.-based parts maker's 8¼% notes due 2010 at 97 bid, 98 offered and its 7% notes due 2014 at 90 bid, 91 offered, both down about 2 points.

Visteon's former corporate parent, Ford's bonds actually bucked the negative trend, its 7.45% notes due 2031 up ½ point at 76.5 bid, 77 offered, while its Ford Credit 7% notes due 2013 were ¼ point better at 91.75 bid, 92.25 offered.

A market source at another desk saw those Ford Credit bonds up nearly a point to 92.5 bid, while its 9¾% notes due 2010 were ½ point better at 102.5.

Ford arch-rival GM's 8 3/8% notes due 2033 were unchanged at 84.75 bid, 85.25, offered, a trader said, while the latter's General Motors Acceptance Corp. financing arm's 8% notes due 2031 were ¼ point up at 103 bid, 103.5 offered.

Mixed readings on Lear

Among the other losers in the sector were Lear's 8.11% notes due 2009 at 94 bid, 94.5 offered, "a little lower," a trader said, a day after the Southfield, Mich.-based automotive interior, seating, and electronic components manufacturer announced lower 2006 revenue, operating earnings and cash-flow guidance, citing production cuts by major customers GM, Ford and the Chrysler Group of DaimlerChrysler AG. Lear's bonds gyrated around at lower levels Thursday on that news, before ending unchanged to just modestly lower.

However, a trader at another shop saw the 8.11s actually up ½ point Friday around that same 94 bid level, while calling Lear's 5¾% notes due 2014 unchanged at 79.25 bid, 79.75 offered.

Among other automotive names, Metaldyne's 11% notes due 2012 were down a point at 87 bid, 88 offered, continuing the retreat seen the last several days amid what traders are terming market angst over whether the Plymouth, Mich.-based parts maker's recently announced $1.2 billion sale to Japanese partsmaker Asahi Tec Corp. will in fact be completed.

A trader saw Cooper Standard Automotive Inc.'s 7½% notes due 2012 at 82.5 bid, 83.5 offered, and its 8 3/8% notes due 2014 at 71 bid, 72 offered, each "down about a point or so."

Extendicare up on tender

Outside of the autos, "it was a pretty quiet afternoon," a trader said. "A lot of people left early."

Some activity was seen in Extendicare Health Services, after the Markham, Ont.-based long-term care provider announced cash tender offers for its 9½% notes due 2010 and its 6 7/8% notes due 2014.

The latter bond was seen by one source having moved up nearly 1¼ points to just under 107, while the 91/2s - already trading near their anticipated takeout level - were pretty much unchanged at 105.

However, another source, while quoting the 6 7/8s at 105.5 bid, called that a better than 2 point jump.

The tender offer has an Oct. 20 deadline and an Oct. 5 consent deadline.

Tribune easier on downgrade

Elsewhere, Tribune Co.'s bonds were quoted lower Friday after two ratings agencies hit the media company with downgrades to junk on the news that it wants to explore strategic alternatives to boost its share price - which debt market players fear could involve adding more leverage to its balance sheet.

Even though its 5½% notes due 2008 moved up to about 99.5 bid from prior levels around 98-plus, its 5¼% notes due 2015 dipped to about 88.5 from prior levels around 91 bid. Tribune's 4 7/8% notes due 2010 retreated to 94.75 from prior levels around 96. However, traders said that actual dealings were light, and a couple said they saw no trades at all.

Both S&P and Fitch downgraded Tribune to BB+ from prior levels at BBB-, citing the possibility that the company may take on additional debt to fund whatever stockholder-friendly move the company's board may decide upon.

Moody's Investors Service already had the company at a junk-rated Ba1.

Who says you can't take it with you?

Also in the media world, traders saw no movement in Cablevision Systems Corp. bonds, even as the Bethpage, N.Y. based cable company announced that it had filed its overdue 10-Q quarterly report for the recent second quarter with the Securities and Exchange Commission, as well as a re-stated 10-Q for the first quarter, and a restated 10-K annual report for 2005.

That filing corrects any technical breaches of its loan covenants and bond indenture brought about by the late filing of the second-quarter financials. Cablevision had been forced to delay its second-quarter results while it restated the past reports due to the discovery of accounting irregularities, particularly when it came to its practices in the grant of stock options to key executives. On Friday, it was revealed that the company had actually granted stock options to a dead executive - but had improperly back-dated them for when he was alive. The dead man's estate was entitled to exercise the options upon his death.

Cablevision's 7 5/8% notes due 2011 and its 7 5/8s due 2018 were each seen "roughly unchanged" at 102.5 bid, 103.25 offered and 101.5 bid, 102.5 offered, respectively.

Casita only primary news

The primary market remained extremely quiet during Friday's session.

Mexico City mortgage company, Hipotecaria su Casita SA de CV Sofol priced its debut issue of dollar-denominated bonds in a $150 million issue of 10-year senior notes (Ba3/BB-) the came at par to yield 8½%.

Credit Suisse was the bookrunner for the Rule 144A for life, Regulation S transaction.

Among companies in the United States and Western Europe no news was heard on Friday.

Week's issuance nears $2 billion-mark

Tallying su Casita and the rest of the week's junk-rated Rule 144A business, the market saw just under $1.95 billion of issuance during the week to Friday, which of course pales in comparison to the previous week's $5.2 billion.

At Friday's close, year-to-date dollar-denominated issuance stood at just over $92 billion in 265 tranches, as year-over-year 2006 leads 2005 by 18% in terms of dollar issuance.

At the Sept. 22, 2005 close the market had seen slightly more than $75.5 billion price in 294 tranches.

Maintaining the pace

As with the week to Friday, the final week in September 2006 gets underway with approximately $2 billion of business on the new issue calendar expected to price by Friday's close.

Three of them top the quarter-billion mark.

Georgia Gulf Corp. plans to price $750 million in multiple tranches of senior notes via Merrill Lynch & Co.

Service Corp. International is expected to complete its two-part $500 million senior notes deal via JP Morgan Securities and Merrill Lynch.

And American Entertainment Properties Corp. has a single $250 million tranche of eight-year senior floating-rate notes that it expects to price via Bear Stearns & Co.

Big deals will come

Since mid-summer, high-yield market observers have been keeping watch for a handful or more of massive acquisition and LBO financings which according to some forecasts were expected to appear during the late-summer/early-fall time frame.

On Friday a buy-side source advised Prospect News that some of those transactions will certainly come, and further predicted that the market would be receptive.

These included HCA Inc.'s up to $5.70 billion of senior secured second-lien notes to help fund the LBO of the Nashville health care services company. Banc of America, Citigroup, JPMorgan, Merrill Lynch, Deutsche Bank and Wachovia Securities are expected to be involved.

In addition the investor mentioned Aramark Corp.'s $2.470 billion bonds to fund the approximately $8.3 billion LBO of the Philadelphia-based professional food, hospitality and facility management services company. JP Morgan and Goldman Sachs & Co. will lead the deal.

Finally this investor mentioned Kinder Morgan Inc., which will come with a sizable bond offering as part of its $14.5 billion of funded debt to help fund proposed $22 billion buyout of the company, Goldman Sachs, Citigroup, Deutsche Bank, Wachovia and Merrill Lynch are believed to be in the deal.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.