Ford debt little moved on lower earnings; National Waterworks gains on buyout plan; Acco seen launching

By Paul Deckelman and Paul A. Harris

New York, July 19 - Ford Motor Co. bonds were seen pretty much unchanged on Tuesday, traders said, after the Dearborn, Mich.-based automotive giant - as expected - reported a sizable drop in second-quarter earnings from year-earlier levels. The traders also saw little real movement in other automotive-related names.

One name which was seen better was National Waterworks Holdings Inc., which announced that it has agreed to be acquired by The Home Depot Inc.

The distressed bond market was meantime following the fall of Anchor Glass Container Corp.'s bonds, after the Tampa, Fla.-based glass container manufacturer's warning Monday that it may not be able to make the scheduled Aug. 15 interest payment on its bonds, and may also be in danger of breaching covenants in its bank credit agreement.

Overall high-yield bond prices eased throughout the Tuesday session, market sources said.

After the close, one syndicate official put the overall market down a quarter of a point to half a point on the day.

Primary remains quiet

Meanwhile the primary market produced very little in the way of news on Tuesday.

No new issues priced.

One roadshow start was heard, however.

FTI Consulting, Inc., will hit the road Wednesday with $175 million of eight-year senior notes (Ba2/B+), via Goldman Sachs & Co. and Banc of America Securities.

The Annapolis, Md., turnaround, restructuring and bankruptcy consulting services provider will use the proceeds, along with those from an offering of $125 million of seven-year convertible securities, to repurchase common shares, repay bank debt and for general corporate purposes.

Meanwhile a market source told Prospect News that Illinois-based office products company Acco World Corp. is expected to launch its $350 million offering of senior subordinated notes the week, with Citigroup leading the deal.

Proceeds will be used to help fund Fortune Brands Inc.'s spin off of Acco World Corp. and the merger of Acco with General Binding Corp. to form a new entity called Acco Brands.

Ashtead, Digicel talk

Price talk emerged during the Tuesday session on a pair of deals that are expected to be completed this week.

U.K. equipment rental company Ashtead Holdings plc talked its $250 million of 10-year senior secured second-priority notes at a yield in the 8¾% area.

Pricing is expected Wednesday via Citigroup, JP Morgan and Deutsche Bank Securities.

Elsewhere Kingston, Jamaica-based Caribbean wireless operator Digicel Ltd. upsized to $300 million from $250 million its offering of seven-year senior notes (B3/B), and talked it at the 9½% area.

JP Morgan and Citigroup are bookrunners. Pricing is expected Wednesday or Thursday.

A buy-side source told Prospect News that the Digicel order book is believed to be subscribed to the tune of $1.5 billion.

A sell-side source not involved in the Digicel transaction, speaking later in the session, said that such an oversubscription level is by no means difficult to swallow.

"There is good investor interest out there right now," the source asserted, adding that deals seem to be pricing pretty well.

SunGard starts marketing

Elsewhere Tuesday talked turn to the only mega-deal presently in the market: SunGard Data Systems Inc.'s $1.25 billion of eight-year senior unsecured notes (B-) in fixed rate and floating rate tranches.

The deal, which is being run by Deutsche Bank Securities, JP Morgan, Citigroup, Goldman Sachs & Co., Morgan Stanley and Banc of America Securities, kicked off the roadshow on Monday.

Sources told Prospect News that although SunGard is in the market with $1.25 billion it's no secret that the company would prefer to raise more - the $11.3 billion LBO financing contains a $3 billion bridge loan to high yield.

"The loans are going very well," one market source commented. "The book is probably going to close this week.

"If they can upsize the bonds they will," the source added. "My sense is that the bonds are going to come somewhere around 9% for the fixed piece.

"They will try to get as much done as they can."

Another source close to the deal told Prospect News late Tuesday that the early pro forma on the bonds has them coming at a blended yield of 9¼%. The source calculated that in such a scenario the floating-rate portion would come at approximately Libor plus 475 basis points.

Ford quiet on earnings

Back in the secondary market, Ford was probably the most notable company reporting earnings Tuesday - but from a bondholders' perspective, there was not much to write home about.

The second-largest U.S.-based automotive manufacturer was expected to post lower earnings for the quarter than it did a year ago due to sagging performance by its core North American vehicle operation, and it did exactly that, as earnings fell to $946 million (47 cents per share) from $1.2 billion (57 cents per share) a year ago, a 19% slide. The domestic auto operation showed a pre-tax loss of $907 million versus year-ago earnings of $454 million. However, Ford was bailed out by the strong performance ($1.2 billion in earnings) of its financial arm, Ford Motor Credit Co., as well as by good performance by its non-U.S. auto operations around the world.

The company also reported that it has more-than-ample credit availability, cash positions and overall liquidity (see related story elsewhere in this issue).

With Ford having done about what was expected, traders didn't see much activity in the company's bonds, particularly its benchmark 7.45% notes due 2031.

A trader called the notes "up a little," at 83.5 bid, 84 offered, half-point gain on the session.

Another trader saw the Ford bonds off a little at 82 bid, 82.5 offered, down from 83 bid, 83.5 on Monday, and saw Ford Motor Credit's 7% notes due 2013 likewise half a point down at 96 bid, 96.5 offered.

A market source at another shop corroborated that the 7.45s had eased, to 83.75 bid, 84.125 offered, from prior levels at 84.125 bid, 18 offered.

Other auto names flat to lower

Apart from Ford, automotive names pretty much took a backseat, trading unchanged to slightly lower, with General Motors Corp.'s 7 1/8% notes due 2013 half a point lower at 91.75.

A trader saw former GM unit Delphi Corp.'s 7 1/8% notes due 2029 falling half a point to 73 bid, 75 offered, while its 6½% notes due 2013 lost 1½ points to close at 77 bid, 78 offered. He also saw former Ford unit Visteon Corp.'s 8¼% notes due 2010 and 7% notes due 2014 each down 1½ points, at 93 bid, 94 offered and 84 bid, 85 offered, respectively.

Collins & Aikman better

Collins & Aikman Products Co.'s 10¾% notes due 2011, which bounced around on Monday at sharply lower levels on news of its European units seeking court protection, before coming off its lows to end the day just slightly lower, were nowhere nearly as volatile Tuesday. The bankrupt Troy, Mich.-based automotive components supplier's bonds were quoted by one trader at 27.75 bid, 28.5 offered, up from 26.625 bid, 27.625 offered on Monday, while another one saw the bonds unchanged at 27 bid, 28 offered.

Anchor plunges, partially rebounds

Also from the distressed precincts, a trader saw Anchor Glass Container's 11% notes due 2013 "initially drop" to levels as low as 61 bid, 62 offered from Monday's close at 73 bid, 74 offered, after the company cautioned investors that it expects to violate its bank covenants because of "substantially" lower than expected earnings for May and June, further warned that its ability pay the $19.2 million of interest due Aug. 15 on the $350 million of 11% notes is "uncertain" and said it is considering various options, including a debt restructuring.

The trader said that after hitting those lows, the bonds bounced back to a closing price of 66 bid, 67 offered, and trading flat, or without the accrued interest. Dealings in Anchor, he said, "were pretty active."

Anchor said Monday that the results for May and June mean it does not expect to be in compliance with the fixed-charge coverage ratio covenant on its two revolving credit agreements with Wachovia Bank NA and Madeleine LLC and its capital leases with General Electric Credit Corp. It said that discussions are under way for a waiver or modification of the requirement, and it expects to be able to borrow on the revolvers to pay ordinary course liabilities.

However, the company said the non-compliance would allow the lenders to accelerate the debt if they wished.

Moody's Investors Service said Tuesday that it had downgraded ratings on Anchor by two notches, with both the corporate family rating (formerly senior implied rating) and the rating on the 11% notes falling to Caa1. The ratings have been placed on review for further possible downgrade.

National Waterworks higher on Home Depot purchase

Elsewhere, the news that Home Depot has agreed to acquire National Waterworks Holdings gave the 10½% notes due 2012 of the Waco, Tex.-based maker of water transmission systems equipment a boost. A trader said that the bonds were "up a couple' of points, at 116.5 bid, 117.5 offered - what he called a "T + 75 [bps] price," obviously anticipating a call of the notes. They firmed to that level from 115 bid, 116 offered.

Financial terms of the Waterworks deal were not disclosed.

Maytag rise stalls

Also on the acquisitions front, there was no follow-through seen from the solid rise that Maytag Corp.'s bonds saw Monday, on the news that appliance giant Whirlpool Corp has made a bid for the Newton, Iowa-based appliance maker, which had already endorsed another would-be buyer's previous offer. Maytag's recently junked 5% notes due 2015, after rising to the 88 bid area from prior levels around 80, were seen at or slightly below that 88-ish level.

Mylan Laboratories Inc's recently priced 6 3/8% notes were at par bid, 100.75 offered, while a trader - who said he had not seen the company's 5¾% notes Monday or Tuesday - suggested that their price was probably ¾ of a point behind the 6 3/8s.

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