Aleris, Georgia-Pacific lead busy pricing parade; airlines head back up

By Paul Deckelman, Paul A. Harris and Ronda Fears

New York, Dec. 13 - The March of the Mega-deals continued on Wednesday, junk market syndicate sources, with two more bond offerings in the $1 billion-plus range - for Aleris International Inc. and Georgia-Pacific Corp. - having priced by the time activity wound down. Those offerings followed similarly huge transactions on Monday and Tuesday by the financing arms of Ford Motor Co. and General Motors Corp., respectively.

On top of that, there was a slew of lesser deals, including scheduled issues - deals actually on the forward calendar when the week began-from Tristan Oil Ltd. and Navios Maritime Holdings Inc., as well as quickly shopped offerings from MGM Mirage, Quebecor World Inc. and Level 3 Communications Inc. The latter deal was an add-on to the Broomfield, Colo.-based telecommunications infrastructure company's existing 9¼% notes due 2015 and met with enough interest to justify upsizing it. The Tristan, Alaris and Quebecor deals performed well when the issues broke into the secondary market, but the other deals were anchored around their respective issue prices.

Elsewhere in the secondary, Level 3's 10¾% notes due 2011 were up, since the company announced that it would tender for those bonds, using the proceeds from its new deal. On the other hand, existing bonds of MGM Mirage and its subsidiaries retreated in the face of the new deal.

Outside of issues with new-deal connections, the volatile bonds of the troubled airline industry - which had been climbing steadily over the previous several sessions before running into turbulence during Tuesday's dealings - were once again on the upside Wednesday, with Delta Air Lines Inc. and Northwest Airlines Corp.'s paper pushed skyward by renewed speculation about possible merger and acquisition activity among the carriers.

A source from a hedge fund marked the broad high yield market lower on Wednesday, spotting the CDX 100 down 3/16 point on the session.

A sell-off in Treasuries hurt, commented this and other sources.

The source from the hedge fund marked 10-year government paper off by 5/8 point on the day.

Another likely factor in the junk market's softness, the hedge fund source added, is the massive supply of new issuance presently being rolled out of the primary market.

Fifth biggest day of 2006

With regard to the phenomenal amount of issuance volume presently being cranked out of the new issue market, the Wednesday session produced a sizable chunk.

Eight issuers raised slightly less than $4.8 billion of proceeds in 10 dollar-denominated Rule 144A tranches. That tally rendered the Wednesday session the fifth biggest of 2006, in terms of dollar amount of issuance.

Of those 10 tranches, one came at the tight end of price talk, five came on top of price talk, one came on top of revised price talk, one came wide of talk and one priced wide of talk.

Two of the tranches were upsized and two were downsized.

Georgia-Pacific upsizes

Wednesday's largest amount of issuance came from Georgia-Pacific Corp.

The Atlanta-based paper and building products company priced $1.25 billion of senior guaranteed notes (Ba3/B) in a two-part transaction that was upsized from $1.0 billion.

Georgia-Pacific priced a $500 million tranche of 10-year notes at par to yield 7%, on top of price talk, and a $750 million tranche of 10-year notes at par to yield 7 1/8%, at the tight end of the 7¼% price talk.

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

With the upsizing of the bond deal, Georgia-Pacific withdrew a $250 million add-on to its revolver.

Aleris prices a billion

Also joining 2006's burgeoning billion-dollar deal club on Wednesday was Aleris International, Inc.

The Beachwood, Ohio, manufacturer of aluminum rolled products priced a downsized $1 billion high-yield notes transaction in two tranches.

Aleris priced a $600 million tranche of eight-year senior PIK toggle notes (B3/B-) at par to yield 9%, and a $400 million tranche of 10-year senior subordinated notes (Caa1/B-) at par to yield 10%.

Both tranches came on top of the price talk.

Deutsche Bank Securities and Goldman Sachs & Co. were joint bookrunners for the acquisition- and related debt refinancing deal.

The overall notes transaction was decreased from $1.10 billion.

MGM Mirage drives through

MGM Mirage priced a $750 million issue of 10-year senior notes (Ba2/BB) at par to yield 7 5/8% in a quick-to-market transaction on Wednesday.

The yield came at the wide end of the 7½% area price talk.

Barclays Capital, BNP Paribas, UBS Investment Bank and Wachovia Securities were joint bookrunners for the debt refinancing and general corporate purposes deal from the Las Vegas-based gaming company.

Level 3 upsizes tap

Also coming quick to market was Level 3 Financing, Inc.

The internet backbone company priced an upsized $650 million add-on to its 9¼% senior notes due Nov. 1, 2014 (existing ratings B2/CCC-) at 101.75, resulting in an 8 7/8% yield, according to an informed source.

The issue priced on top of price talk.

Merrill Lynch & Co. had the books for the debt refinancing.

The original $600 million priced at par on Oct. 25, 2006, leaving the total issue size at $1.25 billion following Wednesday's add-on, which resulted in 37.5 basis point of interest savings for Level 3, with respect to the yield on the original notes.

Quebecor atop talk

Elsewhere Quebecor World Inc. priced a $400 million issue of eight-year senior notes (B2/B) at par to yield 9¾%, on top of price talk.

Citigroup, Banc of America Securities, RBC Capital Markets and Scotia Capital were joint bookrunners for the debt reduction and general corporate purposes deal from the Montreal-based printing business.

Tristan atop revised talk

Tristan Oil Ltd., a British Virgin Islands oil and gas exploration and production company operating primarily in Kazakhstan, priced a $300 million issue of five-year senior secured notes at par to yield 10½% on Wednesday.

The yield came on top of the 10½% price talk, which had been revised from 10¾% to 11%.

Jefferies & Co. ran the books for the debt refinancing, dividend funding and general corporate purposes deal.

Navios comes wide

Greek maritime shipping firm Navios Maritime Holdings priced a $300 million issue of 9½% eight-year senior notes (B2/B) at 99.316 to yield 9 5/8%.

The yield came 12.5 basis points beyond the wide end of the 9¼% to 9½% talk.

Merrill Lynch & Co. and JP Morgan were joint bookrunners for the debt refinancing deal.

Maxcom downsizes

Also pricing a dollar-denominated Rule 144A deal on Wednesday was Mexican telecommunications company Maxcom Telecomunicaciones SA de CV.

The company priced a downsized $150 million issue of eight-year notes (B3/B) at par to yield 11%.

Morgan Stanley ran the books for the debt refinancing and capital expenditures funding deal.

Not quite cleared out

Wednesday's 10-tranche, $4.8 billion primary market session cleared most but not all of this week's anticipated new issue business.

Three deals are parked on the forward calendar as business that is expected to be cleared by the Friday close.

UCI Holdco Inc., the ultimate parent of Evansville, Ind., vehicle replacement parts supplier United Components Inc., plans to price a $235 million offering of seven-year senior floating-rate PIK notes (Caa2) on Thursday.

The deal, which is being led by Lehman Brothers and Goldman Sachs, is talked with a Libor plus 700 basis points coupon at an issue price of 99.00.

Tropicana Entertainment LLC and Tropicana Finance are expected to price a a $925 million offering of eight-year senior subordinated notes (B3/CCC+) on either Thursday or Friday.

The deal, which is being led by Credit Suisse, is talked at 9% to 9¼%.

And Dollarama Group Holdings LP along with Dollarama Group Holdings Corp. is expected to price a $200 million offering of six-year senior floating-rate deferred interest notes via Citigroup, JP Morgan and RBC Capital Markets, before the end of the week.

No price talk had been heard as the Prospect News High Yield Daily went to press on Wednesday night.

Two for next week

The mid-week session also saw two issuers kick off roadshows for deals that are expected to price during the pre-Christmas week.

Both are being led by Goldman Sachs, in one case jointly with Credit Suisse.

Titan International, Inc., a Quincy, Ill.-based parts supplier to agricultural and construction vehicles is roadshowing a $200 million offering of five-year senior bullet notes, in a debt refinancing deal.

And Texas-based Metals USA Holdings Corp. began a roadshow on Wednesday for a $150 million offering of five-year senior unsecured floating-rate PIK notes (Caa1/CCC+), a dividend deal being led by Goldman Sachs and Credit Suisse.

New Aleris is hot, Georgia-Pacific is not

Looking at the day's two biggest deals, when the new Georgia-Pacific deal was freed for secondary dealings, a trader said that both the 7 1/8% notes due 2016 and the 7% notes due 2014, which had priced at par, were at par bid, 100.5 offered on the break, and then eased back to a low of 99.5. At the end of the day, the bonds had inched back up to straddle par, at 99.75 bid, 100.25 offered. Another trader had those bonds ending a little lower on the day, at 99.625 bid, 99.875 offered.

By way of contrast, a trader saw the new Aleris bonds firming smartly in the aftermarket. At mid-morning, the company's 9% senior secured PIK toggle notes due 2014 and its 10% senior subordinated notes due 2016 had risen to 101.5 bid, 102 offered from their par issue price for each tranche. By the end of the day, the bonds had eased ever so slightly, but were still seen by several traders in a 101 bid, 101.5 offered context.

Tristan is triumphant

Also seen having moved up nicely by the end of the session were Tristan Oil's 10½% senior secured notes due 2011, with a trader quoting them at 102 bid, 103 offered, well up from their par issue price.

Another trader did not see a bid on the issue, but heard it having been offered as high as 104.

Quebecor's new 9¾% notes due 2015 were also seen having pushed solidly higher in the aftermarket to 100.75 bid, 101.25 offered, up from their par issue price.

MGM, Navios go nowhere

On the other hand, the new Navios Maritime 9 5/8% notes due 2014 were quoted as trading at 99.5 bid, par offered, not far from their 99.316 issue price.

MGM Mirage's new 7 5/8% notes due 2016 actually slipped back slightly from their par issue price into a straddle at 99.75 bid, 100.25 offered.

Existing bonds affiliated with the Las Vegas-based gaming giant were meantime lower on investor reaction to the prospect of more debt being put onto the company's balance sheet. Its 5 7/8% notes due 2014 were seen down ¾ point at 92.375, while the 7 5/8% notes due 2013 issued by the formerly independent Mandalay Resort Group, now an MGM Mirage subsidiary, were also ¾ point lower, at 97.5. Mirage Resorts Inc.'s 7¼% notes due 2017 were down even further, off 1½ points at 96.75.

New deal raises Level 3

The upsized Level 3 9¼% add-on to its existing 2015 bonds, which priced at 101.75, came too late in the session for any aftermarket activity.

However, the company's 10¾% notes due 2011 - which are to be taken out with the proceeds from the new deal - were seen by a trader up a point at 109 bid, 109.5 offered, while a trader at another desk saw the bonds improve even further, to 109.125 bid, 109,625 offered, from 107.75 bid, 108.375 offered previously.

New GMAC, Ford Credit ease

A trader, noting the generally heavier Treasury market as an influence, saw the new GMAC LLC 6% notes due 2011 lower at 98.75 bid, 99 offered versus their issue price Tuesday at 99.443 and initial aftermarket finish that session at 99.5 bid, 99.75 offered.

He also saw the new Ford Motor Credit Co. 8% notes due 2016 at 97.25 bid, 97.75 offered, down from those bonds' issue price Monday at 98.322 and their initial secondary rise to 98.5 bid, 98.75 offered. Ford Credit's floating-rate notes due 2011 were also lower, at 97.5 bid versus their 98.758 issue price Monday and 98.5 bid, 98.75 offered in initial secondary trading.

The two carmakers' outstanding bonds were also seen limping along in the breakdown lane on Tuesday due to investor angst over the massive addition of debt at each company - $1 billion for GM and a whopping $3 billion for Ford - as well as heaviness in Treasuries. Ford's 7.45% notes due 2031 were down a point to 96.25 bid, 97.25 offered, while its 7% notes due 2013 were off a point at 94.75. GM's benchmark 8 3/8% notes due 2033 were down ¾ point at 88.75-89.75, while its 7 1/8% notes due 2013 were ¾ point lower at 92.5. GMAC's 6 7/8% notes due 2012 were ½ point lower at 102.75.

Airlines resume climb

Apart from the new issues that moved into the secondary, and the behavior of the existing bonds of some of those companies, the bulk of activity in the secondary - and relatively speaking, there wasn't all that much of it - took place among airline bonds, particularly those of Delta and Northwest.

Those bonds had been steadily climbing for most of the past month, especially after US Airways Group Inc. stepped forward in mid-November with an unsolicited offer to buy the bankrupt Atlanta-based Number-Three U.S. carrier for $8.7 billion in cash and stock. Since that time, Delta's bonds have risen from the upper 30s into the mid-to-upper 60s, although they were seen down about 2 points on Tuesday on apparent profit-taking.

But on Wednesday, they were once again gaining altitude, with Delta's 8.30% notes due 2029 up 2 points to 68 bid, 69 offered, while its 7.90% notes due 2009 went from 66.75 bid, 67.75 offered, to 68.25 bid, 68.75 offered.

Northwest's bonds, which have also been firming since November on buyout buzz and takeover talk, were also several points lower on Tuesday, though higher on Wednesday. The bankrupt Eagan, Minn.-based Number-Four U.S. carrier's bonds were up 1½ points across the board, one trader said, seeing its 10% notes due 2009 at 95 bid, 96 offered.

Although Northwest has not received a takeover offer like Delta, it has been mentioned, both as a possible acquisition target, or, alternatively, even as a possible acquirer, in investor discussions about airline consolidation scenarios. Northwest last week sought bankruptcy court approval to hire Evercore Group LLC as a financial advisor, sparking market scuttlebutt that it might be looking to be bought - or to buy someone else.

One "someone else" which has been mentioned this week is Houston-based Number-Five carrier Continental Airlines. But another, probably more likely suitor than the bankrupt Northwest appeared on Wednesday, amid market reports that Continental was in preliminary talks with the second-biggest U.S. carrier, Elk Grove Village, Ill.-based United Airlines, a unit of UAL Corp. Such a linkup between the two carriers could create the largest airline in the world, surpassing AMR Corp. subsidiary American Airlines.

Also adding to the frothy, heady atmosphere of merger-mania in the airline industry were two other pieces of news on Wednesday: low-cost carrier AirTran Holdings Inc. offering to buy a so far reluctant Midwest Air Group Inc., and, late in the day, the announcement that Australian carrier Qantas had revered its earlier opposition and had accepted an $8.7 billion buyout offer from an investor consortium that includes private equity investment group Texas Pacific.

Toys off, CHC up on numbers

Elsewhere, a trader said, Toys "R" Us Inc. was out with its quarterly numbers late Tuesday, and the Wayne, N.J.-based specialty retailer's bonds were seen down ½ point, with its 7 3/8% notes due 2018 easing to 80 bid, 81 offered.

A market source saw the company's 7 7/8% notes due 2013 down ½ point at 89.25.

However, a source saw its 7 5/8% notes due 2011 up ½ point at 92.5 bid, and pegged the 7 7/8s actually ¾ point better at 89 bid.

The first trader also saw Canadian oilfield transportation operator CHC Helicopter better on the latest quarterly numbers, with its 7 3/8% notes due 2014 up ½ point at 96.5 bid, 97.5 offered.

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