Macrovision prices five-year; new Ford Credit notes firm smartly; Univision gains on Televisa trial delay

By Paul Deckelman and Paul A. Harris

New York, April 29 - Microvision Corp. was heard to have successfully priced its five-year note offering on Tuesday. That bond deal had been downsized and restructured as part of some recent changes in the company's debt financing connected with its acquisition of Gemstar-TV Guide International Inc.

Elsewhere in the new-deal arena, price talk emerged on Axcan Pharma Inc.'s upcoming eight-year note offering.

In the secondary sphere, Ford Motor Credit Co.'s new seven-year bonds, which priced at a steep discount to par on Monday, were seen Tuesday having moved up solidly after breaking into the aftermarket.

Among the established bonds, Univision Communications Inc.'s bonds jumped by several points, helped by the news that the opening of a court case pitting the Los Angeles-based Spanish-language media company against one of its major content suppliers, Mexico's Grupo Televisa, has been postponed, apparently to allow the lawyers for both sides to try to craft an out-of-court settlement acceptable to both parties.

Elsewhere, Lear Corp.'s bonds moved up after the Southfield, Mich.-based automotive components supplier reported strong first-quarter earnings. In that same industry, ArvinMeritor Inc.'s bonds likewise moved up on that company's numbers.

GMAC LLC's bonds were in retreat, as the giant lender reported a sharply wider loss versus a year-ago, much of it originating with GMAC's Residential Capital LLC mortgage lending unit. But despite the latter company's own big loss, ResCap paper was better across the board. Sector peer Countywide Financial Corp.'s bonds were also seen improved, even though that mortgage lender too racked up nearly $1 billion of losses.

Macrovision prices

A senior high yield syndicate official marked the broad market unchanged on Tuesday, and added that it was the first recent day during which the market had seen "a little fade."

Compared to a mammoth Monday session, the Tuesday market turned out only a modicum of primary market news.

In a transaction which took some primary market observers by surprise, Macrovision Solutions Co. priced a $100 million issue of 11% senior notes due Nov. 15, 2013 (B1/B) at par via Rule 144A.

JP Morgan and Merrill Lynch & Co. led the deal, which had earlier been downsized by $50 million, with that amount shifted to the term loan.

Last week Macrovision restructured the debt financing for its $2.8 billion acquisition of Gemstar-TV Guide International, Inc. by shifting $50 million from the proposed $150 million issue of high-yield bonds to its term loan.

Market sources told Prospect News that Macrovision had been expected to raise the remaining $100 million bond portion of the financing via the private placement market.

On Tuesday, when terms on the deal surfaced, sources commented that its size and its call structure, callable in 1.5 years at par, were somewhat novel in the context of mainstream high yield deals.

Originally, Macrovision planned on getting $800 million of debt financing comprised of a $650 million term loan B and a $150 million bridge loan, but the amount of total debt financing was reduced to $650 million by means of proceeds from the roughly $200 million sale of its software business unit to Thoma Cressey Bravo, which is expected to close before the Gemstar acquisition.

One sell-side source, not in the Macrovision deal, commented that its call structure brought to mind mezzanine debt, but added that the 11% coupon is lower than one would expect in a true mezzanine deal.

Several traders said that they had not seen any signs of the new Macrovision 11% notes due 2013 in the aftermarket. "If they were freed to trade late in the day," a trader said," they probably were kept in-house."

Axcan sets talk

Elsewhere on Tuesday, Axcan Pharma set price talk on its revived $235 million offer of eight-year senior unsecured notes (expected ratings B3/B-) at the 13% area on Tuesday.

The bridge refinancing deal, which is being led by Banc of America Securities, HSBC and RBC Capital Markets, is set to price Wednesday.

Waiting for a calendar

Sources at three investment banks have lately told Prospect News of new deals that are expected to come to market in the near to intermediate term.

A banker who operates in both the high yield and leveraged loan markets wonders if those markets have returned to a level of health at which a heftier calendar might be digested.

"Things are definitely better," the banker conceded on Tuesday.

"I don't know if the fundamental problems have been solved. But there has been a lot of movement of paper in the marketplace at attractive prices. And there has been a big move in the secondary.

"Everyone knew that the market was ridiculously oversold."

This sell-sider paused a moment to reflect on Monday's drive-by bond deal from Ford Motor Credit Co. LLC, which priced a $1.1 billion issue of non-callable 12% seven-year senior notes (B1/B/BB-) at 98.834 to yield 12¼%.

"That's a pretty hefty coupon," the banker said.

"Where is the liquidity for the big deals?

"Although Ford got done, 12¼% was expensive.

"When will we see the progress that the secondary market has made translate into a more robust new issue market?"

The backlog

This banker suggested that the "translation" of a rallying secondary market into a more robust primary might still take a while.

This source and others have lately told Prospect News that although the backlog is being moved, visibility on the backlog will continue to decrease as risk is increasingly "sold off the side of the desk."

Right now, the banker who tracks both high yield and leveraged loans tallies the bank loan backlog at $90 billion, and the bond backlog $65 billion.

As others have lately told Prospect News, this banker believes that it is just a matter of time until the bank loan portion of the overhang becomes a lesser amount than the bond backlog.

New Ford Credit bonds drive upward

Back in the secondary, the new issue garnering the vast bulk of the attention from junk marketeers was Ford Credit's 12% notes due 2015, $1.1 billion of which had priced on Monday at a steeply discounted 98.834, to yield 12¼%.

The new bonds, a trader said, were "up nicely," seeing them at 102 bid, 102.5 offered. He said that there had been "a fair amount of trading" in the new bonds, mostly between 102 and the day's high print at 103 bid, with the bulk of the trades between 102.5 and 102.75.

The new Ford bonds, another trader said, traded as high as 102.625 bid in round-lot dealings of at least $1 million.

He said that the fact that the mega-deal priced as cheaply as it did - more than a point south of par - was "so interesting - because if you run the yield" at which the bonds were trading Tuesday when they were above 102, "the company could have come with an 11½% coupon versus 12%. Do you know how much in savings that would be on a billion-dollar issue for a struggling credit like Ford?" he asked rhetorically.

"It's just mind-boggling that these companies [bringing new deals at steep discounts] seem not to realize this. These issues that pop multiple points are literally wasted money out of these issuers' pockets."

He did acknowledge the new reality in the junk bond world - that it's a buyers' market. Only about a year ago, issuers were racing to the junk market to price big new deals like there was no tomorrow, and at spreads and coupons at or near record lows, and all of this paper was being eagerly snapped up by investors despite the relatively sparse returns - at this time last year, some 162 dollar-denominated U.S. deals collectively worth $58.344 billion had priced, versus just 30 deals aggregating to $16.994 billion so far in 2008. Fast-forward a year - and now those same issuers are forced to discount even what objectively speaking are already very hefty, lucrative coupons, like the 12% on Ford Credit's new bonds, to further boost a new issue's yield to overcome investor reluctance to buy new deals. This is particularly so for companies which have had their problems, like Ford.

But while accepting that this might be "a valid point - you do need to put some bait [in the form of extra yield] on the hook," he added, "but to what extent?" While some pop in new issues is to be expected - a quarter-point, a half-point, even three-quarters, especially if buyers are trying to round out positions to make up for cuts in their original allocations - "when you have something move up dramatically like this, over 3 points...it's incredible...It's like a disservice to the issuer. Every quarter of a point [of higher coupon] on a billion-dollar-plus issue is a lot of cash flow for them."

While Ford Credit's new bonds were sizzling, its established issues were fizzling.

A market source saw the Ford Credit 7 3/8% notes due 2009 down 1½ points at 96.5, in quite active trading, while the company's 7% notes due 2013 were down around the same amount at 86.5.

Among the established automotive benchmarks, a trader saw Ford's 7.45% bonds due 2031 down ½ point at 74.5 bid, 75.5 offered, while Ford domestic arch-rival General Motors Corp.'s 8 3/8% bonds due 2033 were unchanged at 73.75 bid, 74.25 offered. But at another desk, the 7.45s were seen about 3/8 point higher, just above 74.

Auto parts producers cruise higher

While Ford - other than the new bonds - and GM struggled, some of the automotive parts makers were accelerating, driven by positive earnings.

A trader saw seat assembly and electronic components maker Lear's 8¾% notes due 2016 up a point at 92.25 bid, 93.25 offered, citing the company's "good quarter overall," and saw Troy, Mich.-based Troy, Mich.-component producer ArvinMeritor's 8 1/8% notes due 2015 some 2 points better at 88 bid, 89 offered.

Lear "was doing a little better today," another trader said. "It's been improving all week" in anticipation of the better numbers reported on Tuesday. He saw the 83/4s up 1 to 1½ points, with the bulk of the day's trading around 92.5-93.

However, another source saw the bonds ending up as much as 3 points on the day at 96, in busy trading. Lear's 5¾% notes due 2014 meantime rose ½ point to 83.

Lear reported a 57% climb in net earnings from a year ago. The company made $78.2 million, or $1 a share - well up from $49.9 million, or 64 cents a share, the previous year. Excluding unusual items such as restructuring costs and expenses related to a supplier strike, Lear earned $1.34 per share - far exceeding analysts' average forecasts of about 47 to 50 cents per share of earnings, excluding special items. Profits went up even as net sales slid to $3.86 billion from $4.41 billion due to Lear's divestiture of its interiors business and lower North American auto industry production, impacted at least in part by the continued strike at American Axle & Manufacturing Holdings Inc., which has caused production disruptions at customer GM, which is also a big Lear customer as well.

Besides reporting stronger than expected earnings, Lear also raised its full-year 2008 sales guidance to $15.5 billion, up from $15 billion, largely as a result of the weak dollar. Analysts have been projecting 2008 sales of $14.8 billion.

ArvinMeritor, meanwhile, reported a fiscal second-quarter profit of $20 million, or 28 cents per share - a solid turnaround from its year-earlier loss of $94 million, or $1.34 per share. Excluding one-time items, earnings per share were 37 cents in the latest period, topping analysts' consensus projections of about a quarter per share of profit. The company also said that revenues rose 9% to $1.78 billion.

Looking ahead, ArvinMeritor executives told analysts and investors on a conference call following release of the numbers that the company remains on track to earn between $1.40 and $1.60 per share from continuing operations in fiscal 2008, which ends in September. That's above average analyst predictions of around $1.25 per share. The executives also said ArvinMeritor was expecting full-year sales from continuing operations in a range of $7.1 billion to $7.3 billion - up $200 million from its prior forecasts due to the stronger euro.

In that same industry, Visteon Corp.'s 7% notes due 2014 were seen up about a point in busy trading at 66. The Van Buren Township, Mich.-based parts producer - formerly a Ford subsidiary, until its spinoff by the giant carmaker a few years ago - is scheduled to report its first quarter earnings on Wednesday. Wall Street is looking for a per-share loss in the 68-to-70 cent area, which would be an improvement from its year-ago 80 cent per share deficit.

Market indicators mixed

Outside of the auto-related names, a trader saw the widely followed CDX index of junk bond performance unchanged at the 97½ bid, 97¾ offered level to which it had risen on Monday. Meanwhile, the KDP High Yield Daily Index ended down 18 bps at 75.63, while its yield rose by 3 bps to 9.24%.

In the broader market, advancing issues led decliners by only a narrow margin. Overall activity, reflected in dollar volumes, eased around 2% from Monday's levels.

Market participants saw a fairly restrained session, heading into Wednesday's meeting of the Federal Reserve's policy-making Federal Open Market Committee. The Fed panel is widely expected by economists to cut the benchmark lending rate by another quarter point to an even 2%, but to then stress in its communiqué that further rate reductions below that level are by no means a certainty.

"Heading into 'Fed Day' [Wednesday], the market generally is firm, a little bit better in spots," a trader said. He said that tech-sector names like Freescale Semiconductor Inc. "continue to strengthen here." He saw "a fair amount of trading" in the Austin, Tex.-based chip maker, its 9 1/8% notes due 2014 active in the 80-80.5 context, "up a touch" from Monday. He said the company's bonds "have all had a pretty good rally in the past week or two."

Univision up on court delay

A trader saw Univision's 9¾% notes due 2015 trading at 72.25 bid, versus levels Monday around 64.5 bid, none offered. "They opened at 69 [Tuesday] and traded up to 72.25 bid, so there's no question these things have popped by multiple points," he declared.

He also saw the company's 7.85% notes due 2011 at 96.75 bid, 97 offered, well up from round-lot trades around 92 on Monday and from levels around 90 bid this past Thursday and Friday. Another trader called the bonds up 3½ points at 95.5.

The Univision bonds firmed on the news that a federal court trial scheduled to begin Tuesday in Los Angeles has been put off until July 1. That will give the lawyers for Univision and its legal opponent, Grupo Televisa, additional time to perhaps work out a settlement that would avoid a ruinous loss for one side or the other.

Univision and Televisa have been feuding since 2005. The two Spanish-language media giants have been partners for years, with Televisa supplying Univision, the leading Latino network in the United States, with Hispanic-oriented soap operas and other entertainment programming under a long-term deal that runs through 2017. Televisa claims Univision has stiffed it on millions of dollars of royalties and wants out of the programming arrangement; Univision, which fears losing the Televisa programming, leaving it with giant holes in its programming schedule to be filled, countersued, claiming Televisa is trying to sabotage its business.

Mortgage names better despite big losses

A trader saw Residential Capital's 6½% notes due 2013 "actually up 2 points" to 49 bid, 50 offered, even though the troubled mortgage company lost $859 million in the first quarter and has considerable near-term liquidity challenges, including $17 billion of maturing 2008 debt, according to corporate parent GMAC LLC. The trader saw the latter's 8% bonds due 2031 down 1½ points at 74.5 bid, 75.5 offered, as the Detroit-based financing company reported a first-quarter loss of $589 million, up from its year-ago red ink of $305 million. It attributed much of the loss to the drag that wholly owned subsidiary ResCap had on the rest of GMAC's finances.

GMAC also said that it may not show a profit this year; traditionally, GMAC has been a strong profits generator, helping 49% owner GM - its full owner until about a year ago - offset losses from its declining core automotive business.

Another trader saw the ResCap 61/2s up ½ point to 1 point at 49 - the same level at which its 8 7/8% notes due 2015 were trading, also up a point on the day.

A trader meantime saw Countrywide Financial's 6¼% notes due 2016 some 2 points better at 87 bid, 89 offered, despite a bad tumble into the red in the most recent quarter, which saw the Calabasas, Calif.-based mortgage originator lose $893 million. He chalked the seemingly incongruous rise up to "short covering, probably."

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