Maytag bonds jump as Whirlpool makes takeover offer

By Paul Deckelman and Paul A. Harris

New York, July 18 - Bonds of the recently junked Maytag Corp. were seen firming smartly in trading Monday after larger rival Whirlpool Corp. made a $1.3 billion cash-and-stock offer for the Newton, Iowa-based appliance maker.

Elsewhere, Collins & Aikman Corp.'s bonds were bouncing around at lower levels on the news that the bankrupt Troy, Mich.-based automotive components maker's European units had sought insolvency protection - the overseas equivalent of Chapter 11 - in the British courts. However, those bonds ended up bouncing off their lows and finishing only marginally lower.

Overall, the high-yield market eased through the course of the Monday session, according to sources.

One official from a high-yield syndicate desk marked a couple of the benchmark issues down by about an eighth of a point on the day, trailing weakness in both the stock market and the Treasury market.

A market source saw Maytag's 5% notes due 2015 as having jumped to bid levels in the 88-89 area, well up from prior levels around 80 bid, on the news that Whirlpool has offered to acquire its competitor in a $17 per-share cash and stock deal worth an estimated $1.37 billion. Whirlpool has also offered to assume $969 million of Maytag debt, bringing the total value of the deal to about $2.3 billion.

The source said that only the 5% notes were being actively traded. Although he heard the company's 6 1/8% notes due 2006 also quoted in the high 80s, the 5% notes were "the only one we saw trading with any volume."

While an eight-point jump in a bond is pretty good in anyone's book, the source did opine that he "thought that there would be more movement" in all three of the company's securities [Maytag also has 6.45% notes due 2014 out] on news like this."

A trader at another desk saws the Maytag 5s "pretty well rebounding" after recent declines, estimating them up eight points, at 87.5 bid, 88.5 offered, versus prior levels at 79.5 bid, 80.5 offered. He estimated that the bonds "may have been even higher than that," and "maybe they tricked down from their highs."

The Maytag bonds had recently been on the slide, falling into the 70s in late April after the major ratings agencies cut the company's debt ratings to junk status, citing its lagging sales and high materials and labor costs.

The Whirlpool offer seeks to top a $14 per-share bid submitted in mid-May by Ripplewood Holdings LLC, a New York-based private equity firm, and an informal $16 offer that Chinese appliance maker Qingdao Haier Ltd. Maytag has already formally accepted the Ripplewood offering and has a shareholders meeting scheduled for next month to vote on it, but it is also in the process of doing due diligence with Haier. It said Monday it would consider the Whirlpool offer (see related story elsewhere in this issue).

Auto rally halts

Elsewhere, it looked like the strong surge in automotive names seen late last week, after government statistics showed that auto sales jumped in June, chiefly due to General Motors Corp.'s new "employee discount prices for everyone" gimmick, ran out of gas on Monday, or at least was starting to stall out.

Traders said that there seemed to be little continuation of the momentum, for instance, in Dura Automotive Systems Inc., whose bonds had accelerated sharply upward Friday after Credit Suisse First Boston upped its rating and its share-price target on the Rochester Hills, Minn.-based automotive systems maker's shares.

With that story now old news, Dura's bonds were seen little changed, a trader said, quoting its 9% notes due 2009 at 80.5 bid, 81.5 offered, while its 8 5/8% notes were also unchanged, at 95 bid, 96 offered.

A market source who saw the 9s get as good as 81.5 bid during the early part of the day, up about a point, noted that by the end of the day, those gains had evaporated.

"The autos got weaker," said a trader, who noted that "they had a big run last week," but were now trading off.

He quoted the sector down about a half point overall, with Delphi Corp.'s 7 1/8% notes due 2029 dipping to 73.5 bid 74.5 offered from prior levels around 74. He saw Visteon Corp.'s 7% notes due 2014 at 84 bid, 85 offered, down half a point on the session but off several points from week-earlier levels around 87 bid, 88 offered. And ArvinMeritor Inc.'s 8¾% notes due 2012 were also about half a point lower, he said, at 04.5 bid 105.5 offered.

This particular trader did not see Dura, although he speculated that it was probably lower as well, last week's surge not withstanding. He also saw General Motors' benchmark 8 3/8% notes due 2033 at 86.75 bid, 87.75 offered, which he guessed would be "unchanged to lower."

Another trader saw "nothing going on" in the Duras; he also saw Visteon's 7s at 85.625 bid, down from 86 previously.

Collins & Aikman drops, rebounds

Also among the auto names, Collins & Aikman Product Co.'s 10¾% senior notes due 2011 were seen by a trader as having swooned to as low as 23 bid, 25 offered from recent levels around 29 bid, 30 offered. However, he said, those bonds came back to only close a point lower at 28 bid, 29 offered.

Another trader saw the bonds fall on the news the European operations had sought administration protection, similar to Chapter 11 in the United States. But he saw the losses as more conservative, seeing the 103/4s dropping perhaps two points on the day, to 27.25, but only down perhaps a half point below that at its depth.

Yet another trader saw the 103/4s at 27 bid, 28 offered - down a point on the day, but two points better than their low levels for the day around 25.

WL Ross & Co. LLC announced Monday that it has provided a loan to Collins & Aikman's U.K. affiliates, and is also preparing to provide additional financing to the other European subsidiaries under Administration in the United Kingdom.

Lucent holds

Lucent Technologies Inc.'s bonds were seen steady Monday, with its flagship 7¼% notes due 2006 at around 102 bid, its 5½% notes due 2008 at par and its 6.45% notes due 2029 at 91.5 bid. The Murray Hill, N.J.-based telecommunications equipment maker is scheduled to release fiscal third-quarter earnings Tuesday morning, and is expected to post strong results, spurred by big orders from wireless providers looking to build out their 21st century voice and data networks.

A quiet Monday in the primary

The new issue market paid out news in mean amounts on Monday, as no new issues were priced and no roadshow starts were announced.

Southern Peru Copper Corp. issued price talk on Monday for its $600 million two-part offering of senior notes (Ba1/BB+/BB+).

The company talked $400 million of 30-year notes at the Treasuries plus 325 basis points area, and $200 million of 10-year notes at the Treasuries plus 240 basis points area.

Pricing is expected on Tuesday or Wednesday.

Citigroup and UBS Investment Bank are the bookrunners for the debt refinancing from the copper producer.

One informed source told Prospect News that both U.S. high-yield accounts and emerging markets investors are having a look at the notes, adding that the company in registered in Delaware and headquartered in Phoenix, Ariz.

The precursor for a quiet week?

With Monday's overall quiet in the new issue market one sell-side source said that at the session's close only three deals, in addition to Southern Peru Copper, are parked on the forward calendar as business expected to price before Friday's close.

Price talk on two of them is expected to come out Tuesday, one source said.

One of those is Ashtead Holdings plc's $250 million offering of 10-year senior secured second-priority notes, being led by Citigroup, JP Morgan and Deutsche Bank Securities.

The Leatherhead, U.K. equipment rental company will use the proceeds to repay debt.

The other deal expected to be talked Tuesday is Kingston, Jamaica-based Caribbean wireless operator Digicel Ltd.

The company is offering $250 million of seven-year senior notes (B3/B) via JP Morgan and Citigroup.

At the close of Monday's session the only other bond deal believed to be headed toward pricing during the July 18 week is from Swedish oil refiner Preem Petroleum AB. Issuing entity Corral Investment Co. (Preem Holdings) is in the market with approximately €500 million of five-year senior floating-rate split-coupon notes and loans to be sold in dollar and euro denominations.

Deutsche Bank Securities is the bookrunner. An investor lunch scheduled for Tuesday.

Brookstone $190 million for LBO

Elsewhere on Monday Merrimack, N.H., product developer and specialty retail company Brookstone Inc. disclosed plans to sell $190 million of senior unsecured notes to finance its leveraged buyout by OSIM International, JW Childs Associates LP and Temasek Holdings Ltd.

Brookstone also plans on getting a new $100 million credit facility in connection with the LBO that will be used to refinance debt and provide for working capital and general corporate purposes.

Bank of America, Goldman Sachs Credit Partners LP and UBS Securities are leading the bank portion of the financing.

Strong gains in Europe says Merrill's Garman

In the Friday, July 15 edition of EuroHYLights, Merrill Lynch's weekly strategy report on the European high-yield market, Christopher Garman, Merrill's global high-yield strategist commented that European high-yield bonds posted strong gains during the second quarter of 2005.

Garman noted that Merrill's euro-denominated index returned 2.27% during the quarter, while its sterling-denominated junk index advanced by 3.30%.

Those figures compare to a 2.61% gain in the U.S. High Yield Master II index. Banking, gas, electronics, and pharmaceuticals were among the best performing sectors in Europe, while paper, insurance, railroads, and steels underperformed.

European high-yield issuers priced $3.5 billion worth of new bonds during the second quarter, the slowest pace since the first quarter of 2003, when only $2.1 billion was issued. Over 40% of European new issues came in as either C rated or non-rated credits, the highest such proportion on record going back to 1998.

Only 10.8% of European new issues were dollar-denominated, down from a 27.6% in 2004.

Quiksilver off highs

In trading of recent new issues, a source saw Quiksilver Inc.'s recently priced 6 7/8% notes due 2015 - which had run up to around the 101 bid level after their pricing at par on Thursday - coming down from those highs, to end at 100.25, down 5/8 point on the session. The source did not see any activity in any of the other recently priced issues, including such names as Mylan Laboratories Inc., CCM Merger Inc./Motor City Casino, or Clayton Williams Energy Inc.

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