GMAC continues to skid; Refco up on asset list; Ventas sells 10 ½% notes

By Paul Deckelman and Paul A. Harris

New York, Dec. 6 - Bonds of General Motors Corp.'s financing arm, General Motors Acceptance Corp., continued on the road downward Tuesday, a day after Wells Fargo & Co. said it was not interested in buying a controlling stake in GMAC.

On the upside, bankrupt commodities trader Refco Inc.'s notes were solidly higher, with one trader suggesting the rise was linked to Refco's release of details about its assets.

Overall sources said that the broad high-yield market was unchanged to perhaps slightly lower on Tuesday.

In the primary market, Ventas Inc. was heard to have successfully priced an offer of 101/2-year notes, while a prospective new deal emerged for Atlas Pipeline Partners LP. Price talk was heard on Cleveland Unlimited's planned offering of floating-rate notes.

Ventas drives through

Sources have been forecasting that the drive-by market could come to life for higher rated issuers.

On Tuesday that forecast proved correct.

Ventas Realty, LP, issuing in conjunction with Ventas Capital Corp., priced a quick-to-market $125 million issue of 6½% notes due June 1, 2016 (Ba2/BB+) at 99.50 to yield 6.566%.

Banc of America Securities and UBS Investment Bank ran the books for the debt refinancing deal from the Louisville, Ky.-based healthcare real estate investment trust.

AES Dominicana plays to junk accounts

AES Dominicana Energia Finance, SA's new 10-year notes (/B-/B-) also played to some high-yield accounts, sources said.

On Tuesday the company priced $160 million at par to yield 11% via ABN Amro.

AES Dominicana is an energy group operating in the Dominican Republic, which manages two of Virginia-based AES Corp.'s wholly owned generation assets.

Atlas pipes in

One roadshow start was heard, as the forward calendar of deals expected to price before the end of the year climbed close to $8.9 billion.

Atlas Pipeline Partners, LP took to the road with its $250 million offering of 10-year senior notes (B1/B+) via Wachovia Securities.

The Moon Township, Pa.-based midstream energy services provider will use the proceeds to repay debt.

Talk in the market

Official talk was heard on one of the deals expected to price this week.

Cleveland Unlimited Inc. talked its $150 million offering of five-year senior secured floating-rate notes at three-month Libor plus 775 basis points area.

Jefferies & Co. is leading the deal for the Ohio-based privately held wireless voice and text messaging services provider which markets under the "Revol" brand.

Also among the deals expected to price this week is Massey Energy's $725 million of eight-year senior notes (B1/BB-), which one buy-side suggested could come at a yield in the high 6% range and could conceivably upsize.

The source also said that Galaxy Casino's $500 million two-part bond deal (B1/B+) - seven-year fixed-rate notes talked at a yield in the 10% area and five-year floating-rate notes talked at the Libor plus 500 basis points area - is a blowout.

Further ahead: the mega-deals

The source also looked ahead to the billion-plus mega-deals expected to price next week.

Hertz Corp.'s $2.8 billion two-part deal is doing well early, the source claimed, adding that Hertz's bank deal is now two-times oversubscribed.

The $2.2 billion equivalent eight-year senior notes (expected B1/confirmed B/confirmed BB-) appear to be coming with a nine-handle, the source said, while the $600 million 10-year senior subordinated notes (expected B3/confirmed B/confirmed B+) could print somewhere in the 11% range.

Deutsche Bank Securities, Lehman Brothers, JP Morgan, Goldman Sachs & Co. and Merrill Lynch & Co. are the bookrunners.

The buy-side source also commented on Paxson Communications Corp.'s $1.130 billion offering.

Paxson's $700 million of seven-year first-priority notes are being whispered in the Libor plus 250 bps area, the source said, while the $430 million eight-year second-priority notes are whispered in the Libor plus 600 basis points area.

Citigroup, Bear Stearns & Co., CIBC World Markets, Goldman Sachs & Co. and UBS Investment Bank are the bookrunners.

GM steady, GMAC falls

In the secondary arena, GMAC's bonds and GM's "continued to dissociate," a trader said, noting that while the auto giant's benchmark 8 3/5% notes due 2033 were holding steady at 68 bid, 69 offered, GMAC bonds - which had fallen several points in Monday's session - continued in reverse on Tuesday, pushed lower, apparently, by a combination of Wells Fargo pulling out as a potential buyer and by technical factors connected to the credit default swaps market.

The trader quoted GMAC's flagship issue, the 8% notes due 2031, down a point on the session at 93.5 bid, 94.5 offered.

At another shop, GMAC's 6 7/8% notes due 2012 were being quoted nearly two points lower at a shade under 88 bid.

"I think it's CDS-related - people unwinding trades and stuff like that," the first trader said. "I don't think its necessarily credit-specific - just on trading metrics, technical factors."

With GM's fortunes looking bleaker and bleaker, the CDS market - where contracts are sold that which essentially function like an insurance policy against a possible payment default or other negative credit event - has reflected growing investor angst about GMAC; the cost of buying a five-year credit protection contract has increased substantially over the past several weeks. The spread on such a contract, which stood at 230 basis points at the beginning of the year and which had widened only moderately to 257 bps as of a month ago, had ballooned out to 475 bps by Friday, and continued to widen to 510 bps in Monday's dealings. The trader quoted that spread Tuesday as having moved still further out, to around 560 to 570 bps, as "the short end keeps on getting beat up here."

The deterioration in GMAC's position in the CDS market is also connected with the unexpected reverses GM has encountered in its efforts to sell a majority stake in GMAC to some deep-pocketed financial buyer, which would result in a GMAC's currently junk-level credit rating being lifted back to investment grade, in line with the buyer's own ratings. That would mean substantially lower borrowing costs for GMAC, which is the official issuer of record for most of GM's estimated more than $200 billion of corporate debt.

It was several weeks ago that GM announced its intentions to pursue such a sale - which would have the added benefit of bringing anywhere from $10 billion to $15 billion of proceeds into the struggling auto giant's revenue-challenged coffers. In the interim, though, two big financial companies which had been mentioned as potential buyers have taken themselves out of the running. Bank of America's chief financial officer, Alvaro de Molina, declared last week that the second largest U.S. bank had pretty much finished up with large acquisitions and certainly had no interest in pursuing "a GMAC-type" transaction.

Those sentiments were echoed on Monday by Wells Fargo's chief executive officer, Richard Kovacevich, during a conference call. No other firm potential buyer has yet emerged for GMAC.

Parent GM meantime announced the appointment of Frederick Henderson, up till now the head of its European unit, as its new chief financial officer, effective Jan. 1. He replaces John Devine, whose five-year contract with the automaker finishes at the end of the month and year; Devine will stay on an additional year, assisting Henderson for several months during the transition, and then advising GM's chairman and chief executive officer, Rick Wagoner, on the implementation of GM's recently unveiled turnaround plan for its North American operations. Henderson had previously overseen a similar turnaround in the European division.

Dillard gains on earnings

Apart from GM, the retailing sector saw Dillard's Inc. bonds better, after the Little Rock, Ark. reported improved third quarter results.

Its 7.13% notes due 2018 were being quoted at 98 bid, up 2½ points, although a trader at another shop saw considerably less movement in the bonds. He pegged Dillard's 6 5/8% notes, also due 2018, up perhaps half a point at 92.5 bid, 94.5 offered, while its 6.69% notes due 2007 were unchanged at 100.5 bid, 101.5 offered, owing, he said, to its relatively close-in maturity date.

The company posted a net loss of net loss of $2.7 million (three cents per share) - an 86% improvement from its year-ago deficit of $18.7 million (23 cents per share). The loss figure was also substantially less than the 21 cents per share of red ink that Wall Streeters on average had been looking for.

Refco strong

From out of the distressed precincts, Refco Inc.'s bonds "opened on a strong tone," a trader said, following the overnight news that the bankrupt New York-based financial services company had complied with a bankruptcy court order to list schedules of certain assets, client accounts and balances from its unregulated Refco Capital Markets Ltd. unit.

He saw the company's 9% notes due 2012 up 6½ points at the outset and holding onto those gains throughout the session to go home at 77 bid, 79 offered.

At another desk, a trader saw those bonds as high as 78 bid, 78.75 offered, well up from recent levels at 71.75 bid, 72.5 offered.

Refco released schedules listing some $1.91 billion in stocks, bonds and cash that may be related to client accounts, valued as of Nov. 18. The schedules list $3.68 billion in client accounts and exclude other Refco Capital Markets assets, such as claims against clients, securities and other Refco units.

Refco cautioned that the schedules should not be interpreted as the amount that Refco Capital Markets clients may recover in its current bankruptcy case or other proceedings.

Separately, ousted Refco chairman Phillip R. Bennett has consented to maintaining a freeze on more than $100 million in assets that he received from the sale of stock in the company's initial public offering in August.

A court order made public Monday said that Bennett had agreed to agreed to "an indefinite extension" that keeps in place a freeze on assets he received from Refco's initial public offering this past summer, when Bennett sold more than 5.3 million shares as part of the company's equity financing.

Refco's house of cards began to collapse several weeks after that IPO, on revelations that over $400 million of trading losses had been transferred on paper to a private company he controlled and had thus been buried deep in the books and kept from potential shareholders, apparently so as not to impact the success of the IPO. That caused federal regulators to look into the cooked books, leading to Bennett's ouster from the company and his later indictment on securities fraud charges. After numerous clients began pulling their money out of the company, Refco filed for Chapter 11 in October, and last month sold the assets of its regulated Refco LLC regulated brokerage business - which was not a part of the bankruptcy filing - to U.K.-based Man Group, the world's largest publicly traded hedge fund company, for $282 million.

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