CCS, Inergy deals price; Ford up on surprise Q1 profit; funds see $295 million inflows

By Paul Deckelman and Paul A. Harris

New York, April 24 - CCS Inc. and Inergy Finance Corp./Inergy LP were heard to have successfully priced their expected new offerings on Thursday - Inergy's add-on tranche was even upsized. That clears the junk market forward calendar of scheduled offerings for the week.

In the secondary arena, Ford Motor Co.'s bonds were seen firmer after the automaker reported an unexpected profit for the first quarter, citing stronger sales in Europe and South America and a smaller-than-expected loss in its core North American operations.

Sabine Pass LNG LP's bonds were seen up solidly, investors basking in the warm afterglow of this week's official inauguration of the company's big new liquefied natural gas terminal on the Louisiana Gulf Coast.

On the downside, Residential Capital LLC's bonds, and those of corporate parent GMAC LLC, were lower following Wednesday's downgrade of both companies' debt ratings by Moody's Investors Service and a similar action Thursday by Standard & Poor's.

A high yield syndicate official said the broad market was a little better on Thursday.

Funds up by $295 million on week

Meanwhile the technical picture continued to appear strong, with AMG Data Services reporting $294.6 million of inflows to the high yield mutual funds for the week to Wednesday, according to market participants familiar with the statistics generated by AMG Data Services of Arcata, Calif. said that in the week ended Wednesday. It was the fourth consecutive inflow, following the cash infusion of $59.239 million seen in the previous week, ended April 16.

Over that four-week stretch, inflows have totaled $1.442 billion, according to a Prospect News analysis of the figures, far outweighing the $409.6 million of net outflows which had been seen over the three weeks before that.

The results over the past four weeks have represented a sharp break away from the negative fund-flow trend which had dominated for most of this year. With 17 weeks now in the books, outflows and inflows are almost evenly split, with outflows seen in nine weeks versus eight inflows, according to the Prospect News analysis.

That winning streak also erased what up till that time was a sizable year-to-date outflow totaling over $1 billion as of the week ended Wednesday, March 26

According to market sources, net outflows from the weekly-reporting funds since the start of the year are now estimated at $368.8 million, up from $74.239 million the previous week.

The sources meanwhile said that there was no change on the week in the total assets of funds which report on a monthly, rather than a weekly basis. So far this year, $547.8 million more has come into that latter group of funds than has left them.

Taken in the aggregate, combining the cumulative totals for the monthly-reporting funds and the weekly reporters, the high yield mutual funds show a consolidated net inflow of some $916.6 million, the market sources said.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise 10% to 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and, most recently, hedge funds.

CCS comes at talk

In the primary Calgary, Alta.-based oilfield waste management company CCS Inc. priced a $312 million issue of 11% senior unsecured notes due Nov. 15, 2015 (Caa1/B-) at 89.484 to yield 13¼% on Thursday.

The notes priced on top of price talk which was raised to 13¼% from the 13% area.

Goldman Sachs & Co. and Deutsche Bank Securities were joint bookrunners for the bridge refinancing.

Inergy upsizes

Inergy LP and Inergy Finance Corp. priced an upsized $200 million add-on to their 8¼% senior notes due March 1, 2016 (B1/B+) at 102.00.

The deal, which was upsized form $150 million, priced on top of the price talk.

The informed source said that the deal went very well and added that the order book was oversubscribed.

Wachovia Securities, Lehman Brothers and JP Morgan led the debt refinancing related to an acquisition.

Newport launches two-parter

Newport Television Holdings LLC and NTV Holdings Finance Corp. began a roadshow on Thursday for a $394.5 million face amount two-part offering of high-yield notes (Caa1/CCC+).

The deal includes $200 million of 13% nine-year senior PIK toggle notes. The toggle notes come with a 75 basis points coupon step-up if the interest is paid in kind as opposed to in cash.

In addition the offering includes a $194.5 million face amount of 13¾% 10-year senior discount notes, which are non-callable for five years.

Wachovia Securities, Goldman Sachs & Co. and UBS Investment Bank are joint bookrunners for the bridge refinancing deal.

CCS not seen in trade

After the new CCS 11% notes due 2015 priced, traders said they had not seen the bonds trading around in the aftermarket. One trader said he had heard a quote in an 88-90 context, but acknowledged that he himself had not seen them trade.

"It didn't really blow out," he said of the new issue, noting the steep discount to par at which the bonds had to price - a more than 10 point concession - in order to achieve an attractive enough yield to get the deal done, even with their nice fat 11% coupon. "It seemed like they had a bit of a problem, and were struggling."

The new Inergy Finance add-on bonds hit the market even later in the day, and were not seen trading around either.

Market indicators seen mixed

A trader saw the widely followed CDX index of junk bond performance up ¼ point at 96 5/8 bid, 96 7/8 offered on Thursday. Meanwhile, the KDP High Yield Daily Index ended down 5 bps at 75.62, while its yield rose by 1 bp to 9.26%.

In the broader market, advancing issues led decliners by a better-than five-to-four margin. Overall activity, reflected in dollar volumes, rose nearly 25% from Wednesday's levels.

A trader opined that "the market continued to improve today," although he thought that Wednesday was "kind of the more active day," Thursday's higher dollar volume figures notwithstanding.

Ford firmer after getting back in the black

Ford's bonds were seen to have firmed following the unexpected news that the Dearborn, Mich.-based automotive giant - a big money-loser over the last couple of years - actually turned a profit in the first quarter.

A trader saw Ford's benchmark 7.45% bonds due 2031 up 1¼ points to 74 bid, 75 offered, while another pegged the bonds ½ point better at 73.75 bid, 74.5 offered. And a market source elsewhere estimated them to be about ¾ point firmer at 74.5, with a number of big-block trades seen.

Ford reported net income of $100 million, or 5 cents per share - a considerable, if unexpected improvement from the year-earlier quarterly loss of $282 million, or 15 cents. Excluding discontinued operations and other special items, the company earned $525 million, or 20 cents per share, during the quarter, handily beating Wall Street's expectations of a loss of about 14 or 15 cents per share.

It was the first profitable quarter since last year's second period for Ford, whose all-important North American sales have been deteriorating badly for some time; the carmaker recently suffered the embarrassment of surrendering its traditional spot as the second-biggest U.S. seller behind perennial industry leader General Motors Corp. - a niche it had occupied for literally decades - to hard-charging challenger Toyota.

The North American operations continue to bleed - while profits rose handsomely for both its European and South American operations, spurred by the popularity of Ford vehicles in those markets, North America had a $45 million pre-tax loss in the latest quarter - although that was considerably improved from the $613 million of red ink seen the year before. Ford said the difference was some $1.2 billion of cost cuts it was able to put into effect in the intervening year, including sharp work-force reductions achieved by offering buyouts and other early-retirement incentives to thousands of hourly workers at plants in the United States and Canada.

Even with the reduced costs and the quarterly profit, though, Ford executives warned on the company's conference call following the release of the results that 2008 will be an unprofitable year overall for Ford as domestic vehicle sales continue to slide. The company's chief financial officer, Don Leclair, said that Ford is already scheduled to build a total of just 710,000 vehicles in the current second quarter, down 101,000 units from year-ago output levels, including 40,000 trucks - up until now among Ford's most profitable sellers. The 710,000-unit figure is down about 20,000 from the company's earlier guidance.

Ford's chairman, Alan Mulally, said that the company likely will make further cuts in both output and hourly workforce. He told analysts and investors on the call that while the remainder of the year will be "challenging" and while Ford anticipates a full-year loss for 2008, it remains on track to return to profitability next year. Ford plans to spend $12 billion to $14 billion per year through 2009 to cover losses and pay for restructuring costs.

ResCap, GMAC off following downgrades

A trader saw Residential Capital's 6½% notes due 2013 down 1½ points at 52 bid, 54 offered, while corporate parent GMAC's 8% bonds due 2031 were also down 1½ points, following Wednesday's downgrade of the companies by Moody's Investors Service and a similar action Thursday by S&P.

At another desk, ResCap's 8 7/8% notes due 2015 were seen more than 2 points lower at 52 bid, while GMAC's 6 7/8% notes due 2012 were a point lower at 83 bid.

ResCap was "under a little pressure today," yet another trader said, noting the ratings downgrades and the board shakeup that led to it. He saw the 61/2s as "quite active today," down 1½ to 2 points on the day at trading levels as low as 52.

On Wednesday, Moody's cut ResCap's corporate credit two notches to Caa1, and GMAC's one notch to B2. S&P on Thursday lowered ResCap's corporate credit two notches to CCC+, and GMAC by one step to B.

The agencies voiced similar concerns, citing changes in ResCap's board composition, with two independent directors choosing to resign for as yet unspecified reasons; S&P said that "sharpens concerns about company performance, hit by turmoil in housing and mortgage markets."

They also warned that GMAC likely will be required to kick in additional support for its problem child.

In fact, the companies said in a regulatory filing Thursday that ResCap last week borrowed $468 million from its parent by partially drawing on a $750 million credit facility previously made available to ResCap by GMAC. ResCap said it borrowed the money to add to its liquidity until it can arrange longer-term funding.

Sabine bonds cooking with gas

Back on the upside, a trader saw Sabine Pass' 7½% notes due 2016 up a point at 90.5 bid, 91.5 offered. Another market source saw the bonds up more than 2 points on the session to 91.25 bid, in fairly active trading.

The company - a unit of Houston-based Cheniere Energy - this week officially inaugurated its big new liquefied natural gas regasification terminal, located on the Sabine River in Cameron Parish, La., not far from the Gulf of Mexico. The first LNG carrier successfully docked at the terminal and was subsequently unloaded on April 11, allowing for a final test of the cool-down and testing processes before the plant officially came on-stream this week. Further tests are scheduled for the coming weeks.

The new terminal - the largest LNG receiving facility in the United States - has a current capacity of 2.6 billion cubic feet per day (Bcf/d) send-out capacity and 10 Bcf of storage capacity. Plans are underway to expand this to 4 Bcf/d of send out capacity and 16.8 Bcf of storage capacity by the 2009 second quarter.

Tech names seen mostly firmer

A trader saw tech names such as NXP Semiconductors and Freescale Semiconductor Inc. continuing to "grind a little higher," with the latter up by ½ point to a point.

"It looked like they were pretty active," he said, while "NXP's were up a little bit."

The Freescale bonds, particularly, seemed to shrug off disappointing quarterly numbers turned in by the company's former corporate parent and still its major customer, Motorola Inc.

A market source saw Austin, Tex.-based chipmaker Freescale's 8 7/8% notes due 2014 up nearly a point at 84.5 bid, while its 9 1/8% notes due 2014 gained more than a point to finish around the 77 level. At another desk, those bonds were seen up better than 1½ points on the day in brisk trading, just above 77. However, the company's 10 1/8% notes due 2016 were quoted on the downside by nearly a point, at just under 74. Yet another trader saw the 9 1/8s a point better at 76.5 bid, 77.5 offered.

In that same sector, another trader saw Sanmina-SCI Corp.'s 6¾% notes due 2013 improve after the San Jose, Calif.-based electronics manufacturer announced a smaller fiscal second-quarter loss versus a year ago. He said the bonds had risen about ½ point to 90.25.

In the fiscal quarter ended March 29, the company's net loss narrowed to $24.4 million, or 5 cents a share, from $26.1 million, or 5 cents a share, a year earlier. Its adjusted net income was $28.2 million, or 5 cents a share. Revenue increased to $1.82 billion from $1.79 billion a year ago.

Gaming names busy

In the gaming sector, a trader said "there looked like there was a lot of trading" in Harrah's Entertainment Inc.'s 10¾% cash-pay bonds, and noted that during Wednesday's session, "there was some speculation regarding MGM Mirage that [principal owner Kirk] Kerkorian would do something to enhance shareholder value at the expense of the bondholders." He said that the latter company's paper "was probably the only bonds that traded out without [concrete] news out on them."

He said the company's 10-year paper was off about a point, and said that its 7½% notes due 2016 were likewise down a point, going as low as 88.5 bid, 89.5 offered. In Thursday's dealings, he saw the bonds come off those lows to move back up to around the 89 bid, 89.5 offered - although that's still down from recent levels above 90. "So they're still kind of at the lows."

He said that the "the equity guys" are still of the belief that the cantankerous octogenarian billionaire investor "will try to get the company to pay a large dividend or authorize a big share buyback. The bondholders, on a knee-jerk basis, just pulled back."

He continued that "even after the bad news that you had in the last week about Atlantic City gaming revenues being down 10% and Las Vegas being down 3% to 4%, after almost never being down, after bonds [initially] sold off, they were trading [back] up."

He said that "even" Trump Entertainment Resorts Inc.'s 8½% notes due 2015 were improved, trading in the 65.5-66 area, "a couple of points off the lows" hit during the early part of the week. After bottoming around 64, "where a lot of bonds traded," they got as high as 66 on Thursday.

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