Junk comes alive as Abitibi, Armtec slate deals, NewPage jumps on guidance, GM trades busily

By Paul Deckelman and Paul A. Harris

New York, Sept. 1 - With the turning of the calendar page on Wednesday, the high yield market seemed to rouse itself from the slumber which has kept the market largely becalmed for about the last two to three weeks.

Two new deals actually joined the forward calendar, both from Canadian-based issuers. Montreal-based papermaker AbitibiBowater Inc. was heard to be shopping around a $750 million bond offering, the proceeds of which, along with new bank borrowings, will be used to fund its exit from Chapter 11. And Armtec Holdings, Ltd. announced plans for a C$150 million seven-year offering. High yield syndicate sources meantime heard that the Guelph, Ont.-based infrastructure components manufacturer will begin a road show next week to market its deal to potential investors.

Away from the new-deal arena, NewPage Corp.'s bonds firmed smartly, and in heavy trading, in response to the paper company's surprisingly bullish guidance for the current third quarter and for the fourth quarter. Traders said that NewPage was easily the busiest name in Junkbondland on Wednesday.

There was also no small amount of activity in General Motors Corp.'s bonds as the remainder of the company - now officially known as Motors Liquidation Co. - filed its reorganization plan with the bankruptcy courts.

, laying out a roadmap for the disposal of billions of dollars in claims against the "Old GM" that were left over after the more profitable parts of the carmaker were separated from it and reorganized into "New GM" in July 2009. That latter entity - now an independent company, with Motors Liquidation merely a minority shareholder - meantime released worse-than-expected August sales figures versus a year ago. GM arch-rival Ford Motor Co. also reported a year-over-year sales drop, though not quite as pronounced.

Also in the autosphere, off-highway wheel and tire manufacturer Titan International Inc.'s 8% notes due 2012 were trading several points above recent levels, aided by the late-Tuesday news that the company will tender for those bonds.

Armtec sets roadshow start

No high-yield issues priced during the Wednesday primary market session.

However, expectations for the post-Labor Day deal calendar continued to build, with one deal announced.

Armtec Holdings Ltd. plans a Sept. 8 roadshow start for a C$150 million private placement of seven-year senior unsecured notes (/B/).

The roadshow wraps up on Sept. 13, and the deal is expected to price early in the Sept. 13 week.

Scotia Capital and TD Securities will lead the placement.

Proceeds will be used for general corporate purposes and to repay Armtec group debt, including a portion of its senior secured debt.

The Guelph, Ont.-based company also plans on putting in place a $250 million revolver.

Abitibi to bring $750 million notes

Departing from previous forecasts of a moderately busy September, a dealer told Prospect News on Wednesday that, as has been the case in six of the eight months in 2010 to date, September could see a new monthly issuance record set.

Issuer names continue to be in scarce supply.

However, Abitibibowater Inc. plans to sell $750 million of notes during September in order to help finance its exit from Chapter 11 bankruptcy, an informed source said on Wednesday.

Citigroup and Barclays Capital will lead the deal.

The exit financing also includes new bank debt, including an expected $600 million revolver, and possibly new term loan debt.

The bank deal will launch at a Tuesday bank meeting.

AbitibiBowater filed for bankruptcy on April 16, 2009.

Busy week ahead

Dealers began disclosing plans for a post-Labor Day week that is shaping up to be busier than earlier estimates implied.

A syndicate banker professed visibility on as many as five post-Labor Day deals during a Wednesday conversation.

Two or three of those could be drive-bys expected to price before the end of the week.

All of this prospective issuance emanates from companies well known to the high-yield community, the official added.

And all of them will be big - $500 million-plus - deals.

Issuers are expected to surface from the natural resources and the consumer-industrial sectors, the source added.

And the standing September record - 2009's $20.4 billion, according to Prospect News data - is in trouble, this debt capital markets banker said, departing from previous color from other syndicate bankers who earlier forecast that the old September issuance record would not be broken this year.

This official has visibility on a possible $30 billion of issuance for the month ahead.

Market indicators on the rise

Away from the new-deal world, a trader saw the CDX North American HY Series 14 index gain a full 1 point on Wednesday to end at 96¾ bid, 97 offered, after having lost ¼ point on Tuesday for a second consecutive session.

The KDP High Yield Daily index meantime rose by 12 basis points Wednesday to end at 71.65, after having eased by 5 bps on Tuesday. Its yield declined by 3 bps to 8.34%, after having risen by 1 bp on Tuesday.

The Merrill Lynch High Yield Master II index rose by 0.15% on Wednesday, after having lost 0.071% on Tuesday. It ended the day with a year-to-date return of 8.704%, up from Tuesday's 8.541%. However, the index remains below its peak level for 2010 so far, the 9.085% recorded on Aug. 9.

Advancing issues jumped back out ahead of the decliners on Wednesday, after having trailed them for two consecutive sessions. The advancers held about a seven-to-five margin, versus the six-to-five edge that the declining issues had held on Tuesday.

Overall activity, represented by dollar-volume levels, rose by 14% on Wednesday, on top of the 35% increase seen on Tuesday.

A trader said that apart from specific names which had news out on them, for instance NewPage, "there was not much activity. It was pretty boring.

"Everyone was watching equities," he said, as stocks opened the new month and the final one-third of the year by moving sharply higher. Wall Street got a jump-start after the Institute for Supply Management said manufacturing activity in the United States rose in August, painting a different picture than the recent slew of economic data that pointed to a slowdown.

A second trader called Wednesday " a big day today," between the strong trading in NewPage, the rise of market statistical measures like the CDX and the emergence of two new deals in the recently quiet primary.

But yet another trader said that "New Page was where most of the action was."

NewPage pops on projections

A trader said that clearly "New Page was the name of the day," as the Miamisburg, Ohio-based coated-paper manufacturer's bonds zoomed in very heavy trading on unexpectedly strong guidance it offered for the rest of the year.

He saw its 11 3/8% senior secured notes due 2014 having jumped 6 or 7 points on the session to around 88 bid, versus prior levels around 81 or 82 bid, with "a lot of activity today - a lot of volume all day long."

He said that the third- and fourth-quarter projections "obviously were positive." He saw the sharp rise in the bonds starting "first thing this morning" and continuing all day.

"We saw that one kind of tossing around," a second trader said - but he said "the biggest gainer" was not the 11 3/8s, but the company's 10% second-lien senior secured notes due 2012, which got as good as 44 bid on the day, a 10½ point rise in the credit, on strong volume of $40 million.

But the most heavily-traded issue was the 11 3/8s, which he saw at the 88 level, up 6½ points on the day, on turnover of over $90 million.

"Clearly, somebody was busy," he opined.

He noted that the 11 3/8s are "a pretty good-sized issue," with almost $1.8 billion outstanding, meaning that at least 5% of the issue traded on Wednesday. "That's a lot of volume."

"You'd better write a lot about NewPage," yet another trader jokingly warned, "because that was the big name of the day."

He quoted that 11 3/8s as "wrapped around" 87 bid, up from 81¼ bid, 82¼ offered on Tuesday, while the 10s were up at 41 bid, 42 offered, a 7 or 8 point gain from 33 bid, 35 offered the previous day.

"There was substantial volume, definitely good volume in it," he declared, "no question."

The bonds were seen getting a boost - their biggest gains in nearly a year - on the strong earnings guidance which the company put out.

In an 8-K filing with the Securities and Exchange Commission on Wednesday, NewPage predicted that adjusted EBITDA for the current third quarter will likely come in somewhere between $90 million and $100 million - down from $149 million in the year-ago third quarter, but well up from the $10 million of adjusted EBITDA seen in this year's second quarter. And in the fourth quarter, NewPage said that adjusted EBITDA is expected to jump to between $145 million and $165 million, which would represent a near doubling of $88 million seen in the year-earlier fourth quarter.

NewPage said that its net loss will likely fall to between $75 million and $85 million in the third quarter, versus $174 million in the second quarter and $138 million a year ago. In the fourth quarter, it sees the red ink shrinking to between $10 million and $35 million, which is also down from the $55 million net loss posted in last year's fourth quarter.

A trader said that NewPage was the only name he saw really doing anything among the paper manufacturers. "I don't see any others."

GM volume jumps

General Motors Corp.'s 8 3/8% benchmark bonds due 2033 were seen fairly active, if not much moved in price, amid the news that the entity that is legally the bond issuer - NOT the same company that sells Chevrolet, Cadillac and other GM cars - filed its reorganization plan with the federal courts, in the hopes of having it confirmed sometime in next year's first quarter.

A trader said that GM had "a good trading day," with "a lot of activity" between 31½ and 32 bid. He suggested the actual turnover in the bonds might even be two or three times the $20 million-plus estimates people in the market gave based on the Trace system, since "with all the plusses, you have no idea" whether the real volume of a $1 billion-plus trade is "$2 million or $10 million."

A market source saw the bonds trading all day around the 32 bid level, around a point above Tuesday's closing trades but about unchanged from the previous session's final round-lot dealings a little earlier. The source estimated that over $25 million of the bonds had changed hands by the close, making them among the more actively traded junk issues on Wednesday.

A trader said that the GM benchmarks had been "in the same place, give or take ¼ point, where they've been for a couple of weeks."

However, another trader said the bonds were down 3/8 point on the session, at 31¼ bid, 32½ offered, perhaps pushed downward by investor response to sour sales figures the top U.S. carmaker posted Wednesday.

The bonds' technical issuer of record is Motors Liquidation Co., the name assigned to what used to be GM Corp. before its pre-packaged Chapter 11 filing in June 2009 with the U.S. Bankruptcy Court in Manhattan, which has been overseeing the company's reorganization. Motors Liquidation sold all of GM's profitable operating divisions, such as its Chevy, Cadillac, Buick and GMC brands, as well as trademarks and other usable assets, in July 2009 to a "New GM," General Motors Co. LLC, with the purchase financed by the U.S. Treasury. "New GM" now manufacturers those cars, plus several remaining overseas brands like Opel in Germany, Vauxhall in the United Kingdom and GM Daewoo in South Korea, and is currently planning an initial public stock offering for later in the year.

Meanwhile, Motors Liquidation - "Old GM" - was left holding and settling all of the carmaker's liabilities, such as its roughly $28 billion of unsecured bond debt, including the $3 billion of the '33s, and a trunkload of lawsuits and claims against the company. It also has been tasked with disposing of the company's old, unwanted assets currently in the process of being sold off or else wound down and liquidated, like the remnants of the once-popular Hummer brand or various closed production facilities.

Under the plan filed with the court on Wednesday, all of the remaining assets and liabilities will be transferred to four trusts, including an Environmental Remediation Trust which will provide funds for the continuing cleanup efforts at the remaining old GM properties not transferred to the "New GM" and a General Unsecured Creditors Trust, which will be responsible for resolving the outstanding claims of the company's unsecured creditors.

The latter trust will divide among those creditors whose claims are allowed the 10% of the shares of the "New GM" and warrants exercisable for a further 15% of the "New GM" that are currently held by Motors Liquidation. A third trust will handle both present and future asbestos-related claims against the "Old GM," a legacy from the days when asbestos was widely used in automotive brake pads, before it was identified as a dangerous carcinogen. A fourth trust will deal with certain litigation-related claims.

Since the "Old GM" became Motors Liquidation more than a year ago, the company said that more than 70,000 claims totaling some $275 billion have been submitted and are being managed, with over $150 billion of those claims already resolved or eliminated since then. Anticipating confirmation of its plan by next year's first quarter, Motors Liquidation said that it expects a majority of the unsecured claims to be resolved within the first two years after the plan is confirmed.

Separately, GM - the "New GM," that is - released August sales figures and as expected, they were pretty bad versus a year ago, when the government-sponsored "Cash For Clunkers" program was in full swing, boosting car sales. GM sold 185,176 vehicles in August this year, down 25% from August 2009's 246,479 vehicles. Critics have said that the year-ago incentive program artificially fattened the 2009 July and August sales tally at the expense of sales in the months that followed, once the program was over. It also created difficult if not impossible comps for the following year to beat, or even just to match .

On an adjusted basis, taking into account the number of selling days in the month, GM sales fell 22%, more than the 19% slide analysts were expecting.

GM's main domestic competitor, Ford, meantime reported that its August sales slid to 157,503 vehicles from 176,323 a year earlier, or an 11% downtown, or 7.1% on an adjusted basis; Wall Street had been looking for around a 5% Ford fall-off.

Ford's 7.45% bonds due 2031 were seen by a trader up ½ point at 98 bid, 99 offered. Another trader called the Ford long bonds pretty much unchanged around 97 bid, 98 offered.

But the Dearborn, Mich.-based Number-Two U.S. carmaker's 6½% notes due 2018 were reported by a market source to have gained 1 5/8 points on the day to end just over 102 bid.

Titan trades up

A trader said that there was "some activity today" in Titan International's 8% notes due 2012, seeing "a couple million" of the bonds moving around between 107 bid and 107.40.

Another trader said that the Quincy, Ill.-based off-highway wheel and tire producer's bonds were "definitely up a couple of points, maybe 2 or 3," at 107¼ bid, 107½ offered.

He said they were the first trades in the bonds in a number of weeks, as investors reacted to the late-Tuesday announcement that Titan plans to tender for the $139.948 million of outstanding bonds. Market sources had last quoted the issue in mid-August - but even then on only small trades - around the 104 level. Round-lot trading at that 104 level last took place near the end of June.

Titan will offer tendering holders total consideration of $1,075 per $1,000 principal amount tendered, which includes a $30 per $1,000 consent fee for those tendering before the Sept, 14 consent deadline.

Skilled Healthcare subsides

Elsewhere, a trader said that there was "no volume on the tape" for Skilled Healthcare Group Inc.'s 11% senior subordinated notes due 2014, which had seen some dealings on Tuesday, along with a surge in its stock price.

He saw the bonds trading around an 89-90 range, just below the levels seen late Tuesday a little above 90, but said that he "did not hear them mentioned around at all" during Wednesday's session.

"It's a small deal," just $129 million, "so good luck with [finding any trading going on in] that."

On Tuesday, bond and stock investors had been reacting to the news that the lawsuit proceedings against the California-based nursing home chain which had been scheduled for Tuesday had been put off till Thursday. That delay raised hopes in the market that a settlement between the company and its courtroom foes was in the process of being worked out, which would likely save Skilled Healthcare from being forced into bankruptcy by a huge judgment against the company awarded by the jury in the case earlier this year.

ATP moves up

A trader said that ATP Oil & Gas Corp.'s 11 7/8% second-lien senior secured notes due 2015 were "a little better," up 1 point on the session at 82 bid. He saw the issue have a "sort of moderately active day."

There was no fresh news out on the Houston-based energy exploration and production company, whose bonds got battered around in the wake of the recent BP oil-rig disaster in the Gulf of Mexico due to tough new federal rules on deepwater drilling there, where ATP has the bulk of its proven reserves.

Blockbuster unmoved

A trader said that Blockbuster Inc.'s 11¾% senior secured notes due 2014 were "unchanged and quiet" around 51 bid, 52 offered, where the bonds have been trading the last few days despite recent news reports indicating that the troubled Dallas-based movie-rental company is preparing for a Chapter 11 filing soon.

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