Activant, Saxon deals price; Wolverine bonds jump on numbers; funds see $16 million outflow

By Paul Deckelman and Paul A. Harris

New York, April 27 - Activant Solutions Inc. and Saxon Capital Inc. successfully priced new deals Thursday, high yield syndicate sources reported. Also in the primary arena, The Rouse Co. was heard getting ready to price a big new deal early next week, Mecachrome International was preparing to start at mid-week a Europe-only roadshow.

In the secondary market, earnings seemed to be the focus on the day, for both good and bad. Wolverine Tube Inc.'s bonds were seen up solidly, in tandem with a big jump in the Huntsville, Ala.-based tubular metal products producer's stock, as it reported better sales and a lower quarterly net loss versus a year ago. Also helped by good earnings was Amkor Technology Inc. - whose bonds had firmed in late trading Wednesday and then continued to improve Thursday. On the downside, Dura Automotive Systems Inc.'s bonds and shares fell as the Rochester Hills, Minn.-based automotive controls producer reported lower sales and a wider loss from a year ago.

And after trading had mostly wound down for the day, participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday, $15.9 million more left the funds than came into them.

It was the third straight weekly outflow, including the $147.2 million leakage seen in the previous week, ended April 19. Over that three-week span, outflows have totaled $314.6 million, according to a Prospect News analysis of the AMG figures. Outflows have now also been seen in 10 weeks out of the last 12, dating back to early February, during which time nearly $1.196 billion more has left the funds than has come into them, according to the Prospect News analysis.

Outflows have now been seen in 13 weeks out of the 17 since the start of the year, against only four inflows, and net outflows during that time have totaled $1.564 billion, up from $1.548 billion the week before, according to the Prospect News analysis.

Those results, confirm the continuation of the predominantly negative trend that was in evidence throughout most of 2005, when $11.483 billion more left the funds than came into them, according to the Prospect News analysis - much more severe than the $3.236 billion net outflow seen in 2004.

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 between 10% and 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 hedge funds.

The figures exclude distributions and count only those funds that report on a weekly basis.

Still, a high-yield syndicate official commented that the AMG funds flow number is no longer a "tell-all number," with respect to the liquidity of the high-yield asset class.

The official said that presently there is a lot of involvement in the high-yield market by investors not affiliated with mutual funds.

Activant brings sessions' sole deal

Only one issue priced during the Thursday primary market session.

Activant Solutions Inc. priced a $175 million issue of 10-year senior subordinated notes (Caa1/CCC+) at par to yield 9½%, on the tight end of the 9½% to 9¾% price talk.

Deutsche Bank, JP Morgan and Lehman Brothers were the underwriters for the acquisition financing from the Austin, Texas-based enterprise resource planning software company.

Also on Thursday, the market learned that after the Wednesday close Saxon Capital Inc. had priced a restructured $150 million issue of eight-year senior notes (B2/B) at par to yield 12%, on the wide end of the 11¾% to 12% price talk.

JP Morgan was the bookrunner for the issue from the residential mortgage lending and servicing REIT based in Glen Allen, Va.

The notes were restructured, with call protection extended for the life of the bond other than a Treasuries plus 50 basis points make-whole call. Originally the bonds had been marketed with four years of call protection.

Proceeds will be used to repay bank debt which will then be drawn for general corporate purposes, primarily for the acquisition of third party mortgage servicing rights and whole loans in bulk.

Looking to Friday

Only one issue is expected to price on Friday.

FS Funding AS, a subsidiary of Denmark-based global facilities services provider, ISS, is in the market with an upsized, restructured €1.109 billion two-part offering of 10-year senior subordinated notes (B3/B-).

The company is talking a tranche of fixed-rate notes at 9% area. The notes will come with five years of call protection.

Meanwhile the company is talking a tranche of floating-rate notes at Euribor plus 700 basis points. The floating-rate notes will be callable immediately at 101.

Citigroup and Goldman Sachs & Co. are joint bookrunners.

Tranche sizes remain to be determined.

The offering was upsized from €975 million. However a proposed dollar-denominated tranche was abandoned.

A rumor circulated the market on Thursday that the company had further upsized the deal to €1.30 billion, and revised price talk to 8 7/8% on the fixed-rate tranche and three-month Euribor plus 662.5 basis points on the floating-rate tranche.

However an informed source told Prospect News late Thursday that there had been no official upsizing or price talk revision.

Elsewhere terms could emerge Friday or Monday on Shaw Communications Inc.'s C$300 million offering of 6.15% senior unsecured notes due May 9, 2016 (Ba2/BB+/BB from DBRS).

TD Securities and RBC Capital Markets are joint bookrunners for the debt refinancing and working capital deal.

Rouse plans $500 million

The Rouse Co. LP and financing subsidiary TRC Co-Issuer Inc. plan to price a $500 million offering of senior notes (expected ratings Ba1/BB+) on Tuesday.

The bullet notes are expected to be structured with a five-year or seven-year maturity.

Lehman Brothers has the books for the debt refinancing deal.

Rouse is a Columbia, Md., REIT focused on shopping centers and office buildings, as well as mixed-use and industrial properties.

The company's properties include Boston's Faneuil Hall Marketplace, Baltimore's The Gallery at Harborplace and New York's South Street Seaport.

Saxon soars in trading

When the new Saxon Capital 12% notes due 2014 were freed for secondary dealings, "they were doing pretty well," a trader said with some understatement, since the notes had jumped to 103 bid, 104 offered after having broken at 101 bid, 102 offered, still well up from their par issue price earlier in the session.

The trader also saw Activant Solutions' new 9 ½ notes due 2016 more than holding their own, at 101.75 bid, 102.25 offered versus their par issue price.

Among bonds which had priced during Wednesday's session, Nordic Telephone Co.'s new dollar-denominated 8 7/8% notes due 2016 - which had priced at par, along with two euro-denominated bond tranches, and which had then jumped to 103 bid, 103.5 offered - were seen to have firmed slightly from those lofty levels to 103.25 bid, 104.25 offered.

Rural Cellular Corp.'s new add-on issue of 8¼% notes due 2012 were seen at 104.5 bid, 105 offered, up from their 104.125 issue price on Wednesday. And Pioneer Natural Resources Co.'s new 6 7/8% notes due 2018, which were being quoted on a spread versus Treasuries basis, tightened marginally on Thursday to a bid level of 177 basis points over the comparable government bond, and an offered level of 175 bps, versus 178 bps at issue.

Wolverine gains on earnings

Back among the established issues, Wolverine Tube's 10½% notes due 2009 were seen by one trader as having jumped perhaps as much as six or seven points from recent levels, as its stock zoomed on more favorable quarterly results. He pegged the bonds at 81 bid, 81.75 bid.

"They were the winner," he said, noting that the bonds had been offered on Wednesday morning at 75.375, and then had moved to a bid level of 77 on Thursday morning, before continuing to appreciate all during the session, after the company reported a jump in first-quarter sales to $298.3 million from $213.5 million a year earlier. Its loss meantime narrowed to $2.1 million (14 cents per share) from $2.5 million (17 cents per share) a year earlier.

"They just kept right on going" up, he noted. Part of the bond's attraction, he said was that big coupon. "With the yieldy stuff, people are looking for any reason to bid up big-coupon discount paper," he declared, adding that such a name was "not much affected by Treasuries - who cares about a 50 or 100 bps rise?"

Another trader saw the bonds at 80.5 bid, 81.5 offered, while yet another saw a more restrained rise to 79.5 bid, which he called up two points on the day. He also saw the company's 7 3/8% notes due 2008 at 75.5 bid, up ¼ point.

A market source at another desk saw that latter bond up a point on the session at 76 bid, 77 offered, but only saw the 101/2s at 78.5 bid, 79.5 offered, up 1½ points.

The bond rise was helped along by a steep jump in Wolverine's New York Stock Exchange-traded shares, which rocketed up 67 cents (25.97%) to $3.25, on volume of 1.3 million shares, about four times the norm.

Blockbuster better on results

Also on the earnings front, Blockbuster Inc. reported a first-quarter net loss of net loss of $1.9 million (three cents per share) - a solid $55.6 million improvement from its year-earlier net loss of $57.5 million (31 cents per share). The Dallas-based top home video rental and sales store chain operator's adjusted net income for the first quarter increased by $61.6 million to $13 million (five cents per share), from its year-earlier adjusted net loss of $48.6 million (26 cents per share).

A trader saw Blockbuster's 9½% notes due 2012 about a point better at 94.5 bid, 95.5 offered. However, another trader saw the bonds little moved on the session at 93.5.

Amkor's gains continue

Amkor's bonds continued a rise that started late Wednesday after the Chandler, Ariz.-based provider of packaging and testing services to the semiconductor manufacturing industry swung into the black in the fourth quarter from a year-ago loss, paced by surging sales.

A market source saw Amkor's 9¼% notes due 2008 - which firmed a point on Wednesday to around the 104 level - up an additional point on Thursday, to 105. He also saw its 10½% notes due 2009 two points better at 102 bid, while its 7¾% notes due 2013 and 7 1/8% notes due 2011 were each up about ¾ point, at 95.25.

Auto names slip

On the downside, some automotive supplier bonds were seen lower after reporting weak results that pushed the companies' shares lower. Chief among these was Dura, whose 9% notes due 2009 were seen down 2¼ points to 56.25, while its 8 5/8% notes due 2012 were off ¾ point at 86.

Dura's bonds slid after the company reported a net loss for the quarter of $7 million (38 cents per share) versus year-earlier red ink of $4.8 million (26 cents per share), as sales slid sharply amid continued problems in the domestic automobile industry, a major portion of Dura's customer base.

Dura senior executives told analysts on a conference call following the release of the results that the company was meantime continuing with its previously announced global restructuring of its operations that includes the possible closure of between five and 10 plants in the United States and overseas, as well as the separate possible sale of three German plants.

And they said the company is in good shape, liquidity-wise, as a result of having recently enlarged its $150 million senior secured second-lien term loan facility due 2011 by $75 million, a transaction which closed in March (see related story elsewhere in this issue).

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