Movie Gallery moves up sharply; Lear up as Icahn bid goes down in flames; primary quiet

By Paul Deckelman and Paul A. Harris

New York, July 16 - For a second straight session, Movie Gallery Inc.'s 11% notes due 2012 were the market's feature presentation - after Friday's coming attractions, in which the bonds moved up to the upper 20s from around 23-24 previously. Call Monday an encore performance, with the troubled Dothan, Ala.-based Number-Two U.S. video rental chain operator's notes getting as high as 38.5 bid, before going home somewhere in that area, despite a lack of hard news that might explain the jump.

Also on the upside on Monday were bonds of Lear Corp., even as the Southfield, Mich.-based auto components company's shareholder rejected billionaire investor Carl Icahn's takeover bid for the company.

Sell-side sources marked the broad market unchanged to perhaps slightly better on Monday.

Meanwhile the primary market turned out very little in the way of hard news as the July 16 to July 20 week got underway.

French real estate developer, Groupe Akerys SA priced a €300 million issue of floating-rate notes on top of the price talk.

And, as had been the case last week, high yield syndicate officials pointed to three project financing bond deals from gaming firms now on the road, and said that good executions on these three transactions could be just the palliative that presently rocky primary market needs.

"The primary market is kind of quiet," a trader said. "They got a lot of deals done at the quarter end, and whatever was [going to be] pulled, was pulled, and [prospective issuers] are re-evaluating. There's a calendar, but as to when it's going to come - well, we'll see."

He noted that "they tried to do that Quebecor [Media] deal last week, with the market all choppy and ended up pulling it down when they didn't get the price they wanted."

But loss of that deal should hardly matter, he said. "What I am told is there's plenty of [potential] supply to come if the market ever stabilizes,."

While he said that "Treasuries were on a tear today," knocking down markets in some other asset classes, such as asset-backed paper, "but it didn't really affect our market - if anything, high yield was a little bit higher," at least in the earlier part of the session. By the time of the close, he said, it felt "maybe a touch softer."

Movie Gallery moves

No bonds moved quite as high as Movie Gallery, which was one of the most actively traded issues in the market

A trader who saw the Movie Gallery bonds finishing at 37 bid, 39 offered, which he called a 9 point jump on the session, said that Movie had been "the big mover" from where he sat, attributing the zoom to short covering.

Another trader saw the bonds at 35 bid, 38 offered, up from the mid 20s, but ventured no opinions on why the bonds had jumped.

Another trader quoted the bonds at 36.75 bid, 37.75 offered, "a pretty big move," although he also could not account for the rise.

However, yet another trader, who pegged the Movie Gallery notes up 7 points at 37.25 bid, 38.25 offered, attributed the gain to "speculation about one investor buying everything and trying to get a controlling stake in the 11s," presumably to position himself for an anticipated restructuring scenario.

The trader also noted the speculation "that everyone was covering shorts." He said the bonds "went up really quick. Everything happened at once," with the bonds jumping to 35 from 28-29 "in an hour - maybe even less than that, a half hour."

The bonds have firmed solidly since the company's announcement earlier in the month that it was having trouble meeting its debt covenants and would have to ask its lenders for easier terms. There has been talk that the rise is nothing more than a snapback from the bonds' recent plunge.

Sector peer Blockbuster Inc.'s 9% notes due 2012 meantime were up a point on the day at 89 bid, 90 offered.

Lear leaps as Icahn bid stumbles

Lear Corp.'s bonds were seen mostly better, apparently given a boost, along with the company shares, on the news that shareholders had voted down Carl Icahn's $2.9 billion offer for the company, preferring to stay independent.

Although one trader said that he saw the Lear bonds essentially unchanged, another pegged the company's 8¾% notes due 2016 up 2 points at 96 bid, 97 offered.

Another source saw those bonds at 96.75 bid, up 2 points on the day, though down a little from their peak levels around 97.5 Trading was busy in that particular issue, but much less so in the company's other bonds.

Shareholders as well as bondholders approved; Lear's stock rose 60 cents to $37.50 on the New York Stock Exchange.

Ford firmer, but trader doubts Volvo scenario

In other automotive names, Ford Motor Co.'s flagship 7.45% bonds due 2031 were seen having firmed more than a point to 79.625 bid following the weekend news that the troubled Number-Two domestic carmaker might consider a sale of its Volvo unit as a way of raising cash and focusing on its core North American auto business.

That would be a reversal of Ford's previous position, which has been to rule out selling the brand, part of Ford's Premier Group of luxury European nameplates.

But a trader doubted that the Volvo news was the catalyst behind the bonds' rise, noting that the concept had already been bandied around the market and was "not a secret."

Dura turmoil continues

Among the distressed automotive supplier bonds, a trader said that Dura Automotive Systems Inc., Dana Corp. and Delphi Corp. "did nothing" Monday.

However, another trader saw bankrupt Rochester Hills, Mich.-based components supplier Dura's 9% subordinated notes due 2009 up 1 point on the day to a wide 3.5 bid, 7.5 offered.

"They kind of went up and down." he said. "Some guys had them around 4-ish, but I think up a point is the best you can figure." He noted that there had been trades at 2.5 on Friday - the low level to which those bonds skidded, from around 12-13 previously, after Dura outlined its reorganization plan - which would give holders of its 8 5/8% senior notes due 2012 an equity stake in the restructured company, but which envisions no recovery at all for the subordinated bond holders.

The senior bonds, he said, were meanwhile at 71.5 bid, 72.5 offered, up 1 point on the day.

Spectrum struggle continues

A trader saw Spectrum Brands Inc.'s bonds lower, although he acknowledged that the big move in the embattled Atlanta-based battery and consumer products company's bonds had come on Friday, when its 11¼% notes due 2013 fell into the mid-80s from prior levels in the lower 90s, while its 7 3/8% notes due 2015 dip into the mid 70s from previous levels in the low 80s.

On Monday, he saw Spectrum's 111/4s retreat a bit further to 83.5 bid, 85.5 offered, and saw the 7 3/8s around 74.5 - although that was around the level at which they had gone home on Friday.

Spectrum's bonds fell after the warning last week that the company now expects full-year EBITDA in a range of $260 million to $264 million on revenue of $2.63 billion - down from its previous expectations of booking $282 million of year-end EBITDA on $2.65 billion of revenue. Spectrum blamed the lowered projections on unfavorable weather conditions, particularly drought in a big part of the United States, which is hurting sales of its home and garden products like Spectracide weed killer. It also cited lower-than-expected European sales of its Rayovac batteries, as well as a "cautious outlook on the part of U.S. retailers" stocking their shelves, which also impacts Rayovac, as well as the company's personal-care products like its Remington electric shaver line.

Tembec better

A trader saw Tembec Inc.'s bonds up as much as 1½ points in the early going, before those gains were whittled down to around ½ point, with the Montreal-based forest products company's 8 5/8% notes due 2009 at 58 bid, 60 offered. He saw the company's other bonds, such as its 8½% notes due 2011 and 7¾% notes due 2012 essentially unchanged, around 50.5 bid and 49.5 bid, respectively.

A trader saw Sea Containers Ltd.'s bonds pretty much down a point, with the 10¾% notes that were to have come due in 2006 at 90 bid, 92 offered, the 7 7/8% notes due 2008 at 86 bid, 88 offered, and its 10½% notes die 2012 at 89.5 bid, 91 offered. He had no explanation for the continued weakening of the bankrupt Bermuda-based maritime and railroad transportation company's debt.

Akerys prices €300 million

Only one issue was placed during the Monday session.

Groupe Akerys priced €300 million of seven-year senior floating-rate notes (Ba3/BB-) at par to yield three-month Euribor plus 325 basis points, on top of price talk.

BNP Paribas, Calyon Securities and SG Corporate & Investment Banking were joint bookrunners for the deal to refinance debt related to an acquisition.

Elsewhere, the primary market produced very little news, indeed.

The structure, and possibly the price talk, could emerge Tuesday on Intergen Group's $1.975 billion senior secured notes offer (Ba3/BB-), according to an informed source.

When the deal began roadshowing market, sources told Prospect News that the company was expected to sell sterling-denominated eight-year floating-rate notes, as well as 10-year fixed-rate notes in dollar, euro and sterling denominated tranches.

However late last week a source close to the deal said that no final structure had been decided.

Merrill Lynch is the bookrunner for the LBO financing from the Massachusetts-based power generation company.

Eyes on the gaming sector

Late last week high yield syndicate sources began telling Prospect News that the recently rocky primary market, which has seen six issuers pull 11 tranches totaling $4.45 billion since June 26, needs some "middle of the fairway" deals in order to get back on track.

Different versions emerged with respect to what kind of deals they would be.

One source asserted that a decent-sized debt refinancing deal from a name well known to high yield investors would be just the ticket.

Alternatively, on Friday and again on Monday, several sources pointed to three project financing deals from gaming companies which are now in the market.

These sell-siders asserted that investors are apt to pay attention when there is new paper in the market from the gaming sector.

Two of these deals were launched last Friday.

East Valley Tourist Development Authority began a roadshow on Monday for its $290 million two-part offering of senior secured notes (B+), via Merrill Lynch.

The Downstream Development Authority of the Quapaw tribe of Oklahoma will begin a roadshow on Wednesday for its $235 million offering of eight-year senior notes (B-) via left bookrunner Banc of America Securities.

They join Silverton Casino Hotel & Resort which launched a $215 million offering of eight-year second mortgage notes (B-), also via Banc of America Securities, earlier last week.

All three are expected to price during that week that begins July 23.

All three are project financing deals, or "story deals," in the jargon of the high yield market, because they call upon investors to study the merits of their respective proposed developments.

However, the sell-side sources tell Prospect News that the accounts tend to have capable gaming analysts.

And the appetite of accounts for high yield paper from the gaming sector is thought to be sufficient that they will be apt to devote the time necessary to get up to speed on these deals.

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