Downsized InterGen deal prices, Allison gone; United Rentals, Vertis up on M&A

By Paul Deckelman and Paul A. Harris

New York, July 23 - InterGen priced a slightly downsized version of its three-part, three-currency 10-year senior notes deal Monday. But high yield syndicate sources said another mega-deal - for Allison Transmission - was postponed, with the borrowers citing current market conditions as the reason.

In the secondary market, it was generally "an ugly day," as one trader put it - with many issues down a point or more, in line with a fall in the benchmark junk bond index.

But United Rentals Inc. - whose bonds had fallen on Friday - snapped back nicely Monday on the news that the Greenwich, Conn.-based equipment rental company will be bought out for $4 billion.

Merger and acquisition news also pushed up the bonds of both Vertis Communications and American Color Graphics, which plan to merge.

Back on the downside, housing names got hurt as Beazer Homes USA Inc. became the subject of a formal investigation by the Securities and Exchange Commission

A hedge fund manager said late Monday that the market was going out very weak, with the high yield tracking CDX 100 index down a point on the session at 93 bid, 93 1/8 offered.

The source added that presently the high yield market is an "ugly environment."

Other sources concurred.

One sell-sider said that the following last week's news that price talk had to be hiked on the Chrysler Corp. LLC's $12 billion bank loan - earmarked to help fund the buyout of the company by Cerberus from DaimlerChrysler - people in the leverage markets have been waiting with bated breath to hear whether the new pricing would be sufficient to get the bank deal across the threshold.

However, the source added somewhat ominously, it was "radio silence" on Monday from the bookrunners on the Chrysler bank deal.

In the junk bond primary market Intergen NV placed $1.875 billion equivalent.

The deal was downsized by $100 million equivalent, and all three tranches - the deal came in dollars, euros and pounds - priced an eighth of a point wide of upwardly revised talk.

Nevertheless sell-siders, some in the deal and some not in it, insisted that the important thing is that it "got done."

Elsewhere in the primary GE Plastics launched a $2.765 billion equivalent two-part deal.

And DAE Aviation Holdings Inc. set price talk for its $325 million offering of eight-year senior unsecured notes at 11% to 11¼%.

InterGen prices $1.875 billion

InterGen placed a downsized $1.875 billion equivalent amount of 10-year senior secured notes (Ba3/BB-) in three tranches on Monday.

The Burlington, Mass.-based power generation company priced $1.26 billion of 9% notes at 99.189 to yield 9 1/8%. The yield was printed 12.5 basis points beyond the wide end of the revised 8 7/8% to 9% price talk, which was increased from the 8½% area.

InterGen also priced a downsized €150 million of 8½% notes at 99.174 to yield 8 5/8%. The euro-denominated notes also priced 12.5 basis points beyond the wide end of the 8 3/8% to 8½% price talk, which had been increased from the 8% area. The euro-denominated tranche was downsized from the planned €200 million to €300 million range.

In addition, InterGen priced a downsized £200 million tranche of 9½% notes at 99.209 to yield 9 5/8%.

As with the dollar-denominated and euro-denominated notes, the sterling notes came 12.5 basis points beyond the wide end of the 9 3/8% to 9½% price talk, which had been increased from the 9% area. The sterling-denominated tranche was downsized from the planned £250 million to £300 million range.

The overall transaction was downsized by $100 million equivalent, from $1.975 billion equivalent.

Merrill Lynch & Co., Barclays Capital, Deutsche Bank AG London and Lehman Brothers were the underwriters.

Proceeds will be used to refinance LBO-related debt.

Notwithstanding the fact that the deal was downsized and all three pieces came wide of the upwardly revised price talk, sell-side sources insisted that the most important aspect of the transaction was that it got done at all.

Sources had characterized InterGen's transaction as a good deal in a tough market.

One source who had eyed the transaction closely insinuated that that description of the conditions was an understatement.

The source, reiterating that the notes were "senior secured," and that they came with four-B credit ratings (Ba3/BB-), pointed to the spreads - the dollar-denominated bonds at 416 basis points, the euro-denominated paper at 420 bps and the sterling-denominated at 429 bps - and asserted that earlier this year triple-C paper was being priced at similar spreads.

Meanwhile a trader saw the InterGen dollar-denominated 9% notes, which priced at 99.189, trade at 99 3/8 bid.

At another desk a trader saw the same paper at 99.25 bid, 99.5 offered.

GE Plastics launches $2.765 billion

Elsewhere on Monday, GE Plastics launched a $2.765 billion equivalent two-part offering of eight-year notes.

The Pittsfield, Mass.-based supplier of plastic resins plans to place $1.95 billion and €590 million of the notes.

Citigroup, ABN Amro, GE Capital and HSBC are joint bookrunners.

Proceeds will be used to help fund the acquisition General Electric's plastics business by Saudi Basic Industries Corp. (Sabic).

DAE Aviation sets price talk

DAE Aviation Holdings set price talk for its $325 million offering of eight-year senior unsecured notes (Caa2/B-) at 11% to 11¼% on Monday.

The acquisition financing deal, via Barclays Capital and Lehman Brothers, is expected to price on Tuesday afternoon.

Also expected to price Tuesday is the Silverton Casino Hotel & Resort $215 million offering of eight-year second mortgage notes (Caa1/B-).

Late last week the notes were talked at 11¼% to 11½%.

Banc of America Securities is the bookrunner for the project financing deal.

InterGen steady in trading

When the new InterGen deal was freed for secondary trading, a trader - noting that "the deal got done, but they had to downsize it and a price a concession in it, and I still don't know how many bonds are around."

He described the 9% dollar-denominated issue due 2017 as trading "at issue [99.189] or above - but how long that will last, I've got no idea." While trading above the issue price, the new deal had not broken par as of late Monday.

Overall, the trader said, "it was an ugly day in bond land, as things continued to sell off with a vengeance."

He saw the widely followed CDX junk bond performance index off a full point at 93-93 3/8.

It was "ugly, ugly," he reiterated. It's partly due to continued market angst over the declining fortunes of the subprime lending industry - and the ripple effect that may have on other sectors of the fixed-income world, as well as "the corporate loan calendar. It seems like it's just over the top, as far as forward supply, and very little paper getting paid off. Maybe the market is telling us the economy is not quite as strong as everybody thinks it is."

Given current levels on things, he continued "it's almost as though the bond market is pricing in a recession, with governments trading well through 5%, and almost a positive sloping yield curve now, which means that the market kind of thinks the Fed is going to be easing - there's a lot of mixed signals."

United Rentals gains on LBO

But there were no mixed signals Monday for investors in United Rentals, which announced that Cerberus Capital Management LP will acquire the company for $34.50 per share, or $4 billion. Debt assumption will bring the total price tag to $6.6 billion.

A market source said that the company's 7% notes due 2014 were up nearly 5 points on the day to 102.5.

A trader at another desk saw the bonds up anywhere from 1¾ points on the short end to 2½ points on the long, with the 7s seen up 2½ points at 102.25 bid, 102.75 offered, and the 7¾% notes due 2013 at 103.25 bid, 104.25 offered. He saw the 6½% notes due 2012 up 1¾ points at 101 bid, 101.75 offered.

Another trader called the bonds up 3 points on the session, with the 73/4s at 102.5 bid, 103.5 offered.

While bondholders clearly indicated they like the idea of the buyout, the major rating agencies do not; both Moody's Investors Service and Fitch Ratings put United Rentals on watch for a possible downgrade, citing likely damage to the company's credit profile, depending on the funding for the deal

Vertis, ACG both move up

Two more names succumbing to mergermania Monday were American Color Graphics and Vertis. The companies announced plans for Baltimore-based Vertis, a provider of print advertising, direct marketing solutions and related services, to acquire Bentwood, Tenn.-based ACG. Financial terms were not disclosed.

A trader saw Vertis' 13½% notes due 2009 up 4 points at 81.5 bid, 83.5 offered while its 10 7/8% notes due 2009 were 3 points better at 98 bid, 99 offered. But its 9¾% notes due 2009 were unchanged at 100.5 bid, 101.5 offered.

ACG's 10% notes due 2010 were 5 points better at 83 bid, 85 offered.

Beazer leads homebuilder slump

The trader saw Beazer homes' bonds fall on the formalization by the SEC of its previously informal probe into the company. Its 8 5/% notes due 2011 lost 3 points to 87 bid, 88 offered.

"The investigation news really hit the bonds, and they also hurt the sector as well."

For instance, the trader said he saw further erosion of Technical Olympic USA's bonds, in the context of a difficult day for the housing sector overall. He saw the troubled Hollywood, Fla.-based homebuilder's 10 3/8% notes due 2012 at 61 bid, 63 offered, and its 7½% notes due 2011 at 55 bid, 57 offered, both down a whopping 9 points on the day. He saw the 9% notes due 2010 down a more moderate 3 points at 83.5 bid, 84.5 offered.

Movie Gallery moves downward

A trader said that the generally heavy, down market was apparently not much impressed with Movie Gallery's news that the troubled Dothan, Ala.-based Number-Two U.S. video rental chain operator had reached a forbearance agreement with its senior credit facility lenders, who agreed to take no action to try to enforce their contractual rights under the credit facility covenants through Aug. 14.

That would seem to be good news for the struggling company but "if anything, it went lower," the trader said, quoting its 11% notes due 2012 at 28 bid, 30 offered, down a point on the session.

Another trader saw the notes at that same 28 bid, 30 offered context, but called that a 3 point drop.

On the upside, the trader saw Linens 'n Things Inc.'s zero-coupon notes due 2014 up 2½ points on the day, at 66.5 bid, 68.5 offered.

The Clifton, N.J. -based specialty retailer of bedding, kitchen gadgets and home decor items announced a multi-yearn extension of its existing long-term e-commerce agreement with GSI Commerce Inc. Financial terms were not disclosed.

A trader said that Dana Corp.'s bonds were up, but "don't ask me why," he added, while quoting the bankrupt Toledo, Ohio-based automotive parts maker's 6½% notes due 2008 at 101.75 bid, 103 offered, up ¾ point on the session.

On the other hand, bankrupt parts maker Delphi Corp.'s bonds were lower, with its 6.55% notes that were to come due last year trading at 124 bid, 126 offered, down from 126.5 bid, 128.5 offered.

Tembec rises

The trader saw Tembec Inc.'s bonds actually bucking the trend and rising by about a point on the session across the board - even as the Canadian finance minister, James Flaherty, said that Ottawa would do nothing to step into the foreign exchange markets and reel in the surging Canadian dollar, whose recent upside rampage has hurt the export sales of Canadian companies like Montreal-based forest products maker Tembec and its sector peers.

He saw Tembec's 8 5/8% notes due 2009 at 56 bid, 58 offered, saw its 8½% notes due 2011 at 50 bid, 52 offered, and pegged its 7¾% notes due 2012 at 49 bid, 51 offered.

Spectrum gains on forecast

Among consumer products companies, the trader saw Spectrum Brands Inc.'s bonds up about a point, after the Atlanta-based maker of Rayovac Batteries, Remington electric shavers and other products released further financial projections phrased more positively than its recent full-year earnings warning.

He quoted Spectrum's 11¼% notes due 2013 up a point at 78 bid, 80 offered while its 7 3/8% notes due 2015 were also a point better, at 69 bid, 71 offered.

A source who had seen the company's bonds fall several points on Friday, on no news, saw them recover that lost ground, and then some, on Monday, with the 11 1/4s pushing up to about 80 bid, and the 7 3/8s finishing at 72 bid, after gyrating around between 68 and 72 on Friday.

Spectrum - which earlier in the month warned that full-year results would come in under expectations - said Monday that it now anticipates generating operating cash flow of $120 million to $140 million for the second half of its fiscal year ending Sept. 30, and predicted that its cash on hand at the end of the quarter ended June 30 was more than $175 million.

Spectrum also projected that net debt would likely be about $2.4 billion as of Sept. 30, down about $200 million from its April 1 net debt levels.

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