Xerox, Broadview deals price; Dura sub bonds continue slide

By Paul Deckelman and Paul A. Harris

New York, Aug. 15 - Xerox Corp. on Tuesday became the latest junk bond issuer to opportunistically bring a quickly-shopped offering to market, pricing an upsized deal that was expanded into a $650 million two-part transaction, with both fixed- and floating-rate notes.

Broadview Network Holdings Inc. meantime priced a scheduled calendar offering of $210 million of six-year notes.

In the secondary market, Dura Automotive Systems Inc. confirmed market speculation and news reports that it has hired restructuring firm Miller Buckfire & Co. LLC to advise it on evaluating its capital structure and reducing its debt, even as it struggles to overcome the problems besetting the automotive supplier industry and return to profitability. The Rochester Hills, Mich.-based automotive systems maker's already badly battered 9% subordinated notes due 2009 - which had dropped several points Monday on rumors of the Miller Buckfire hire and speculation about a possible eventual bankruptcy filing, were down another 3 to 4 points Tuesday, traders said.

Also out of the automotive sector, traders saw Dana Credit Corp.'s bonds up solidly, while all of bankrupt parent company Dana Corp.'s other bonds were pretty much unchanged.

A senior high yield syndicate source said that the market was up in the morning on Tuesday, but ended the day flat, with some profit taking seen.

The source commented that the producer price index, which according to the Bureau of Labor Statistics rose 0.1% in July, below the 0.4% increase that economists were expecting, combined with a rally in the equity markets, gave junk a solid underpinning.

Xerox upsizes to $650 million

With business on the forward calendar all but dried up, and sources maintaining that it will remain that way until September, primary market watchers are expecting drive-by deals to dominate new issue market news right up until Labor Day.

Adhering to this script, the Tuesday session saw Xerox price an upsized $650 million of senior unsecured notes (Ba2/BB+/BBB-) in a two part drive-by.

However, according to an informed source, the deal was priced high-grade style and played to a largely high-grade audience.

The Stamford, Conn., document management company priced an upsized $500 million issue of 6¾% 10.5-year notes at a 190 basis points spread to Treasuries, at the tight end of the Treasuries plus 190 to 195 basis points price talk. The tranche, which was upsized from $400 million, came at a 99.392 dollar price to yield 6.833%.

Xerox also added a $150 million tranche of floating-rate notes due in Dec. 18, 2009, which priced at par to yield three-month Libor plus 75 basis points, on top of price talk.

The overall transaction, via Bear Stearns and Goldman Sachs, came upsized by $250 million to $650 million from $400 million.

Proceeds will be used to support customer financing activities and for general corporate purposes.

An informed source said that high-grade buyers actually drove the deal, and added that it was in fact the second deal that Xerox has done that has attracted more high-grade buyers than high-yield buyers.

Back in March of this year, the source recounted, Xerox priced a massively upsized $700 million issue of 6.4% 10-year senior notes (Ba2/BB+) at Treasuries plus 175 basis points - with a dollar price of 99.413 to yield 6.481%.

That issue was upsized from $400 million.

Broadview prices mid-talk

Tuesday's other issuer was Rye Brook, N.Y. voice and data communications provider Broadview Networks Holdings, Inc., which priced a $210 million issue of six-year senior secured notes (B3/B-) at par to yield 11 3/8%.

The Jefferies & Co.-led acquisition, debt refinancing and general corporate purposes deal came in the middle of the 11¼% to 11½% price talk.

Bifurcated market

Looking over the Xerox deal, one sell-side source said that The Document Company's Tuesday drive-by, which actually came with an investment grade BBB- from Fitch, appeared to benefit from tight execution.

However because of its high credit ratings - Moody's Investors Service rates the notes at Ba2 and Standard & Poor's puts them at BB+ - the Xerox paper does not represent a good proxy for present high-yield deal dynamics.

The market is bifurcating between well known, seasoned double-B issuers (such as Xerox) and higher leverage single-B LBO and acquisition financing deals, the source said.

"Investors are looking at each deal on a credit-specific basis and I think we shall continue to see highly leveraged deals experience pricing pressure, especially on junior tranches of debt," the source added.

Meanwhile another sell-side source said that primary market activity will remain light, and the forward calendar will remain scant until September.

"You may see another couple of quick-print deals between now and Labor Day, but nothing meaningful," the source said, adding that some of the bigger LBO deals are likely to be rolled out in September.

Xerox, Broadview up in trading

When the new Xerox 6¾% notes due 2017 were freed for secondary activity, traders saw the bonds offered at par versus their issue 99.35 issue price earlier in the session. The floating-rate notes due 2009 were not quoted in the aftermarket.

A trader also saw Broadview Networks' 11 3/8% senior secured notes due 2012 at 101 bid, up from their par issue price.

Dura subs down again

Back among the established issues, Dura Operating Corp.'s 9% notes - which had been knocked down about 2 points on the session on Monday on market buzz that the troubled vehicle components manufacturer had hired a restructuring firm, stoking investor worries about a possible bankruptcy filing soon - were seen down several additional points on Tuesday, as the company confirmed it had hired turnaround specialist Miller Buckfire.

A trader saw the 9s - which had finished Monday's trading around 21-22 bid - "off a couple more" to 18 bid, 19 offered.

A market source at another desk pegged those bonds down 4 points at 19 bid, while yet another trader saw them fall all the way to 18.5 bid, 19.5 offered from prior levels around 22.

However, the company's senior bonds - its 8 5/8% notes due 2012 - were actually seen better on the day, with one trader quoting them up a point at 78 bid, 80 offered, and another one estimating them 1½ points higher at 78.5.

A market source opined that the holders of the senior bonds probably are not too worried about the prospects of a bankruptcy filing - while the holders of the subordinated bonds fear they may be in for a haircut, no matter what shape the coming reorganization takes.

A spokesman for the company maintained that it would be "premature" to take the hiring of Miller Buckfire as a signal of a possible bankruptcy filing down the road - even though it has been involved in a number of high-profile Chapter 11 situations of late - and he said the company is in no danger of defaulting on any of its obligations.

He further indicated that Dura is only looking to restructure its financial obligations and that such a restructuring would not include its trade creditors - a possible sign that company management at this point still believes that the restructuring can be accomplished without resort to the bankruptcy courts, where trade creditors have to take their chances with everyone else (see related story elsewhere in this issue).

Dana Credit higher

Also in the automotive area, a trader said that Dana Credit's 8 3/8% notes due 2007 jumped to 94 bid from prior levels around 91, even though there was no fresh news seen out on the company, the financial arm of bankrupt Toledo, Ohio-based automotive components manufacturer Dana. A market source at another desk saw an even more pronounced upside move - to 94 bid from 90 previously, although yet another trader saw the bonds little changed at 91.75 bid, 92.75 offered.

Dana Credit's bonds recently gyrated around before moving higher on the news that Dana Credit had reached a forbearance agreement with its bondholders, who agreed not to take actions to enforce their legal rights, giving the company more time to resolve problem situations.

While the credit unit's bonds were better, Dana's own bonds were little changed, its 6½% notes due 2008 steady at 83 bid, 84 offered, and its 5.85% notes due 2015 likewise little changed, at 73 bid, 74 offered.

Delphi gains

Delphi Corp.'s bonds were seen up about a point on the session, a trader said, even though the bankrupt Troy, Mich.-based automotive component's maker's second-quarter numbers showed an ocean of red ink - a yawning $2.3 billion, although most of that loss was due to special one-time items including payments connected with its pending early retirement and buyout offers to its unionized hourly workers.

A trader saw Delphi's 6½% notes due 2009 at 85 bid, 86 offered, up a point, while its 7 1/8% notes due 2029 were also up a point, at 78.5 bid, 79.5 offered.

Sirius lower

Outside of the automotive area, a trader saw Sirius Satellite Radio Inc.'s 9 5/8% notes due 2013 down a point at 93.25 bid, 94.25 offered. He cited the impact of a negative Wall Street Journal article about the upstart New York-based satellite radio operator.

He saw the 6 5/8% notes due 2016 of Iron Mountain Inc. up ½ point to 92.5 bid, 93.5 offered, apparently helped by the news that Berkshire Hathaway Inc. - the investment vehicle of legendary Wall Street guru Warren Buffet - had nearly doubled its investment in the Boston-based information storage company.

Amkor steady despite default letter

However, traders saw little movement in the bonds of Amkor Technology Inc., even though the company said that it had received warning letters from two banks that act as indenture trustees for $1.62 billion of its outstanding junk bonds and convertible notes, alleging that the Chandler, Ariz.-company's failure to file its 10-Q financial report for the quarter ended June 30 on time with the Securities and Exchange Commission constitutes a default under the indentures for those notes.

Amkor's 9¼% notes due 2008 were unchanged at 102, while its 91/4s due 2016 were likewise steady at 91.5. Its 7¾% notes due 2013 were unchanged at 89, a market source said.

In addition to the default warning from the banks, Amkor also said that it received a notice from the Nasdaq stock market warning that it is in danger of being delisted due to its failure to make the filing.

Amkor, which provides testing and packaging services to semiconductor manufacturers, said that the bond trustees - U.S. Bank NA and Wells Fargo Bank, NA - said the company had to cure the purported default within 60 days from the receipt of the letters in order to avoid a formal "event of default," which would allow the trustee or the holders of at least 25% of the notes to accelerate the notes and declare the principal and any outstanding interest to be immediately due and payable.

The junk bonds involved are the company's 10½% senior subordinated notes due 2007 and four issues of senior notes - the two issues of 9¼% notes, its 7 1/8% notes due 2011 and the 7¾% notes due 2013. Also covered under the warning letters are three series of convertible notes - its 5% converts due 2007 and 6¼% converts due 2013, and its 2½% senior subordinated converts due 2011.

Amkor said the 10-Q filing was delayed because of its need to review its historical stock option practices, and has a special committee of independent directors, assisted by independent legal counsel, working on it. The company aims to have its 10-Q filed on or before Oct. 9, to avoid any event of default.

Meanwhile, the company - hoping to avoid the delisting of its shares and keep them trading on a recognized exchange - said it will request a hearing to review the default determination issued by the Nasdaq staff. Pending a decision, Amkor's common stock will remain listed on the Nasdaq National Market - although the company acknowledged that there is no guarantee that the hearing panel will grant its request for continued listing.

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