Sirius, XM jump as feds OK deal; Thornburg up despite no financing news; Abitibi gains on new funds

By Paul Deckelman and Paul A. Harris

New York, March 24 - Sirius Satellite Radio Inc.'s bonds and those of its intense rival but soon-to-be corporate brother, XM Satellite Radio Holdings Inc. were seen going into orbit late Monday, given a boost by the news that the U.S. Justice Department had given a green light to the proposed merger of the satellite radiocasters, finding that their combination is unlikely to lessen broadcast industry competition or harm consumers.

Another big gainer was AbitibiBowater Inc., whose bonds firmed across the board, with the short-dated issues particularly strong, on news that the Montreal-based forest products company has lined up a $350 million investment from Fairfax Financial Holdings Ltd., which will buy convertible notes from Abitibi via a private placement. Fairfax's own relatively lightly traded bonds were also higher.

Thornburg Mortgage Inc.'s bonds - which had fallen sharply on Thursday on investor worry that the Santa Fe, N.M. based mortgage lender might not be able to raise the nearly $1 billion it needs to avoid possible bankruptcy within the allotted timeframe - jumped some 10 points Monday, even though there was no immediate good news on the financing front announced.

Market indicators up solidly

A trader saw the widely-followed CDX index of junk market performance zoom 1½ points on Monday to 89½ bid, 90 offered. Meanwhile, the KDP High Yield Daily Index leaped by 0.52 to end at 73.11, while its yield tightened by 13 basis points to 9.89%.

In the broader market, advancing issues beat decliners by a better-than-five-to-four margin. Overall activity, reflected in dollar volumes, rose by 16% from Thursday's anemic pre-holiday levels.

A trader said that Monday's session was largely "a slow, weird day that had a little burst at the end, nothing the middle and a slow morning, that was about it."

Noting Thursday's abbreviated session ahead of Friday's full-market close and the tendency of some people to schedule vacations around the Easter season - it coincides with the spring vacation that many school districts give their students - he opined that "a lot of people were still out today."

But those that were there seemed to be making the most of it, another trader indicated, proclaiming that "the market did really well today," as junk seemed to follow the lead of the equity markets which were all up, helped by news of J.P. Morgan Chase's much-improved bid for Bear Stearns Cos. as well as better-than-expected existing home-sales numbers - the latter a sign of hope for the beleaguered housing industry.

Sirius, XM reach for the skies

A trader said that XM and Sirius were "big movers" during the latter part of the day as news began to spread that the Justice Department had given its unconditional approval to their proposed $5 billion combination of the two companies, despite opposition from consumer groups and a full-court lobbying press by conventional land-based broadcasters fearful of a powerful new rival. Opponents of New York-based Sirius' planned buyout of its Washington, D.C.-based competitor now regard the Federal Communications Commission - which once before nixed such a merger, back during the industry's infancy in the 1990s - as their last, best hope for stopping the deal.

But investors didn't seem to be worried about that prospect - the trader noted that XM's 9¾% notes due 2014 had pushed all the way up to 96.5 bid post-news versus 91 bid, 93 offered before the Justice Department news came down. Sirius' 9 5/8% notes due 2013, meantime, "moved up a little" from its pre-news levels at 82 bid, 83 offered.

Another trader pegged both bonds up 4 points post-news, Sirius to 83.5 bid, 85.5 offered and XM to 94 bid, 96 offered. A market source at another desk saw the XM bonds nearly 5 points better on the day at 95.5 bid.

XM's Nasdaq-traded shares moved up $1.85, or 15.49%, to $13.79. Volume of 36 million was six times the norm. Sirius' Nasdaq shares rose 25 cents, or 8.62%, to $3.15. Volume of 152.9 million shares was nearly four times the usual turnover.

The Justice Department, in refusing to stop the planned merger on anti-trust grounds, said that the proliferation of other outlets for audio entertainment, including high-definition radio, internet-based radio stations or even devices like Apple Inc.'s iPod - as well as the expected introduction in the next several years of mobile broadband internet devices - make it "even more unlikely that the transaction would harm consumers in the longer term," the Justice Department said.

Abitibi up on Fairfax investment

Back on terra firma, Abitibi Bowater's bonds rose solidly after the company announced a private placement of new convertible notes that will bring it $350 million - just the amount it needs to take out two issues of bonds maturing this year, one of them literally just days from now.

A trader saw Abitibi's 6.95% notes slated to come due on April 1 at 91 bid, 93 offered, well up from 85 bid, 88 offered previously and its 5¼% notes due on June 20 at 88 bid, 90 offered, up from 82 bid, 85 offered before, on news of the investment by Fairfax Financial Holdings. He saw Abitibi's 8.85% bonds due 2030 jump to 44 bid, 46 offered from 37 bid, 39 offered previously.

Another trader saw Abitibi's 8.85s up 5 points to 42 bid, 53 offered while its 8.55% notes due 2010 were 4 points better at 56 bid, 58 offered.

Abitibi's New York Stock Exchange-traded shares were meantime up $3.79, or 38.79%, to finish at $13.59. Volume of 4.4 million shares was not quite triple the average daily handle.

The bonds and shares screamed upward on the news that Toronto-based Fairfax Financial had agreed to invest $350 million in the company in exchange for new 8% convertible notes due 2013.

The investment, which is scheduled to close on March 31, is subject to certain conditions, including the receipt of various lender consents and the closing of the other components of the company's recently announced $1.4 billion refinancing plan. However, Abitibi said there is no financing condition to the obligations of Fairfax to fund the investment.

Fairfax will have the right to put two directors on Abitibi's board.

A trader meanwhile saw Fairfax's 7¾% notes due 2012 up 2 points on the day at par bid, 101 offered. He saw its 7% notes due 2008 "up a little on the day" at 99 bid, par offered.

Thornburg up even with no positive news

While it was pretty obvious what was driving Abitibi's bonds upward - news of its cash infusion and the impending takeout of the short-dated bonds - or XM and Sirius', it was much less obvious what, if anything, was behind the solid bounceback in Thornburg Mortgage's bonds, which had fallen sharply on Thursday.

A trader saw Thornburg's 8% notes due 2013 "bouncing around" at higher levels before ending at 40 bid, 43 offered, up 12 points on the day. The bonds are still trading flat.

Another trader saw the Thornburg bonds at 44 bid, well up from 30 bid, 31 offered, but said people "are still concerned" about whether the planned $1 billion convertibles offer Thornburg has to complete to satisfy its lenders and avoid a bankruptcy filing will get done, despite the gain.

Yet another trader said the bonds rose because either "someone heard something from a little birdie" indicating that the deal would get done, or else, short covering, "or a little bit of both."

And yet another trader attributed the 10 point rise to relief that Thornburg did not file for bankruptcy, "so that was a positive." He saw the bonds ending at a wide 40 bid, 45 offered after trading "all over the place - down 8 points one day, down 20 points the next, up 10 points today."

Thornburg - which has been struggling for a month to meet margin calls on its short-term mortgage-backed borrowings, announced last week that it would sell $1 billion of new convertibles to comply with its lenders' demands that it raise new capital. But while that deal was expected to come to market last Thursday, the company said after the financial markets had pretty much closed before the holiday weekend that it was postponing the deal's pricing till Monday.

That convertibles deal is being lead-managed by Friedman Billings Ramsey and UBS Investment Bank; syndicate sources were saying that the deal's status was "day to day" and it was not expected to price Monday. A Thornburg spokeswoman said she was sticking by her statement that pricing would take place Monday, but nobody reported seeing or hearing the deal in the market right now.

Bonds of another mortgage provider, Residential Capital LLC's 6½% notes due 2013 rose 2 points to 47 bid, 49 offered.

Housing numbers are a help

Thornburg may have also been lifted, as was ResCap, by positive investor sentiment in the wake of better existing-home sales numbers. The National Association of Realtors said that sales of already occupied houses were up 2.9% in February to a 5.03 million-unit annual pace, breaking a six-month losing streak'. That figure was considerably above analysts' consensus estimates of an annual pace around 4.85 million units.

The possibility that there may finally be a light at the end of the housing tunnel - even though the NAR report also showed median home prices falling steeply -was additionally seen giving high yield homebuilders a break.

A trader saw Beazer Homes USA Inc.'s 8 5/8% notes due 2011 gains 2 points to 76 bid, 78 offered. He saw Standard Pacific Corp.'s 7% notes due 2015 also up 2 points at 71 bid, 73 offered, while Hovnanian Enterprises Inc.'s 6 3/8% notes due 2014 and 6¼% notes due 2016 likewise were up a deuce at 68 bid, 70 offered

Another trader saw Standard Pacific's 7¾% notes due 2013 up 4 points at 73 bid, 74 offered, and said the company had gotten additional bank debt covenant waivers, so the bonds were "making a little comeback."

Primary stays quiet

Meanwhile the primary market produced no news as the final full week of March got underway.

However the Tuesday session is expected to produce some news, sources said.

Last week FairPoint Communications Inc./Northern New England Spinco, Inc. set price talk for $540 million of 10-year senior unsecured notes (B3/B+) at the 11½% area.

Banc of America Securities, Lehman Brothers and Morgan Stanley are joint bookrunners for the merger-financing deal, which could price on Tuesday.

Elsewhere price talk will possibly emerge Tuesday on Abitibi-Consolidated Co. of Canada's $415 million offering of three-year non-callable senior secured notes (B1), a debt restructuring deal via Goldman Sachs.

As part of its $1.4 billion restructuring plan AbitibiBowater Inc. announced Monday that it privately placed $350 million of five-year non-callable convertibles with a subsidiary of Fairfax Financial Holdings Ltd.

The converts are carry an 8% cash coupon and are convertible into AbitibiBowater common shares at $10 per share. The company has a PIK option at 10%.

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