Ford weathers triple ratings hit; Six flags off; Regency Energy slates deal; funds see $25 million outflow

By Paul Deckelman and Paul A. Harris

New York, Nov. 27 - News that Ford Motor Co. plans to issues $18 billion of new secured debt to fund its restructuring was greeted with dismay by the major ratings agencies, which all downgraded the problem-plagued carmaker's debt ratings Monday - but bondholders took it in stride, with Ford's existing bonds actually seen a little firmer - this against the backdrop of a mostly heavier market.

Overall, junk prices were seen down anywhere from ¼ point to ½ point on average, as high yield took its cue from the equity market, which "got murdered," a trader said. Stocks suffered their worst day in more than four months as the dollar weakened and concerns about the strength of the retail industry arose following a rare sales decline at Wal-Mart Stores Inc.

Some issues were down even more than that, with airline bonds like Delta Air Lines Inc. and Northwest Airlines Corp. losing some altitude due to profit-taking after having flown high last week on continued merger and acquisition speculation about the restructuring sector.

In the new-deal market, participants got back to business after a holiday-shortened week in which nothing much had happened outside of last Monday's big new deal for Lear Corp. Primary-side players heard price talk on upcoming deals for Complete Production Services Inc. and Momentive Performance Management - the latter a five-part mega-deal worth nearly $2 billion. And new deals for Regency Energy Partners LP and Angiotech Pharmaceuticals, Inc. were seen clambering onto the forward calendar.

Outflow breaks funds' winning streak

During the session, 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 $25.2 million more left the funds than came into them - breaking a three-week winning streak during which $289.2 million of net inflows were seen, according to a Prospect News analysis of the AMG figures. The previous week, ended Nov. 15, saw a $48.7 million infusion.

According to a market source, the outflow extends the year-to-date red ink among funds that report on a weekly basis to negative $2.925 billion.

Meanwhile, funds that report on a monthly basis have enjoyed $4.222 billion of net inflows for 2006 to Nov. 21.

Hence year-to-date aggregate flows, which tally both the weekly and monthly reporting mutual funds, are $1.297 billion.

VWR lines up $350 million

Meanwhile trailing the four-day Thanksgiving holiday, the primary market kicked off in a purposeful fashion.

Although no issues were priced several companies announced deals, the majority of which are expected to price by the end of the week.

VWR International will host an investor call at 11 a.m. ET on Tuesday for its $350 million offering of five-year senior floating-rate PIK notes, with pricing expected to follow on either Tuesday or Wednesday.

Banc of America Securities has the books for the dividend-funding deal from the West Chester, Pa., distributor of scientific supplies.

Angiotech plans $325 million

Market sources have advised Prospect News that the new issue market is currently perceived as being open to opportunistic debt refinancings.

Opportunistic or not, two debt refis did take bows on Monday

Angiotech, the Vancouver, B.C.-based specialty pharmaceutical and medical device company, is expected to price a $325 million offering of seven-year senior floating-rate notes on Thursday via joint bookrunners Credit Suisse and Banc of America Securities.

Proceeds will be used to repay bank debt.

Roadshow for Regency's $650 million

Regency Energy Partners will begin a roadshow on Tuesday for its $650 million offering of seven-year senior notes (B2/B).

The roadshow is scheduled to conclude on Dec. 7, with the notes expected to price the same day.

UBS Investment Bank, Lehman Brothers and Wachovia Securities will be joint bookrunners for the Dallas-based midstream energy partnership's debt refinancing.

Talking the week's deals

Momentive Performance Management (General Electric's advanced products business) gave price talk on its $1.95 billion five-part offering of high-yield notes on Monday.

The deal is comprised of $1.355 billion of eight-year senior notes (B-) in three tranches.

A dollar-denominated cash-pay tranche is talked at a yield in the 9½% area. A tranche of dollar denominated toggle notes is talked to price 25 to 37.5 basis points behind the cash-pay notes. And a euro-denominated tranche of cash-pay notes is talked price 75 to 100 basis points inside the dollar-denominated cash-pay notes.

In addition Momentive is offering $595 million of 10-year senior subordinated notes (CCC+) in dollar- and euro-denominated tranches, both talked 150 basis points behind their respective tranches of cash pay senior notes.

The LBO deal is expected to price on Wednesday via JP Morgan, GE Capital and UBS Investment Bank.

Elsewhere Complete Production Services talked its $600 million offering of 10-year senior notes (B2) at 8% area.

The Credit Suisse-led deal is expected to price Wednesday afternoon.

The euro market

Late Monday Oklahoma City-based Chesapeake Energy Corp. announced a €400 million offering of 10-year senior notes - also a debt refinancing.

Barclays Capital is the global coordinator and joint bookrunner. The other joint bookrunners are Credit Suisse, Deutsche Bank Securities and Goldman Sachs.

Chesapeake Energy joins TNT Logistics (Louis No. 1 Plc), in the market with a €730 million two-tranche offering expected to price late this week via joint bookrunners Credit Suisse, Bear Stearns, Goldman Sachs & Co. and ABN Amro.

In addition to those Finnish pulp and paper company M-Real Corp. is expected to price a €400 million offering of four-year senior floating-rate notes (B2/B+) late this week, via Deutsche Bank and BNP Paribas.

Junk weak but slow

A secondary market trader saw the overall junk bonds market down about 7/16 of a point ; while he saw Ford's bonds firmer, and those of the troubled carmaker's arch-rival, General Motors Corp., "other stuff was lower.

"It was a really slow day," he opined, with many market players apparently not fully recovered from what was for some of them a five-day weekend, counting the half-sessions last Wednesday and Friday that bracketed Thursday's market-closing Thanksgiving holiday.

Recently priced bonds mixed

"There were a couple of new deals announced, but for the most part, things were really slow. Volume was down considerably."

Among recently priced bonds, he saw "a little bit of activity" in HCA Inc.'s new senior secured paper, with the Nashville-based hospital giant's 9 1/8% notes due 2014 going out at 103.125 bid, 103.625 offered, as did its 9¼% notes due 2016, while its 9 5/8% 10-year bonds finished at 103.5 bid, 104 offered.

He also saw "a market in Griffin Coal" [Mining Co.]'s recently priced 9½% notes due 2016, at 99.875 bid, 100.375 offered, doing "not too badly," while Sally Holdings LLC's new 9¼% senior notes due 2014 and 10½% senior subordinated notes due 2014 were both at 101 bid, 101.75 offered, which he estimated as down ½ point.

And he saw the new Lear 8½% notes due 2013 at 98 bid, 98.5 offered and the Southfield, Mich.-based auto components maker's new 8¾% notes due 2016 at 97.75 bid, 98.25 offered, which he pegged down half a point

At another desk, a trader said the new Elan Corp. bonds "continued to struggle," with Irish pharmaceutical company's paper seen at 99.75 bid, par offered.

Ford shrugs off downgrades

Back among the more established issues, Ford continued to cruise, even as Moody's Investors Service, Standard & Poor's and Fitch ratings all downgraded the Number-Two domestic carmaker, citing its plans for massive new borrowing to fund its restructuring. Moody's cut Ford's corporate family ratings by one notch to Caa1, while S&P cut its corporate credit to CCC+ from B, a two-notch slide. Fitch lowered Ford's B+ rating to a B.

Despite that sobering news, most traders saw Ford's bonds little changed or, if anything, higher, with one trader seeing the company's benchmark 7.45% notes due 2031 up ½ point at 78.5 bid, 79 offered, while Ford Motor Credit Co.'s 7% notes due 2013 firmed a bit to 94.25 bid, 94.75 offered.

He also saw GM go up in sector empathy, the top carmaker's 8 3/8% notes due 2033 up ¾ point on the session at 90 bid, 90.5 offered.

Airlines head lower

Apart from the automotive names, traders saw the bonds of Atlanta-based Number-Three domestic carrier Delta dip, after having reached new heights last week on the latest development in the effort by US Airways Group to acquire Delta - some big Delta bondholders formed a rump creditors group, alongside the official creditors committee, to urge the airline to seriously consider the US Air offer and not reject it out of hand.

They cited profit-taking from the recent gains, as well as the news that the airline has agreed to give its retired pilots an extra $719 million in unsecured claims in its bankruptcy case, to help them recoup losses from the termination of the pilots' pension plan.

A trader saw Delta's 8.30% notes due 2029 at 59.5 bid, 60.5 offered, which he called down 2 points on the day.

Another trader saw those bonds at 59 bid, 61 offered, a 3 point loss.

The traders also saw Northwest's bonds down about 2 points, with its 8 7/8% notes that were to have come due this year at 87 bid, 89 offered.

At another desk, a trader said the bonds of the bankrupt Eagan, Minn.-based Number-Four carrier "started out strong but then gave it all back." He had the 8 7/8s up about a point in the early going to 87.5 bid, 88.5 offered, but saw them end at 86 bid, 87 offered, down ½ point.

The Northwest bonds had risen last week in response to the recently solid rise in Delta, whose 8.30s went from the upper 30s to the lower 60s, as well as M&A speculation possibly involving Northwest.

Six Flags asset sale problematic

In another downdraft, Six Flags Inc. bonds were seen lower by 3 to 4 points as players grow weary of news on its efforts to sell assets to help shore up the theme park's balance sheet. Basically, as time wears on, one sellsider said, the prospects of a profitable sale grow dimmer.

"I don't think they are going to get it done at all. If they don't get the price they want, they will just hold on to them," that source said.

"If they had done this a year ago it would be a different story, when the real estate market probably peaked out. Now, they may be stuck in the down cycle for real estate."

Six Flags' 9¾% bonds due 2013 traded down to 93.75 on Monday from a 97.5 open and Friday's close of 96.125, a trader said. He said the sell-off was motivated by profit taking, echoing other remarks that the longer Six Flags has properties on the sale block the less likely it will see a transaction at decent prices.

Six Flags said in its third-quarter earnings calls that it is still trying to sell nine parks it put on the block earlier this year. The company said it received interest from 50 different parties and, come December, will announce either a successful sale or the decision to keep the parks if a suitable offer is not received.

The company hopes to sell Six Flags Darien Lake outside Buffalo, N.Y., Six Flags Waterworld in Concord, Calif., Six Flags Elitch Gardens in Denver, Wild Waves and Enchanted Village outside Seattle, Six Flags Splashtown in Houston and Six Flags Magic Mountain and Hurricane Harbor near Los Angeles, and three other parks.

Earlier in November, the New York-based them park operator reported that third-quarter earnings fell 16% to $159.3 million, or $1.08 per share, from $190.2 million, or $1.29 per share, a year before while revenue slid to $540.7 million from $546.1 million.

Earlier this year, the company also had trouble meeting financial covenants under its credit facility due to EBITDA shortfalls.

Ronda Fears contributed to this report

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