Ford prices upsized $3 billion deal; Northwest bonds continue to fly

By Paul Deckelman, Paul A. Harris and Ronda Fears

New York, Dec. 11 - Ford Motor Co. took the drive-by route Monday, high yield syndicate sources said, as it priced a quickly marketed $3 billion two-part offering. That mega-deal met with such strong demand that it was doubled in size from the $1.5 billion originally talked around to potential investors.

Also in the new-deal arena, Hanesbrands Inc. sold $500 million of new floating-rate notes, after what was originally a two-tranche deal was restructured to eliminate the fixed-rate portion. And Geokinetics Inc. came to market with a slightly upsized offering of six-year floaters. Those two deals did respectably well when they were freed for aftermarket dealings, traders said.

Back among the established issues, Northwest Airlines Inc.'s already recently high-flying bonds were seen pushing further upward, propelled by renewed market merger and acquisition speculation swirling around the bankrupt Eagan, Minn.-based airline company - including some rumblings that rival carrier Continental Airlines Inc. might be involved.

Elsewhere, much of the day's activity centered around the distressed markets, particularly in the automotive area, with Hayes Lemmerz International Inc. and Dura Automotive Systems Inc. each seen up multiple points.

Among names not considered to be distressed, a trader said that Six Flags Inc. bonds were better, ahead of the theme park operator's Tuesday conference call with investors and analysts.

A sell-side official said the market opened stronger on Monday, up ½ point across the board with good two-way trading, and added that it definitely went out better than it did last week.

The primary market, meanwhile, saw three companies raise $3.66 billion of proceeds as Ford's Ford Motor Credit Co. subsidiary showed up Monday morning with its deal.

And bond investors are presently keen on bonds that pay floating-rate coupons, according to one source, who had a close eye on two of Monday's three transactions.

Ford doubles deal size

Ford Motor Credit priced a massively upsized $3.0 billion senior unsecured notes (B1/B/BB-) transaction on Monday in an a.m.-to-p.m. drive-by that was increased from $1.5 billion.

The company priced $1.5 billion of 8% 10-year fixed-rate notes at 98.322 to yield 8¼%, on the tight end of the 8 3/8% area price talk.

Ford Motor Credit also priced $1.5 billion of three-month Libor plus 275 basis points five-year floating-rate notes at 98.758 to yield three-month Libor plus 305 basis points, tight to the three-month Libor plus 315 basis points price talk.

Morgan Stanley, Deutsche Bank Securities, Lehman Brothers, Merrill Lynch & Co. and Goldman Sachs & Co. were joint bookrunners for the deal, which was priced off high-grade desks.

Demand for the new Ford paper, which came on the heels of a $4.5 billion convertible securities transaction which the company completed last week, was phenomenal, according to various market sources.

Early in the morning when the initial $1.5 billion offering was announced, an informed source said that demand was already far outstripping the supply of bonds.

At the end of the day, when the deal size had doubled, the sale was multiple times oversubscribed, a source said.

Hanesbrands a blowout

Also on Monday Hanesbrands priced a restructured $500 million issue of eight-year senior floating-rate notes (B2/B-) at par to yield six-month Libor plus 337.5 basis points, tight to the Libor plus 337.5 to 362.5 basis points price talk.

A proposed tranche of eight-year senior fixed-rate notes was abandoned.

Morgan Stanley and Merrill Lynch & Co. were joint bookrunners for the debt refinancing issue from the Winston-Salem, N.C.-based apparel company.

An informed source said that demand for the floating-rate paper was in excess of $2 billion on Monday morning, and added that the terms on the floater, which came tight to talk, were good enough to compel the company to drop the fixed-rate tranche.

Big demand for floaters

With the primary market seeing a face amount of $2 billion of floating-rate issuance on Monday between the Ford and Hanes deals, one source who had a close eye on both said that there is a lot of strength in the floating-rate market at present.

The source also said that floating-rate structures tend to be good for issuers because the call protection is so much more advantageous than the typical call structures of fixed-rate notes.

The source said that if issuers have to take floating-rate notes out a year or two down the line the price differential compared to call structures on fixed-rate notes is enormous.

Geokinetics upsizes

Also pricing bonds on Monday was Houston-based Geokinetics.

The seismic services company priced an upsized $110 million issue of six-year second-priority senior secured floating-rate notes (B3/CCC+) at par to yield three-month Libor plus 650 basis points, on top of price talk.

RBC Capital Markets was the bookrunner for the deal, which was upsized from $100 million.

An informed source told Prospect News that the upsizing was driven by the healthy demand for Geokinetics' paper.

Canada shows a pair

Two Canadian offerings were unveiled on Monday, both of which are expected to price before the end of the week.

Montreal-based printing concern, Quebecor World Inc. will host an investor call at 11 a.m. ET on Tuesday for its $400 million offering of eight-year senior notes (B2/B+).

The debt refinancing and general corporate purposes deal, which is being led by Citigroup, Banc of America Securities, RBC Capital Markets and Scotia Capital, is expected to price on Wednesday.

Dollarama brings $200 million

Meanwhile Canadian dollar store company, Dollarama Group Holdings LP and Dollarama Group Holdings Corp., will host an investor call on Wednesday for a $200 million offering of six-year senior floating-rate deferred interest notes.

The debt refinancing deal is being led by joint bookrunners Citigroup, JP Morgan and RBC Capital Markets, with Citigroup on the left, and is expected to price Thursday morning.

Aleris downsizes

Aleris International Inc. has downsized to $1 billion from $1.1 billion its two-part offering of high yield notes.

The Beachwood, Ohio, manufacturer of aluminum rolled products is offering $600 million of eight-year senior unsecured PIK toggle notes (B3/B-).

The toggle notes come with a 75 basis points PIK coupon premium, and four years of call protection, and are talked at a yield in the 9% area.

Aleris is also offering $400 million of 10-year senior subordinated notes (Caa1/B-), talked at the 10% area. The subordinated notes tranche was downsized from $500 million. They come with five years of call protection.

Pricing is set for Wednesday.

Deutsche Bank Securities and Goldman Sachs & Co. are joint bookrunners.

Talking the deals

Elsewhere news surfaced on deals expected to price during the mid-week period.

Navios Maritime Holdings Inc. talked its $300 million offering of eight-year senior notes (B2/B) at 9¼% to 9½%. The Merrill Lynch and JP Morgan-led deal is expected to price on Wednesday.

Tristan Oil Ltd. talked its $300 million offering of five-year senior secured notes at 10¾% to 11%. The Jefferies deal is expected to price on Wednesday.

Finally, Esco Corp. put out price talk on its $275 million two-part offering of seven-year senior notes (B2/B) on Monday.

The Portland, Ore., metal parts manufacturer talked a fixed-rate tranche, which comes with four years of call protection, at 8½% to 8¾%.

Meanwhile the company talked a floating-rate tranche, which comes with two years of call protection, at Libor plus 375 to 400 basis points.

Goldman Sachs & Co. and Morgan Stanley are joint bookrunners for the deal, which is expected to price on Tuesday.

New Hanesbrands, Geokinetics move up

The new Ford bonds came too late in the session for any meaningful aftermarket activity, traders said.

Among the other issues which priced during the session, the new Hanesbrands and Geokinetics deals did moderately well when they were freed for secondary activity. Their gains did not replicate the roughly 2 point jump that the new bonds of OPTI Canada Inc. and Buffalo Thunder Development Authority notched when those issues, which both priced Friday, were freed to trade, but they did do better than the new issues from NewMarket Corp. and Regency Energy Corp. that priced Thursday.

Several traders saw the new Hanesbrands floating-rate notes due 2014 at 101 bid, 101.25 offered, up from their par issue price earlier in the session.

One of them saw the Geokinetics floaters due 2012 trade up to 100.5 bid, 101 offered, from their par issue price. However, another trader said he had not seen any trace of the smallish $110 million deal in the aftermarket.

Northwest bonds gain altitude

Northwest Airlines' bonds - which had gained about 4 or 5 points on Friday, fueled by buyout and takeover buzz, continued to head for the wild blue yonder on Monday, with traders quoting the bonds up anywhere from 3 points to 8 points on the day.

One trader saw the company's widely quoted 8 7/8% notes due 2006 three points better at 95.5 bid, 96.5 offered, while others saw larger gains. A market source projected an 8 point gain to the 96 level. One saw those bonds at that same level but called it a 6 point jump, and saw the 9 7/8% notes due 2007 also up 6 points at 98 bid, 99 offered. Northwest was "up 6 points across the board," he said, adding that those were pretty good gains for a name that is mired in the throes of Chapter 11, with no expectation of emerging from bankruptcy any time soon.

At another desk, a trader saw the Northwest 10% notes due 2009 at 96.5 bid, 97.5 offered, up from Friday's nadir at 89.375 bid, 90.375 offered. He attributed the sharp gain to the market's "need to throw money at things."

Other observers had a different take. They noted that the bonds had jumped Friday, and were again up many points on Monday, while the stock marked another 16% gain following a whopping 48% spike in the previous session.

Last week, Northwest asked for bankruptcy court approval to hire financial advisory firm Evercore Group LLC to help it evaluate strategic alternatives, possibly including a merger. That was all it took to bring buyers into the distressed debt airline area, pushing up Northwest's bonds and those of bankrupt Atlanta-based carrier Delta Air Lines Inc.

Adding fuel to the red-hot market for the Northwest bonds, the rumors were flying Monday that Northwest may be pursuing a deal with Houston-based Continental Airlines.

Right out of the gate on Monday, another market source said, Northwest's bonds were catching higher bids in the low 90s, which elicited a "wow" from the source. He also saw the 7 5/8s quoted at the end of the day at 95 bid, 96 offered, while Northwest's 10s of '09 and its 9 7/8% notes due 2007 also were pegged going out at 95 bid, 96 offered.

And the stock ended the session at another new high of $5.70, after trading as high as $6.23.

An equity trader, noting the latter gain, theorized that "people are still shorting, I think, but there are a lot of buyers around." He noted that a mind-boggling 17 million shares of Northwest stock traded Monday, more than four times the usual daily handle.

While many in the market shrugged off chatter last week that envisioned a merger of Northwest and Delta - which is already considered to be "in play" as a result of US Airways Group Inc.'s unsolicited $8.6 billion cash-and-shares offer for the Number-Three carrier - on Monday the rumors spread to include Continental, with the speculation being that the latter air carrier was perhaps a potential target for Northwest. Traders said the "market was keen on that notion."

"Continental is seen as a likely partner, albeit an unwilling partner," remarked one trader, alluding to comments of that nature from Continental's top executives. He said Continental's bonds were about 2 points better, and noted the stock was up Monday by more than 8%.

"From the wording in Northwest's request" for hiring Evercore to the U.S. Bankruptcy Court in Manhattan, he said, "it could be looking to be acquired, or to make an acquisition. Either way, Northwest is in play."

Delta's bonds have also firmed solidly since mid-November, when it got the unsolicited takeover proposal from Tempe, Ariz.-based US Airways. Those bonds had been languishing in the mid-30s, but have now pushed into the upper 60s, spurred by takeover speculation. A trader said that Delta's 8.30% notes due 2029 initially rose 2 points Monday, then gave back some of those gains to finish up a point at 67 bid, 68 offered.

Hayes Lemmerz up despite big loss

Back on solid ground, a trader saw Hayes Lemmerz' 10% notes solidly higher, quoting those bonds at 86 bid, 87 offered, well up from Friday's levels around 82.5 bid, 83.5 offered.

"It sounds like something is going on" at the Northville, Mich.-based automotive wheel-maker, he said.

Hayes Lemmerz on Monday said that its third-quarter loss widened to $59.6 million ($1.55 per share), much larger than its year-earlier red ink of $13.3 million (35 cents per share). The company noted a drop in revenue, which fell 2.4% to $589.5 million from $604 million in the year-ago period.

However, it should be noted that most of the big latest-quarter loss was due to a $39 million asset impairment charge related to the company's suspension facilities in Indiana and Michigan. Excluding that charge, Hayes Lemmerz actually posted earnings from operations of $11.4 million and a net loss of $20.6 million for the quarter, which the trader said was about in line with market expectations.

And the company further expressed confidence that it will post full-year sales of $2.2 billion to $2.3 billion and will record improved adjusted EBITDA versus 2005 levels.

That hopeful guidance helped to shoot its Nasdaq-traded shares up $1.01 (40.56%) to $3.50. Volume of 2.1 million shares was eight times the norm.

More Dura upside on COO move

Traders saw Dura Automotive Systems' 8 5/8% senior notes due 2012 continuing to power up for a second straight session; those bonds had firmed 3 points on Friday to the upper 20s, and were seen finishing at 32 bid, 33 offered on Monday. Even its badly battered subordinated 9% notes due 2009 managed to get into the act, ending up a point at 4 bid, 5 offered.

That two-session surge comes in the wake of the announcement late last week by the bankrupt Rochester Hills, Mich.-based auto systems manufacturer that it has appointed respected auto industry veteran executive David Szczupak as chief operating officer, effective immediately. He joins Dura from the Ford Motor Co., where he most recently served as Ford's group vice president of manufacturing. Szczupak joined Ford as chief engineer of Jaguar Cars in 1990. Before that, he served in engineering positions with U.K.-based Jaguar Cars LTD and with Holset Engineering.

Six Flags up ahead of call

Outside of the distressed names, not too much was shaking. A trader saw Six Flags' bonds ½ point better ahead of its scheduled Tuesday morning conference call. He pegged its 9¾% notes due 2013 at 94 bid, 95 offered.

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