Smithfield Foods, CMS Energy price quickie deals; Remy rise continues; Expedia off on cut to junk

By Paul Deckelman and Paul A. Harris

New York, June 19 - Smithfield Foods, Inc. served up a quickly shopped offering of 10-year notes to the junk market Tuesday - one of two rapidly marketed drive-by offerings from established U.S. corporate issuers seen during the session, the other one a two-part offering of 6-year and 10-year bonds for Michigan-based power producer CMS Energy Corp. When the new Smithfield notes were freed for secondary activity, they were seen having risen only modestly.

Also pricing was a euro deal from Norske Skog Industrier ASA.

All three new issues sported double-B credit ratings from both Moody's Investors Service and Standard & Poor's.

Price talk emerged on Surgical Care Affiliates LLC's upcoming $300 million two-part deal and roadshow details were heard on prospective new issues from Blaze Recycling & Metals, LLC, Paetec Holding Corp. and Calcipar SA, the latter a euro-denominated offering.

In the secondary market, big movements in some distressed issues continued to be the most interesting happenings in an otherwise largely calm environment - and the biggest mover continued to be Remy International Inc.'s bonds, up for a third straight session in the wake of the troubled Anderson, Ind.-based automotive electrical systems manufacturer's Friday morning statement indicating that its bondholders support the company's restructuring plan, which will be implemented via a pre-packaged bankruptcy filing.

Another big mover in that area was Sea Containers Ltd., whose bonds were seen up several points on the session - even though the British government agency that oversees company pensions said Monday that it will order the bankrupt Bermuda-based maritime and railroad transportation company to make payments to cover the shortfalls in two pension plans covering employees in its Sea Containers Services subsidiary in the UK.

Outside of the distressed-debt precincts, homebuilder names like Hovnanian Enterprises Inc., were generally seen not very much affected by the news that new-home starts in the United States fell to a four-month low in May - even though that news, implying a non-inflationary economy, gave a big shot in the arm to Treasury issues, and, in turn, equities on Tuesday.

And the nominally investment-grade bonds of internet travel giant Expedia Inc. were on a downside journey, after the company announced plans for a massive stock buyback - which caused Standard & Poor's to actually dump its ratings into the junk category, while Moody's Investors' Service said it might do the same to Expedia's precarious Baa3 status.

Smithfield sells $500 million

In addition to bringing highly rated junk, both of Tuesday's U.S. issuers came with rapidly shopped deals.

In an a.m.-to-p.m. drive-by, Smithfield Foods priced a $500 million issue of 10-year senior notes (Ba3/BB) at par to yield 7¾%.

The yield came at the wide end of the 7 5/8% to 7¾% price talk, according to a market source.

Citigroup and JP Morgan were joint bookrunners for the pork processor's debt refinancing deal.

CMS comes tight to talk

Meanwhile CMS Energy announced its $400 million two-part senior notes (Ba1/BB+/BB-) deal on Monday and priced it on Tuesday.

The Jackson, Mich., integrated energy company priced a $250 million tranche of 6.55% 10-year fixed-rate notes at a 150 basis points spread to Treasuries, at the tight end of the Treasuries plus 150 to 155 basis points price talk.

CMS also priced a $150 million tranche of 5.5-year floating-rate notes at par to yield three-month Libor plus 95 basis points, at the tight end of the three-month Libor plus 95 to 100 basis points price talk.

Deutsche Bank Securities, Barclays Capital, Citigroup, JP Morgan, Merrill Lynch & Co., Wachovia Securities were joint bookrunners for the debt refinancing and general corporate purposes deal.

Norske Skog oversubscribed

Norwegian paper and pulp firm Norske Skogindustrier also completed its four-B rated deal on Tuesday.

The company priced a €500 million issue of 7% 10-year senior notes (Ba1/BB+) at a 225 basis points spread to mid-swaps.

The spread came on top of price talk that was lowered from 237.5 basis points earlier on Tuesday.

The notes came at an original issue discount of 99.009 resulting in a 7.14% yield to maturity.

BNP Paribas, Citigroup and Deutsche Bank were the underwriters for the debt refinancing and general corporate purposes deal.

A market source said that the deal was two-times oversubscribed.

Surgical Care sets talk

Surgical Care Affiliates set price talk for its $300 million two-part notes offer on Tuesday.

The Nashville-based ambulatory surgery services provider talked its $150 million tranche of eight-year senior PIK election notes (B3/CCC+) at the 8¾% area and its $150 million tranche of 10-year senior subordinated notes (Caa1/CCC+) at the 9¾% area.

The Goldman Sachs and JP Morgan deal is expected to price on Thursday.

More issuers to start marketing

Meanwhile several new deals were added to the forward calendar.

Paetec Holding will start a roadshow on Wednesday for its $300 million offering of eight-year senior notes (Caa2/CCC+), via Merrill Lynch & Co., Deutsche Bank Securities and Wachovia Securities.

The Fairport, N.Y.-based communications services provider to businesses will use the proceeds to refinance debt.

Catalyst Paper Corp. will begin a brief roadshow on Wednesday for its $200 million offering of 10-year senior notes (expected ratings B2/B+), in a deal being run by Deutsche Bank Securities and Merrill Lynch.

The Vancouver, B.C.-based producer of mechanical printing papers will use the proceeds for general corporate purposes, which may include acquisitions and investments to support growth.

And Blaze Recycling & Metals, issuing in conjunction with Blaze Finance Corp., began a roadshow on Tuesday for its $110 million offering of five-year senior secured notes.

Jefferies & Co. is quarterbacking.

The Georgia-based metal recycler will use the proceeds to fund the acquisition of the company by affiliates of Altazano Management LLC, CarVal Investors LLC and Jefferies & Co., Inc.

Proceeds will also be used to fund capital expenditures and for general corporate purposes.

Finally, Calcipar, a Luxembourg-listed subsidiary of Netherlands lime producer L.V.I. Holding NV, will begin a roadshow on Wednesday in Paris for its €200 million offering of seven-year senior unsecured floating-rate notes (Ba2/BB+).

BNP Paribas and Fortis are the underwriters for the debt refinancing deal.

Smithfield new bonds up slightly

When the new Smithfield Foods 7¾% senior notes due 2017 were freed for secondary dealings, a trader saw those bonds slightly improved from their par issue price at 100.25 bid, 100.625 offered.

The trader also saw CMS Energy's new 6.55% notes due 2017 trading on a spread versus Treasuries basis in a 146-148 basis points context at par, versus their issue level of 150 bps at a slightly discounted price of 99.742.

He estimated that "you could say" they were at 99.75 bid, par offered. "That was the market."

Remy keeps rolling on restructuring news

Back among the established issues, a trader said of troubled auto systems producer Remy that "the thing just keeps on going up." He noted that the company's Delco Remy 11% notes due 2009 and its 9 3/8% notes due 2012 were each hovering around the 97.25 bid, level, which he called up another 3¼ points on top of the earlier gains over the previous two sessions which had carried those bonds all the way up into the 90s from levels they held at mid-week last week around 66 and 70, respectively.

"It's just unbelievable how they keep on going up," he added.

The trader meantime saw Remy's 8 5/8% notes slated to mature this Dec. 15 still at 107, the level at which they ended Monday, he said.

Another trader exclaimed that "the Delco Remys are flying again," seeing the 11s at 97 bid, and the company's floating-rate notes due 2009, previously seen trading just above the par level, at 105. He quoted the 8 5/8s trading as high as 112, "all up another 10 points, or whatever."

Yet another trader saw the 8 5/8s up a more modest 1 point on the session at 106.5 bid, 107.5 offered, but called the 11s 5-point winners at 95.5 bid, 100.5 offered.

A different source said the 8 5/8s going out at 110, up some 4 points on the session, while the other three issues all settled at 100.5, a 5 point gain on the 11s and 9 3/8s, while the floaters were about unchanged at that desk.

The catalyst for the three-day buying binge has been the company's announcement on Friday morning that its bondholders support the Remy's restructuring plan, which will be implemented via a pre-packaged bankruptcy filing.

The plan envisions the conversion of the two series of subordinated notes into 100% of the reorganized company's common equity - all existing stock will be cancelled - the exchange of the existing senior notes for $100 million of new third-lien pay-in-kind notes and approximately $50 million in cash, and the repayment in full of the outstanding second-priority senior secured floating-rate notes.

Remy further anticipates raising $75 million in preferred equity through a rights offering to be made to holders of the 8 5/8% senior notes and the two series of subordinated notes.

Sea Containers up despite pension trouble

Another big-time mover, traders said, was Sea Containers' bonds - even though the problem-plagued company, now trying to reorganize under Chapter 11, faces a new headache.

The Pensions Regulator - the British government agency that oversees company pensions - said Monday that it will issue an order of Financial Support Direction to Sea Containers, calling upon the company to make payments to cover the shortfalls in two pension plans covering employees in one of its subsidiaries. Those two pension schemes, dated 1983 and 1990, have deficits of £83 million and £17.5 million, respectively. The £100 million of pension obligations comes on top of the hundreds of millions of dollars of claims against the company filed by the holders of its junk bonds and other creditors.

Even with that daunting new negative factor, a trader saw Sea Containers' 7 7/8% notes due 2008 as having gone up to 92.5 bid, 94.5 offered from prior levels at 89 bid, 91 offered, while its 10¾% notes due 2006 pushed upward to 97 bid, 99 offered from 93 bid, 95 offered. Its 10½% notes due 2012 advanced to 95.5 bid, 97.5 offered from 92 bid, 94 offered.

A second trader saw Sea Containers "strong again today," despite the extra potential burden on its reorganization finances if the pension regulator's order is upheld, while yet another pegged the 103/4s at 97 bid, 98 offered, up three points on the day.

Sea Containers said in a statement that it is "disappointed" in the outcome of the hearings that led to the pension agency's decision, and holds open the possibility that it may file an appeal.

Bally bounce continues

Yet another troubled name seen as a large mover Tuesday was the soon-to-be bankrupt Bally Total Fitness Holding Corp.

A trader saw its 10½% notes due 2011 gaining another 2 points to 109 bid, 110 offered, while another source called the Chicago-based fitness center operator's 9 7/8% notes scheduled to come due on Oct. 15 a point ahead at 99.

The Bally bonds rose Monday and again on Tuesday, after it announced that a wide majority of the bondholders had endorsed the company's reorganization plan, which like Remy's, will be implemented via a pre-packaged Chapter 11 filing, and which will cancel all existing stock and leave the company's ownership in the hands of the bondholders.

However, a trader at another desk saw Bally bonds moving the opposite direction, the 9 7/8s off a point to 98.5 bid, 99.5 offered, and the 101/2s at 108.5 bid, 109.5 offered, down ½ point.

Housing hangs in

Apart from the really troubled credits, traders said that things were pretty quiet. One saw the widely followed CDX index measuring junk bond performance at par bid, 100 1/8, down about ¼ point on the day.

Despite the big news coming out of the housing sector - the Commerce Department reported that builders broke ground on new houses at an annual rate of 1.474 million in May, down 2.1% from April's 1.502 million rate - a trader said that "there was not a lot of housing action. That sector is bullet-proof."

He saw Hovnanian's 8 5/8% notes at 99 bid, 99.5 offered, and its 7½% notes at 93.25 bid, 94.25 offered - down slightly on the day, but "really not much" in the context of the market. "I don't know what you have to do to bring this sector down." he added.

Expedia travels to junk land

A trader saw Expedia's 7.456% notes due 2018 down 2 points to 99 bid, par offered.

Another said that his desk hasn't seen it yet, "but it looks like we soon will."

That followed S&P's downgrade of the company's ratings by a notch to BB+ after the internet travel company said that it would spend up to $3.5 billion to repurchase up to 42% of its shares.

Moody's, which for the moment rates the company at Baa3, also expressed skepticism and wariness about the company's plans and said that it would consider a downgrade to junk as well.

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