Huntsman jumps on court decision; Ford tad lower as debt comes due; VeraSun firms; primary quiet

By Stephanie N. Rotondo and Paul A. Harris

Portland, Ore., Sept. 30 - Hunstman International Inc.'s paper got a fair boost Tuesday after a court ordered Hexion Specialty Chemicals Inc. to go ahead with a merger agreement.

Traders said the bonds gained anywhere from 6 to 8 points on the day as Hexion and its financiers were ordered to live up to their end of a $6.5 billion deal. However, the court noted that the deal still could fall apart, given the current market conditions.

Meanwhile, Ford Motor Co., as well as sector rival General Motors Corp., saw its debt finish the session unchanged to lower. Ford's paper was deemed lower due to upcoming maturities that are expected to be funded with cash on hand. There was no fresh news out on GM.

VeraSun Energy Corp.'s bonds firmed on the day as buyout chatter that began in the previous session persisted. Elsewhere, Charter Communications Inc.'s notes seemed little effected by the announcement of a tender offer for up to $100 million in debt.

Market indicators mixed

High-yield market indicators were mixed on the day as some players stepped away from their desks and others kept their eyes turned to Washington.

The CDX High Yield Index gained 9/16 of a point to close at 89 5/8 bid, 90 1/8 offered. But the KDP High yield Index fell to 64.26 with a yield of 12.24%, from 64.49 with a yield of 12.23% previously.

"It was a difficult day to get things done," one source said, as some players were absent due to Rosh Hashana and month- and quarter-end pricing kept others busy. Still others were waiting to see if the government's failed $700 billion bailout plan would reemerge by Thursday.

"High yield opened on the weakish side," one trader said, blaming that on a "hangover of excess supply."

Still, "a lot of that has been cleaned up," he added.

Traders also reported that volumes were lighter away from finance names, although so-called "bottom feeders" were taking advantage of the recent declines in prices.

"Customers are coming in to put their money to work at these lower levels," a trader said.

All quiet in the primary

A near-term regeneration of the primary market is unlikely but not impossible, according to a high-yield syndicate source.

However it would hinge on a number of things going right, including continued improvement of the secondary market.

"No matter how good the secondary gets, nothing is likely to come this week or next week," the source said.

This official contended that underwriters need to see some resumption in the high-grade bond and commercial paper markets.

"Overnight rates need to become a little more tolerable and normalized," the official added.

Also there needs to be some "positive action" from Congress on a financial rescue package, trailed by a couple of days of stability in the stock market.

"We could possibly see something happen mid-to-late next week, but a lot of things have to go right for that to happen," the official said.

Huntsman jumps on court decision

Huntsman International's bonds gained 6 to 8 points across the board, a trader said, as a court ordered Hexion Specialty Chemicals to honor its buyout agreement.

The trader quoted the 7 3/8% notes due 2015 at 84 bid, 85 offered, up from around 77 previously. Another source placed the issue at 84.5 bid, 7 points better.

At another desk, a trader said Huntsman's debt gained 6 points across the board, with its 7 3/8% notes at 86 bid, 87 offered and its 7 7/8% notes due 2014 at 88 bid, 89 offered.

The Delaware Chancery Court sided with Huntsman's claims that Hexion violated the $6.5 billion buyout agreement when it cancelled its offer. Hexion first made its bid for Huntsman in July 2007 for $28 a share.

Furthermore, the court ordered the deal's financiers - including Credit Suisse and Deutsche Bank - to live up to their end of the agreement. The termination date was extended until Hexion completes the transaction.

However, the court acknowledged that there were still obstacles facing the deal. Huntsman has said it will seek at least $3 billion in damages or, should the deal fall apart on its own, the difference between the purchase price and the current share price. Hexion has said it was disappointed by the decision and is looking at its options.

Ford paper a tad lower

Ford paper finished the day unchanged to just slightly off as the company was expected to likely use cash on hand to repay debt coming due Wednesday.

A trader said the 7.45% notes due 2031 were unchanged at 44 bid, 46 offered. But another source called the 5.7% notes due 2010 down a point to around 77.

At another desk, a market source deemed the 7% notes due 2013 down nearly 3 points at 62.75 bid. Yet another source called the 7.45% notes 1.5 points weaker at 43 bid, 45 offered.

According to a Bloomberg report, analysts said they expected Ford would use available cash to repay the 5 5/8% and 7¼% notes due Wednesday instead of drawing down its revolving credit facility. The total debt maturing equals just over $1 billion. In the article, one analyst said that the repayment was more likely than a refinancing given the current market conditions.

However, Ford also has several other issues maturing in October. According to NASD Trace, about eight issues come due on Oct. 20. That does not count the other paper maturing through the end of 2008.

As of June 30, Ford had $30.1 billion in cash and equivalents, as well as $12.5 billion in marketable securities.

Meanwhile, sector rival General Motors also saw its debt unchanged to slightly lower.

One trader called the benchmark 8 3/8% notes due 2033 at 39 bid, 40 offered, down a deuce. Another quoted the bonds around 40, down from 42 bid, 44 offered previously.

Another trader saw GM's benchmark issue fall a point to 40 bid, 42 offered, while its GMAC LLC 8% notes due 2031 slipped a half, also to the 40 bid, 42 offered level.

Buyout chatter boosts VeraSun

Rumors of a potential acquisition helped VeraSun's bonds gain anywhere from 2 to 7 points on the day.

A trader said the 9 7/8% notes due 2012 closed at 70 bid, 74 offered, up 7 points, while the 9 3/8% notes due 2017 finished at 39 bid, 41 offered, up 2 points.

But another called the 9 3/8% notes "about the same" at 39 bid, versus 37 bid, 38 offered last week. He saw the 9 7/8% notes 5 points firmer at 75 bid, 79 offered, compared to 70 bid, 73 offered last week.

The buyout speculation came after the company said several interested parties had expressed a "strategic interest" in the ethanol producer. The chatter was also preceded by the Sioux Falls, S.D.-based company's expectations that its quarterly loss would fall between $63 million to $103 million, as well as an attempt to raise $20 million though a public offering.

Among other energy producers, Reliant Energy Inc.'s 7 7/8% notes due 2017 "did not come back at all," a trader said, after losing 10 points in the previous session. The trader quoted the bonds at 73 bid, 75 offered.

Charter little changed

Charter Communications announced during the session that it will buy back about $100 million in outstanding debt, but the news had little effect on the company's bonds.

One market source said there was "not much trading" in the name, pegging the 11% notes due 2015 at 65 bid, 68 offered, compared to 67 bid, 69 offered last week.

"The issues they are taking out, there was not much of an effect," the source said.

Another source placed the 10¼% notes due 2010 around 90, just a touch softer from its previous levels around 89.

Yet another source said the bonds were not heavily traded, calling the 10% notes due 2014 a point weaker at 35 bid, 37 offered.

St. Louis-based Charter said in a press release that its subsidiary, Charter Communications Holding Co., LLC, has begun a tender for five series of notes. The tender includes the 10¾% senior notes due 2009, the 10¼% senior notes due 2010, the 11¾% senior discount notes due 2010, the 10% senior notes due 2009 and the 9 5/8% senior notes due 2009. The company plans to pay up to $100 million, including interest, to exchange the debt.

For each $1,000 principal amount, Charter is offering $975 for the 10¾% notes; $970 for the 10¼% notes; 11¾% discount notes and 9 5/8% notes; and $980 for the 10% notes. Holders will also receive accrued interest. The payouts also include a $15 early tender premium for those bonds received by 5 p.m. ET on Oct. 14. The offer is set to expire on Oct. 29.

WaMu jumps, broad market weak

Financials remained active, traders reported. Washington Mutual Inc.'s debt, for one, got a boost on the back of an 8-K filing with the Securities and Exchange Commission that stated the company had more cash than was previously thought.

One trader said the holding company paper, such as the 4.2% notes due 2010, jumped 15 points from the 50s up to the mid-60s on the news, before settling back to close just below 60 in active trading.

Another trader quoted the paper at 60 bid, 65 offered, up 15 points.

Meanwhile, Lehman Brothers Holdings Inc.'s senior paper, like the 6 7/8% notes due 2018, slipped a point to 11 bid, 14 offered.

Smithfield Foods Inc., the largest pork producer in the United States, saw its bonds dip as much as 3 points, a trader said. He placed the 7¾% notes due 2013 at 84, down from 87 on Friday, and the 7% notes due 2011 at 88 from 90 bid, 90.5 offered previously.

Another trader said the bonds continued their decline set in motion Monday, with Smithfield's 7¾% notes due 2017 at 76 bid, 78 offered, down a point.

Elsewhere, Pilgrim's Pride Corp.'s 8 3/8% notes due 2017 fell half a point to 42 bid, 44 offered.

In the rest of the market, Idearc Inc.'s 8% notes due 2016 continued to fall, ending around 28.25. A trader called sector peer R.H. Donnelley Corp. down "2 to 3 points across the board," with its Dex Media West LLC's 8½% notes due 2010 at 87.25.

After losing more than 6 points in the previous session, Spectrum Brands Inc.'s 7 3/8% notes due 2015 pared their losses, gaining 3 points to close at 45 bid.

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