Ford brings $2.25 billion deal; Qwest, Textron also price; Cinemark slides; funds see $336 million inflow

By Paul Deckelman and Paul A. Harris

New York, Aug 3 - Ford Motor Credit Co. dominated the high-yield primary market as it shopped a quickly emerging $2 billion-plus two-part offering on Thursday, syndicate sources said.

The Ford deal overshadowed the day's other placements - Qwest Corp. selling an upsized offering of eight-year senior notes, TFS Acquisition Corp/Textron Fastening Systems pricing an eight-year offering of floating-rate notes and Barrington Broadcasting Corp. coming in with yet another eight-year issue.

Those deals brought total issuance for the session to $2.93 billion from four companies.

In the secondary market, Cinemark USA Inc.'s bonds slid as investors gave two thumbs down to news reports that the Plano, Tex.-based movie theater operator is in talks to acquire Century Theaters Inc. - a combination which potentially would create one of the largest movie theater operators in the United States.

Another downsider was troubled Rochester Hills, Mich.-based vehicle components manufacturer Dura Automotive Systems Inc., whose bonds had been heading back upward over the past several sessions after having been soundly drubbed a week ago on an unexpected fall into red ink during the latest quarter.

But the auto area also saw Visteon Corp.'s bonds heading upward in response to news reports that the Van Buren Township-based components maker had hired J.P. Morgan Chase - some also mentioned Citigroup - to explore a possible sale of the company.

A buy-side source marked the broad high-yield market flat on Thursday, but noted that most of the week's new issues, including Qwest's upsized $600 million drive-by deal, had traded better.

"The tone felt okay," the investor added, noting that it had been a busy day.

And as the session was winding down, market 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 $336.2 million more came into the funds than left them.

The inflow trails a succession of generally anemic flows - most of them outflows - reported thus far in 2006.

But it was the second straight week of inflows, including the $56.1 million infusion the funds saw in the previous week, ended Wednesday, July 26. It was also the fourth inflow in the last five weeks - a rarity in a fund-flow landscape so far this year that has been almost completely dominated by outflows. Over those five weeks, net inflows have totaled $489.1 million, according to a Prospect News analysis of the statistics - although this past week was the first in which inflows actually reached into the triple digits.

Even with the latest gains, though, outflows have now been seen in fully 22 weeks out of the 31 since the start of the year, against only nine inflows, counting the latest.

The latest inflow represents the tally of funds that report to AMG on a weekly basis.

The funds that report on a monthly basis saw $245.0 million of inflows for the most recent period, according to AMG.

Counting the most recent numbers, the weekly funds are now negative $3.151 billion year to date, according to the market source, while the monthly reporters are in the black for the year to the tune of $2.094 billion.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise between 10% and 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and hedge funds.

Ford Motor Credit upsizes

Ford Motor Credit priced an upsized $2.25 billion two-part junk bond transaction (Ba3/B+/BB) on Thursday, according to a market source.

The credit arm of Ford Motor Co. sold an increased $1.50 billion tranche of five-year senior notes at par to yield 9 7/8%, on top of price talk. The tranche was raised from $1.25 billion.

Ford Motor Credit also priced a $750 million add-on to its Libor plus 445 basis points floating-rate notes due April 15, 2012 at 102, again on top of price talk.

UBS Investment Bank, Merrill Lynch & Co. and BNP Paribas were joint bookrunners for the registered deal.

Proceeds will be used for general corporate purposes, including the purchase of receivables and loans, as well as to refinance debt.

The Ford deal priced off the investment-grade syndicate desks, with the terms circulating well after the Thursday close.

However an investor who spoke to Prospect News right around the session close and was not in the deal, said that nevertheless it appeared to be "going good.

"I don't know if it was a complete blowout but they definitely rallied over the past couple of days, and they seem like they're doing okay for themselves," the source added.

Qwest upsizes

Meanwhile Qwest Corp. priced an upsized $600 million issue of eight-year senior notes (Ba3/BB) at par to yield 7½% in a quick-to-market transaction on Thursday.

The yield came on top of the price talk and the deal was increased from $500 million.

Deutsche Bank Securities, Credit Suisse and Merrill Lynch & Co. were joint bookrunners for the Rule 144A with registration rights notes.

Proceeds will be used to refinance a $500 million term loan at Qwest Corp. and for general corporate purposes.

The extra $100 million of proceeds from the upsizing will be used to repay notes coming due in January 2007.

The buy-sider noted that Qwest had posted a profit for the second quarter, reversing its year-ago loss - the result of lower costs and improved productivity.

"The time must have been right for this deal," the source said, noting that the new Qwest 7½% paper was trading up in the secondary market.

Textron snaps up $190 million

Also crossing the finish line Thursday was TFS Acquisition Corp. (Textron Fastening Systems)'s $193.87 million issue of restructured eight-year senior secured floating-rate notes (Caa1/B-), which priced at 98.00, generating approximately $190 million of proceeds.

The notes priced with a coupon that pays three-month Libor plus 750 basis points.

According to a market source the resulting discount margin is three-month Libor plus 789 basis points.

Credit Suisse ran the books.

The structure was changed from 10-year non-call-five senior secured fixed notes.

The Troy, Mich.-based provider of fasteners will use the proceeds to partially fund the acquisition of Textron's fastening systems business by Platinum Equity Advisors.

Noting that Textron had initially talked its originally structured fixed-rate notes at a yield in the 11¾% area more than a week ago, the buy-side source noted that the company finally pinned down a rate of approximately 12¾% fixed-rate equivalent, and added that Textron ended up also having to tighten up the bond covenants to get the deal done.

Barrington wide of talk

Finally, Barrington Broadcasting Corp. priced a $125 million issue of eight-year senior subordinated notes (B3/CCC+) at par to yield 10½% on Thursday, 25 basis points beyond the wide end of the 10% to 10¼% price talk.

Banc of America Securities LLC and Wachovia Securities ran the books for the Hoffman Estates, Ill., TV station operator's acquisition financing.

PNA for Friday

Heading into the final session of the July-August hinge-week, only one deal is parked on the forward calendar as business expected to price by Friday's close.

PNA Group, Inc., an Atlanta-based steel processing and distribution company, is planning to price a $250 million offering of 10-year senior notes (B3/B-).

The Banc of America Securities and Citigroup-led debt refinancing and dividend funding deal was talked earlier in the week at 10¼% to 10½%.

Room to rally

The buy-sider who kibitzed with Prospect News during the busy Thursday session said that next Tuesday's Federal Reserve Federal Open Market Committee meeting could conceivably prod the junk market in the right direction.

"Year-to-date we're up 4.5% and change," the investor said, citing figures gleaned from the Merrill Lynch High Yield Master Index.

"January was a huge month," the investor added.

"According to Merrill we were up 1.5% in January. And in February we were up another half. So there was a 2% total return in those two months. And since then we're up another two points and change.

"I was short duration throughout this whole thing," the investor said, with reference to the Fed's two-year interest rate-tightening cycle.

"That strategy served well, but I'm starting to extend duration with the expectation that the Fed will hike rates again in August, but I don't think that there are another three or four moves.

"I think there is one move and maybe two," the investor said.

"On the other side of that is the potential for a rally."

Qwest up in trading

When the new Qwest 7 ½% senior notes due 2014 were freed for secondary dealings, a trader saw those bonds push up to 101.25 bid, 101.75 offered, well up from their par issue price earlier in the session.

Qwest's outstanding 7¼% notes due 2011 were down ¼ point at 98.5

The new Barrington Broadcasting 10½% seniors due 2014 had a less impressive break, finishing at 100.25 bid, 100.5 offered, from their par issue price.

The Textron eight-year floaters priced too late in the session for any meaningful aftermarket activity, as did the Ford Motor Credit bonds.

Existing Ford, GM bonds mixed

A secondary market trader saw Ford Credit's outstanding 7% notes due 2013 up ¼ point at 89.25 bid, 89.75 offered. He also saw parent Ford Motor Co.'s benchmark 7.45% notes due 2031 off ½ point at 75 bid, 75.5 offered.

Ford arch-rival General Motors Corp.'s 8 3/8% notes due 2033 and its General Motors Acceptance Corp. 8% notes due 2031 were each down ¼ point, at 82.25 bid, 82.75 offered, and 98.25 bid, 98.75 offered, respectively.

Visteon jumps on advisor news

A trader saw one of the day's "big winners" emerge from the auto sector, as Visteon's 8¼% notes due 2010 were up 2 points at 96 bid, 97 offered. Those bonds, he said, "had a steady bid to them all afternoon." The company's 7¼% notes due 2014 were up even more, at 85.5 bid, 86 offered, a 2¼ point rise on the day.

Visteon's New York Stock Exchange-traded shares meantime zoomed $1.92 (28.11%) to $8.75. Volume of 14.3 million shares was about six times the usual turnover.

Investors were reacting with some degree of excitement to news reports that the problem-plagued former Ford subsidiary had hired J.P. Morgan Chase & Co. to explore strategic options, possibly including the sale of the entire company. Some of the reports indicated that Visteon had also retained Citigroup. Visteon was said to have actually received a first round of bids. Neither investment bank was commenting on those stories and Visteon itself also said that it would have no comment on what it termed "speculation."

However, the trader said, "that definitely helped to explain why there's buying in it [Thursday]."

Dura ends bounce

Also in the automotive sector, the trader said, Dura "seems to have settled down," its recent rebound having apparently run its course.

Dura's bonds got solidly drubbed over two sessions a week ago when the company reported a large quarterly loss, versus a year-earlier profit. That knocked its Dura Operating Corp. 9% notes due 2009 down from levels around 50 to the mid-20s, while its 8 5/8% notes due 2012 fell from the mid-80s to the lower 70s. After having been oversold, each series of bonds moved back up in the front part of this week, the 9s getting back to nearly 30 and the 8 5/8s to 80. However, on Thursday, the 9s were back down 2 points to 27 bid, 28 offered, while the 8 5/8s retreated a point to 79 bid, 80 offered.

Another market source saw the subordinated bonds at 28.5 and the seniors at 79, both down ½ point.

Cinemark lower

Outside of the autos, Cinemark's 9% notes due 2013 were being quoted at 102 bid, down 2 3/8 points from Wednesday's close at 104.375 in apparent response to the report that it was in talks to acquire smaller rival Century Theaters, although the bonds were up slightly from Thursday's opening at 101.75.

A market source also saw the company's zero-coupon/9¾% bonds due 2014 decline ½ point to 78.

Yet another trader, while seeing the 9s still unmoved around the 104 level, did see the zeroes off 1¼ points at 76.25 bid, 77.5 offered.

The Wall Street Journal story attributed its information to unidentified sources familiar with the matter. It said that Cinemark - which, like San Rafael, Calif.-based Century, is privately held, following its 2004 acquisition by Madison Dearborn Partners LLP - had first approached the California company about an acquisition last year. The paper said those talks foundered after Cinemark's bid fell substantially short of the $1 billion that Century's owners were seeking. There was no indication in the Journal's account how much Cinemark might now be willing to pay for its competitor.

The paper noted that Cinemark, the third-largest U.S. exhibitor, has about 3,300 screens, versus Century's roughly 1,000, which makes the latter company the eight-biggest exhibitor. Cinemark trails the industry's top two players, Regal Cinemas and AMC Entertainment.

Spectrum rises

Elsewhere, Spectrum Brands Inc.'s bonds and shares were solidly higher, the news that the federal government has apparently ended its investigation of the Atlanta-based consumer products company's past finances apparently outweighing its announcement of lower fiscal third-quarter earnings.

A trader saw Spectrum's 7 3/8% notes due 2015 up more than 2 points to 77.5 bid, 78 offered, while its 8½% notes due 2013 were 2½ points better at 82.25 bid, 82.75 offered.

The company's NYSE-traded shares meantime were up $1.10 (16.79), closing at $7.65. Volume of 2.99 million shares was about three times the norm.

Spectrum said that federal investigators had ended their inquiry into the company's financial results for the 2005 third and fourth quarters and the sale of company shares by senior management officials.

That positive news apparently carried greater weight with both debt and equity investors than the announcement that its profit for the fiscal third-quarter ended July 2 plunged 90% from year-ago levels to $2.5 million (5 cents per share) on $698.3 million in revenue. The company posted income of 22 cents per share excluding one-time items, badly missing Wall Street's expectations of 29 cents per share earnings on revenue of $706.9 million.

Spectrum, the maker of Rayovac brand batteries and Remington electric shavers, cited weakness in its European battery operations, and weaker-than-expected Father's Day holiday sales of Remington shaving products.

Revlon up

Another consumer products company, Revlon Inc., also had disappointing earnings, its net loss widening to $87 million (21 cents per share) from $36 million (10 cents per share) in the year-ago second quarter. The New York-based cosmetics company attributed the sharper loss to the expenses it incurred in the launch of Vital Radiance, a cosmetics line targeted at older consumers.

However, bond investors thought Revlon looked just fine, lifting its Revlon Consumer Products Corp. 8 5/8% notes due 2006 a full point despite the wider loss, to a close of 93 bid, 94.5 offered.

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