York departure sends GM lower; Softbank prices €500 million; Spectrum, Burlington Coat trade higher

By Paul A. Harris

St. Louis, Oct. 6 - High yield wrapped up the week a little softer after a very quiet session that left most prices basically unchanged, according to a trader who spoke late in Friday's abbreviated session.

The trader said that a considerable number of market participants spent the session in the sky flying home from the Deutsche Bank Global High Yield Conference in Arizona.

Also, the trader added, some people who sat out the conference and remained in New York decided to get an early start on the three-day Columbus Day weekend.

"It barely even got started today," the trader commented, adding that trading in junk had remained quiet throughout the day.

Another trader, who gave the market a similar mark, said that equities were down and, curiously, Treasuries were also off trailing news that the U.S. Department of Labor reported an increase of 51,000 jobs in September, the smallest increase since July 2004 with the exception of the effects of Hurricane Katrina in 2005.

Meanwhile in the primary market, Japanese telecom Softbank Corp. completed its €500 million Regulation S deal at the tight end of talk, while Berry Petroleum Co. announced it will hit the road next week with $200 million.

And the new bonds from NXP and Peabody Energy Corp. which sold during Thursday's massive primary market session plowed higher in Friday trading.

York departure sends GM lower

News that Jerome York, investor Kirk Kerkorian's man on the General Motors Corp. board of directors, resigned in the wake of GM's decision to scrap talks aimed at forming an alliance with Nissan Motor Co. and Renault SA - a move that had been championed by Kerkorian - caused GM's bonds to trade lower during Friday's quiet session.

A trader who spoke at just before noon said that the news, which was circulated in a story from the Wall Street Journal, had GM's long paper, the 8 3/8% notes due 2033, trading at 86.25 bid, down ½ point.

"This is a big deal and it has the market's attention," the trader said.

A little while later another market source said that the news smacked of a power play on the part of York and Kerkorian.

"The stock is off and the bonds are off across the curve," said the trader who did not provide specific levels.

"I don't think we've heard the last word on this, though," the source added.

After Friday's early close another trader saw the GM 8 3/8% notes due 2033 at 86.50 bid, 87.50 offered, down ½ point.

However this source said that the paper had actually staged a comeback after having been down by as much as a point earlier in the day.

Spectrum heavily traded

Shortly after the close, a market source said that the existing bonds of Atlanta-based Spectrum Brands, Inc., were heavily traded in Friday's session.

Earlier in the day market research firm Kline & Co. announced that Spectrum, which has lines of lawn and garden products in addition to its better-known Duracell and Energizer batteries, is among the principal beneficiaries of the 5% growth in the U.S. consumer market for pesticides and fertilizers over the past two years.

A portion of that growth, according to the press release from Kline & Co., is attributable to rising petroleum costs that have been passed to consumers, resulting in higher fertilizer prices.

The market source saw Spectrum Brands 7 3/8% notes maturing in 2015 trading at 82 bid, 83 offered, up a point.

Meanwhile the company's 8½% notes due 2013 were seen at 88 bid, 89 offered, also up a point.

Burlington rises

The source also had the existing bonds of Burlington Coat Factory Holdings, Inc., the 11 1/8% notes due 2014, trading at 99 bid, 100 offered, up ½ point.

Earlier in the day a trader said that Burlington had been the subject of positive comments in a report from Credit Suisse, and had the 11 1/8% notes up 1.25 at 99.50 bid.

Softbank twice oversubscribed

The primary market passed a quiet Friday ahead of the holiday.

One issue priced.

Japanese telecommunications company Softbank sold €500 million of 7¾% seven-year senior unsecured notes (Ba2/BB-) at 99.335 to yield 8 7/8%, at the tight end of the 7 7/8% to 8 1/8% price talk.

Deutsche Bank Securities was the bookrunner for the Regulation S debt refinancing issue.

A market source said that the order book, which contained accounts from Asia and Europe, was two times over subscribed.

Berry plans $200 million

Berry Petroleum will begin a roadshow on Tuesday for a $200 million offering of 10-year senior subordinated notes, which is expected to garner credit ratings in the mid-single B range.

JP Morgan, Citigroup, Wells Fargo Securities and Goldman Sachs & Co. are joint bookrunners for the debt refinancing and general corporate purposes deal from the Bakersfield, Calif., exploration and production company.

2006 issuance tops $100 billion

With no dollar-denominated issues pricing Friday, the market came to a close having seen $5.457 billion price during the week in eight tranches, including the $5.208 billion that priced in seven tranches from three issuers on Thursday, the biggest day thus far in 2006.

By Friday's close, year-to-date dollar issuance had inched over the $100 billion mark, as 2006 issuance leads that of 2005 by more than 20% on a year-over-year basis. By the Oct. 6, 2005 close the market had seen $79.3 billion of issuance.

Thursday's dollar tranches

Late Friday a market source told Prospect News that the dollar-denominated bonds that were priced Thursday by NXP and Peabody for the most part held their ground or traded higher on Friday.

NXP's new 7 7/8% secured notes due 2014, which priced at par in a $1.026 billion tranche on Thursday, were higher on Friday, according to the source who spotted them at 101.25 bid, 101.75 offered.

Meanwhile the dollar-denominated Libor plus 275 basis points secured notes due 2013, which priced at par in a $1.535 billion tranche, were seen Friday at 101.50 bid, which was approximately the level at which the floater closed on Thursday.

The source also saw a little improvement in NXP's dollar-denominated 9½% unsecured notes due 2015, which priced at par in a $1.250 billion tranche. The source had the unsecureds spotted at 100.75 bid, 101.25 offered at the Friday close.

Altogether the NXP deal, which also contained one tranche each of euro-denominated secured and unsecured notes, totaled €4.5 billion equivalent - the biggest burst of issuance ever from a European junk issuer.

Peabody's new notes also held their ground or traded higher.

The new Peabody 7 3/8% notes due 2016, which priced at par Thursday in a $650 million tranche, closed Friday at 101.25 bid, 102 offered, unchanged from the Thursday close, according to the source.

Meanwhile Peabody's 7 7/8% notes due 2026, which priced at 98.753 in a $250 million tranche, were at 99.25 bid, 100.25 offered, up 0.50 at the close of the week.

Chattem lower on acquisition

Other bonds active in the secondary market on Friday included the paper of over-the-counter health care products manufacturer, Chattem, Inc., which was lower on news that it would take on $425 million of bank debt in order to help fund the purchase of five Johnson & Johnson brands.

Chattem's 7% notes maturing in 2014 were seen 95 bid, 96 offered, down 2 points.

Also active, according to a trader, was the paper of Solo Cup Co.

The source said trading was "sloppy" in Solo Cup's 8½% senior subordinated notes due 2014, trailing a conference call in which the company was heard to be nearing technical default.

The trader had the Solo Cup 8½% notes spotted at 83.50 bid, 84.50, down 2 points.

Ahead in the primary

Heading into the four-session post-Columbus Day week, only one deal from a U.S. junk issuer is parked on the calendar as business expected to price before Friday's close.

CompuCom Systems Inc. is in the market with $175 million of eight-year senior notes (B2/B), via Citigroup.

And late Friday a sell-sider said that Minnesota-based buffet-style restaurant chain, Buffets, Inc., is expected to launch a $330 million offering of high-yield notes sometime during the week.

Credit Suisse will lead the acquisition deal.

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