Ford Credit sells giant deal, parent up on Tracinda news; MarkWest adds on; Cott off as results disappoint

By Paul Deckelman and Paul A. Harris

New York, April 28 - Ford Motor Credit Co. drove into the junk market Monday and drove away with a trunkload full of freshly raised capital. Meanwhile, the automotive financing company's existing bonds were seen to have finished mixed.

Parent Ford Motor Co.'s bonds were seen generally better, helped by news that billionaire investor Kirk Kerkorian has already amassed 100 million shares of the carmaker and is looking for another 20 million, which would boost his stake to about 5.6%. Kerkorian's investment vehicle, Tracinda Corp., had words of praise for the turnaround effort being led by Ford's chief executive officer, Alan Mulally.

Elsewhere, Lear Corp.'s bonds were seen better ahead of the Southfield, Mich.-based automotive components maker's scheduled release of first-quarter earnings.

Apart from the automotive realm, disappointing earnings helped to drop Cott Corp. as the Toronto-based soft-drink bottler was feeling the pinch from Wal-Mart Stores' recent decision to reduce the shelf space given to the retailing giant's Cott-produced store brand.

In total the primary market saw two issuers raise $1.2 billion of proceeds by pricing one tranche of notes each Monday in drive-by deals.

Ford Motor Credit Co. priced a $1.1 billion issue of non-callable 12% seven-year senior notes (B1/B/BB-) at 98.834 to yield 12¼%.

JP Morgan ran the books for the issue which generated $1.09 billion of proceeds.

Elsewhere MarkWest Energy Partners, LP priced a $100 million add-on to its 8¾% senior notes due April 15, 2018 (B2/B) at 102. JP Morgan was again involved, this time as joint bookrunner with RBC Capital Markets and Wachovia Securities.

The original $400 million priced at 99.183 on April 10.

Calendar tops $1 billion

The forward calendar of deals in the market climbed to $1.18 billion with announcements from a trio of prospective issuers during the Monday session.

Ace Hardware Corp. will begin a full roadshow on Wednesday for its $300 million offer of eight-year senior secured notes (expected ratings Ba3/BB-), via Banc of America Securities.

Proceeds will be used to repay debt and for general corporate purposes.

Elsewhere Range Resources Corp. will host an investor call at 10 a.m. ET Thursday for its $250 million offer of 10-year senior subordinated notes, which it expects to price the same day via JP Morgan and Credit Suisse.

Proceeds will be used to repay bank debt.

And Axcan Pharma has revived a $235 million offer of eight-year senior unsecured notes (expected ratings B3/B-) which it withdrew from the market in mid-February.

The deal is expected to price mid-week.

Banc of America Securities, HSBC and RBC Capital Markets are joint bookrunners for the bridge refinancing.

Existing Ford Credit issues mixed

Traders said the new Ford Credit and MarkWest bonds priced too late in the session for any meaningful aftermarket dealings.

The news that the Ford financing arm had opportunistically brought such a mega-deal to a junk market still cautiously trying to regain its balance after a horrendous first quarter for both the primary and the secondary sides caused the company's existing bonds to trade all over the map, some up and some down. A market source said that Ford Credit's 8% notes due 2016 were among the most actively traded issues of the session, finishing off ½ point at around the 87.5 level.

On the other hand, Ford Credit's 7.80% notes due 2012 gained nearly 2 points on the session to end just below 91. But the company's 9.75% notes due 2010 were off ½ point at around 98.

A trader at another desk saw the 7.80s at 91 bid, up from 89.75.

Ford seen 'selectively higher'

Against that backdrop and the news of Kerkorian's increased investment in the company and apparent endorsement of Mulally's turnaround strategy, parent Ford, a trader said, showed "isolated strength.

"Yes, the paper is better, but it was isolated issues that were better," rather than rising across the board. He noted that the Dearborn, Mich.-based carmaker's widely traded 7.45% bonds due 2031 were seen about 3 points higher around the 76 bid level, but added that "I really haven't seen any others that were up that much."

For instance, he quoted the company's 6 1/8% notes due 2018 having moved higher to 73 bid, up from around 71.75 on Thursday, the last round-lot trading in the credit, and also noted the rise in the Ford Credit 7.80s, "so that seems to be the theme - up 1 to 2 points in selected issues."

Another trader saw the 7.45s push up to their highs at 76 from previous levels at 74 bid, 75 offered, apparently assisted by the Kerkorian news. However "they were up, but then came back down" on the news of the $1.1 billion Ford Credit new deal, which caused a supply overhang, to end unchanged around 74.

A market source saw the 7.45s as among the busiest movers, but said that when push came to shove they really hadn't gone very far, up perhaps a bit more than ½ point at the 74 level, while the company's long-term bonds - the 7.70% paper due 2097 - gained more than 3 points on the day to the 65.75 area.

Tracinda said Monday that it had amassed a total of 100 million shares, or about 4.5% of the company, starting in early April, and was looking to buy another 20 million shares via a tender offer at $8.50 per share.

The 90-year old Kerkorian is no stranger to the troubled U.S. automotive industry, having in the past accumulated a nearly 10% stake in Ford's domestic arch-rival, General Motors Corp., before finally getting out of GM when the carmaker refused to go along with Kerkorian's efforts to broker a combination with Japan's Nissan Motor Co. and European carmaker Renault SA. Kerkorian was publicly critical of GM CEO Rick Wagoner's leadership of the company.

In contrast, Kerkorian on Monday praised Mulally's handling of Ford, saying that the company, after several years of big losses, was "starting to achieve highly meaningful traction in its turnaround efforts." Kerkorian advisor Jerry York - a former senior auto executive who represented the tycoon on GM's board - said in an interview that Mulally "is a tremendous leader, a great manager."

The Ford chief and company chairman William Clay Ford Jr. said in a statement that it welcomed Kerkorian's investment in the company, seeing it as a vote of confidence in Ford's turnaround efforts, which resulted in last week's surprise announcement that the company had earned more than $100 million in the first quarter after several consecutive quarters in the red.

GM slips

Elsewhere among the auto names, a trader saw GM's flagship 8 3/8% notes due 2033 "off on the day" at 73.5 bid, 74.5 offered. Another trader saw the bonds fall to that level from 75 bid, 76 offered on Friday, while financing arm GMAC LLC's 8% bonds due 2031 dipped 1½ points to 76 bid, 77 offered.

A trader at another desk meantime saw the bonds of Lear - which makes seating assemblies and automotive electronics systems for many of the major carmakers - as pushing up ahead of the Tuesday's scheduled release of quarterly results. The company's 8¾% notes due 2016 were up 1½ points at 91 bid, 92 offered.

Wall Street is looking for earnings per share of around 48 to 50 cents - about half of the 95 cents the company earned a year ago and just one-third of its $1.52 per share earnings in the 2007 fourth-quarter.

No pop for soda-maker Cott

Apart from the autosphere, a trader saw beverage-maker Cott's 8% notes due 2011 down 2 points at 83.5 bid, 85.5 offered, citing the Canadian company's "disappointing numbers" in the first quarter.

Cott - which primarily bottles and cans private-label store brands such as the Sam's Club line of soft drinks sold at Wal-Mart - posted a first-quarter net loss of $20.7 million, or 29 cents a share, versus a year-ago profit of $4.8 million, or 7 cents.

It cited the impact of the February decision by Wal-Mart, its biggest customer, to cut down on the shelf space it will allocate to the Cott-produced Sam's Club store-brand product line, as well as higher costs of sweeteners and of plastic and aluminum beverage containers.

Level 3 up, Idearc down

A trader said that Level 3 Communications Inc.'s bonds were "definitely up on the day," its 9¾% notes due 2014 at 92 bid versus last week's levels in the high 80s and its 8¾% notes due 2017 up 1¼ points at 86.25.

A second trader saw its 12¼% notes due 2013 at par bid, 101 offered, but saw "no news" out on the Broomfield, Colo.-based telecommunications company, which last week rose on the company's first-quarter results, which included a smaller-than-anticipated loss and positive forecasts.

A market source saw Idearc Inc.'s 8% notes due 2016 down as much as 3 points at the 68 level. There was no immediate fresh news seen out on the Dallas-based telephone directory publisher, which will report first-quarter earnings on May 6.

Market indicators firmer

Overall, a trader saw the widely followed CDX junk bond performance index unchanged at 97.5 bid, 97.75 offered. The KDP High Yield Daily Index rose by 9 bps to 75.81, while its spread tightened by 2 bps to 9.21%

In the broader market, advancing issued led decliners better-than five-to-four. Activity represented by dollar volume levels, was up about 18% from Friday's pace.

Even so, a trader said "not a ton of stuff was going on," especially outside of Ford.

Another noted that the market had "a little better tone."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.