Moog upsizes deal, Cablevision prices also; existing Cablevision paper off; Standard Pacific keeps rising

By Paul Deckelman and Paul A. Harris

New York, May 28 - Moog Inc. was heard by high yield syndicate sources to have successfully brought an upsized issue of 10-year notes to market on Wednesday.

Also managing to price a deal was Cablevision Systems Corp., which quickly shopped its half-billion-dollar offering around and priced it within a matter of a few hours. Traders meantime said that the Bethpage, N.Y.-based cable systems operator and sports franchise and arena owner's existing bonds were meantime lower in anticipation of the new offering.

On the other hand, Standard Pacific Corp.'s bonds were seen higher - some of them sharply so - for a second consecutive session, continuing to draw strength from Tuesday's announcement that the struggling homebuilder had lined up a large equity infusion.

A high yield trader in a buy-side shop said that apart from the auto sector, which remains heavy, cash bonds felt better on Wednesday.

Meanwhile in the primary market, drive-by traffic continued as Cablevision Systems Corp. subsidiary CSC Holdings, Inc. placed a $500 million issue of seven-year senior subordinated paper (B1/BB) in an a.m.-to-p.m. drive-by.

The notes priced at par to yield 8½%, on the wide end of the 8 3/8% area price talk.

Banc of America Securities, Merrill Lynch, Citigroup and JP Morgan were joint bookrunners for the deal, proceeds from which will go to retire the company's 7¼% senior notes due July 2008.

Meanwhile, in a deal that launched on Tuesday, Moog Inc. priced an upsized $200 million issue of 10-year senior subordinated notes (Ba3/BB-) at par to yield 7¼%.

The issue was upsized from $150 million, and was priced on top of price talk.

Banc of America Securities ran the books for the bank debt refinancing.

The squeeze

A money manager whose portfolio includes high yield bonds as well as stocks told Prospect News that three factors are presently putting pressure on high yield spreads: weaker Treasuries, a huge investment-grade calendar and high-coupon preferred deals coming out of the financial sector that are paying interest at rates higher than those now being extracted from top tier junk names, especially junk issuers from the oil and gas sector.

Also, the buy-sider pointed out, there has been a pretty good high-yield deal flow.

"When you look at where high grade bonds and the preferreds are coming, where can spreads go?" the investor asked rhetorically.

"And you still have indigestion in certain parts of the financial sector, and in the asset-backed sector, and in the loan market.

"That says to me that we may see spreads either take a pause or widen out a little, because we've come so far so fast. We've moved 150 basis points off of the lows in March - in about 10 weeks.

"That seems like a substantial short-term move absent significant change in the fundamentals."

Prospect News asked the buy-sider whether the preferred deals, which come with investment-grade ratings, would appeal to an investor accustomed to trafficking in seven-, eight- and 10-year fixed-rate paper from the high-yield sector.

"A lot of the perferreds are perpetual and convertible into stock," the money manager explained.

"So they have less liquidity.

"And if the company does poorly they have a lot of downside potential. They have equity downside if the company doesn't improve its operations.

"And on the upside they have a call price that tells you you're not going to enjoy that big coupon for very long."

However, the investor added, the preferreds are attracting a lot of crossover money, as well as a lot of income-oriented money which would otherwise look at high yield.

Existing Cablevision paper lower

Secondary market traders did not see any aftermarket activity Wednesday in either the new Moog notes or the new Cablevision paper.

However, some of them saw existing Cablevision bonds lower ahead of the big new deal's arrival on the scene.

A trader said that Cablevision's longer dated outstanding bonds initially were lower by "a couple of points" before coming back later in the day to end with only modest losses.

He saw the company's 7 5/8% notes due 2011 as "very active, actually," with at least $10 million traded, and possibly more - "could even be $15 [million] or $20 [million]." He saw those notes trading in the par-100.5 area, with the last round-lot trade at 100.375, down from the previous last round-lot trade at 101 notched late last week, "so I would say they're down a ¼ to a ½ [point] or so."

He also saw the company's 7 7/8% notes due 2018 trading at 96, a little off from late last week's round-lot trades in the 96.5-96.75 range, "so again, they were down around ½ point."

Market indicators trend lower

Back among the established issues with no new-deal links, a trader said, the widely followed CDX junk bond performance index was unchanged at 96¼ bid, 96¾ offered. The KDP High Yield Daily Index was also steady at 75.79, as was its spread, at 9.26%.

In the broader market, advancing issues again trailed decliners by a better than five-to-four margin. Activity, represented by dollar volume levels, was up some 52% from Tuesday's levels.

Despite the increased trading volume, all told, a trader said, "not much was going on," with personnel at several shops having cut out early for lack of anything better to do.

Standard Pacific gains continue

As was the case on Tuesday, Standard Pacific's bonds continued to rise for a second straight session on news of a major equity investment in the Irvine, Calif.-based company.

A market source saw its most actively traded issue, the 9¼% notes due 2012, push up to the high 70s from Tuesday's levels around 71. Most of the activity was in odd lots in the 73.5-75 area, but late in the day, several large trades pushed the bonds higher to a round-lot high of 77.75 and an odd-lot finish around 80.

Standard Pacific's 6½% notes due 2010 likewise were solidly higher for a second straight session, going home at 91 bid, up from Tuesday's finish around 88 bid. However, its 7% notes due 2015 were seen little changed at 78.75

A trader at another shop said that Standard Pacific was "up again today." and quoted the 91/4s at 78 bid, 80 offered, up 6 points on the day.

Another trader pegged the 7¾% notes due 2013 as trading in round lots between 81.5 and 82, up slightly from 80 bid, 81 offered on Tuesday, while its 91/4s took "quite a jump" up to around the 78 area in round-lot trading, versus 71 on Tuesday.

Standard Pacific - which, like a number of high-yield-issuing homebuilders, has struggled mightily in the past year as the credit crunch has helped to dry up home sales, and whose bonds are a staple of distressed-debt market trading - got a solid shot in the arm on Tuesday when the company announced that the private equity firm of MatlinPatterson Global Advisors LLC had agreed to invest $530 million in the homebuilder.

Under the terms of the deal, MatlinPatterson's affiliates will receive $381 million in preferred stock that is convertible into 125 million shares of Standard Pacific common stock at a price of $3.05 per share. MatlinPatterson will also exchange about $128.5 million of senior and subordinated debt it holds for warrants to purchase additional preferred stock that is convertible to 89.4 million shares at a price of $4.10 per share.

Further, Standard Pacific is issuing an additional 50 million shares of common stock at a price of $3.05 per share to raise $152.5 million more. MatlinPatterson will backstop the deal, purchasing any unsold shares. The private equity firm will also name three members to an expanded 11-member Standard Pacific board of directors.

Elsewhere in the housing sector, Hovnanian Enterprises Inc.'s 6½% notes due 2014 lost more than a point to finish around 69.5, but there otherwise was not much activity seen there.

Telecom issues a mixed bag

Bonds of Sprint Nextel Corp.'s affiliate Sprint Capital were among the more actively traded issues on the day, although there was no fresh news seen out on the Overland Park, Kan.-based wireless provider.

A market source saw Sprint Capital's 6 7/8% notes due 2028 off about 1½ points at 80 bid, while its 6 3/8% notes due 2009 were seen up by around that same amount to 99.5. Its busiest issue, the 7 5/8% notes due 2011, ended little changed at around the 97 mark.

Elsewhere in that sector, a trader saw Level 3 Communications Inc.'s 9¼% notes due 2014 trading around 94 bid, 94.375 offered, down from Tuesday's levels around 94.75, but he pronounced the movement as "not a big deal," particularly since he saw no fresh news out on the Englewood, Colo.-based telecommunications infrastructure company.

Also in the telecom area, a trader saw Primus Telecommunications Group Inc.'s 12¾% notes due 2009 up 2 points at 90.5 bid, 92.5 offered, in the wake of the McLean, Va.-based company's recent debt exchange offer, which saw it eliminate $130.3 million of its existing notes - including $5.7 million of the 123/4s - in exchange for $67.1 million of newly issued 14¼% senior secured notes and $4.7 million in cash.

American Axle gains on savings, backlog numbers

American Axle & Manufacturing Holdings Inc.'s 5¼% notes due 2014 were seen up a point at 81 bid; the Detroit-based automotive component company's bonds got a boost as the company - which recently settled a lengthy strike by the United Auto Workers union by means of an agreement which will let it cut costs over the next few years - outlined the anticipated savings.

It estimates that it will reap about $300 million of annual savings from the deal by means of job cuts and other belt-tightening measures which the union agreed to in order to preserve at least some of its domestic jobs. It expects to eliminate some 2,000 jobs - more than half of its current hourly workforce - through buyouts and early retirement and buyout offers, as well as plant closings and layoffs, and foresees bringing its average UAW-represented hourly labor cost for the remaining workers down from nearly $73 at present to a range of between $30 and $45. The Wall Street Journal reported that as many as three plants may be closed.

The company further said that it has an order backlog of some $1.4 billion of anticipated business in its pipeline between 2009 and 2013.

Elsewhere in the automotive realm, Ford Motor Co.'s bonds were seen fairly actively traded, although its widely followed 7.45% benchmark issue due 2031 was seen unchanged at 69 bid, 70 offered, a trader said.

Its Ford Motor Credit Co. financing arm's 8% notes due 2016 ended down nearly a point in busy dealings at 85 bid. Domestic arch-rival General Motors Corp.'s 8 3/8% bonds due 2033 also closed unchanged at the 69-70 level, while the latter's 49%-owned GMAC LLC 8% bonds due 2031 were seen up 1 point at 75.5 bid, 76.5 offered.

Expedia unmoved despite buyout buzz

While online-travel operator Expedia Inc.'s shares surged Wednesday on market speculation that its chairman, Barry Diller, might attempt to take the company private, a trader said that the company's 7.456% notes due 2018 were little changed from the from the 103 level to which they had moved in round-lot trading last week. "There's been nothing since then," he noted.

However, that going-private talk was seen benefiting major Expedia holder Liberty Media Corp., which holds a 27% ownership stake in the company, with 60% voting control. Liberty Media's 5.70% notes due 2013 were seen at 90 bid Wednesday, up more than a point on the day.

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