United Rental continues slide as LBO officially declared dead; primary unseen in quiet pre-holiday session

By Paul Deckelman and Andrea Heisinger

New York, Dec. 24 - United Rentals Inc. bonds were being quoted down anywhere from 2 to 4 points across the board - one source saw one of its issues off as much as 7 points - as realization sank in to the market that the planned leveraged buyout of the Greenwich, Conn.-based equipment-rental company is indeed dead and buried following a Delaware court decision on Friday.

Elsewhere, the pre-holiday market was seen as light and essentially featureless, with many participants having long since headed for the exits by the time the "official" abbreviated closing time of 2 p.m. ET recommended by the Securities Industry and Financial Markets Association rolled around.

There was downside activity seen in the split-rated bonds of Temple Inland Inc., with some investors apparently choosing to close out their positions in the Austin, Tex.-based packaging, forest products and real estate company's paper ahead of the official completion of its previously announced corporate restructuring.

Ford Motor Credit Co. bonds were also seeing some activity at lower levels, although there was no specific negative news seen out on the captive financing arm of Ford Motor Co.

No activity was seen in a primary market which has gone into hibernation for what little remains of 2007.

'A lot of nothing'

Traders reached by Prospect News vied with one another to express in the most emphatic and colorful way possible the notion that they were seeing absolutely nothing going on.

"The market didn't even open," was how one put it in describing the dearth of overall activity. "The few people that I did see that were in were mostly sending out holiday greeting messages. I doubt that I saw one two-sided market out there. It was a slower day than even the day before or after Thanksgiving."

"I see a lot of nothing happening," another observed, while a third simply demanded "you're kidding, right?" when asked for the record whether anything was actually going on. The latter added that "high yield was essentially closed - there were no Street people, no dealer business, no nothing. This is just one of those days where you have to sit there and drink water."

The numbers would seem to bear all three of them out. Market activity, as measured by overall dollar value of bonds traded, was slightly more than one-fifth of Friday's already depressed and anemic levels. Declining issues were slightly ahead of advancers. A trader saw the widely followed CDX junk-bond performance index up maybe 3/16 point at 95 5/8 bid, 95 7/8 offered. The KDP High Yield Daily Index, on the other hand, eased 0.04 to 77.57, while its yield widened one basis point to 8.76%

United Rentals slides again

About the only issue that was really being quoted around much was United Rentals.

Those bonds had initially moved lower by about a point or so on Friday on the afternoon news that a Delaware chancery judge had ruled against United Rentals' attempts to force would-be purchased Cerberus Capital Management LP to go through with its previously announced intentions of acquiring United Rentals; Cerberus backed out in November when it became apparent that the turmoil in the credit markets would prevent it from lining up the necessary bond and bank debt financing for the LBO on acceptable terms. While United Rentals initially said that it would consider its alternatives, the company on Monday indicated that there would be no drawn-out appeal to any other court to try and keep the deal alive; it formally said it would end the buyout transaction, and was demanding payment of the contractually mandated $100 million breakup fee.

A market source saw United Rental's 7% notes due 2014 down by as much as 7 points on the session to around the 81 bid level, but most other market participants saw a more conservative move downward. One, for instance, pegged the company's 6½% notes due 2012 down a bit more than 2 points at 91 bid, with some degree of actual trading activity, and most in the market suggested a 2, 3 or 4 point retreat in the various issues, at the most.

A trader at another desk said that the day's activity was "just a hangover from Friday," estimating them quoted down "2 or 3 points" - but adding that from where he sat, "there was no trading at all."

He said that he had heard that "the big guys" had traded as much as $40 million of the 61/2s, to which he exclaimed "God bless 'em" - but surmised that "it had to be all in-house, institutional type stuff." He quoted those bonds at 91 bid, 92 offered, while the company's 7s were at 84.5 bid, 85.5 offered, and its 7¾% notes due 2013 at 87 bid, 88 offered, all down 2 points at least from Friday.

Yet another trader said that he had seen "a little activity" in United Rentals paper "because of the court order."

He pegged the 61/2s at 90.5 bid, 91.5 offered on Monday, down from levels around 93.5 bid, 94 offered on Thursday, the day before the Delaware court ruling was handed down. He also saw the 7s at 83.75 bid, 84.75 offered, down from 87.5 bid, 88 offered pre-news, and the 73/4s at 87.5 bid, 88.5 offered on Monday, down from 91.75 bid, 92 offered on Friday before the news of the court ruling broke.

At another desk, a market source guesstimated that the 73/4s were languishing below 88, down more than 4 points from where they had been on Friday.

"Even if the bids were lower," a trader said, "it's hard to tell without a two-sided picture whether that was someone bottom-fishing or if that was really where they are."

Temple-Inland off as revamp nears completion

Whatever the actual level of trading, it was pretty clear that United Rentals was probably the main focus in the mainstream high yield market.

The distressed sector was seeing Tembec Inc.'s bonds continuing the rise which began last week when the Montreal-based forest products company announced a recapitalization and $1.2 billion debt -reduction plan; its 7¾% notes due 2012 were seen up more than 2 points on Monday to about the 49 level.

Another company in that same sector was animating crossover players on Monday, only they took the split-rated (Ba1/BBB-) bonds of Temple-Inland in the opposite direction.

Its 6 5/8% notes due 2018 were observed down nearly a point at just below par, while its 6 3/8% notes due 2016 were also hovering below par, down slightly more than a point.

There was no fresh news seen out on the company, although it should be noted that Temple-Inland is in the final stage of a previously announced transformation plan that involves retaining its manufacturing operations - corrugated packaging and building products - spinning off its financial services segment to its stockholders, spinning off its real estate segment to its stockholders and selling its strategic timberland. Target date for completion of the plan is Dec. 31.

Junk market grab-bag

Elsewhere, Ford Motor Credit's 9¾% notes due 2010 were seen fairly actively traded at lower levels, quoted down 2½ points on the day at just above the 96 level; no fresh news was seen about Ford's financing unit.

At another shop, though, Ford Credit's 7 7/8% notes due 2010 were quoted up 1½ points at about 93.5. But parent Ford's benchmark 7.45% notes due 2031 eased about ¼ point to 73.25.

Ford Credit rival GMAC LLC's 7¼% notes due 2011 were seen by a market source up a point at just under 89.

There was some activity seen in gaming bonds, with Isle of Capri's 7% notes due 2014 quoted at 82 bid, down 1 point. But sector peer Station Casinos Inc.'s 6% notes due 2012 were about ½ point firmer at 90 bid, and its 6 5/8% notes due 2018 also ½ point better at 70 bid.

No deals, Harrah's plans

As expected there were no new high-yield issues Monday, and none are anticipated for the rest of the week, market sources said.

Harrah's Entertainment, Inc. said it is planning to issue up to $4.525 billion in senior unsecured notes and $1.5 billion of payment-in-kind toggle senior notes.

The notes will be backed by a $6.025 billion bridge facility via joint bookrunners Banc of America Securities, Credit Suisse, Deutsche Bank, JPMorgan and Merrill Lynch.

This information was included in a Securities and Exchange Commission filing about the company's leveraged buyout by Texas Pacific Group and Apollo Management.

The last new high-yield issue came from Helix Energy Solutions Group Inc. with $550 million of eight-year senior notes in a private offering.

Just short of a record

With high yield issuance likely completed for the year, 2007's total fell just short of the record set in 2006.

Dollar-denominated U.S. market issuance totaled $155.83 billion in 375 deals during 2007, $800 million below the year earlier's $156.63 billion in 396 deals.

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