Gamestop, Pogo deals price; Delphi bonds gain on chief's reassurances

By Paul Deckelman and Paul A. Harris

New York, Sept. 21 - Gamestop Corp. successfully priced a two-tranche offering that fell just shy of billion-dollar mega-deal status Wednesday, while Pogo Producing Co. brought an upsized quickie deal to market, high-yield primaryside sources said.

They also reported that LIN TV Corp. plans to sell an offering of new 10-year bonds, with the roadshow for the deal starting Thursday, while Drivetime Automotive Group/DT Acceptance Corp. and Wesco Distribution - a subsidiary of Wesco International Inc. - were getting ready to price deals Thursday, the latter a rapidly emerging drive-by issue. School Specialty Inc. was heard to have done some tinkering with the respective tranche sizes of its upcoming two -part deal.

In the secondary market, Delphi Corp.'s badly sagging bonds got a badly needed shot in the arm, as company chief executive Robert "Steve" Miller said that he would prefer not to go into Chapter 11, if possible; Delphi also sought to quash rumors that it had exhausted its bank credit line, telling the Securities and Exchange Commission it still has a few hundred million dollars of the $1.8 billion facility available.

Elsewhere, the bonds of both Dex Media Inc. and R.H. Donnelley Corp. were lower on a published report that the two telephone directory publishers are in merger talks.

When asked to mark how Wednesday's junk market fared, one sell-side source simply wrote "ugly" in a late-afternoon email message to Prospect News.

Pressed to amplify, the official wrote that the mid-week session saw the market "very heavy and sloppy," and noted that the biggest of the day's new issues, Gamestop's $950 million two-part deal, saw both tranches pricing wide of guidance and trading down in the secondary.

Gamestop completes $950 million

Grapevine, Texas-base Gamestop took its place among a crowded list of new issuers that have seen their junk price wide of price talk since the high yield entered what one source termed "a soft patch" mid to late last week.

Using last Friday, Sept. 16, as a starting point, Prospect News data shows that of 11 tranches which priced during the period, including Wednesday's three, seven have priced wide of price talk, two priced at the wide end of price talk, and only two of the 11 have come in the middle of price talk.

None have priced tight to talk or inside of talk during that four-session period.

Gamestop's $950 million (Ba3/B+) senior unsecured guaranteed notes deal went this way: the company priced $300 million of six-year floating-rate notes at par to yield three-month Libor plus 387.5, 37.5 basis points beyond the wide end of the Libor plus 325 to 350 basis points price talk.

Meanwhile Gamestop's $650 million of 8% seven-year notes priced at 98.688 to yield 8¼%, 50 basis points past the wide end of the 7½% to 7¾% price talk.

Citigroup, Banc of America Securities and Merrill Lynch & Co. were joint bookrunners for the acquisition financing.

Pogo upsizes, prices in middle of talk

Elsewhere Wednesday, Pogo Producing Co., from the red hot energy sector, priced its deal in the middle of talk, and in doing so joined IKON Office Solutions, the only other issuer among the above-mentioned 11 to get a deal done on top of the talk.

Pogo priced an upsized $500 million issue of 12-year senior subordinated notes (Ba3/B+) at par to yield 6 7/8%, in the middle of the 6¾% to 7% talk. The deal was increased from $350 million.

Goldman Sachs & Co. ran the books for the quick-to-market acquisition financing from the Houston-based oil and gas exploration and production company.

Hence Wednesday's primary market tally came to $1.45 billion in three tranches.

Talking the deals

Price talk surfaced Wednesday on some of the business expected to clear the primary market by the end of the week.

Wesco Distribution talked its $150 million offering of 12-year senior subordinated notes (B2/B) at 7 1/8% to 7 3/8%.

Goldman Sachs & Co. and Lehman Brothers are joint bookrunners for the deal which is expected to price on Thursday afternoon.

Elsewhere DriveTime Automotive Group/DT Acceptance Corp. talked its $150 million offering of eight-year senior notes (B2/B-) at 10¾% to 11%.

Pricing is expected on Thursday afternoon via UBS Investment Bank and Bear Stearns.

And talk surfaced on School Specialty Inc.'s restructured $650 million two-part offering.

The Greenville, Wis., supplemental education company increased its tranche of eight-year senior notes (B3/CCC+) to $425 million from $350 million, and talked them at 9¼% to 9½%.

Meanwhile School Specialty downsized its tranche of 10-year senior subordinated notes (Caa2/CCC+) to $225 million from $300 million, and talked them notes to price 200 basis points behind the senior notes, or approximately 11¼% to 11½%.

The deal, led by Banc of America Securities, JP Morgan and Deutsche Bank Securities, is expected to price Friday.

LIN TV to market $175 million

One new roadshow start was heard during the mid-week session.

LIN TV Corp. subsidiary LIN Television Corp. expects to begin a brief roadshow on Thursday for a $175 million offering of 10-year senior subordinated notes.

JP Morgan, Goldman Sachs & Co. and Deutsche Bank Securities are joint bookrunners for the acquisition-related debt refinancing deal.

LIN expects the interest rate on the new notes to come approximately on top of where the company's $375 million of existing 6½% senior subordinated notes due May 15, 2013 are trading, which is in the mid-7% range (see related story in this issue).

Gamestop slips in trading

When the new Gamestop bonds were freed for secondary dealings, a trader said that the company's 8% notes due 2012 eased to 98.25 bid, 99.25 offered, down from their 98.688 issue price earlier in the session. He did not see any trading in the company's new floating-rate notes due 2011.

Another trader saw the new 8s at 98.125 bid, 98.625 offered, and quoted the floaters at 99 bid, 99.5 offered, down from their par issue price.

The trader said that the new Pogo Producing 6 7/8% notes due 2017 priced too late in the day for any meaningful aftermarket activity.

Delphi jumps higher

Back among the established issues, Delphi's bonds "were all over the place," the trader said, bouncing around at higher levels on the Troy, Mich.-based automotive electronics manufacturer's CEO's comments about his reluctance to enter bankruptcy, as well as the company disclosure in its SEC filing that it still has about $300 million undrawn on its credit line.

"That, plus Miller's comments that he'd be less inclined to go into bankruptcy made people think that they may be less inclined to have to do that," according to the trader.

He saw Delphi's benchmark 6.55% notes due 2006 - which on Tuesday had dropped below the psychologically significant 70 mark - shoot back up to 73.75 bid, 74.75 offered, a gain of four points, while the company's 7 1/8% notes due 2029 were perhaps "three points and change" better at 63.5 bid, 64.5 offered.

Another trader saw the 6.55s at 74 bid, 76 offered, up six points from what he said was the close Tuesday at a wide 68 bid, 72 offered, while the 7 1/8s ended at 64 bid, 66 offered, "up a couple" of points as well.

Yet another trader said that Delphi's notes "were trading pretty actively. They bounced around - they started the day higher" on Miller's comments, which were reported in The Wall Street Journal, "and then settled back down to below those [initially high] levels, and ended here."

He saw the 6.55s open strongly higher, rising all the way up to 76 bid, before coming off that peak level to end at 74 bid, 75 offered - still up at least four to five points on the day. The company's other bonds were "up accordingly," with the 6½% notes due 2009 moving up to 69 bid, 70 offered from Tuesday's close at 64.5 bid, its 61/2s due 2013 pushing up to 68 bid, 69 offered from 63 on Tuesday, and the 7 1/8s going home at 64.25 bid, 65.25 offered, well up from 60 at the close on Tuesday.

Delphi's New York Stock Exchange-traded shares jumped 46 cents (15.23%) to $3.48. Volume of 16.9 million was nearly three times the norm.

Miller - who took the reins of the problem-plagued auto supplier in July - was quoted by the Journal as having said that he would rather fix the company out of court rather than file for bankruptcy protection.

"Not going into Chapter 11 is much to be preferred," Miller said, after the company's stock had fallen to its all-time low on Tuesday.

Miller, who also serves as the chairman of Delphi, came aboard after stints at such companies that entered bankruptcy to restructure as Bethlehem Steel Corp. and, more recently, Federal-Mogul Corp. He has recently said that unless Delphi can get the kind of assistance it needs from former corporate parent General Motors Corp. and from the United Auto Workers union, Delphi might be forced into a bankruptcy filing, and such a filing would probably occur before Oct. 17, when changes in the federal bankruptcy code that make it much less favorable to debtor companies are slated to take effect.

However, the executive - who was also part of the team that successfully restructured Chrysler Corp. in the late 1970s without going into bankruptcy - was quoted by the paper as saying: "I have been through financial stress situations where we succeeded in keeping the company out of bankruptcy. I have been through financial stress situations where we use Chapter 11 as a process to deal with it. It is simpler, cheaper, quicker to avoid it, whereas the Chapter 11 process takes longer, costs more and has a lot of aggravation that goes with it."

Those encouraging words were coupled with the revelation in the SEC filing that contrary to market rumors, Delphi - which in August said that it had already drawn down $1.5 billion of the $1.8 billion of available credit - said Wednesday that it still has the remaining $300 million available.

Delphi, which was spun off from GM several years ago, inherited high wage and benefit costs as part of the transaction, forcing it to pay thousands of workers auto-manufacturing wages rather than the lower pay scale of most parts suppliers. Delphi is looking for GM to offer it the kind of relief offered to competitor Visteon Corp. by its former corporate parent, Ford Motor Co., which agreed to take back 23 unproductive, high-labor cost plants from Visteon, with an eye toward selling them.

Any such move by GM would need a green light from the UAW - which has said that it can't grant Delphi all of the concessions that the company is asking for.

Delphi lifts supplier sector

Delphi's good news was seen giving a bid to the troubled auto supplier sector, with Dana Corp.'s bonds - down the past couple of sessions in response to the Southfield, Mich.-based automotive power train component supplier's earnings warning issued last week and its resulting credit ratings downgrade to junk bond levels - stopping the bleeding and ending unchanged to slightly higher.

A trader saw Dana's 6½% notes due 2009 at 91.75 bid, 92.75 offered, "pretty much where they had been already, or maybe half a point higher," while its 7% notes due 2028 moved about a point higher to 78.5 bid 79.5 offered.

Overall market weak

The auto supplier sector was about the only real area of strength in an overall junk secondary market that one trader described as "getting a little heavy here."

There are, he said, "sellers all over the place, particularly in the CCC names. Anything below a solid B credit is being sold or trying to be sold, because you've had some major run ups [in the lower-rated paper] during the summer. Either they're taking profits here, or taking money off the table to redo their books, but there's definitely [investors] making some room because we've had a slew of new deals in the past week or two.

"The market is heavy across the board," he opined. He said that sectors he particularly watches "are down one to three points. Certain names are more stressed than others."

However, he added "even some of the names that trade like mud" - i.e. bonds above par that hardly ever move - are easier. In the casino area, for instance, "you're seeing names down half a point, a point, on stuff that normally never even moves." For instance, he said "MGM [Mirage] is a little weaker, Isle of Capri stuff is down, Station Casinos is off a touch."

Grocers, retailers soft

Another such area of sudden weakness is supermarkets and retailers. Rite Aid Corp. "is off a couple [of points] in the past week or so." Jean Coutu, the Canadian drugstore chain operator that bought the northern half of J.C. Penney Corp.'s Eckerd drugstore division was likewise easier, with its 8½% notes due 2008, recently around 103 bid, 104 offered, having opened trading Wednesday around Tuesday's close at 101.5 bid, 102.5 offered, before falling to 99.5 bid, par offered Wednesday, on no news.

The trader also saw Mother's Work's 11¼% notes due 2010 - CCC paper, he noted - as "as case in point." The Philadelphia-based maternity wear store chain's bonds had been hovering around par bid, 102 offered, "and you couldn't even find them, no one had them - and now that paper is offered at 99, and you don't even see a bid up against it. So, across the board, things are definitely weaker."

Dex, Donnelley lower

The Wall Street Journal reported that R.H. Donnelley was in talks with Dex Media to acquire the Denver-based Dex, which had been spun off from former parent Qwest Communications International Inc. several years ago. The prospect of the two highly levered companies uniting into one entity was greeted with little enthusiasm in the junk market, where Dex Holdings' 8% notes due 2013 fell back to 102.5 bid, 103.5 offered from 104 bid, 105 earlier, while Donnelley's 6 7/8% notes due 2013 dipped two points to 99.25 bid, 100.25 offered.

Another trader saw the 8s at 103 bid, 104 offered, while the Dex Media West 9 7/9% notes closed at 110.5 bid, 111.5 offered, each "down a couple of points."

A market source at another desk saw the Dex 8s off three points at around the 103 level, while the Donnelley 10 7/8% notes due 2012 were a point lower at 114.5.

Cott notes ignore warning

A trader said he had seen little activity in the bonds of Cott Corp., even after the Toronto-based bottler of private brand-label soft drinks and bottled water announced that it was withdrawing its previously announced 2005 earnings guidance, saying it expects lower full-year results. That announcement also caused Standard & Poor's and Moody's Investors Service to eye the company's debt ratings for a possible downgrade.

While that surprise announcement caused the company's NYSE -traded shares to swoon by $3.75 (16.67%) down to $18.74 on volume of 3 million shares, nine times the usual turnover, the company's 8% notes due 2011, the trader said, "don't look a hell of a lot different than they did the day before," holding steady post news at 103.75 bid, 104.75 offered.

At another desk, a trader said that the bonds had come in to about the 103 level from 103.625 earlier in the session.

Another trader said he had seen absolutely no activity in the name

Cott's chairman and chief executive officer, John Sheppard, while noting the announcement during his presentation at a Scotia Capital consumer products company conference in Toronto, offered little in the way of specifics beyond the company's explanation blaming the anticipated lower earnings on higher raw materials costs - particularly for the petroleum-based resin used to make the plastic bottles in which it packages its soda and bottled water products - and lower soda sales in the United States, as sales trend more toward water.

Sheppard said that the company is "reviewing a number of initiatives," both in terms of trying to cut costs and possibly raise prices to generate more revenues, but said he would have more concrete details when Cott releases its third-quarter results next month.

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