Matrix, Denbury deals price; Spectrum, Federal-Mogul firm; funds see $115 million inflow

By Paul Deckelman and Michelle Anderson

New York, March 29 - Matrix Acquisition Corp. priced a downsized offering of 10-year senior subordinated notes Thursday, high yield syndicate sources said. When the new bonds were freed for secondary dealings, they moved up solidly, traders said.

Also pricing was an upsized add-on issue of bonds for Denbury Resources Inc.

Price talk meantime emerged on European issuer Orion Cable GmbH's PIK loan paper, which is likely to price on Friday, the sources said.

In the secondary market, Federal-Mogul Corp.'s distressed bonds shot up by at least 4 or 5 points, propelled upward by the news that fellow bankrupt auto parts producer Tower Automotive Inc. had agreed to be sold - the latest in a series of consolidation transactions going on in the badly battered sector.

Beleaguered homebuilder Technical Olympic USA's battered bonds were seen better, likely as a simple snap-back reaction after having been soundly beaten down over the previous several sessions.

Funds move back into the black

And as activity was trailing off for the day, market participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday $115 million more came into those weekly-reporting funds than left them.

That followed the previous week's $18.7 million outflow - the fourth in a choppy pattern of small weekly flows, alternating between inflows and outflows. It was the first convincing flow number seen since mid-February. Thanks to strong inflows seen in the first portion of the year, year-to-date inflows among the weekly-reporting firms now total $950.5 million, with inflows having been seen in 10 weeks out of the 13 since the beginning of the year, according to a Prospect News analysis of the AMG figures.

Looking at the mutual funds which report on a monthly basis, there was no change - neither an inflow nor an outflow - in the latest week, while on a year-to-date basis those funds show a net inflow of $2.359 billion.

Collectively, the weekly- and monthly-reporting funds show a year-to-date net inflow of about $3.309 billion.

The fund-flow figures exclude distributions.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise 10% to 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and, most recently, hedge funds.

MacDermid prices downsized 10-year

Matrix Acquisition - a company specially formed to handle the financing for the coming leveraged buyout of Denver-based specialty chemical manufacturer MacDermid Inc. - priced a downsized $350 million offering of 10-year senior subordinated notes (Caa1/CCC+).

The company downsized the note offering by $115 million from an originally envisioned $465 million, abandoning a proposed tranche of eight-year senior notes and shifting that portion of its LBO financing to the bank loan market.

The new notes priced at par to yield 9½%, for a spread of 488 basis points over the comparable Treasury issue.

The Rule 144A bonds came to market via joint book-running managers Credit Suisse and Goldman Sachs & Co.

Proceeds of the bond deal, plus an equity investment from the prospective buyers of $366 million and the proceeds of a new $660 million senior secured credit facility, will be used to fund the LBO.

The company is being acquired by Daniel H. Leever, the company's chairman and chief executive officer, and investment funds managed by Court Square Capital Partners II LP and Weston Presidio V LP.

The estimated $1.3 billion transaction includes the assumption or repayment of about $301 million of current MacDermid debt.

Denbury upsizes eight-year offering

Also heard pricing Thursday was a $150 million add-on offering for Denbury Resources, somewhat larger than the $125 million originally expected.

The Dallas-based independent oil and gas company sold the new bonds - tacked onto its outstanding 7½% senior subordinated notes due 2015 - at 100.5, to yield 7.4%. The spread was 278 bps.

Those bonds came to market via book-runner JP Morgan Securities Inc.

Proceeds will be used to repay bank debt.

El Paso Natural Gas split-rated deal prices

Out of that same energy sector, sources heard that El Paso Natural Gas had come to market with a quickly shopped split-rated $355 million offering of 10-year senior notes, in a Rule 144A/Regulation S deal with registration rights.

The company - a natural gas pipeline unit of Houston-based El Paso Corp. - sold the bonds at par to 5.95%, 135 bps over the comparable Treasury issue.

The company said it would use the proceeds to redeem a like amount of 7 5/8% notes due 2010 via a tender offer.

Moody's Investors Service rates the bonds at Baa3, while Standard & Poor's rates them BB.

Price talk heard on Orion deal

Junk primary sources meantime heard pre-deal market price talk emerge on German cable systems operator Orion Cable GmbH's €365 million PIK facility, which is expected to price on Friday at a price of 99. The sources expect a coupon in the 11¾% area.

Credit Suisse is the bookrunner on the deal. It orchestrated an investor conference Thursday in London for would-be buyers.

The paper, when it emerges, will be issued through Orion Cable's corporate parent, Escaline Sarl.

Proceeds will fund potential acquisition and will be used to refinance existing debt and buy out a minority shareholder.

Matrix bonds shoot up in aftermarket

When the new Matrix Acquisition 9½% notes were freed for secondary dealings, a trader saw the bonds firm smartly, rising to the 102.75 bid, 103 offered area from their par issue price earlier in the session.

Another trader later confirmed that same elevated level.

New Steel Dynamics, Service Corp. not much moved

Elsewhere among newly priced issues, Steel Dynamics Inc.'s new 6¾% notes due 2015 - which priced late Wednesday at par, too late for any meaningful aftermarket activity in that session - were seen having inched up only slightly Thursday to about the 100.25 bid, 100.5 offered level.

The traders also saw little movement in Houston-based deathcare giant Service Corp. International's new issues. Its 7½% notes due 2027 held steady around 100.75 bid, 101.25 offered, up from their par issue price.

The company's 6¾% notes due 2015 meantime firmed a bit to 100.25 bid, 100.5 offered from their 99.583 issue price Wednesday.

Federal-Mogul takes an upside ride

Back among the established issues, traders saw bankrupt Southville, Mich.-based Federal-Mogul Corp.'s bonds up around 5 points or even more on the session.

One trader saw its bonds jump to 89 bid, 90 offered from 83 bid, 84 offered previously.

Another trader, who saw the company's 7½% notes due 2004 at that same level, called them up 4 points.

While possible catalysts range from positive monthly earnings data to Federal-Mogul's licensing agreement with Johnson Controls - which will introduce a line of batteries to the automotive aftermarket sector beginning in April - some traders opined that the bonds rose on the back of sector peer Tower Automotive's big M&A deal with private-equity player Cerberus Capital Management.

Distressed automotive parts maker Tower announced earlier this week that it had entered into a $1 billion deal with Cerberus to purchase all of its assets. The deal, expected to close July 31, will pay off Tower's $725 million debtor-in-possession loan and $41 million in second-lien loan obligations.

Tower's bond debt meantime has seen little to no activity since the beginning of the year. Even the buyout news has done little to move the notes, which a trader pegged as trading in the 9 area. At another desk, a trader said the 12% notes due 2013 "didn't trade much," but "might have been quoted lower," at 6 bid, 9 offered.

Tower is not the first distressed automotive parts company Cerberus has gotten involved with. The private equity firm is also part of a $3.4 billion recapitalization deal with Delphi Corp.

Those deals, meantime come against a sector consolidation scenario, with M&A deals recently announced for, among others, Lear Corp. M&A buzz has also recently boosted the bonds of Remy International Inc. However, after having firmed smartly from prior lows on that buyout talk, as well as scuttlebutt about a possible equity infusion somewhere, the Anderson, Ind.-based electrical systems manufacturer's bonds were easier Thursday, its senior notes off a point at 79 bid 80 offered.

Technical Olympic rebounds

Heading in the opposite direction were Technical Olympic's bonds, which had been recently clobbered by the company's problems with its Florida homebuilding joint venture, Transeastern, and a generally softer, soggier homebuilding and mortgage lending business.

But after several days of volatile movement and big losses, the bonds steadied Wednesday, and were on the upside Thursday, with its 10 3/8% notes due 2012 seen up 5 points, a trader said, at 72 bid, 73 offered.

He ascribed the movement to the market snapping back from a previously oversold state.

Primus Telecommunications edges up

A $51 million notes-for-cash deal boosted Primus Telecommunication's bonds, according to a distressed trader. He quoted the 12¾% notes due 2009 up a couple of points at 92 bid. He said the bonds closed the previous day in the high-80s.

The new 14¼% second lien notes, due 2011 will be used for cash, giving the company a better liquidity position.

"Earlier this week, we announced the refinancing of a credit facility in Canada which extended until mid-2009 the earliest material principal maturity on the company's outstanding debt. As a result of the Canadian credit facility refinancing and this $50 million cash raise, our liquidity position has been substantially enhanced," stated Thomas R. Kloster, chief financial officer, in a press release. "This should now allow the company the flexibility not only to improve its balance sheet but also to make investments to grow its profitable business lines."

Stephanie N. Rotondo contributed to this report.

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