Greif, Cooper Alion deals price; Novelis climbs on sale talks news

By Paul Deckelman, Paul A. Harris and Stephanie N. Rotondo

New York, Jan. 25 - Alion Science & Technology Corp., The Cooper Cos. Inc. and Greif Inc. were all heard to have successfully priced new high yield issues on Friday. Traders said that the Alion deal broke respectably higher, but the other two offerings were little changed from their issue price when they hit the aftermarket.

The secondary market, meantime, saw a big rise in Novelis Inc., spurred by the news that the Atlanta-based aluminum sheet-maker is in talks regarding the possible sale of the company.

There was considerable activity Friday in the bonds of MagnaChip Semiconductor Ltd. after the Korea-based computer chip maker reported a wider loss for the just-ended quarter and issued bearish revenue guidance.

Also in the distressed precincts, the recent slide in the bonds of Northwest Airlines Corp., which had been seen falling sharply over the past few sessions, was halted Friday, as the bankrupt Eagan, Minn.-based Number-Five U.S. airline carrier parent's levels were seen steady in the lower 90s. Also steadying was Delta Air Lines Inc., whose paper frequently moves in tandem with Northwest.

A sell-side source said that the broad market ended mixed on Friday, trailing Thursday's downturn which broke a three-week rally in junk.

The source added that much of the market's attention was focused on the primary which turned out $900 million of new issuance from three issuers each pricing single-tranche deals.

Cooper prices $300 million

Cooper Cos. priced a $350 million issue of eight-year senior notes (Ba3/BB-) at par to yield 7 1/8% on Friday, in the middle of the 7% to 7¼% price talk.

Citigroup and Credit Suisse were joint bookrunners for the debt refinancing deal from the Lake Forest, Calif., manufacturer and marketer of diagnostic products, surgical instruments and accessories for the women's healthcare market.

Greif prints sub-7% yield

Greif Inc. priced a $300 million issue of 10-year senior notes (Ba2/BB-) at par to yield 6¾% on Friday, with the yield coming at the wide end of the 6 5/8% to 6¾% price talk.

Deutsche Bank Securities was the bookrunner for the debt refinancing deal.

According to Prospect News data, the Greif deal is the first in the junk market with a yield below 7% since GMAC LLC's $1 billion sale of 6% notes priced to yield 6.131% on last December.

Before that, the previous non-emerging markets issuer to come in below 7% was Seagate Technology HDD Holdings with two tranches totaling $1.2 billion on Sept. 15, 2006.

Alion's upsized $250 million

Finally, Alion Science and Technology priced an upsized $250 million issue of eight-year senior notes (B3/CCC+) at par to yield 10¼% on Friday, according to market sources.

The yield came at the tight end of the 10¼% to 10 3/8% price talk, which had been lowered from initial price talk of 10½% area.

Credit Suisse had the books for the debt refinancing issue. The deal was upsized from $200 million.

$4 billion week

Tallying the Friday deals, the junk market ended the Jan. 22 to Jan. 26 week having seen slightly more than $4 billion of issuance in 11 dollar-denominated tranches.

That takes issuance for the new year to just above $10.55 billion in 32 dollar-denominated tranches.

Hence in terms of dollar amount of issuance, 2007 continues to lag 2006 on a year-over-year basis. At the Jan. 26, 2006 close new issuance stood at just over $12.8 billion in 25 tranches.

The week ahead

The January-February crossover week gets under way with the primary anticipating $1.385 billion and €948 million of new issuance to price before Friday's close.

Most of that business is expected to come late in the week.

One exception, a sell-side source told Prospect News, is TransDigm Inc.'s $250 million offering of seven-year senior subordinated notes via Credit Suisse and Lehman Brothers, which is expected to price in the early part of the week.

Alion up, not so Cooper and Greif

When the new Alion Science & Technology 10¼% senior notes due 2015 were freed for secondary dealings, traders saw them break at 101.25 bid, 101.5 offered, up solidly from their par issue price earlier in the session.

However, the day's other new issues failed to replicate that achievement.

When the new Cooper Cos. 7 1/8% senior notes due 2015 moved over to the aftermarket, they went no further than 100.5 bid, 101 offered, versus their par issue price, a trader said, while Greif's new 6¾% senior notes due 2017 didn't even get that far, holding close to their issue price at par bid, 100.25 offered.

Among the issues that came on Thursday, the trader said, Baldor Electric Co.'s $550 million of 8 5/8% senior notes due 2017 remained very well bid for at 102.75 bid, 103.75 offered - up from the 101.75 bid, 102.25 offered level at which the Fort Smith Ark.-based industrial electric motor manufacturer's new bonds had closed in Thursday's session, and well up from their par issue price earlier that day.

However, Terra Capital's new 7% notes due 2017, which had priced Thursday at 99.11 and had then fallen to 99 bid, 99.75 offered in initial dealings, continued to backpedal, falling to 98.75 bid, 99.25 offered on Friday.

Novelis news boosts bonds

Back among the more established issues, Novelis' 7¼% notes due 2015 were seen having steadily climbed up to the 103 bid level, a market source said, after having closed at 97.375 on Thursday - a gain of more than 5½ points on the session.

Trading was described as active, with many of the trades for big blocks of the bonds.

"Wow!" another trader exclaimed, as he pegged the bonds at 102.25, still up over 5 points from 96.75 bid, 97.75 offered on Thursday.

On the equity side of the ledger, Novelis' New York Stock Exchange-traded shares jumped by $7.17 (23.80%), to $37.30. Volume of almost 10 million shares was nearly 20 times the norm.

The bonds boomed and the shares zoomed after the company confirmed news reports that it was in talks that could result in its sale, although it refused to be specific about who the potential buyer or buyers were, saying only that it was in negotiations with "various parties," and cautioning that there was no assurance that a sale might result.

An Indian newspaper, The Hindustan Times, reported on its website Friday that Mumbai-based Aditya Birla Group, a conglomerate controlled by Indian tycoon Kumar Mangalam Birla, may make a bid of between $5 billion and $6 billion for the company, which could conceivably be combined with Birla's Hindalco Industries Ltd., India's biggest aluminum producer.

Hindalco and Novelis both declined comment on the story, with Hindalco terming it "speculation."

Novelis was spun off in 2005 from Canadian aluminum producer Alcan Inc., but the rosy early predictions about the new firm's probable prosperity never panned out. In the first nine months of 2006, the company - which makes sheet aluminum used in making cars and in construction - lost $170 million.

The company has a $3.2 billion debt load.

MagnaChip gyrates on wider loss

Elsewhere, traders reported hectic up-and-down trading in MagnaChip Semiconductor after the company posted a wider loss for the just-ended quarter and issued bearish guidance.

During MagnaChip's mid-morning ET conference call, its chief financial officer said that recent amendments made to its bank covenants are not a sign that the company believes it is headed for trouble, but rather were just a routine renegotiation similar to several others MagnaChip has arranged since 2004 (see related story elsewhere in this issue).

But the market apparently was not buying that reasoning - traders said that initial gains evaporated after the conference call, leaving the bonds essentially unchanged.

One called trading "volatile," saying the company's 8% notes due 2014 - easily the most actively traded issue, with big blocks changing hands - shot up to 70 in the early going, pre-conference call, then "gave it all back," at one point falling to a low of 63.5, before finally closing at 65 bid, 66 offered, which he called unchanged.

He said the 6 7/8% notes due 2011 also traded around, "though not as wildly" as the 8s. He had them peaking at 86, and then falling back to close unchanged at 82.5 bid, 83.5 offered.

And he said the company's floating-rate notes due 2011 moved as high as 88 before coming off that high to close at 85.5 bid, 86.5 offered.

He said that "they were going to try and make a run [upward], but that petered out."

He also said that the behavior of the notes was "the exact opposite of what we saw last time around" - the last time the company released results. Then, he said, "they got crushed" initially - but came back from the day's lows to end pretty much unchanged."

In the fourth quarter ended Dec. 31, MagnaChip's net loss about doubled to $45.6 million from $22.9 million a year earlier. Its operating loss grew to $39 million in the latest period from $28.1 million a year earlier, while revenues fell to $162.3 million from $245.6 million in the 2005 fourth quarter.

One small area of improvement was in interest expense, which fell to $14.1 million from $14.4 million a year earlier.

For the current first quarter, MagnaChip expects revenues to fall 10% to 12% from fourth-quarter levels, reflecting lower seasonal demand and an inventory correction in the analog and power areas of its foundry business. It sees gross margins of 4% to 6% of revenue, due to reduced loadings partially offset by cost containment measures. Gross margin in the fourth quarter was $18 million or 11.1% of revenue, down from $60.4 million or 24.6% of revenue for the 2005 fourth quarter.

Elsewhere in the high-tech sector, a market source saw Amkor Technology Inc.'s 7¾% notes due 2013 at 95, up about ½ point, and Freescale Semiconductor's 8 /8% notes due 2014 also up ½ point, at 100.5.

However, another trader said he'd seen "nothing going on" with Austin, Tex.-based Freescale, and said that Amkor's bonds were unchanged, with the 73/4s unchanged at 94.25 bid, 95.25 offered.

Northwest not very active

Recently volatile airline bonds seemed to be flying a steadier course Friday, a trader said, quoting Northwest Airlines' notes as "stable" around the 92 bid, 93 offered area, while bankrupt rival Delta Air Lines' 8.30% notes due 2029 were at 61.25 bid, 62.25 offered, "maybe down a point."

Another trader agreed that Northwest "did all of its moving yesterday [Thursday]," when it was down about 4 points - the culmination of several days of decline - and was steady on Friday. He saw the 10% notes due 2009, which had recently traded as high as 105, at 94.5 bid, 95.5 offered, little changed on the session.

He also saw Atlanta-based Number-Five domestic carrier Delta unchanged, with the 8.30s at 61.5 bid, 62.5 offered.

GM easier after earnings delay

A trader saw General Motors Corp.'s benchmark 8 3/8% notes due 2033 slightly easier at 94.5 bid, 95.5 offered, a ½ point slippage. That followed the Detroit giant's announcement late Thursday, after the market had closed, that although it expects to make a net profit in the fourth quarter - its first such quarterly gain in two years - it will have to delay reporting its 2006 financial results because of accounting errors and other issues.

However, nobody Friday thought the delay particularly significant.

GM said that it found tax accounting mistakes from before 2002 that will end up increasing its retained earnings for all subsequent years by anywhere from $450 million to $600 million.

Tembec taken down

Tembec Inc. was seen lower in what one trader characterized as "volatile" dealings. He saw the Montreal-based forest products company's 8½% notes due 2011 dropping 2 points to 74 bid, 75 offered, on profit-taking off recent gains, while its 8 5/8% notes due 2009 were a point lower at 84.25 bid, 85.25 offered.

Another trader who saw those bonds at similar levels opined that there was "a point difference, that's all, with not a lot of activity."

Tembec's bonds had recently been firming on weakness in the Canadian dollar, seen as an aid to export sales, and after the company said earlier in the week that it had come to an agreement with its lenders on an amended and restated working capital facility.

There was no other fresh news out about the company.

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