Realogy launches $31.5 billion deal; Remy, Bally, Fedders rise, Tembec tumbles

By Paul Deckelman and Michelle Anderson

New York, March 23 - Realogy Corp. launched a four-part $3.15 billion note offering Friday, syndicate source said, although the deal was downsized from the originally planned $3.65 billion.

In the only pricing activity seen in the high-yield primary market - and the offering was not even a regular junk bond - EB Holdings Inc. set terms on a €600 million offering of 10-year fixed-rate PIK loan paper.

That brought an end to a week which saw $2.5 billion of new paper price for such issuers as Citizens Communications Corp., Pinnacle Foods Group, Sun Healthcare Group Inc. and EB Holdings among others.

In the secondary market, the news that Fedders Corp. had made the coupon payment due this past March 1 on its bonds, and had made it within the stipulated 30-day grace period, pushed the Liberty Corner, N.J.-based air-quality products manufacturer's bonds up, and saw them once again trading with their accrued interest.

Also on the upside was Remy International Inc., whose bonds shot up on market rumors that the troubled Anderson, Ind.-based automotive electrical systems manufacturer would soon get a sizable cash infusion via an equity rights offering.

Another gainer was Bally Total Fitness Holding Corp., whose bonds were seen having moved up solidly over a two-day span Thursday and Friday, although a trader attributed the moves to short-covering.

Tembec Inc.'s bonds were seen getting hammered down, despite a lack of fresh news out about the Montreal-based forest products company.

EB prices

The day's only pricing was for EB Holdings, the parent of British battery recycling company Eco-Bat Technologies. Its €600 million fixed-rate PIK loan (Ba3/B+) priced at 99 with an 11% coupon - at the wide end of the anticipated coupon of 10¾% to 11% and in line with the expected dollar price of 99.

The deal priced after a short roadshow which began on Thursday. It came to market via joint book-running managers Credit Suisse and Citigroup.

Proceeds will be used to repay existing PIK notes and to fund a dividend to shareholders.

Realogy hits the road

The syndicate sources also saw Realogy launch its $3.15 billion, multi-part mega-deal, which will consist of $900 million eight-year senior subordinated notes (Caa2/B-) and $2.25 billion of seven-year senior notes broken into three tranches: fixed-rate notes, non-callable for four years; toggle notes which will also be non-callable for four years; and fixed rate notes non-callable for two years (Caa1/B-).

Realogy, a Parsippany, N.J.,-based real estate franchisor, is being acquired via a leveraged buyout by Apollo Management, with proceeds from the bond offering to be used to help finance that LBO.

Syndicate sources heard that the company will begin a roadshow on Monday to market the deal to prospective investors, with pricing expected on April 4.

The Rule 144A offering will be brought to market via joint bookrunners JP Morgan, Credit Suisse, Bear Stearns and Citigroup, with Barclays Capital and Calyon Securities as co-managers.

Sun shines during a $2.5 billion week

By the end of the week, $2.5 billion of new paper had priced, including, the largest deal, Citizens Communications' $750 million two-part offering last Monday, followed by Peak Finance LLC/Pinnacle Foods Finance Corp.'s downsized $575 million two-part deal, which priced on Wednesday. Among the relatively smaller deals were Aventine Renewable Energy Holdings Inc.'s $300 million offering of 10-year notes on Wednesday, and a pair of $200 million single-tranche deals on Thursday, for Sun Healthcare and for MSX International Inc., the latter a notes unit deal.

A portfolio manager said that of those deals clearly Sun Healthcare's offering of 9 1/8% senior subordinated notes due 2015 was the standout deal, since the deal came inside of price talk, and the bonds firmed smartly once they moved into the secondary market.

Overall, the manager said, "it was sort of mixed - some of them were good, some of them were really good, and some of them weren't so good. It all depended on how well you priced them."

Looking ahead to the upcoming week, the manager said it was anyone's guess which might be the marquee deal, among the offerings for Advanced Medical Optics Inc.'s $200 million of 10-year senior subordinated notes, Coleman Cable Inc.'s $100 million add-on to its 9 7/8% notes due 2012, Matrix Acquisition/Macdermid Inc.'s $350 million of 10-year senior subs, and Sterling Chemicals Inc.'s $125 million of senior secured notes, with none of those issuers really standing out as an issuer and none of the deals particularly large.

"I think it's going to be [pretty much] a nothing week," the manager opined - particularly with Lehman Brothers holding its high-yield bond and syndicated loan conference, monopolizing the attention of many portfolio managers and other investment decision-makers, "so we'll see how busy the market really is."

Remy rolls on rights rumor

In the secondary market, "it was pretty quiet, with not much going on," a trader said, although he did see Remy International's senior bonds up as much as 10 points on the session on rumors that the troubled company would raise capital via a rights offering to current stockholders.

He saw its Delco Remy 8 5/8% notes due 2007 as 10 point gainers to 86 bid, 87 offered, while its subordinated 11% notes due 2009 were up 5 points on the day to 27 bid, 28 offered.

Another trader saw the 8 5/8s up 6 points on the day to close at 85, and said the notes had gained about 8 points over the week.

At yet another desk, a trader pegged the notes at 85 bid, 86 offered, up from the previous day's close of 78 bid, 79 offered. He noted that the bonds had opened Friday at 81.

Like the first trader, both of the latter traders cited the rumor mill as the impetus for the bonds' improvement.

One said there has been talk of an equity infusion going round since last week, but as time has passed, "the certainty has become a lot more clear."

The other also said that he'd heard Remy is looking into a rights offering, "backstopped by its subordinated creditors."

The company had previously seen losses on top of losses as rumors surfaced that the company was looking for debtor-in-possession financing.

Cooper Standard higher

Also in the automotive arena, one of the trader saw Cooper Standard Corp.'s 8 3/8% notes due 2014 a point better at 85.5 bid, 86.5 offered, opining that he saw "no reason" for the rise, but suggesting that it might be linked to the speculation that DaimlerChrysler AG is getting close to selling its Chrysler Group unit, since the tiremaker is "a big supplier to Chrysler - but who knows?"

Among other auto names, Chrysler rival General Motors Corp.'s benchmark 8 3/8% notes due 2033 were seen up 2 3/8 points at 91.75, while its 49%-owned financing arm GMAC LLC's 8% notes due 2031 were up almost a point at 110 bid.

GMAC rival Ford Motor Credit Co.'s 9 7/8% notes due 2011 were the most heavily traded of any Ford-linked bond, up 2¼ points at 106.5

Fedders better as coupon is paid

Fedders' bonds have been improving over the past several sessions, with the market finally becoming aware Friday that the long-awaited payment of the March 1 coupon has been made, putting an end, finally, to the speculation about whether Fedders would make that payment or not within the 30-day grace period.

The bonds started rising earlier in the week when the company closed on its new $90 million credit facility from Goldman Sachs, giving it the financial firepower to pay the coupon.

"They made the payment" on the 9 7/8% notes due 2014, said a trader, who saw those bonds go up a point Friday to 60 bid, 61 offered; on top of that, he noted, "they are again now trading with the accrued interest," which had been lost when the coupon payment was not made and the bonds began trading flat.

Those bonds were seen having gained at least 4 points over the course of the week on speculation, eventually realized, that the coupon would be paid out of the proceeds of the new financing.

Kent Hansen, Fedders' executive vice president for administration and secretary of the board, confirmed the coupon payment, adding that the payment was made as soon as the refinancing deal closed.

"Our intention was as we got this refinancing done, we expected to pay it and we did," he said.

After having traded in the mid to upper 50s at the beginning of the week, the bonds, another trader said, "traded all over the place but generally at 62" at the close of the week. Another market participant pegged the notes at 62.75.

Hansen would not comment on the company's future plans, as earnings had not yet come out. The company delayed filing its 10-K due to the refinancing deal.

Fedders is slated to hold a bondholders conference call Monday at 10 a.m. ET. A trader said the company would likely try to "make the bondholders happy - keep everyone warm and fuzzy."

Bally strengthens

Also having warm and fuzzy feeling as the week let out were the bondholders of Bally Total Fitness, the Chicago-based nationwide fitness club operator. Its 9 7/8% notes due 2007 moved up to the 84.5 level, a trader said, citing "damage control" as the reason.

Those bonds had been trading in the mid-90s earlier in the month, when Bally delayed filing its 10-K and warned that a Chapter 11 filing could be in the company's future.

That beat the bonds down to as low as the 60s, before they started to come back up.

However, another trader said that while those bonds had jumped 7 or 8 points to around the 84.5 bid, 85.5 offered level on Thursday, a phenomenon he blamed on a short squeeze, he saw them actually down a point on Friday at 83 bid, 84 offered. He saw Bally's 10½% notes due 2011 also down a point, at 95 bid, 96 offered, but said that they had on Thursday shot up about 3 or 4 points.

Tembec softens

On the downside, Tembec's bonds continued to weaken, extending a week of losses for the forest products company.

"Day by day, they keep going a little bit lower," a market participant said.

He pegged the 8½% notes due 2011 down a point at 65 offered. He said the notes had lost a point a day over each of the last three days.

At another desk, a trader called the notes at 64 bid, 65 offered.

Yet another trader said its 8 5/8% notes due 2009 were 2 points lower at 71.5 bid, 72.5 offered. "The bonds have been getting destroyed," he added.

There was no ready explanation for the losses, although there was some talk the bonds could be reacting to fluctuations in the Canadian dollar, which hurts the company's exports of its lumber products. However, the latter trader was skeptical, saying that while it may have been true earlier in the year when the loonie was on an upward tear, now, the currency "isn't doing that much" to explain the Tembec moves.

Stephanie N. Rotondo contributed to this report

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