H&E Equipment 10-years price; Dura Automotive extends slide

By Paul Deckelman and Paul A. Harris

New York, July 28 - H & E Equipment Services Inc. was heard to have successfully priced an offering of 10-year notes Friday.

That closed out a busy week whose most notable feature on the primaryside was the pricing of a $900 million three-part deal from Verso Paper Holdings/Verso Paper Inc.

In the secondary market, following a volatile session Thursday which saw the battered bonds of embattled Rochester Hills, Mich.-based vehicle components manufacturer Dura Automotive Systems Inc. nosedive badly in response to poor earnings, the company's bonds extended that downturn Friday, though at a considerably more moderate pace.

Specifying that the market remains focused on earnings and that high yield is presently a credit-by-credit story, a high yield syndicate official nevertheless said that the broad market had a better tone on Friday.

The source also made mention of a positive day in the equity markets which saw the Dow Jones Industrial Average advance by close to 120 points.

H&E comes mid-talk

Meanwhile the primary market saw two deals price Friday, generating $350 million of proceeds.

The only American company to price junk during the final session of the July 24 week was H&E Equipment Services Inc.

The Baton Rouge, La., heavy equipment rental company priced a $250 million issue of 10-year senior notes (B3/B+) at par to yield 8 3/8%, in the middle of the 8¼% to 8½% price talk.

Credit Suisse and UBS Investment Bank were joint bookrunners for the debt refinancing deal

Brazil's Friboi upsizes

Also pricing high yield bonds on Friday was Brazil's JBS SA (Grupo Friboi).

The São Paulo-based beef company sold an upsized offering of $300 million 10-year senior bullet notes (B1/B+) at par to yield 10½%, on top of price talk. The deal was increased from $200 million.

ING and JP Morgan were the bookrunners for the debt refinancing and general corporate purposes deal.

Week's issuance totals

Tallying the $350 million which priced during the Friday session, the new issue market saw just over $1.74 billion price in six dollar-denominated tranches during the July 24 week, including the Verso Paper Holdings LLC and Verso Paper Inc. $900 million three-part deal that priced on Wednesday.

Hence the July 24 week's issuance topped the previous week's $1.08 billion in four tranches.

At Friday's close, year-to-date issuance stood at just under $74.59 billion, as year-over-year 2006 continues to outpace 2005 in terms of dollar volume: at the July 28, 2005 close the market had seen a little less than $59.77 billion of issuance.

However in terms of deal volume, 2006, with 217 dollar-denominated tranches, year-to-date, continues to lag 2005 which had seen 231 tranches price by the July 28 close.

A surprising calendar

A sell-side source told Prospect News late Friday that considering the market is plying its way through what is traditionally thought of as the dormant part of the year - i.e.. late summer - the forward calendar is surprisingly robust.

The Prospect News High Yield Daily forward calendar closed the July 24 week with deals totaling $6.735 billion thought to be in the market.

The newest potential issuer to climb aboard that calendar is Durham, N.C.-based Reichold Industries which will begin a roadshow on Tuesday for its $195 million offering of eight-year senior notes.

Banc of America Securities and Wachovia Securities are the underwriters for the debt refinancing and dividend funding deal from the chemical coatings company.

Pricing is not expected before the week of Aug. 7.

The week ahead

For the week ahead, the July 31 week, the market anticipates $3.160 billion of issuance in 11 tranches from seven issuers.

The combined issuers garnering the lion's share of attention are VNU NV and Nielsen Finance LLC, which are expected to combine to produce $1.67 billion equivalent with a five-part deal that is scheduled to price on Tuesday.

Nielsen Finance, the operating company, plans to sell $835 million equivalent of eight-year senior notes due 2014 (B3/CCC+), talked at a yield in the 9¾% area, and $600 million equivalent of 10-year senior subordinated discount notes (Caa1/CCC+), talked 225 to 250 basis points behind the senior notes. Both of those structures will be sold in dollar- and euro-denominated tranches.

Meanwhile VNU, the holding company, plans to sell €200 million of 10-year fixed-rate senior subordinated discount notes, which are talked at the equivalent of Euribor plus 625 to 650 basis points.

Deutsche Bank Securities, JP Morgan, Citigroup, ABN Amro and ING are joint bookrunners.

Elsewhere Ashtead Group plc is expected to price $550 million of 10-year second-priority senior secured notes (B3) via Citigroup, Deutsche Bank Securities and UBS Investment Bank, on Tuesday.

PNA Group Inc. plans to price a $250 million offering of 10-year senior notes (B-), via Banc of America Securities and Citigroup, late in the week.

MxEnergy Holdings Inc. has a $200 million offering of five-year senior floating-rate notes (CCC+) poised to price Tuesday. The Deutsche Bank Securities and Morgan Stanley led deal is talked at six-month Libor plus 700 to 750 basis points.

U.S. Shipping Partners LP expects to price its downsized $175 million (from $200 million) restructured offering of eight-year second-lien senior secured notes (Caa1) via Lehman Brothers and CIBC World Markets on Monday. Price talk is 11¾% to 12%.

TFS Acquisition Corp. (Textron Fastening Systems) also looks to price its $190 million offering of 10-year senior secured notes (Caa1/B-) on Monday. Credit Suisse is leading the sale of notes which are talked in the 11¾% area.

And finally, Barrington Broadcasting Corp. is marketing $125 million of eight-year senior subordinated notes (B3) via Banc of America Securities and Wachovia Securities. Pricing is expected late in the week.

The sell-side source who noted the robust calendar reckoned that the amount of supply in the pipeline should be no problem, as there still appears to be plenty of cash to put to work in high yield bonds.

H&E up in trading

When H&E Equipment Services' new 8 3/8% notes due 2016 were freed for secondary dealings, traders saw those bonds quoted around 100.5 bid, 101 offered, up from their par issue price earlier in the session.

Traders also saw Phibro Animal Health Corp.'s new two-part offering trading at slightly firmer levels, after both tranches had priced at par as the session was wrapping up Thursday, too late for any meaningful aftermarket activity that day.

One trader saw the Ridgefield Park, N.J.-based animal health and nutrition products maker's new 10% senior notes due 2013 at 100.5 bid, 101 offered, while its 13% senior subordinated notes due 2014 were at par bid, 101 offered.

Dura keeps dropping

Back among the established issues, the "bond du jour," as one trader put it, was Dura, for a second straight session.

The automotive systems maker's Dura Operating Corp. 9% senior subordinated notes due 2009 were trading "like it's going to file" for bankruptcy protection any day, another trader said, quoting those notes around 25 bid, 26 offered. That was down a couple of more points from the upper-20s level to which those bonds had collapsed on Thursday following the release of poor earnings data. Prior to the release of those second-quarter numbers the 9s had been pegged around 50-51.

The trader also saw Dura Operating's 8 5/8% senior notes due 2012 - which on Thursday had fallen as much as seven or eight points on the day to bid levels around 76 - fall into the lower 70s in the early going before ending at 75 bid, 77 offered, "up slightly from their intraday lows," but still down a point on the session.

Another trader agreed, estimating that "the infamous Dura" sub bonds had fallen as low as 23 during Friday's session, before firming off those lows to end around 24 bid, 25.5 offered, which he called a loss of 1½ points on the day. The 8 5/8% notes, meantime, which "started to see some buyers late [Thursday]," moved off their early lows to close at 75 bid, 76 offered, which he called a one-point positive move on the day.

The first trader meantime saw the 9s at 26 bid, 27 offered, which he called a 2 point drop on the session, while the 8 5/8s were a point lower at 75.5 bid, 76.5 offered.

Both Moody's Investors Service and Standard & Poor's cut Dura's ratings Friday, citing the big loss that company posted on Thursday and the anticipated hard times that lie ahead for Dura and other suppliers of parts to original-equipment manufacturers such as General Motors Corp., Ford Motor Co. and the Chrysler division of DaimlerChrysler.

In lowering Dura's corporate family rating to Caa1, its senior unsecured bond rating to Caa3 and its senior subordinated note rating to Ca, all down a notch, with a negative outlook, Moody's warned that the lowered ratings "reflect the company's significant performance shortfall while it executes a major restructuring plan to move production to low cost countries. The company's results have been impacted by market share losses of its Big 3 OEM customers, slower growth in Europe, higher raw material pricing, and the loss of its GMT 800 seat adjuster business and other business mix issues."

The agency said that the negative outlook "reflects Moody's expectation that these industry pressures will continue to negatively impact Dura Automotive's performance given expected lower production levels from the Big 3 OEMs in the second half of 2006 and continued raw material pricing pressures." Moody's also noted that Dura announced its expectation of taking a goodwill impairment charge, "reflecting the lower expected profitability of its businesses." And it said that while Dura hopes to achieve cost benefits from further headcount reductions announced Thursday, "this will unlikely be sufficient to reverse the impact of the industry pressures noted above."

S&P sounded similar themes in cutting Dura's corporate credit rating two notches to CCC.

Metaldyne drops

"Lots of auto parts names were weaker," a trader said, in the wake of Dura's poor second-quarter numbers - which included a deep swing into the red from a year-earlier profit.

One in particular that he noticed was Metaldyne Corp., whose 11% subordinated notes due 2012 lost 2½ points on Friday to end at 80.75 bid, 81.5 offered, while its 10% senior notes due 2013 were off a point at 95 bid, 96 offered.

Rather than blame the drop on sector sympathy after Dura's bad numbers and subsequent slide, he theorized that "there must have been something said on DaimlerChrysler's conference call about production cuts" - which would severely impact Metaldyne, since "Chrysler makes up for something like 25% of Metaldyne's business."

Another trader, however, only saw Metaldyne's 11s down ¼ point at 81.5 bid, 82.5 offered, and said its 10s were unchanged, with "not a hell of a lot going on in them" at 95 bid, 96 offered.

GM, Ford slip

However, he said that GM and Ford "opened a little bit lower, but then just sat there all day, and were pretty much a non-factor."

He saw GM's 8 3/8% notes due 2013 down perhaps 3/8 point at 82 bid, 82.5, while its General Motors Acceptance Corp. financing unit's 8% notes due 2031 were ½ point lower at 97.75 bid, 98.25 offered. Ford's 7.45% notes due 2031 and its Ford Motor Credit Co.'s 7% notes due 2013 were each off ¼ point at 74 bid, 74.5 offered.

HCA heads up

Elsewhere, Friday seemed like a day of recovery for HCA Corp.

The Nashville,-based hospital operator - whose bonds widened out sharply in the beginning of the week on the announcement that it has agreed to be bought out by several private equity companies, a transaction seen maybe adding billions in new obligations to its existing debt - seemed to have turned a corner, a trader said. He quoted the company's 6½% notes due 2016, as having firmed to 79.5 bid, 80 offered from 78.75 bid, 79.5 offered on Thursday.

Dallas-based hospital operator Tenet Corp. - whose bonds had fallen in tandem with HCA's earlier in the week - were pretty much unchanged Friday, a trader said, its 9 7/8% notes due 2014 steady at 94 bid, 95 offered.

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