GMAC, Ford Credit bring mega-deals; MedQuest, Movie Gallery and Linens 'n Things fall

By Paul Deckelman and Paul A. Harris

New York, May 15 - GMAC LLC and its opposite number at Ford, Ford Motor Credit Co., each drove by the junk bond market on Tuesday - and drove off with trunkloads of new capital from their respective financings, $1.5 billion for Ford Credit and €1.3 billion for GMAC, formerly General Motors Corp.'s captive vehicle financing arm.

Also pricing a new deal, though for considerably less money, was U.S. Corrugated Inc., whose new bonds rose respectably when they were freed for secondary dealings.

Also in the primary sphere, Dynegy Holdings Inc. was heard to have partly restructured its upcoming $1.1 billion issue by lengthening its maturity by several years. And pre-deal market price talk emerged on Mueller Water Products, Inc.'s pending 10-year offering of subordinated paper.

In the secondary arena, apart from the movement of the new U.S. Corrugated bonds, MedQuest Associates Inc. nosedived some 10 points on the session after the Alpharetta, Ga.-based operator of medical diagnostic imaging centers turned in what a trader called "very bad" quarterly numbers.

That was also the case with Linens 'n Things Inc., after the Clifton, N.J.-based home furnishings specialty retailer posted "horrendous" numbers, in the estimation of a trader, causing its bonds to slide about 4 or 5 points.

And bad numbers - albeit issued several days ago - were also cited to explain a similar-sized drop in the bonds of Movie Gallery Inc. - that and an apparently bad performance by company executives at an investment conference.

On the upside, Massey Energy Co.'s bonds, which fell badly on Monday in response to federal allegations of massive violations of water pollution laws by the Richmond, Va.-based coal producer, were seen bouncing back, their Monday sell-off apparently overdone.

A source from a hedge fund said that the high-yield tracking CDX 100 index was 1/16 higher at the Tuesday close, but added that a Bloomberg story asserting the existence of a "bubble" in high yield securities had caused some turbulence in the morning.

Oversubscribed in 15 minutes

In the primary market, meanwhile, Tuesday saw an intense amount of drive-by action with the headliners being Ford Motor Credit and GMAC LLC.

Ford Motor Credit completed $1.5 billion of new issuance in two tranches of senior unsecured notes (B1/B/BB-) in a Tuesday drive-by.

The finance arm of Ford Motor Co. priced a $1.5 billion issue of 7.8% notes at 99.833 to yield 7.84%.

The yield came within the 7.8% to 7.875% price talk.

In addition the company priced a $500 million add on to its three-month Libor plus 275 basis points senior notes due Jan. 13, 2012 at par.

The add-on priced at the tight end of the Libor plus 275 to 280 basis points price talk.

The original $1.5 billion issue priced at 98.758 on Dec. 11, 2006.

The total issue size following Tuesday's tap is $2.0 billion.

Lehman Brothers, JP Morgan and Citigroup ran the books for the quick-to-market SEC registered deal. Bear Stearns & Co. and Dresdner Kleinwort were co-managers.

A source from a hedge fund said that both issues were oversubscribed in the first 15 minutes, and added that the books closed within 20 minutes of the deal being announced.

The source said that "big players got in the deal," and added that there had not been much trading of the paper once the bonds were priced - an indication that they were "well placed into strong hands."

GMAC prices €1.3 billion

Meanwhile GMAC issued €1.3 billion of notes (Ba1/BB+/BB+) in three tranches via two subsidiaries on Tuesday.

GMAC International Finance B.V. priced €1.0 billion in two tranches:

• €500 million of Euribor plus 120 basis points two-year floating-rate notes priced at 99.962 to yield Euribor plus 122 basis points versus price talk of the Euribor plus 125 basis points area; and

• €500 million of 5¾% three-year fixed-rate notes priced at a 137 basis points spread to mid-swaps, with an original issue discount of 99.738 to yield 5.85%. Price talk was for the mid-swaps plus 140 basis points area.

Meanwhile General Motors Acceptance Corp. of Canada, Ltd. priced a €300 million issue of 6% five-year notes at a 162 basis points spread to mid-swaps, with an original issue discount of 99.55 to yield 6.11%. Price talk was for a spread in the mid-swaps plus 165 basis points area.

ABN Amro, BNP Paribas and SG Corporate & Investment Banking were the underwriters.

A buy-side source said that the total book size, across all three tranches, was €4 billion, and added that each tranche saw in excess of €1.25 billion of orders.

Health Net tight to talk

In the under $1 billion category, Health Net Inc. priced a $300 million issue of 6 3/8% 10-year senior notes at a 170 basis points spread to Treasuries.

The spread came at the tight end of the Treasuries plus 170 to 175 basis points price talk.

The notes priced at an original issue discount of 99.769 to yield 6.406%

JP Morgan, Banc of America Securities, LLC and Citigroup were joint bookrunners for the debt refinancing deal which, like the Ford Motor Credit and GMAC transactions, came quick to market.

Teppco brings hybrid

Meanwhile Teppco Partners LP priced a $300 million issue of 7% 60-year hybrid junior subordinated notes (Ba1/BB) at 99.839 to yield 7.022%.

The notes will pay a fixed rate of interest at 7% until they become callable on June 1, 2017, after which the interest rate will float at a 277.75 basis points spread to three-month Libor.

Wachovia Securities, JP Morgan and SunTrust Capital Markets were joint bookrunners for the debt refinancing and general corporate purposes deal from the Houston-based owner and operator of petrochemical and natural gas liquid pipelines.

U.S. Corrugated completes private

Elsewhere in the Tuesday primary market, U.S. Corrugated privately placed an upsized $135 million issue of six-year senior secured notes (B3/CCC+), pricing it at par to yield 10%.

The yield was printed on top of the price talk.

Jefferies & Co. was the sole placement agent for the Regulation D debt refinancing issue, which was increased from $125 million.

The issuer is a Kennesaw, Ga., containerboard and packaging company.

Dynegy extends maturity

Tuesday also produced some news on deals currently being marketed.

Dynegy Holdings extended the maturity of its proposed $1.1 billion senior notes offering (B2/B-) to 12 years from 10 years.

JP Morgan, Citigroup and Credit Suisse are joint bookrunners for the deal, which was announced on Monday and is expected to price sometime after an investor call set for Wednesday.

According to market sources, no price talk had been circulated as Prospect New was going to press on Tuesday.

Mueller Water sets talk

Talk did materialize, however, on Mueller Water Products' $350 million offering of 10-year senior subordinated notes: 7 3/8% to 7½%.

Pricing is expected on Wednesday afternoon.

Banc of America Securities and JP Morgan are leading the deal.

U.S. Corrugated new bonds rise

When the new U.S. Corrugated 10% notes due 2013 were freed for secondary dealings, a trader saw them having moved up to 101 bid, 101.75 offered from their par issue price earlier in the session.

He did not see any immediate aftermarket activity in the new bonds of either GMAC or Ford Credit - although he did see the latter's outstanding 7¼% notes due 2011 up ½ point at 98.25 bid, 98.75 offered.

At another shop, GMAC's outstanding 6 7/8% notes due 2012 were seen up ½ point at 101.5 bid.

Another source had the GMAC 8% notes due 2031 little changed at 109.5. GM's own benchmark 8 3/8% notes due 2033 were up about ¼ point at 92.375, while arch-rival Ford Motor Co.'s 7.45% flagship notes due 2031 were up about a point at 81.625 bid.

MedQuest takes a tumble

Apart from the automotive benchmarks and the bonds of their respective financing arms - GMAC is still 49% owned by GM - the big story in the secondary market on Tuesday was big falls suffered by several issuers in response to bad quarterly results.

A trader quoted MedQuest's 11 7/8% notes due 2012 as having fallen 10 points on the session to 78 bid, 80 offered, while a source at another desk saw them at 78.25, also 10-point losers.

The trader said that the numbers that the company posted were "very bad," in explaining that slide.

Yet another trader saw the medical imaging company's 11 7/8s start the day at 86 bid, 87 offered, and then drop down to close at 77 bid, 79 offered.

A trader also saw the company's zero-coupon bonds due 2012, which trade under the name MQ Associates Inc., down at 22 bid, 25 offered.

"The numbers were out and they were not good," he said.

According to its 10-Q report filed with the Securities and Exchange Commission, the company showed a net loss of $10.584 million for the period ending March 31- nearly twice the $5.837 million of red ink seen a year before.

MedQuest attributed the loss to the impact of new Medicare regulations, among other things.

One of the traders said a bondholder conference call is scheduled for next week - and predicted that "people will be asking a lot of questions."

Linen 'n Things retreats

A trader quoted Linen 'n Things' zero-coupon notes due 2014 down 4 points on the session on what he termed "horrendous" quarterly numbers.

After the release of those results, he said, there was a conference call for investors with company executives - but "there were no positives there - no answers to anything."

"A lotta bonds traded," another trader said, "maybe as much as $30 million." He said that the company's numbers came in below expectations, causing the notes, which had finished Monday around 93 bid, 93.5 offered, to open the day at 93, then drop to the 90 level, and keep right on going. He saw them finally finishing the day at 88.5 bid, 89 offered.

Company executives called the results "disappointing," even though Linen's net loss of $58.2 million was actually smaller than the $65.5 million that it dropped in the first quarter of 2006.

Total net sales were $571.6 million for the quarter, a 3.6% decrease over the same quarter in 2006. The decrease was due to a comparable store sales decline of 5.2% for the quarter, although this was partially offset by the opening of new stores. They company also cited a sales mix shift towards the lower-margin housewares categories.

Bad reviews for Movie Gallery

Another laggard was Movie Gallery, with one trader seeing the Dothan, Ala.-based Number-Two U.S. video rental chain operator's 11% notes due 2012 down 4 points to 77 bid, 79 offered, while another pegged the bonds at 76.75 bid, 77.75 offered, which he called a more than 5 point drop.

The first trader chalked the slide up to "bad numbers" that the company reported on Friday, and said that company executives had also made a bad presentation Monday at a Credit Suisse investment conference.

Movie Gallery's Nasdaq-traded shares fell 40 cents (13.16%) to end at $2.64 on volume of 2.8 million, nearly triple the usual activity level.

Bear conference stills market

Apart from the negative moves by companies reporting negative quarterly results, not that much else was seen going on.

A trader suggested that the ongoing Bear Stearns investment conference this week at the Waldorf Astoria in New York was throwing something of a damper over activity generally, with many portfolio mangers and other buyside decision makers occupied there.

That conference began on Monday and concludes Wednesday.

Massey in comeback

One of the few big movers to the upside, a trader said, was Massey Energy's 6 7/8% notes due 2013, which he saw having risen a point at 95.5 bid, 96.5 offered.

Another source saw the bonds doing even better, pushing up nearly 4 points on the day to around the 98 level.

Those bonds plunged on Monday after the company was accused of literally thousands of separate violations of the federal Clean Water Act over the last six years, and analysts said it could be on the hook for as much as $2.4 billion of fines.

Massey on Monday sought to downplay the extent of the alleged environmental damage caused by its operations in West Virginia and in Kentucky, and also said that the problems would have little concrete impact on its bottom line.

On Tuesday, it continued its counter-attack, accusing the feds of exaggerating the number of times it allegedly violated the act and scoffing at estimates that it faces $2.4 billion in fines. Massey suggested any fine would be insignificant for its finances.

Standard & Poor's weighed in on Tuesday, saying that the allegations would not affect the company's debt ratings or outlook.

Stephanie N. Rotondo contributed to this report.

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