VNU/Nielsen mega-deal leads as primary pumps out pricings; Visteon gains on return to profitability

By Paul Deckelman and Paul A. Harris

New York, Aug 1 - If the first day of the new month is any indication of what the rest of the year is going to look like in the high yield primary market - well, fasten your seat belts. After a sedate session on Monday, the new-dealers came roaring back with a vengeance on Tuesday, as more than $3 billion of new paper priced in half a dozen deals.

Chief among them was Dutch market research company VNU NV/Nielsen Finance LLC, which brought the equivalent of $1.68 billion of new paper to market in four tranches, split between dollar- and euro-denominated issues. Another European issuer, Ashtead Group plc, solidly upsized its more than half-billion offering of 10-year senior secured notes.

Perhaps the most familiar junk bond name among the day's new deals, Station Casinos Inc., also upsized its suddenly appearing 10-year drive-by issue. Those upsizings more than made up for downsizings on the part of smaller issuers MxEnergy Holdings Inc. and U.S. Shipping Partners LP.

Syndicate sources also reported pre-deal market price talk emerge on Barrington Broadcasting Corp.'s offering of eight-year senior subordinated notes, expected to price this week.

In the secondary market, traders reported that earnings dominated the first half of the proceedings, and the new deals the second, as several were freed for aftermarket dealings. They said that the Station Casinos and Ashtead deals more than held their own when they moved over to secondary - but that the VNU/Nielsen mega-deal attracted little interest and struggled just to stay around each tranches' respective issue price.

Among the earnings-driven stories, Visteon Corp. seemed to be living life in the fast lane Tuesday morning, the Van Buren Township, Mich.-based automotive parts maker's bonds initially firming several points on the news that the company was showing a profit in the latest quarter versus a huge year-ago loss. However, those bonds gave up most of their gains as the day wore on, and ended only moderately higher.

Also in the automotive arena, General Motors Corp.'s bonds, and rival Ford Motor Co.'s, as well as the notes issued by their respective financing arms, General Motors Acceptance Corp. and Ford Motor Credit Co., were all seen little changed despite the not-unexpected news that July vehicle sales by the two Detroit giants (as well as the Chrysler portion of DaimlerChrysler) were well off the hot pace set last year, when the Big Three were luring customers into their respective showrooms by offering heavy, costly incentives.

Overall, a market source said, the broad high-yield market traded slightly higher on Tuesday.

The VNU/Nielsen deal

Meanwhile the primary market turned out eight tranches of notes generating over $3 billion of proceeds.

Haarlem, Netherlands-based Nielsen Finance LLC, Nielsen Finance Co. and VNU Group BV combined on Tuesday to price $1.68 billion equivalent of high-yield notes, with Deutsche Bank Securities, Citigroup, JP Morgan, ABN Amro and ING leading the LBO deal.

At the operating company level, Nielsen priced a $650 million tranche of eight-year senior notes (B3/CCC+) at par to yield 10%, on top of price talk that had been revised from the 9¾% area.

Nielsen also priced a €150 million tranche of the senior notes (B3/CCC+) at par to yield 9%, on top of price talk.

In addition Nielsen priced $585 million proceeds of 10-year senior subordinated discount notes (Caa1/CCC+) at 54.686 to yield 12½%, on the wide end of the price talk that had the dollar-denominated discount notes coming 225 to 250 basis points behind the dollar-denominated senior notes.

Meanwhile VNU Group BV, the holding company, priced a €200 million proceeds issue of 10-year senior discount notes at 58.337 to yield 11 1/8%, on top of price talk that had been revised from Euribor plus 625 to 650 basis points.

Sources noted that the dollar-denominated senior subordinated discount notes softened significantly in the secondary market.

Ashtead upsizes

Another European company, Leatherhead, U.K.-based Ashtead Group, priced an upsized $650 million issue of 10-year second-priority senior secured notes (B3/B) at par to yield 9%, on the tight end of the 9% to 9¼% price talk. The deal was increased from $550 million.

Citigroup, Deutsche Bank Securities and UBS Investment Bank were joint bookrunners for the acquisition deal from the equipment rental company.

Station Casinos drives through

Station Casinos priced the biggest deal among Tuesday's U.S.-based issuers.

The Las Vegas gaming and entertainment company priced an upsized $400 million issue of 10-year senior notes (Ba3/BB-) at par to yield 7¾%. The debt refinancing drive-by was increased from a planned $300 million size.

The yield came on top of the price talk.

Banc of America Securities, Deutsche Bank Securities and Wachovia Securities were joint bookrunners.

An informed source, pointing to the upsizing and the fact that the deal came on top of talk, said that it had gone very well.

This source went on to tell Prospect News that at present it is really only possible to talk about the primary market on a deal-by-deal basis.

It's not really a flight to quality, the sell-sider added. However, investors seem to be sensitive to high-leverage situations at the moment. Issuers judged to be too highly levered are being made to pay.

MxEnergy downsizes, restructures

Stamford, Conn., natural gas and electricity marketer MxEnergy Holdings priced a downsized, restructured $190 million issue of six-month Libor plus 750 basis points five-year senior secured floating-rate notes (CCC+) at 97.50 on Tuesday.

The issue priced wide of the revised dollar price talk: talk had been increased to six-month Libor plus 750 basis points at 98 from the earlier talk of six-month Libor plus 725 to 750 basis points at 99.

Deutsche Bank Securities and Morgan Stanley were joint bookrunners for the acquisition deal that was downsized from $200 million.

Call protection was extended for the life of the notes from two years. The equity clawback was extended to three years from two years.

U.S. Shipping prices downsized deal

U.S. Shipping Partners LP and U.S. Shipping Finance Corp. priced a downsized $100 million issue of eight-year senior secured notes (Caa1/B-) at par to yield 13% via Lehman Brothers and CIBC World Markets.

The issue, which was twice downsized during marketing (from $200 million to $175 million, and ultimately to $100 million), priced with a yield that came 100 basis points beyond the original 11¾% to 12% price talk.

Proceeds will be used to help fund the construction of new articulated tug barge units (ATBs) and fund an equity contribution to USS Product Carriers LLC.

According to an informed source, the company has both increased its bank deal and purchased an option to cancel one of the four ATBs it initially planned to build.

The company is an Edison, N.J., operator of a fleet of eight vessels, transporting refined petroleum products and chemicals.

Barrington talks notes

Looking ahead, Tuesday's $3 billion-plus blast in the primary market left a thin calendar for the remainder of the week.

Barrington Broadcasting talked its $125 million offering of eight-year senior subordinated notes (B3/CCC+) at a yield of 10% to 10¼%, with pricing expected on Thursday afternoon.

Banc of America Securities LLC and Wachovia Securities are joint bookrunners.

Also remaining to be priced is TFS Acquisition Corp. (Textron Fastening Systems)'s restructured $190 million offering of eight-year senior secured floating-rate notes (Caa1/B-).

A market source said late Tuesday that talk on the deal, which was restructured from fixed-rate notes, apparently remains in the vicinity of where the fixed-rated deal had initially been talked: the equivalent of the 11¾% area.

The source also said that call protection has been rumored to have increased to four years from three years.

Credit Suisse has books.

Although some observers had anticipated seeing terms on Tuesday, the deal is now headed for a Wednesday conclusion.

Finally, talk is expected to surface, Wednesday, on PNA Group Inc.'s $250 million offering of 10-year senior notes (B-) via Banc of America Securities and Citigroup.

Ashtead up in trading

A secondary trader said that the focus at his shop was "all about the new deals today [Tuesday]."

He saw trading in the new Ashtead Group 9% second-priority senior secured notes due 2016 as "active, but very tight" around the 101 level, - a low tick of 101, a high of 101.125 - well up from their par issue price earlier in the session. A trader at another shop saw the bonds in a little more flexible range, at 100.75 bid, 101.25 offered.

VNU weak in trading

The first trader dismissed the new multi-tranche VNU/Nielsen deal, saying that it "looked like a dog," with "all the issues offered below the [respective] issue price, trading down hard, I think."

He saw the dollar-denominated 10% senior notes due 2014 offered at 99.5, down from their par issue price, and the dollar-denominated zero-coupon/12½% senior subordinated discount notes due 2016 trading at 53, after having priced at 54.686.

The other trader also saw the new bonds struggle, with the 10s at 99 bid, 99.5 offered and the 121/2s at 53 bid, 53.5 offered. However, he also saw the euro-denominated 9% notes due 2014 at par bid, 100.5 offered, in line with their par issue price, and the euro-denominated zero-coupon/11 1/8% senior discount notes due 2016 offered at 59.5, with no bid, after having priced at 58.337.

While the VNU bonds were struggling just to tread water, the new Station Casinos 7¾% notes due 2016 moved as high as 100.75 bid, traders said, before settling in at 100.5 bid, 101 offered, off their par issue price. One said that the Las Vegas-based local casino operator's issue "got priced pretty attractively."

The MXEnergy Holdings and U.S. Shipping Partners deals priced too late in the session for any meaningful aftermarket activity.

A trader said "the market was firmer in the morning, and started feeling a little sloppy in the afternoon," by which time "the focus was on the new issues and they didn't look so hot," singling the VNU/Nielsen deal out as a laggard, while allowing that the others "looked OK."

Visteon jumps on earnings

Back among the established issues, he saw Visteon's 8¼% notes due 2010 trading as high as 95 bid during the morning, well up from their close Monday around 92, in response to the company's better numbers, although he said later on, "they pretty much traded back down" and settled in to a 93-94 level, which he saw as up a point on the day, "off the high from the initial reaction."

Another trader said the Visteon bonds "had movement, with good numbers." He saw the 81/4s as high as 94.5 bid, 95 offered early on, before ending the session at 93 bid, 93.5 offered, up ¾ point on the day. He also saw Visteon's 7% notes due 2014 mostly unchanged at 82.25 bid, 82.75 offered.

Visteon, said yet another trader was "up two" on the session, before fading a little.

The company got back in the black during the second quarter ended June 30, reporting net income of $50 million (39 cents per share) - a sharp turnaround from its year-earlier loss of $1.2 billion ($9.85 per share).

Sales for the latest period totaled about $2.995 billion - product sales of $2.86 billion and services sales of $138 million. That was well down from the $5 billion of consolidated sales that the former Ford subsidiary reported a year ago due to last year's big restructuring in which Visteon transferred 23 unprofitable, high-labor cost plants in North America to Automotive Components Holdings LLC, a Ford-managed business entity, for eventual sale. That transaction cut product sales for the latest period by $2.14 billion from year-ago levels.

In the wake of that Automotive Components transaction, which is widely credited with keeping Visteon from falling into bankruptcy the way competitor Delphi Corp. - a former subsidiary of Ford arch-rival GM - did, Visteon showed improvement in various other earnings measures as well.

Operating income was $95 million in the latest quarter, versus a year-earlier operating loss of $1.207 billion. EBIT-R, which Visteon defines as net income or loss before net interest expense, income taxes and an extraordinary item, excluding impairment of long-lived assets and net unreimbursed restructuring charges, was $119 million in the second quarter, a sequential increase of $47 million from the $72 million reported in the first quarter, and a notable turnaround from a year-earlier EBIT-R loss of $33 million.

Visteon had free cash flow of $10 million for the quarter, a sequential improvement of $127 million over the 2006 first quarter, when it had negative free cash flow of $117 million. Free cash flow was lower than the $177 million booked in the second quarter 2005, during which Visteon received the benefit of accelerated payment terms from Ford as part of the funding agreement that was attached to its bailout.

In its earnings announcement, Visteon noted that as of the end of the second quarter it had $836 million of cash and total debt of $2 billion, and was well within the limits of its financial covenants in its existing credit facilities.

During the second quarter, Visteon closed on an $800 million secured term loan due 2013. Proceeds from the loan were used to repay borrowings under the company's existing credit facilities that were scheduled to expire next June, including a $350 million 18-month term loan and a $241 million delayed-draw term loan.

Visteon also said that in connection with the financing, it repaid $50 million of borrowings under its $772 million multi-year secured revolving credit facility, and reduced the amount available under that facility to $500 million. Visteon said that it expects to eliminate the multi-year revolver upon completion of new U.S. and European five-year revolving credit facilities. The company has received commitments for such facilities totaling $700 million from JPMorgan Chase Bank, NA and Citigroup Global Markets Inc., and expects to complete those transactions in the third quarter, subject to market conditions.

Some of the proceeds from the seven-year term loan were also used to repurchase $150 million of Visteon's 8¼% notes due 2010.

Looking ahead, Visteon said that it expects the third quarter to be "challenging, reflecting seasonally low production volumes globally." Visteon raised its estimate for 2006 full year EBIT-R to a range of $170 million to $200 million. It also said that it still expects to generate about $50 million of free cash flow and sees full-year product sales of approximately $11 billion.

Qwest higher on profit

Elsewhere on the earnings front, Qwest Communications International Inc.'s bonds were seen somewhat better, after the Denver-based telecommunications company swung to a profit in the second quarter from a year-ago loss, helped by improving sales of such growth products as high-speed internet, advanced data products, long distance and wireless, as well as declining operating expenses.

A trader saw Qwest's 6 7/8% notes due 2028 up 5/8 point on the session at 88.625 bid, 89.25 offered, while its 6 7/8% notes due 2033 were at 89.25 bid, 89.75 offered, up 3/8 point.

A market source saw Qwest Capital Corp.'s 7¼% notes due 2011 up ¼ to ½ point at 98.75.

Qwest - which also provides basic telephone service to customers in 14 states in the western United States - posted net earnings of $117 million (six cents per share) during the second quarter ended June 30, up sequentially from $88 million (five cents per share) in the first quarter, and a solid rebound from previous year's second-quarter loss of $164 million (nine cents per share).

Qwest's earnings announcement said that the company generated strong free cash flow of $595 million in the quarter by benefiting from improved operating results and lower interest payments. Qwest continues to expect free cash flow of $1.35 billion to $1.5 billion in 2006, versus $904 million in 2005, both before one-time payments.

Quarterly interest expense totaled $298 million, down from $380 million in the year-ago quarter. The company noted its successful tender for high-coupon legacy debt in last year's fourth quarter, which is expected to reduce total interest expense this year by some $300 million.

The company ended the quarter with total debt of $15.4 billion, down $2.2 billion from year-ago levels. It said that its near-doubling of cash and short-term investments to $1.4 billion during the quarter brought total debt, less cash and short-term investments, to less than $14 billion.

Trump firm on earnings

Among other companies posting quarterly results, Trump Entertainment Resorts Inc.'s 8½% notes due 2015 were up about half a point to 96 bid, 96.5 offered, even though the Atlantic City, N.J.-based casino operator lost $4.9 million (16 cents per share) in the second quarter ended June 30 - while Wall Street was only looking for a penny per share of red ink. The numbers are not comparable to year-ago figures, since the company emerged from Chapter 11 reorganization in the middle of the 2005 quarter.

Even with the loss, a trader said, "Trump's numbers were OK." He added that after the reorganization, "they'll have money for a couple of years" while the company presumably gets its act together, "and they'll be fine." However, he added "we'll see what happens" as the company gets closer to the time when the bonds will mature.

Pilgrim's Pride slips

Among the downsiders, a trader saw Pilgrim's Pride Corp.'s 9¼% notes due 2013 finishing a point lower at par bid, 101 offered - but he noted that the bonds were trading a lot worse earlier in the session when investors "over-reacted" to the news that the company had fallen into the red in during the fiscal third quarter ended July 1, after having posted a profit in the year-ago quarter.

"At the beginning, it was down three or four points," he said, "as people threw out low, stupid bids" before calmer heads prevailed and the notes eventually settled in with the one point loss.

He saw the same thing with its 9 5/8% notes due 2011, which also eventually ended a point down on the day, at 103.75 bid, 104.75 offered.

The Pittsburg, Tex.-based poultry producer posted a net loss of $20.5 million (31 cents per share) on total sales of $1.29 billion - a sharp deterioration from a year ago, when it earned $85.4 million ($1.28 per share) on total sales of $1.44 billion.

The Number-Two U.S. poultry producer attributed the swing into the red to reduced exports related to the brewing overseas bird flu epidemic, which turned consumers there away from chicken.

However, company officials told analysts on a conference call that exports are recovering and that recent production cuts throughout the industry have helped breast meat prices.

Kodak lower on forecast cut

Eastman Kodak Co. bonds were off, after the Rochester, N.Y.-based photographic products giant posted a wider quarterly net loss and cut its full-year revenue forecast, citing the difficulty of its shift away from traditional cameras and film to digital technology products more difficult than expected,

A trader punned that "it took all day to see a market develop in Kodak's bonds," with the 7¼% notes due 2013 half a point lower at 95 bid, 95.75 offered, "so they were off a touch."

A market source at another desk, however, quoted the bonds at 95.5, pegging them down a point.

Kodak's New York Stock Exchange-traded shares meantime swooned $3.05 (13.71%) to $19.20 on volume of 17.6 million shares, more than five times the usual turnover.

Kodak's second-quarter net loss widened to $282 million (98 cents a share), from $155 million (54 cents a share) a year earlier.

GM higher

Apart from earnings, traders said, not much was going on. They noted that even the news that GM's July sales fell 22.2% from year-ago levels did not "cause the auto sector to crash and burn." as it had been largely expected, even predicted by GM executives themselves, who noted that a year ago, the carmaker was offering heavy buyer incentives to move their cars, light trucks and SUVs.

"I guess the numbers were already figured in," one said, as he quoted GM's benchmark 8 3/8% notes due 2033 at 82.5 bid, 83 offered, actually up ½ point on the day. GMAC's 6 7/8% notes due 2012 were up ½ point at 96.75 bid.

Ford's poor sales numbers - even worse than GM's with July sales sliding 35.2% from last year's incentive-swollen levels - likewise had little impact on the Number-Two domestic carmaker's bonds. Ford's 7.45% notes due 2031 were perhaps ¼ point easier at 73.5 bid, 74 offered, while its Ford Motor Credit 7% notes due 2013 ended at 88 bid, 88.5 offered, unchanged on the day.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.