Chiquita off on spinach woes; autos continue slide, led by Visteon

By Paul Deckelman and Paul A. Harris

New York, Sept. 25 - Chiquita Brands International Inc. bondholders had one foot on a banana peel Monday as the Cincinnati-based produce company's bonds and shares slid after the company warned that the current E. coli outbreak could harm its finances by affecting the performance of its Fresh Express packaged salad business. That sobering advisory more than offset any upside the bonds might have otherwise gotten from its announced plans to look into selling its shipping assets.

Elsewhere, automotive sector bonds remained stuck on the road to nowhere, with Visteon Corp.'s notes falling on market rumors that French auto parts maker Valeo SA - said to be in the bidding to acquire the Van Buren Township, Mich.-based U.S. parts company - was no longer interested, given the recent sharp downturn in the American auto industry, including big output cuts by Visteon's former corporate parent and single largest customer, Ford Motor Co.

Revlon Consumer Products Corp.'s bonds fell sharply in morning trading as the New York-based cosmetics maker announced a corporate overhaul - its second so far this year - and said that it was pulling the plug on its fledgling cosmetics line for 50+ women, Vital Radiance, just eight months after its launch, due to disappointing consumer response. However, those bonds got a little bounce later in the day, and only ended moderately lower on the session.

Early in the session a source from a hedge fund messaged Prospect News that the broad market was up slightly, with the CDX 100 up an eighth of a point, and noted that the price of crude oil had slid to below the $60 per barrel threshold.

At the session's close a high yield syndicate official, noting that the price of oil had climbed back over the $60-mark, said that the broad market had been very quiet on Monday, and marked it up slightly.

Primary market activity, meantime, seemed centered somewhere between "little" and "none," new-dealers said. Participants were awaiting the pricing later in the week of two fairly big deals - for Service Corp. International and for Georgia Gulf Corp. - as well as for a slew of smaller offerings.

Chiquita warning overwhelms news

Back among the established issues, Chiquita "definitely saw a lot of action," a trader said, pegging its 7½% notes due 2011 at 86.25 bid, 87,25 offered, well down from Friday's levels around 89.25 bid, 90.25 offered, while its 8 7/8% notes due 2015 retreated to 91.5 bid, 92.5 offered, from 94.25 bid, 95.25 offered.

Still another trader saw an even bigger tumble, saying the bonds were "down 6 or 7 points," with the 71/2s at 86 bid 87 offered, and the 9 5/8s at 91 bid, 92 offered.

A source at another desk said that the 8 7/8s moved down to 91.5, down from levels around 95 seen for most of the day Friday, but way down from Friday's closing highs around 98, reached on a couple of small-sized trades fairly late in the session that day. The 71/2s were meanwhile 3 points lower at 86.

The Chiquita bonds fell, the traders said, after the company acknowledged that public concern over tainted spinach tied to the nation's E. coli outbreak has led to unexpected costs and lower sales for the company's Chiquita's packaged produce business, Fresh Express. It said that it would be investing additional funds to reinforce consumer confidence in the quality of Fresh Express products and food safety standards.

Chiquita also said that it was being negatively impacted by changes in the European Union's banana-import rules.

"As a result of these difficult market conditions and continuing uncertainties, the company's third quarter 2006 financial results are expected to be significantly impacted," Chiquita warned.

Mention of the spinach problem "overrode everything," a trader said. "Chiquita's headline risk is huge."

The bad news more than offset whatever positive impact the bonds may have gotten from two other pieces of news in that same announcement - the first, that Chiquita is exploring possible strategic alternatives that could result in the sale of its Great White Fleet shipping arm, which ferries bananas and other fresh produce from their points of origin to their destination in refrigerated cargo ships.

"I guess they're looking to sell ships because they aren't selling enough bananas," a trader quipped, while seeing the company's bonds down between 2 and 3 points.

Chiquita also announced that it was suspending its stock dividend, and would use the anticipated $17 million of annual savings to reduce debt and increase financial flexibility - again, something that normally would make bondholders' hearts beat faster. But one trader said that the decision to scrap the dividend - something which companies are normally loathe to do - was a signal of just how bad things are at Chiquita, which would hardly inspire bondholder confidence.

Shareholders were appalled by the whole idea, and Chiquita's New York Stock Exchange-traded shares slid $2.20 (13.99%), to end at $13.53, on volume of 4.2 million, about six times the norm.

Dole slips

Meanwhile, Chiquita sector peer Dole Food Co.'s bonds continued to retreat, as they have for the past week, ever since the first revelations of the E. coli scare, which is affecting the Westlake Village, Calif.-based produce company's packaged fresh spinach sales.

While one trader called Dole's 8 5/8% notes due 2009 essentially unchanged at 96.75 bid, 97.75 offered, another saw the company's bonds down 2 points, its 7¼% notes due 2010 falling back to 91.5 bid, 92.5 offered on "more E. coli and general weakness."

A market source saw the latter bonds down a point at 91, and saw the company's 8¾% notes due 2013 off 1¼ points at 91.75.

Visteon off as Valeo seen uninterested

Apart from the vegetable patch, traders saw Visteon's bonds leading yet another day's retreat by the automotive sector.

A trader cited market speculation that the company's efforts to sell itself might be running into trouble because recent announced output cuts by Detroit's Big Three carmakers translate to lower orders for Visteon, making it less valuable.

Published reports have named France's Valeo as a possible buyer, since its chief executive officer, Thierry Morin, has said in recent months that he would be interested in buying all or part of Visteon. Those news reports have also linked Visteon as well as to Indian automotive concern Tata Group.

On Friday and Monday, there was market speculation, reported by some news services, that Valeo may no longer be interested.

According to one report, Morgan Stanley was quoted as saying that a deal to buy Visteon would make little or no sense for Valeo, saying that it "appears dilutive at or above the current Visteon share price on 2007 earnings." The investment bank also reportedly said that anticipated 2008 accretion is dependent on a 37% jump in Visteon profits.

However, there were contradictory stories out there to the effect that Valeo was shopping its motors and actuators division, possibly to raise cash with which to fund a Visteon deal. Valeo has refused any and all comment on the stories and rumors.

Wherever the truth lies, the hard fact was that Visteon's bondholders were taking the scuttlebutt to heart, pulling its 8¼% notes due 2010 and its 7% notes due 2014 each down a point, a trader said, quoting those bonds at 95.5 bid, 96.5 offered, and at 87.5 bid, 88.5 offered, respectively. "The rumor is that the sector woes may scare off Valeo."

A trader saw the latter bond close at 88 bid, 89 offered, which he called down 1½ points on the day, but said that the bonds had been off by as much as 2½ points during the session.

Dura, Dana, Delphi down

Other troubled automotive names seemed to be following Visteon lower as if they were riding in a convoy, with Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 seen by a trader down 2 points to 46 bid, 48 offered, while its almost-valueless 9% notes due 2009 were a point lower at 5 bid, 6 offered.

Another trader saw the senior bonds 3 points easier at 45 bid, 46 offered, but dismissed the 9s, at 6 bid, 7 offered. "Who cares?" he asked rhetorically. "They don't have much further to go."

He saw Dana Corp.'s 5.85% notes due 2015 two points lower at 61 bid, 62 offered, while Delphi Corp.'s 6.55% notes supposedly coming due later this year, were likewise down a deuce at 84 bid, 85 offered. Tower Automotive Inc.'s 12% notes due 2013 were "down 2 or 3 points" at 17 bid, 19 offered.

GM steady

Among the more mainstream auto names, General Motors Corp.'s benchmark 8 3/8% notes due 2033 were seen unchanged on the day at 85 bid, 86 offered, neither helped nor hurt by the various conflicting stories circulating on how GM's talks with prospective alliance partners Renault and Nissan are going. Some quoted Renault/Nissan chief executive officer Carlos Ghosn - who is to meet with his GM counterpart, Rick Wagoner, this week in Paris - as saying the talks are progressing well, while other stories said he sees GM as at best reluctant about the alliance idea.

GM arch-rival Ford's 7.45% notes due 2031 were seen up ¼ point at 77.25 bid, 77.75 offered.

Revlon lower

Revlon's bonds gyrated at mostly lower levels on the news that the company was throwing in the towel and admitting defeat in its efforts to turn its Vital Radiance line of cosmetics for women 50 and up into a viable product, after tens of millions of dollars spent on marketing the line.

Adding to investor angst was uncertainty sparked by the latest restructuring effort, which calls for the loss of 250 jobs - including that of an executive closely liked with the Vital Radiance debacle. That corporate shakeup comes barely a week after the sudden resignation of the then-president and chief executive officer Jack Stahl and his replacement by David L. Kennedy, formerly Revlon's chief financial officer.

But those bonds seemed to improve later in the session, perhaps on assertions by Kennedy on a conference call that the company is exploring various plans for refinancing its 8 5/8% notes slated to come due in 2008. He said that such a refinancing deal would be "very high on our agenda" (see related story elsewhere in this issue).

A market source saw those bonds open at 93 bid, down from 96.5 on Friday, and then meander around at lower levels before closing at 92, down another point from the opening. However, the source saw Revlon's 9½% notes due 2011 bounce off its lows around 86.5 at mid-afternoon to end at 87.625, although that was still well down from 91.5 at Friday's end.

Another trader, however said that he saw the bonds only end down ½ point on the day, the 8 5/8s at 93.5 bid, 94.5 offered, and the 9 5/8s at 87.5 bid, 88.5 offered.

Yet another trader - who also noted Standard & Poor's downgrade of the company's debt rating to CCC+ late in the session - saw the 91/2s down 1¼ point at 87.75 bid, 88.75 offered, while the 8 5/8s were down "not as much," only a ¼ to ½ point at 93.5 bid, 94.5 offered.

He wondered aloud - tongue only partly in cheek - that given the state of the company finances, with losses anticipated in the current quarter as a result of charges related to the latest shakeup and the demise of Vital Radiance, "it must mean an awful lot to [Revlon chairman and chief backer] Ron Perelman" and his being able to hobnob socially with supermodels and other glamorous celebrities - the kind of access that owning a major cosmetics house brings - "for him to keep pouring money into this company. Otherwise - why even continue?"

Talk on FTI Consulting

Meanwhile the primary market also remained very quiet during the Monday session.

The only new issue news to be circulated was price talk of a yield in the 7¾% area on FTI Consulting's $215 million offering of 10-year senior notes (Ba2/B+), which is expected to price Wednesday morning.

Deutsche Bank Securities has the books for the acquisition deal from the Baltimore-based provider of restructuring, corporate finance and economic consulting services.

Much of the rest of the announced business on the new issue calendar is expected to be transacted late in the week.

One possible exception is Houston-based funeral services company Service Corp. International's $500 million two-part offering of unsecured senior notes (existing Ba3/confirmed BB-) which, like the FTI consulting deal, is possible Wednesday business.

The acquisition-funding deal, comprised of $250 million of eight-year notes and $250 million of 12-year notes, is being led by JP Morgan Securities and Merrill Lynch & Co.

No price talk on the deal was heard during the Monday session.

Georgia Gulf expected late-week

In the late-week category, Georgia Gulf is also marketing a two-part deal which is expected to price by Friday's close.

The $750 million, total, transaction is comprised of eight-year senior notes and 10-year senior subordinated notes.

Merrill Lynch has the books for the acquisition funding and debt refinancing deal from the Atlanta-based chemical company.

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