Willbros bonds apparently out, loan in; energy again active; L-3 e-mail woes batter bonds

By Paul Deckelman

New York, June 11 -- Willbros Group, Inc. was heard by high yield syndicate sources on Friday to have ended its attempt to do its much delayed $250 million junk bond deal, apparently choosing instead to borrow that funding for a pending acquisition through the bank loan market, although there has been no official confirmation of that. Ironically, the change would bring things full circle, since the Houston-based company's original strategy was to fund the purchase that way, while bringing a junk deal was a later addition.

The apparent failure of that deal put the cap on another lackluster week in the high yield primary, which saw just three deals totaling $1.2 billion principal amount pricing - although that was still a considerable improvement from the week before.

Secondary market activity remained quiet outside of the considerable attention garnered by bonds of companies either connected directly to the Deepwater Horizon oil rig disaster in the Gulf of Mexico, such as Transocean Inc. and BP plc, or those likely to suffer from any government crackdown on oil drilling, such as ATP Oil & Gas Corp.

Away from the energy sphere, L-3 Communications Holdings' bonds were lower after the New York-based defense contractor was ordered suspended by the Pentagon from participating in any contracts following charges that some company employees improperly monitored other people's e-mails to advance L-3's commercial interests.

Automotive names were seen better, including OEM companies like Ford Motor Co. and General Motors Corp., as well as suppliers such as ArvinMeritor Inc.

Willbros heard dead

High yield syndicate sources confirmed the chatter heard among bank debt market players -- that Willbros' $250 million offering of six-year secured notes (B3/B+) will be taken off the forward calendar, and the company will instead try to do that financing through the bank debt market.

A high yield syndicate source, queried about bank loan market speculation that the company would follow such a course, flatly declared: "The bonds are gone; it's going back to a loan."

That actually was Willbros' original strategy back in March, when it announced its plans to acquire InfrastruX Group Inc. But subsequently it downsized the planned $300 million term loan and the provider of engineering, procurement and construction services to companies in the energy, petrochemical and power industries, among others instead launched a junk bond deal in mid-May, cutting the term loan to just $50 million.

But closure on that junk issue proved to be as elusive as completion of the original bond deal, and after wrapping up its roadshow to investors, it never priced, staying on the forward calendar as a day-to-day transaction whose day never did come.

Company officials were unavailable for comment late Friday on any changes in its plans for financing InfrastruX's acquisition.

Bank market sources meantime cautioned that should Willbros decide to indeed go back to the bank loan market and relaunch its original $300 million term loan B deal, it will surely have to pay more for the privilege than it would have paid back in April, owing to the deterioration seen in the credit markets in recent weeks.

A buyside source commented that the apparent demise of the Willbros bond deal indicates that the market's tolerance for risk "is diminished somewhat for less than pristine deals."

The source noted that this was particularly true for energy related companies -- Willbros serves the energy refining and E&P industries -- "after Trico [Marine Group] passing on its coupon and the Gulf of Mexico bonds like BP, RIG and APC.

"You can see spreads in high yield have widened by 90 to 100 basis points since their narrows in April, whether following stocks down, or due to redemptions, or just general nervousness about the world we live in."

Primary slightly improved

The apparent demise of the Willbros bond deal aside, the high yield primary closed out the week a little better than where it had been the previous Friday, when the four sessions of the Memorial Day-shortened week yielded all of one deal worth $750 million.

Three deals worth a collective $1.2 billion principal amount came to market this past week. The biggest deal of the week was Thursday's $625 million offering of 11 3/8% notes due 2018 from TransUnion Corp., a Chicago-based consumer credit reporting company.

Those bonds priced at par after a little tinkering around with the issue's covenants by the issuer and its underwriters, and the inclusion of registration rights, originally not included with the Rule 144A offering.

When the new bonds hit the aftermarket late Thursday, they were heard to have firmed solidly to the 101¼ bid, 102¼ offered area.

A trader on Friday saw them holding their gains at 101 5/8 bid, 102¼ offered.

A multiple-deal week

For the first time since the week ended May 21, more than one new deal actually priced this week. Besides TransUnion, offerings priced for Triumph Group, Inc. and BWAY Holding Co., producing a $1.2 billion week, the busiest week in the last three.

Triumph, a Wayne, Pa.-based aerospace company, priced $350 million of 8 5/8% eight-year notes at 99.27 to yield 8¾%, as part of the financing for its acquisition of Vought Aircraft Industries, Inc. in a transaction valued at about $1.44 billion, including Triumph's assumption of Vought debt.

When the new Triumph bonds were freed for aftermarket dealings they pretty much stayed around their issue price, traders said. On Friday, a trader saw the bonds at 99¼ bid, 99¾ offered

Meanwhile, BWAY, an Atlanta-based maker of rigid large metal and plastic containers, priced $205 million of 10% notes due 2018 at 98.658 to yield 10¼%, with proceeds from the deal going to help fund the previously announced $915 million buyout of the company by Madison Dearborn Partners LLC.

On Friday, a trader quoted the bonds at 100½ bid, 101 offered, holding steady nearly 2 points above issue.

In fact, both of those two latter deals priced on Tuesday -- the first time that that issuers have brought deals back-to-back on the same day since May 19.. On that day, Games Merger Corp. - an issuer for the Dallas-based restaurant/amusement arcade chain Dave & Buster's, Inc. -- priced $200 million 11% notes due 2018 at par and American Tire Distributors Inc., a Charlotte, N.C.-based wholesale tire and automotive parts distributor, came to market with $250 million of 9¾% senior secured notes due 2017, which priced at 98.76 to yield 10%.

Market indicators mostly easier

Back among bonds not related to the new-deal realm, a trader saw the CDX North American HY Series 14 Index unchanged on the day at 93½ bid, 94 offered. The index thus was little changed on the week from the 93½ bid, 93¾ offered level at which the index had ended the previous week.

The KDP High Yield Daily Index, meantime, rose by 6 basis points on Friday to end at 69.33, after having fallen by 4 bps on Thursday. However, it ended below the week-earlier 69.93 finish. Its yield narrowed by 3 bps to 9.08%, after having widened by 4 bps on Thursday. The yield was notably above the previous Friday's 8.89%.

Another market measure, the Merrill Lynch High Yield Master II index, closed the session showing a year-to-date gain of 2.777%, down from the 3.294% level at which it had finished the previous week. The average index price in the latest week was 94.552, versus 95.198 a week ago. Its yield to worst rose over the week to 9.387% from 9.239% while its spread to worst versus comparable Treasuries widened to 726 bps from 714 bps a week ago.

Advancing issues, which fought a see-saw battle against decliners all week, went back out in front of them on Friday, by around a six-to-five margin

Overall market activity, represented by dollar-volume levels, plunged by nearly 45% on Friday from the previous session's pace.

A trader said that apart from the activity in the energy names, "you didn't miss anything, it was that quiet."

A buyside source said that things "looked very quiet - indexes are unchanged and quotes look unchanged. But I have the feeling that the market would move lower if it had some supply, especially because it seems like lower-tier stuff is quoted down the most--suggesting less risk-appetite conditions over the past few weeks."

Energy names active, better

In the energy sector a trader said that Transocean's bonds were mostly up between ½ and ¾ point on Friday, with "a ton of bonds traded."

He quoted the Swiss oil drilling rig operator's 6% notes due 2018, one of its benchmark issues, at 851/2, "so they were up a good point."

He saw Transocean's 6.80% bonds due 2038 having moved up to 84¾ bid, 85¼ offered from Thursday's levels in an 83½ context.

He also saw fairly brisk activity in the company's convertible notes, which moved up with its New York Stock Exchange-traded shares, which gained $2.58, or 5.23%, to end at $46.85, on volume of 17.1 million, about 25% above the usual activity level, amid the news that Transocean and the U.S. Justice department had resolved a dispute centered around the company's attempt to limit its liability in the Gulf of Mexico spill, according to court papers filed on Friday.

"There was a ton of trading in it," he said of the Transocean securities. "This dominated trading today." He said both the bonds and the shares had "recovered nicely" from recent low levels.

A trader saw ATP Gas & Oil's 11 7/8 second-lien senior secured notes due 2015 continuing to languish down in the 60s, versus the levels in the lower 70s seen earlier in the week, as the bonds "couldn't get out of their own way."

However, he did see those notes move up from Thursday's levels to around the 68-69 area from 661/2-67½ region on Thursday.

A trader saw several issues of BP's bonds improved, saying "people are pretty tired of being jerked around" by all of the political rhetoric about the oil spill and who's to blame for it.

Auto names on upside ride

A trader saw General Motors Corp.'s benchmark 8 3.8% bonds due 2033 up ¼ point on the session at 31½ bid, 32 offered, while seeing GM domestic arch-rival Ford Motor Co.'s 7.45% bonds due 2031 up ½ point at 86 bid, 87 offered.

At another desk, a trader said that auto-supplier names were better, quoting ArvinMeritor Inc.'s 8 1/8% notes due 2015 up a point at the 93 level. He said that among the factors helping the bonds was the recent news that the Troy, Mich.-based components supplier had set up a repurchase program for up to the remaining $101 million principal amount of the company's 8¾% notes due 2012 left outstanding following the completion of its oversubscribed tender offer for a portion of those notes earlier this year.

In more general terms, he said that sector companies like ArvinMeritor and Park-Ohio Holdings Corp. whose 8 3/8% bonds due 2014 have gradually firmed strongly to around the 92 level over the last several months, "have done well to master the recession."

L-3 a big loser

A trader saw "a lot of activity" in L-3 Communications' bonds such as its 6 3/8% notes due 2015. He quoted them at 98¼ bid, 98½ offered, but said that "if you go back to the beginning of the week, they were trading at par."

He blamed the downturn on news reports indicating that the Pentagon had suspended L-3's participation in contracts over alleged illegal e-mail monitoring.

"The Air Force is investigating one of their subsidiaries. People are wondering what the hell is going on."

L-3 disclosed in a mid-week regulatory filing that it received notice from the Air Force that its Special Support Programs Division has been temporarily suspended from receiving new orders or contracts from U.S. agencies amid a probe of alleged improper use of email.

The government said that an audit found that the L-3 division "purposefully and intentionally" monitored emails of its own employees with other contractors and U.S. government employees.

Another trader called L-3's debt down 2 points, as company has "got into some trouble, referring to the recent e-mail issue with the government."

The trader saw the 5 7/8% notes due 2015 at 97¾ bid, 98¾ offered, while a third trader said that between $10 million and $20 million of the 6 3/8% notes traded at 98 bid, 98 ½ offered.

-Sara Rosenberg and Stephanie N. Rotondo contributed to this report

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