Bally bonds get bankruptcy boost; Spansion, MetroPCS add-ons price; funds see $41 million inflow

By Paul Deckelman and Paul A. Harris

New York, May 31 - Bally Total Fitness Holding Corp.'s subordinated bonds were seen having pushed upward late in the session Thursday, given a boost by the news that the troubled Chicago-based fitness club operator had reached an agreement with those bondholders on restructuring their debt, and will file a pre-packaged Chapter 11 case to implement it.

Elsewhere, Alltel Corp.'s bonds were on the slide, although there was no fresh news out on the Little Rock, Ark.-based telecommunications company.

Out of the distressed market came word that Dura Automotive Systems Inc.'s bonds were down multiple points, despite seemingly favorable financial results.

In the primary sphere, there were a pair of add-on deals pricing, for MetroPCS Communications Inc. and for Spansion LLC The former's notes were seen having firmed a little when freed for secondary dealings.

Elsewhere, pre-deal market price talk emerged on two upcoming deals, from Forest Oil Corp. and Ardagh Glass Group Ltd.

Junk funds continue to see inflows

As activity was winding down for the day, market participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday $40.7 million came into those weekly-reporting funds than left them.

That followed the $79.2 million inflow seen in the previous week, ended May 23.

It was the seventh straight weekly inflow and the ninth in the last 10 weeks, according to a Prospect News analysis of the AMG figures.

The latest week's additional cash extends year-to-date flows to $1.465 billion.

Meanwhile, funds that report to AMG on a monthly basis have seen $3.761 billion of year-to-date inflows for 2007.

Hence the aggregate flows, which tally both the weekly and monthly reporting funds, were in the black by $5.226 billion to Wednesday.

On a year-to-date basis, inflows have now been seen in 18 weeks out of the 22 since the start of the year.

The fund-flow numbers seem to have successfully regained the positive momentum they showed at the beginning of the year, when an aggregate total of some $862 million came into the funds in the first two months, according to the Prospect News analysis. That stretch run was then interrupted by a choppy four-week period in March, characterized by alternating weeks of outflows and inflows, none larger than $25 million. Over the past 10 weeks, though, with nine inflows seen, the funds have had a net total infusion during that period of $619.5 million, according to the Prospect News analysis.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise 10% to 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and, most recently, hedge funds.

More drive-bys

Drive-by deals, which represent a remarkable 40% of the businesses that came and went in the high yield new issue market during the now-completed month of May, continued to hold sway during the final May session.

Two issuers each brought a single tranche on Thursday.

Both were quickly shopped add-on deals.

And both were upsized.

MetroPCS upsizes

MetroPCS Communications priced an upsized $400 million add-on to its 9¼% senior notes due Nov. 1, 2014 (Caa1/CCC) at 105.875 to yield 7.89%, thus shaving 136 bps off of the original yield.

The issue price came on the rich end of the 105.75 area price talk.

Bear Stearns & Co. ran the books for the deal, which the company brought in order to fund general corporate purposes, which could include financing the company's participation in and acquisition of additional spectrum in the upcoming Federal Communications Commission's 700 MHz auction.

The original $1 billion issue priced at par in November 2006.

The issuer is a wholly owned subsidiary of Dallas-based MetroPCS Wireless, Inc.

Spansion also upsizes

Spansion priced an upsized $75 million add-on to its three-month Libor plus 312.5 basis points senior secured floating-rate notes due June 1, 2013 (B1/B+) at 101.125.

There had been no official price talk for the deal that was done as an a.m.-to-p.m. drive-by.

Deutsche Bank Securities and Banc of America Securities were joint bookrunners for the capital expenditures, working capital and general corporate purposes deal.

The Sunnyvale, Calif., computer memory company priced the original $550 million issue priced at par on May 11. With the add on, the total issue size is now $625 million.

A pair on deck

Two deals are expected to price during the Friday session.

Forest Oil set price talk for its $500 million offering of 12-year senior notes (B1/B+) at the 7¼% area on Thursday.

JP Morgan, Banc of America Securities LLC, Citigroup, Credit Suisse and Deutsche Bank Securities are joint bookrunners for the acquisition deal from the Denver-based oil and gas exploration, production and development company.

Elsewhere Dublin, Ireland-based Ardagh Glass Group set price talk for its €310 million two-part offering of 10-year senior notes (existing B3/confirmed CCC+).

The glass container company talked the fixed-rate tranche at 7% to 7¼%, and toggle notes tranche to price three-eighths to half a percent behind the fixed-rate notes.

Tranche sizes remain to be determined.

Citigroup is leading that acquisition financing.

Fitness operator shows late strength

After having traded pretty much unchanged for most of the session, Bally's bonds - particularly its subordinated 9 7/8% notes due 2007 - were being quoted anywhere from 2 to 3 points higher, helped by the after-4 p.m. ET announcement that the gym operator had reached agreement in principle with the holders of those notes on the proposed terms of a consensual restructuring.

A trader saw the 9 7/8s up 3 points on the day to 92 bid, 93 offered, while its 10½% senior notes due 2011 were perhaps a point better at 98.5 bid, 99.5 offered.

At another desk, a source also called the bonds up a trey, although at 93 bid.

Yet another trader, however, said that the sub bonds were being quoted in a very wide 91 bid, par offered range, post-news, but said he hadn't seen any trading in either one. He saw the 101/2s settling in at 97.5 bid, 98.5 offered.

Bally's shares - trading deeply in penny stock territory via the Pink Sheets ever since the company's de-listing some months back - zoomed 18 cents (29.03%) to 80 cents. Volume of 734,000 shares was not quite 1½ times the average daily handle.

Bally announced that more than 80% of the 9 7/8% noteholders had agreed to the terms of the plan, which will be instituted via a prepackaged Chapter 11 filing. Under those terms, the restructuring will reduce the principal outstanding on Bally's senior subs by $150 million by exchanging all such existing notes for a new class of subordinated notes, common equity and participation in a planned $77.5 million rights offering.

Jo-Ann up on takeover talk

A trader said that Jo-Ann Stores Inc.'s 7½% notes due 2012 jumped 3 points on the session to 99.5 on takeover speculation fueled by a published report that the Hudson, Ohio-based fabric and crafts retailing chain will be sold for nearly $1 billion.

That report said that several middle-market private equity firms with experience in retailing are thought to be among the potential buyers. One such possible acquirer is Leonard Green & Partners LP, which owns Sports Authority Inc. and Petco Animal Supplies Inc., operators of the eponymous respective store chains.

It said that Lehman Brothers will run the bidding for the 801-store chain, with final bids due this coming month.

Another trader saw the bonds going home at 98 bid, which he called up a point, citing speculation that those bonds would likely be taken out at 101 should the company be sold.

Jo-Ann Stores declined comment on the report, or the speculation.

The company's New York Stock Exchange-traded shares jumped $2.77 (8.92%) in busy trading Thursday to end at $33.82. Volume of 1.8 million shares was better than four times the norm.

Metaldyne motors upward

Another big mover on the day, a trader said, was Metaldyne Corp., whose 11% notes due 2012 moved up "on nothing but rumors - they're going to take [the bonds] out, or this or that.

"There was some action there," he added, quoting the notes as having moved up to 103.25 bid from 100.5 bid, 101 offered. Later in the session, he said the bonds of the Plymouth, Mich.-based producer of stamped metal products for carmakers were offered in the 103.25-103.5 ranged.

Alltel tumbles, but on no news

On the downside, Alltel's bonds were down sharply in very active trading, with no news seen out on the wireless operator, which recently announced that it has agreed to be taken private by TPG Group and GS Capital Partners, a unit of Goldman Sachs, in a $27.5 billion deal, which will be mostly funded with new debt, pushing the company's debt ratio up to about eight times EBITDA.

Its split-rated 7 7/8% notes due 2032 (rated by Moody's Investors Service at A2 but pegged at a junky BB- by both Standard & Poor's and Fitch Ratings) were quoted down nearly 3½ points at 90.50, although it could have been worse, since the bonds were down as much as 5 points at one point during the session.

Alltel's 7% notes due 2012 were seen off 1¼ points, at around 99.125.

MedQuest moves down

Another loser, a trader said, was MedQuest Associates, whose 11 7/8% notes due 2012 were seen offered at 80, a 2 point drop on the session.

He said that the bonds of the Alpharetta, Ga.-based medical diagnostic centers operator were "not doing so well," and said that although there was no fresh negative news out, investors felt like "it's getting ready to take a fall."

Dura drops on numbers

In the distressed-debt market, Dura Automotive's bonds were seen down about 5 to 6 points on the day, despite the company's announcement of a smaller operating loss in April.

A trader quoted the 9% notes due 2009 at 12.75 bid, off about a point from the previous day. The 8 5/8% senior notes due 2012, however, took a good-sized hit, losing as much as 5 points to close at 50.25 bid, 50.625 offered.

Another source saw those senior bonds down at least 6½ points at 49.l5

The Rochester Hills, Mich.-based automotive equipment company said in a Securities and Exchange Commission filing that it had a $7.66 million operating loss for the four weeks ending April 29, with $82.05 million in total sales.

April's operating loss compared to an $11.5 million operating loss for the five weeks ended April 1.

The trader called the bonds a "headline risk," adding, "They had a nice run, too. Now they are kind of retracing."

Delphi unmoved despite news

Elsewhere among the automotive names, traders saw little going on in Delphi Corp. despite several news items out about the bankrupt Troy, Mich.-based auto components maker. One saw its 6.55% notes due 2006 at 116 bid, 117 offered, unchanged. Another said he "didn't see much action."

Private equity firms Highland Capital Management LP and Pardus Capital Management are looking into a possible investment in Delphi, although nothing is definite. Highland confirmed in a Securities and Exchange Commission filing the fact that it last week had signed a confidentiality agreement with Delphi to serve as a possible co-investor in a business relationship with Delphi along with Pardus - which signed a similar agreement with Delphi in April.

Should such a deal materialize, it would be an ironic development - since Delphi had previously spurned 7.8% owner Highland when it put forward an alternative investment proposal versus the $3.4 billion equity plan that Delphi had developed last year with Cerberus Capital Management LP, Appaloosa Management LP and other investors.

The Highland filing did not make clear whether any Pardus proposal would complement that $3.4 billion plan or would rival it.

Delphi investors were meantime also digesting the latest news regarding the company's ongoing talks with former corporate parent General Motors Corp. and the United Auto Workers union on ways to cut Delphi's bloated labor costs, one of the factors that drove it into bankruptcy. While some recent reports have painted the situation in optimistic terms, UAW chief Ron Gettelfinger on Thursday had harsh words for Delphi, saying its executives were drawing "obscene bonuses." He said the union has no set timeline for reaching a deal.

New MetroPCS gains

When the new MetroPCS 9¼% notes due 2014 began trading, the bonds were seen having moved up to 106.25 bid, 106.5 offered, from 105.875 at issue.

"It just wasn't a very robust day," a trader said.

Stephanie N. Rotondo contributed to this report

© 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.