Remy climb continues, Friendly's up on buyout plan; Fresenius, CMS, AmeriCredit slate deals

By Paul Deckelman and Paul A. Harris

New York, June 18 - Remy International Inc.'s bonds - which had firmed smartly Friday as the troubled company announced that most of its bondholders had agreed to the terms of its reorganization plan - climbed even higher Monday after investors had spent the weekend evaluating the Anderson, Ind.-based automotive components maker's turnaround scheme.

A similar announcement of bondholder approval of a reorganization plan by Bally Total Fitness Holding Corp. likewise sent the problem-plagued Chicago-based health club operator's bonds climbing to robust levels.

On the merger and acquisition front, Friendly Ice Cream Corp.'s announcement that it has agreed to be acquired by Sun Capital Partners Inc. for $337.2 million pushed the Wilbraham, Mass.-based ice cream producer and restaurant company's bonds up.

But bondholders of another restaurant company, fast-food operator Wendy's International Inc., had a sour taste in their mouths after the third-largest U.S. hamburger chain, behind McDonald's and Burger King, announced a reduction in previously offered earnings guidance for the year, which overshadowed its accompanying announcement that it would consider a possible sale of the Columbus, Ohio-based company.

In the primary market, no deals were heard by participants to have priced, although several joined for forward calendar - Fresenius Medical Care AG & Co. KgaA, CMS Energy Corp., AmeriCredit Corp. and Magnum Coal Co. The CMS deal could price as soon as Tuesday.

A capital markets sell-side source who watches both high yield bonds and leveraged loans told Prospect News that the broad junk market was up 1/8 to ¼ point on Monday.

The source added that after showing unmistakable weakness through much of last week, high yield closed the week strong, with the strength carrying over into Monday.

The official also said that the 10-year Treasury closed yielding 5.13% on Monday, and remarked that in light of it having hit 5.30% last week, Treasuries may be stabilizing somewhat.

A $13 billion calendar

No junk issues were priced on Monday, however prospective issuers and their underwriters continued to lade deals onto an already spectacular forward calendar.

At Monday's close Prospect News had visibility on $13 billion of dollar-denominated high-yield bond deals in the market and expected to price before July 4.

Fresenius launches $500 million

Fresenius will begin a roadshow on Wednesday for its $500 million offering of 10-year senior notes (Ba3).

Banc of America Securities LLC is the left bookrunner for the debt refinancing deal from the Bad Homburg, Germany, provider of dialysis products and services. Deutsche Bank Securities and Morgan Stanley are joint bookrunners.

CMS to price $400 million on Tuesday

CMS Energy is expected to price $400 million of senior notes (Ba1/BB+/BB-) in two tranches on Tuesday.

The Jackson, Mich., integrated energy company is in the market with a $250 million tranche of 10-year fixed-rate notes and a $150 million tranche of five-year floating-rate notes.

Deutsche Bank Securities, Barclays Capital, Citigroup, JP Morgan, Merrill Lynch & Co., Wachovia Securities are underwriters for the debt refinancing and general corporate purposes deal.

Magnum Coal bringing second-lien deal

Magnum Coal will start a roadshow on Tuesday for its $350 million offering of seven-year senior secured second-lien notes (B3/B-) via Lehman Brothers.

The Central Appalachian coal producer will use the proceeds to refinance debt and for general corporate purposes.

AmeriCredit plans $200 million

AmeriCredit began a brief roadshow on Monday for its $200 million offering of eight-year senior notes (Ba3/B+), which are expected to price mid-week.

Deutsche Bank Securities and Lehman Brothers are joint bookrunners for the debt refinancing deal form the Fort Worth, Tex., automobile finance company.

SIG to market €770 million offering

Swiss beverage packaging firm SIG will start a roadshow on Tuesday for a €770 million two-part offering of notes, with Credit Suisse running the books.

The company plans to sell €450 million of nine-year senior notes and €320 million of 10-year senior subordinated notes.

SIG (Beverage Packaging Holdings (Luxembourg) II SA) is the issuing entity.

Proceeds will be used to refinance the company's €770 million bridge facility related to the LBO of SIG by Rank Group Holdings Ltd.

Remy on reorganization roll

Back in the secondary arena, Remy International's Delco Remy bonds - which had firmed solidly on Friday on the news that Remy had agreed to a reorganization plan that's to be implemented via a pre-packaged bankruptcy filing, added to those gains on Monday, after investors had time over the weekend to study the plan, which turns ownership of the company over to the bondholders.

A trader saw Remy's 11% subordinated notes due 2009 up 5 additional points to the 93.5 bid, 94.5 offered level, while the 8 5/8% notes slated to come due on Dec. 15 were up 7 points to 105.5 bid, 107. offered, "the highest level those bonds have traded at since they were issued in 1997," he said.

He further noted that with Remy having announced on Friday that the company has decided - and the bondholders agreed - that it will not make the coupon payment on the 8 5/8s that was due on Friday, "the notes are defaulted and will trade flat from now on" - effectively, a loss of several points in the notes' real value, despite the handsome jump in the nominal price of the bonds.

Another trader pegged those bonds up 4½ points on the day to 107 bid, and said that both the 11s and the company's 9 3/8% sub notes due 2012 had moved up to about 94 bid from 88 previously.

Another market source saw the 8 5/8s having only moved up 1½ points on Friday to 99.5 - but saw those bonds jump more than 5 points on Monday to 105, while the 11s, after having zoomed more than 20 points on the day Friday to around 91, actually moved downward, into the mid 80s, for a while on Monday, before coming off those lows to end above 95.

Trading in both bonds was seen as very active. The 9 3/8s were at the same time up about 5 points from the opening to 95, and up 10 points from where they had gone out on Friday. That issue traded busily Monday, but a little less so than the other subordinated issue, according to the source.

The catalyst for the big move in Remy's bonds was the mid-morning Friday announcement that Remy had obtained the consent of 75% of the holders of the 11s, 83% of the 8 5/8% notes, and 94% of the 9 3/8% notes on the restructuring plan, which will be implemented by the filing of a pre-packaged Chapter 11 case, and which will cut the company's debt by $360 million.

Among the plan's highlights, bondholder-wise, are the conversion of the two series of subordinated notes into 100% of the reorganized company's common equity, the exchange of the existing senior notes for $100 million of new third-lien pay-in-kind notes and approximately $50 million in cash, and the repayment in full of the outstanding second priority senior secured floating-rte notes.

Remy anticipates raising $75 million in preferred equity through a rights offering to be made to holders of the 8 5/8% senior notes and the two series of subordinated notes. It will also cancel out all outstanding stock.

Bally gets bankruptcy boost

Bally Total Fitness Holding's bonds were also up after that company made an announcement not unlike the one which Remy had released on Friday - that holders of a majority of its 10½% senior notes due 2011 and more than 80% of its 9 7/8% senior subordinated notes due slated to come due this Oct. 15 have agreed to the terms of the company's restructuring plan, which will be implemented by a Chapter 11 filing in the near future.

The 10½% senior notes showed particular strength, powering up to bid levels in the 109-111 area, up anywhere from 4 to 7 points, depending on where the bonds had been seen going out on Friday. The 9 7/8% subs were seen up about 2 or 3 points on the session.

A trader saw the seniors, for instance, rise to 109 bid from prior levels at 103.5 bid, 104.5 offered, while the juniors firmed to 99.5 bid, 100.5 offered from prior levels around 96.5 bid, 97.5 offered.

At another desk, a trader called the 101/2s up 6 points on the session at 109 bid, 110 offered, with the 9 7/8s at par bid, 102 offered, which he said was a 3 point rise.

Another market source saw a more-restrained 2 point gain in the sub bonds to 98 bid.

Under the terms of the restructuring agreement agreed to by the bondholders, the scheduled July 15 coupon interest payment will not be made - but the notes' coupon will be modified, including an increase in the annual interest rate to 12 3/8% effective from July 16. Bally plans to increase the amount of senior notes outstanding to $247,337,500, with the extra notes to be distributed to the holders of the existing seniors on a pro-rata basis, and the noteholders would also receive a fee equal to 2% of the face value of their notes on the date of the Chapter 11 filing.

The senior noteholders would also be given a "silent" second lien on substantially all assets of the company and the subsidiary guarantors.

The holders of the subordinated notes will receive $150 million of new PIK toggle notes, representing 50% of the principal amount of their claims, and shares of common stock representing 100% of the equity in the reorganized company. The new notes would carry a coupon of 12% if paid in cash and 13 5/8% if the interest is paid in kind.

Sun scoops up Friendly Ice Cream

Friendly Ice Cream's 8 3/8% notes due 2012 were seen by traders as having moved up to about the 102.5-103 level, well up from Friday's close at 99, on the news that the company will be acquired by Sun Capital Partners. Trading in the bonds was seen as quite active.

Friendly will be acquired by Freeze Operations Holding Corp, an affiliate of Sun Capital Partners in an all-cash transaction for $15.50 per share for a total consideration of $337.2 million. The transaction has no financing contingency.

Friendly, which has struggled to remain profitable, announced in March it would explore strategic alternatives for the nearly 80-year old company.

Bonds slip as Wendy's issues profit warning

Another restaurateur exploring its options is fast-food chain Wendy's, squeezed by the success of larger rivals McDonald's and Burger King.

Wendy said that JP Morgan & Co. and Lehman Brothers would act as its advisors as it looked into possibly selling the company, and while it also studied a possible securitization financing.

But that news was pushed aside by management's warning that 2007 earnings will come in under previous expectations, citing weaker than expected same-store sales growth and higher prices for such commodities as beef and dairy products.

That helped to push Wendy's downward, with its 6.20% notes due 2014, its most actively traded issue, seen having fallen to below 93 from prior levels around 95.

A trader saw its 6¼% notes due 2011 unchanged on the day at 97.5 bid, 98 offered - but said credit default swaps contracts linked to its bonds had widened out by about 15 basis points to 195-200 - a sign of investor angst about the company.

Wendy's had earlier predicted 2007 earnings of $330 million to $340 million, but cut that forecast to $295 million to $315 million.

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