American Pacific prices eight-years; paper bonds off after Monday gain

By Paul Deckelman, Paul A. Harris and Stephanie N. Rotondo

New York, Jan. 30 - American Pacific Corp. was heard by high yield syndicate sources to have successfully priced an issue of eight-year senior notes on Tuesday. However, the smallish $110 million offering never quite made it out of the gate and into the secondary market, traders said.

Elsewhere on the primary scene, pre-deal market price talk emerged on Rexnord Global Inc./Rexnord Corp.'s upcoming two-part offering, and on TransDigm Inc.'s 7¾% 2014 add-on deal, which is expected to price sometime Wednesday. That is also when CEVA (TNT Logistics) is expected to market its holding-company PIK loan, via a London roadshow.

In the secondary market, traders saw little real activity, as investors waited for the conclusion Wednesday of the two-day Federal Open Market Committee meeting. The policy-making Fed panel is expected to keep interest rates where they are, although market participants will carefully examine the wording of the expected Fed announcement for clues as to which way the central bank may move next.

Bonds of paper companies were "in a little bit," in the words of one trader, on profit-taking after the strong gains seen in Abitibi-Consolidated Inc. bonds on Monday on the news that the Montreal-based pulp and paper company will merge with Bowater Inc., news which also lifted the Bowater bonds and the bonds of such other forest products operators as Tembec Inc.

At the mid-day point on Tuesday a market source said that junk was continuing to show some softness, and suggested the accounts may be taking a little bit of a breather.

In the primary market Mexican telecom Axtel, SAB de CV priced an upsized $275 million issue of 10-year senior unsecured notes (Ba3/BB-) at par to yield 7 5/8%, on the tight end of the 7¾% area price talk.

Credit Suisse led the Rule 144A/Regulation S deal, which was upsized from $250 million.

Meanwhile stateside, American Pacific priced a $110 million issue of eight-year senior notes (B2/B) at par to yield 9%, in a transaction that was led by Wachovia Securities.

Slow-building calendar

Heading into the final day of January 2007, primary market observers say the forward calendar is anything but heavy.

The Prospect News tally of deals that are in the market came well shy of the $4 billion mark at Tuesday's close.

A buy-side source said that it is not a big calendar, and added that the low to moderate volume of issuance could be lending support to the prices of existing bonds in the secondary market.

A sell-sider, meanwhile, agreed that the present forward calendar is not large, and added that issuance might remain at the present pace into the intermediate future with prospective issuers entering their "quiet periods" as they prepare fresh financial numbers.

However, the sell-sider added, be on the lookout for opportunistic financings that are apt to come quick-to-market.

Some of those could be sizable, the source advised.

Loan market continues to roar

Lately sources from the buy-side and the sell-side who operate in both the junk bond and leveraged loan sectors say they have been more focused on the loan side as that market continues to roar.

An investor said that demand for new paper is now sufficiently intense that while bank loan issuance maintains a torrid pace secondary prices continue to firm - a phenomenon this buy-sider claims never to have seen before.

A PIK loan from CEVA

Meanwhile, on Tuesday Netherlands-based Louis Topco Ltd., the holding company for CEVA Logistics, unveiled a €250 million offering of PIK loans due June 2017, via Credit Suisse.

Unlike the recent spate of unsecured holdco PIK loans, from Verso Paper Finance Holdings LLC, Affinion Group Holdings, Inc. and Prysmian Cables & Systems, the CEVA deal does not have a toggle feature, under which the coupon steps up, typically by 75 basis points, when the issuer pays in kind.

Also unlike the recent unsecured PIK loans from the issuers mentioned above, the CEVA loans will be exchangeable into notes.

As with the rest of the pack, CEVA will use the proceeds to fund a dividend.

The loan, which will price at 99.00, is going to be presented to investors on Wednesday.

Talking the deals

Compared to the benchmarks set in the fourth quarter of last year by multi-tranche, multi-billion dollar deals from Hercules Holding II/HCA Inc. ($5.70 billion) and Firestone Acquisition Corp. (Freescale Semiconductor Inc.) ($5.95 billion) the offerings presently wending their ways along the investor roadshow trail seem modest indeed.

Nevertheless price talk was heard Tuesday on three quarter billion-dollar or above offerings that are expected to price by Thursday's close.

Egypt's Orascom Telecom Finance SCA talked its $500 million offering of seven-year notes at a yield in the 8¼% area.

Credit Suisse and Citigroup are joint bookrunners for the Rule 144A/Regulation S deal.

Elsewhere Rexnord Global Inc. and Rexnord Corp. talked their $460 million two-part offering of senior notes (expected B3/confirmed CCC+) on Tuesday.

The Milwaukee-based power train manufacturer talked a $310 million add-on to its 9½% senior notes due Aug. 1, 2014 at a price of 102.50 to 103. The notes become callable on Aug. 1, 2010 at 104.75.

Meanwhile Rexnord talked a $150 million offering of new 9.5-year new senior notes at a yield in the 9% area. The new notes come with 4.5 years of call protection.

Credit Suisse, Banc of America Securities LLC and UBS Investment Bank are the bookrunners.

And TransDigm Inc. talked a $250 million add-on to its 7¾% senior subordinated notes due July 15, 2014, via Credit Suisse and Lehman Brothers, at a dollar-price range of 100.50 to 101.0.

Pricing is expected Wednesday morning.

Waiting on the Fed

A secondary trader, when asked about the new American Pacific 9% senior notes due 2015, said "I never saw 'em trade" - a sentiment echoed by several other traders as well.

Back among the established issues, the first trader said: "The market got hurt a little bit today, with some sell-offs and profit-taking.

"Various and sundry things [were lower]. People were taking money off the table before the Fed meeting [Wednesday]."

Overall, he characterized the market as "very quiet," and said that Monday also had been pretty quiet, outside of the news-driven paper issues.

A second trader said "most things were lower, most things were heavier, and most without reason. I think the market is feeling a little heavy here," especially with oil prices heading back up toward the $60 per barrel level.

The price of a barrel of sweet, light crude for March delivery shot up $2.96 on Tuesday to $56.97 per barrel - well up from recent lows in the $50 area - in trading on the New York Mercantile Exchange.

Prices got a boost from investor expectations that the Organization of Petroleum Exporting Countries will make good on its previously announced plans to prop up prices by cutting output across the multinational cartel, whose members include Venezuela. The onset of genuinely wintery weather in much of the northern part of the United States, following several weeks of unseasonably balmy temperatures and little real snow, particularly in the Northeast, is also a factor in the oil price rebound.

While the trader saw Treasurys "kind of sideways - off a touch, then up a touch," the kind of issues he watches were "finally starting to show a couple of cracks here - you've got to have some profit-takers."

However, a third trader offered a contrary opinion. "As much as I would like to say that the market was heavy, it didn't really go down that much. Overall, there's still a lot of buyers out there, a lot of bids, and still a lot of cash in the market."

Overall, he said, "I don't think the activity was tremendous - it was okay, [but] there wasn't a whole lot of activity."

He added that "regardless of what Treasuries do, regardless what the stock market does, or gold or oil or commodity prices, our market tries to back up, tries to get heavy, but just doesn't seem to be able to break through the resistance area. It's met with people putting money to work."

However, noting a dearth of real activity in either the secondary market or in the new-deal arena, he said that "everyone is sitting and waiting for the Fed to come out tomorrow [Wednesday]."

Paper names crumpled

Just as the paper names had been the major upside movers on Monday on the Abitibi-Bowater merger news, they were one of few notable features Tuesday, this time listing to the downside.

The first trader saw Abitibi's 8 3/8% notes due 2015 at 97 bid, 97.75 offered, which he called down a point from Monday's gains, while another trader, saying the sector was "in a little bit," also saw those 8 3/8s at 97.25 bid, 97.75 offered, down from the 98.75 levels that he saw the paper having risen to on Monday from the low 90s previously. He further saw the company's 8½% notes due 2029, which on Monday had moved up to around the 92 level from prior levels around 88 bid, falling back Tuesday to 90.5 bid.

He also saw Bowater's paper "off a little bit."

A market source at another shop saw the Abitibi 7½% notes due 2028 off 2½ points on the day at 84 bid.

Among other names in the group, a trader saw Tembec's bonds a little easier on the day, citing profit-taking on the name, whose bonds have recently firmed smartly on weakness in the Canadian dollar and which were up another 1 to 1½ points on Monday on sector strength following the Abitibi-Bowater merger news.

But they gave those latter points back on Tuesday with the Tembec 7¾% notes falling to 71 bid, 72 offered, down 1½ points. "There was definite weakness there," he said.

Dole decline continues

Elsewhere, the trader saw Dole Food Co. Inc.'s bonds - which had fallen about a point on the day Monday on the late-session news that Moody's Investors Service downgraded the Westlake Village, Calif.-based fruit and vegetable processing giant's ratings - down another point on Tuesday, "but orderly, nothing crazy."

He saw the company's 8¾% notes due 2013 around 98.5 bid, 99.5 offered, "with some sellers out there at the end of the day - so maybe we'll see a little bit of weakness coming out [Wednesday] morning."

Retail, gaming easier

In the retailing area, he saw Duane Reade Inc.'s 9¾% senior subordinated notes due 2011 off ½ to ¾ point at 93.25 bid, 94.25 offered.

Moody's Investors Service on Tuesday affirmed the New York-based drugstore operator's corporate family and probability-of-default ratings at Caa1, its $210 million floating-rate secured senior notes due 2010 at B3, and its $195 million of 9¾% notes at Caa3. The outlook remains stable

He saw the bonds of specialty retailer Brookstone Inc. down about a point to 100.5 bid, 101.5 offered, but added that "they've had a nice run," having gradually moved up to their current levels from a 96-97 context in early November.

He also some heaviness in the gaming sector, with MGM Mirage, Wynn Gaming and Las Vegas Sands "all off a half [point] to three-quarters - but no panic selling."

Remy leads auto names lower

A trader saw the automotive names "off a quarter [point] to a half [point], but he gave no specific levels for any company's bonds, nor an explanation. "No names in particular - just the whole sector was in."

Another saw Remy International Inc.'s "juniors down a couple and their seniors up a couple," with the Anderson, Ind.-based automotive electrical systems manufacturers' 8 5/8% notes due 2007 two points better at 87 bid, 88 offered, but its 11% subordinated notes due 2009 down a point on the bid side and two on the offered side at 38 bid, 39 offered.

Elsewhere in the automotive realm, he saw Dana Corp.'s bonds off 1½ points, such as its 6½% notes due 2008, at 74 bid, 75 offered.

Airlines off on oil hike

Also in the distressed-bond precincts, bankrupt airline paper continued to weaken Tuesday as crude oil hit almost $57 a barrel, possibly portending a future rise in jet fuel prices.

Delta Air Lines Inc. saw its 8.30% notes drop slightly on the higher energy prices, and as would-be buyer U.S. Airways Group Inc. denied a report that it was upping its takeover bid by $1 billion.

As oil prices jumped over $3 during the trading day, Northwest Airlines Corp.'s bonds dropped about a point. Company management also denied that it was in any kind of potential merger talks, reiterating that the company is expecting to soon independently emerge from bankruptcy.

Atlanta-based Number-Three U.S. carrier Delta's 8.30% notes due 2029 slipped about a quarter of a point to 61.75 bid, 62.75 offered, a trader said. Another trader saw some movement in the notes, seeing the bonds push as high as 64 bid from opening levels around 62 bid, 63 offered - but saw them come off those highs and actually give back a point on the day, ending at 61 bid, 62 offered.

News that U.S. Airways is not increasing its hostile takeover bid also fueled the dip. The Tempe, Ariz.-based company denied reports that the bid would be increased by $1 billion, or that the Feb. 1 deadline for Delta to accept the offer would be extended.

"We have not raised our bid," U.S. Airways spokesman Phil Gee said Tuesday. "The previous offer is still on the table and is set to expire Feb. 1."

One trader called the constant back-and-forth between the companies "lots of shuckin' and jivin'."

"There's not a lot of action," he said.

Delta is set to discuss its own reorganization plan with a bankruptcy court on Feb. 7. The company has maintained its desire to emerge from Chapter 11 protection as a stand-alone airline.

To that end, Delta announced Tuesday that it had obtained commitments for a $2.5 billion exit financing facility, "marking a significant step forward for the company's plan to exit bankruptcy in Spring 2007 as a strong, well-capitalized standalone carrier," according to a company issued press release.

Delta said six financial institutions - JPMorgan, Goldman Sachs & Co., Merrill Lynch, Lehman Brothers, UBS, and Barclays Capital - would lead the exit facility.

Meanwhile, news reports Tuesday indicated that Northwest will not be merging with Delta, or any other carrier for that matter, according to the company's chief executive officer.

There had been some recent media reports - all strictly unconfirmed - that Northwest and Delta were in talks, apparently spurred by Delta's desire to not be acquired by US Air.

CEO Doug Steenland said his company will emerge as a stand-alone carrier and stay that way through 2007. Eagan, Minn.-based Number-Five U.S carrier Northwest is due to file the details of its reorganization plan by Feb. 15.

Northwest's 10% notes due 2009 ended lower at 94.25 bid, 95.25 offered. One trader saw Northwest's 8 7/8% notes due 2006 unchanged, at 93 bid, 94 offered.

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