Northwest Pipeline prices $185 million; Adesa launches $1.1 billion; Delco Remy bonds firm in secondary

By Paul A. Harris

St. Louis, April 2 - Sources marked junk generally unchanged during a quiet Monday session that saw the ranks depleted by the Easter and Passover holidays as well as the New York Yankees home opener.

In the primary market, sources were viewing Northwest Pipeline Corp.'s $185 million drive-by deal as junk, despite an investment-grade BBB- rating from Fitch. The 5.95% notes priced at a spread of 135 bps.

And KAR Holdings, Inc. led a parade of deal starts with its $1.1 billion multi-tranche offering that will back the acquisition of Adesa, Inc.

"It's the beginning of a new quarter, and people are taking advantage of the relative stability in the Treasury market," one source commented, adding that junk remains generally stable.

Meanwhile in the secondary market traders said that the Monday session saw extremely light activity apart from names that were impacted by news headlines.

Northwest Pipeline prices $185 million

Northwest Pipeline, a unit of Williams Cos., Inc., priced a quick-to-market $185 million issue of 5.95% 10-year senior notes (Ba1/BB+/BBB-) at a 135 basis points spread to Treasuries on Monday.

The spread came at the low end of the 137.5 bps area price talk.

The issue was priced at 99.655 resulting in a 5.996% yield to maturity.

RBS Greenwich Capital and Banc of America Securities were joint bookrunners for the deal which the company brought in order to refinance higher coupon debt, namely its 8 1/8% notes due 2010.

Sources said that despite the investment-grade rating from Fitch the deal was being viewed as junk.

A trader who spoke at the Monday close had not seen the new 5.95% Northwest Pipeline bonds trade in the gray market.

However a high yield syndicate official reported seeing them slightly firmer at 132 bps bid.

KAR leads parade

Elsewhere in the primary market KAR Holdings led a parade of deal launches announced as the first week of April got underway.

The automotive specialty salvage services provider is offering $1.1 billion in three tranches, with a roadshow this week and pricing set for next week.

The company plans to issue $600 million in tranches of eight-year senior fixed-rate and floating-rate notes (B3/CCC), and $500 million of 10-year senior subordinated notes (Caa1/CCC).

Bear Stearns, UBS, Goldman Sachs and Deutsche Bank Securities are joint bookrunners for the acquisition financing.

Preem launches $750 million

Swedish oil refiner and marketer, Preem Finans AB (Preem Petroleum), plans to issue $750 million equivalent of dollar-denominated and euro-denominated three-year split-coupon floating-rate notes later this week, via Deutsche Bank Securities.

The notes, which will mature in April 2010, will feature a split margin payable in cash or in kind.

Proceeds will be used to fund a distribution.

Stockholm-based Preem Petroleum is a subsidiary of Corral Petroleum, part of the Corral Group which is ultimately owned by Saudi Arabian investor Mohammed H. Al-Amoudi.

United Surgical starts $480 million

Elsewhere United Surgical Partners International, Inc. will start a roadshow on Tuesday for its $480 million two-part notes offering.

The Dallas-based company is offering $240 million each of 10-year senior subordinated notes and 10-year senior subordinated toggle notes.

Citigroup, Lehman Brothers, UBS Investment Bank and Bear Stearns are joint bookrunners for the merger and related debt refinancing deal.

Stater for Tuesday

In drive-by action, Stater Bros. Holdings Inc. announced plans to price a $275 million offering of eight-year senior notes (B2/B+) on Tuesday afternoon.

Banc of America Securities LLC is the bookrunner for the debt refinancing, capital expenditure-funding, stock repurchasing, dividend-funding (and possibly general corporate purposes) deal from the Colton, Calif., supermarket chain operator.

Talking the deals

Pharmaceutical Technologies & Services set price talk on Monday for its $865 million equivalent two-part offering of high-yield notes (B-).

The Somerset, N.J. contract manufacturing and service provider for the pharmaceutical industry talked a dollar-denominated tranche of eight-year senior PIK toggle notes at 9¼% to 9½%, and a euro-denominated tranche of 10-year senior subordinated notes at the 9 7/8% area.

Morgan Stanley, Goldman Sachs & Co., Banc of America Securities and Deutsche Bank Securities are joint bookrunners for the offering which is expected to price on Wednesday.

Elsewhere Altra Industrial Motion Inc. set price talk for a $105 million add-on to its 9% senior notes due December 1, 2011 (B2/CCC+) at a 100.50 to 101.00.

The Jefferies & Co.-led deal is expected to price on Tuesday morning.

Delco Remy firms

Traders said that the existing bonds of Delco Remy traded up smartly on Tuesday after the company announced that it has notified the Securities and Exchange Commission that it is no longer obligated to file periodic reports under the Exchange Act.

"Discontinuing the SEC reporting will provide Remy with additional time and resources to allocate to the two key objectives required to strengthen our company - successfully completing a recapitalization effort and renegotiating certain key commercial agreements," said John Weber, president and CEO, in a Monday press release.

A trader saw the Anderson, Ind., auto parts supplier's 11% notes due 2009 up 6 points to 29 bid, 31 offered, and its 8 5/8% notes due 2007 up 3 points at 83 bid, 85 offered.

Another trader said that Delco Remy's bonds were up 3 or 4 points on the day.

The source said that the 11% and 9 3/8% subordinated paper closed Monday at 29 bid, 29.50 offered, after closing Friday at 23.50 bid, 24 offered.

This trader saw buyers come "out of the woodwork," and suggested that a lot of investors were short the subordinated paper versus long the above-mentioned senior paper.

Nevertheless, the trader added, "There was also some smart money" put to work in Delco Remy bonds on Monday.

Eagle Family Foods up 10 points

Traders also saw a dramatic lift in the price of Eagle Family Foods' sole issue, its 8¾% notes maturing in 2008, on news that is being acquired by jelly-maker J.M. Smucker Co. in a deal estimated to be worth $248 million.

Two traders had identical spots on the bonds: 100.25 bid, 100.75 offered, up from 90.25 bid late last week.

One of those traders, who gave those levels early Monday, said that the paper had held in at the same price throughout the session.

Homebuilders slide

News that the Feds are continuing to investigate Beazer Homes' mortgage lending practices continued to pressure its paper on Monday, a trader said.

The source saw Beazer's 8 1/8% bonds due 2016 closing 92 bid, 93 offered, down 2 points on the session.

This source recounted that a month ago the same paper had been trading at a premium, around 104 bid, so they were off more than 10 points in the space of a month.

Elsewhere in the sector Technical Olympic USA saw its 10 3/8% notes due 2012 off a point at 73 bid, 75 offered.

The trader added that off about 15 points in the past month on news the company faces higher-than-expected charges related to an anticipated settlement of its dispute with joint venture, Transeastern.

In a related note, for the entire month of March 2007 the home builders component of the Bear Stearns High Yield Index's consumer cyclical sector dramatically underperformed the index with a return of negative 5.02% for the period.

Other names on the move

Bonds of Delta Airlines firmed on Monday, with a trader marking the 8.30% due 2029 57.50 bid, 58.50 offered, up a point with better buyers.

Better than expected numbers gave a lift to Duane Reade notes, with a trader spotting its 9¾% notes at 102 bid, up at least half a point.

Meanwhile Land O'Lakes, Inc. long paper improved on news of an asset sale.

The Arden Hills, Minn.-based food and agricultural cooperative announced the completion of the sale of assets of its Cheese & Protein International operations, located in Tulare, Calif., to a U.S. subsidiary of Saputo Inc.

A trader said that the company's 8¾% notes closed at 104.25 bid, 104.50 offered while its 9% notes went out 106 bid, 106.25 offered.

Both issues, the trader added, are straddling the call price, and are not expected to move.

However, the source added, Land O' Lakes' long paper, its 7.45% due 2028, closed Monday at 95.75 bid, 96.50 offered, up at least ½ point in a move that was tied into Treasuries, in part, according to the trader.

"The overall tone of the market remains firm," the trader commented, adding that there had not been much trading volume on Monday.

Recent issues holding firm

Sources said that recently priced issues held firm on Monday.

One source saw the new Matrix Acquisition/MacDermid 9½% senior subordinated notes due 2017 at 102 bid, 103 offered, unchanged on the day.

The source also had the new Hawker Beechcraft Acquisition Co., LLC 81/2s holding in at 104 bid, 104.25 offered while the new Hawker 9¾% notes were at 104.50 bid, 105 offered, also unchanged.

And Freeport McMoRan Copper & Gold Inc.'s new 8 3/8% notes due 2017 were unchanged Monday at 107.75 bid, 108 offered, the source said, adding that 81/4s due 2015 were trading a quarter of a point behind the 8 3/8% notes.

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