Autos continue upward, Elan plunges; TECO sells drive-by; funds end losing run with $976 million inflow

By Paul Deckelman

New York, June 1 - Automotive names continued to live life in the fast lane on Thursday, mostly advancing in line with a generally firming trend in the market. One of the bigger gainers was Lawrenceville, N.J.-based storage battery maker Exide Technologies, whose bonds have pushed up into the 80s from prior levels in the low-to-mid 70s on news that the company is amending its credit facilities.

There weren't many losers - but a notable one was Elan Corp. plc, whose bonds and shares swooned on the news that a fourth patient who took the Irish pharmaceutical company's multiple sclerosis drug, Tysabri, has come down with a rare and potentially fatal brain infection.

In the primary sphere, TECO Energy Inc. was heard to have brought a quickly shopped offering of floating-rate notes to market - the third suddenly-emerging drive-by deal in two days, showing there is some life in the new-deal arena, even if the forward calendar doesn't seem to indicate it.

The suddenly perky primary and generally robust secondary would seem to fit in with the latest gauge of overall junk market liquidity - a whopping $976.2 million inflow to high-yield mutual funds in the week ended Wednesday.

The infusion of cash into the funds tabulated each week by AMG Data Services of Arcata, Calif. marks the first time in a long time - 16 weeks to be exact - that more money has come into the funds than has left them, a sign that investors may feel that things are looking up.

Over the previous 15 weeks - including the week ended last Wednesday (May 25), which saw a $225.6 million outflow - some $6.776 billion had hemorrhaged from the funds, according to a Prospect News analysis of the AMG figures.

Even with the massive inflow - certainly the biggest this year, and, in fact, the largest inflow since the $1.143 billion infusion seen in the week ended Sept. 3, 2003 - far more money has left the funds this year than has come into them, with the cumulative outflow at $6.725 billion, although that is substantially down from $7.701 billion the previous week. Inflows have been seen in just four weeks in the 22 since the start of the year, and outflows in the other 22.

The figures exclude distributions and count only those funds that report on a weekly basis.

"Well," said one trader, who exclaimed "finally, a turn" in reaction to the news of the inflow, "that's $1 billion. Now, just $6 billion [more of outflows to make up for] to go."

Another trader said that the nearly $1 billion inflow seemed appropriate because "the market's certainly been on a tear this past week. "

This was equally true Thursday, when the strong tone of Wednesday's session seemed to carry over.

"With Treasuries up yesterday [Wednesday], we started off very strong this morning [Thursday] and it didn't let up at all," the trader said. "I'd say high yield in general was up a point across the board."

Auto sector keeps rising

Once again, the auto names showed particular strength, even in the face of lower May sales figures reported Wednesday by the supplier sector's two biggest customers, General Motors Corp. and Ford Motor Co.

For instance, a market source saw former GM subsidiary Delphi Corp.'s 6.55% notes due 2006 a point better at 97 bid, while its 6½% notes due 2009 firmed to 85 bid from 82.5. The Troy, Mich.-based automotive electronics manufacturer's 6½% notes due 2013 improved to 76 bid from 72.75 on Wednesday, while its 7 1/8% notes due 2029 closed at 70 bid, up from 68.5.

Delphi's opposite number - Van Buren Township, Mich.-based Visteon Corp., a former Ford subsidiary - was also better, its 8¼% notes due 2010 two points up, at 95 bid, while its 7% notes due 2014 were seen having gained three points to 86. Visteon's 7.95% notes coming due on Aug. 1 - which will be redeemed thanks to a $250 million secured loan to Visteon by its former corporate parent - were unchanged at 100.25.

Other names in the sector seen doing better included Metaldyne Corp., whose 10% notes due 2013 improved nearly four points on the day to 86.75, while Goodyear Tire & Rubber's 11% notes due 2011 were half a point better at 111.75, and its benchmark 7.857% notes due 2011 inflated to 97.5 bid from 96 on Wednesday.

General Motors' 7 1/8% notes due 2013 were seen two points higher at 87.5 bid, while Dura Operating Corp.'s 8 5/8% notes due 2012 were up more than two points at 91.5 bid, a market source said.

Exide gains

Exide's bonds have been sharply higher over the past two sessions, apparently helped by the news that the company and the administrative agent bank on its $365 million senior credit facility would be meeting with its secured lenders Thursday to formally launch amendments to that facility. On investment-oriented internet bulletin boards, there was some talk that the company could have an announcement Friday about better terms on its loans.

A trader saw Exide's 10½% notes due 2013 "on a roller-coaster ride," rising from 71 bid to about 75 bid, 77 offered on Wednesday, and then going on from there to hit a peak of 84 bid, 86 offered Thursday, before dropping back to end, he said, at 79 bid, 81 offered.

The trader, asked if he had heard that anything was up besides the financing news, mentioned some market buzz about the possibility someone could "take the company private" - although no news was seen out as of Thursday that might support such speculation.

At another desk, the Exide bonds were seen having done even better, with a trader quoting them as "straddling 80" at the open, up from 75 bid, 76 offered Wednesday, then trading as high as 84.5 during the day before the notes "came back in a little bit," to still end solidly higher at 82.5 bid, 83.5 offered.

Calpine continues gains

Outside of the autosphere, the trader saw Calpine Corp.'s bonds at least 1½ to two points better on the session, with the San Jose, Calif.-based power generating company's 8½% notes due 2008 up a deuce to 62 bid, 64 offered, while its 8½% 2011 notes were 1½ points ahead at 61 bid, 63 offered.

Calpine's subsidiary, NewSouth Energy LLC, announced Thursday that Entergy Corp. has agreed to buy up to 485 megawatts of electricity from its Carville Energy Center in Louisiana for up to one year starting on July 1. Financial terms of the deal were not disclosed.

Amkor keeps moving up

Amkor Technology Inc. was up for a third straight session, helped by an equity upgrade by Lehman Brothers that sent its Nasdaq-traded shares zooming 70 cents (18.67%) to $4.45 on volume of 7.5 million, nearly four time the norm. Lehman analyst Ted Parmigiani now projects the company to return to profitability during the second half of 2005 - versus earlier forecasts of the second half of 2006.

The rise may have also been aided by continued optimism following the West Chester, Pa.-based high tech company's SEC filing last week in which it revealed its lenders had agreed to give it more covenant flexibility. Its 9¼% notes due 2008, which gained 1½ points on Wednesday, were seen up another point Thursday at 92 bid, while its 10½% notes due 2009 improved to 78 bid from 76.5.

Dobson steady despite rumors

A source said that Dobson Communications Corp.'s 8 7/8% notes due 2013 and the 10% notes due 2011 of its American Cellular Corp. subsidiary hung in at around the same levels they had risen to on Wednesday - 82.75 bid, 83.75 offered for the Dobson bonds and 98 bid, 99 offered for the American Cellulars. Its Nasdaq-traded shares meantime climbed 41 cents (16.73%) to $2.86 on volume of 22 million - more than 14 times the usual.

Standard & Poor's speculated in an on-line report Thursday that the strong trading in Dobson's bonds was linked to a market buzz about a possible effort to sell American Cellular to a larger rival, such as United States Cellular Corp. and Alltel Corp. However, Oklahoma City-based Dobson later issued a statement denying any such intentions.

Elan plunges

On the downside, Elan's bonds - which had risen solidly on Wednesday on the Irish drugmaker's announcement that it had already spent $211 million to pay down 2008 debt and would spend another $31 million to take out some indebtedness - took a tumble Thursday, after the Boston Globe reported that a fourth patient taking the company's Tysabri drug to treat MS may have contracted a rate, and potentially fatal brain disease, progressive multifocal leukoencephalopathy. Prior reports that two patients taking Tysabri had died of MLP during clinical trials and a third was severely affected, had forced Elan and its partner, Biogen Idec Inc., to pull the drug from the shelves earlier this year. Officials of the two companies had held out hope that the drug might be returned to the market somewhere down the line, but the latest reports appear to stymie those hopes, at least for now.

Elan's 7¾% notes due 2011 were seen down nearly four points at 84.75, while its 7¼% notes due 2008 were two points off at 92.25. Elan's New York Stock Exchange-traded shares nosedived $1.14 (14.27%) to $6.85 on volume of 43.1 million, nearly double the usual turnover.

TECO sells floaters

In the primary market, Tampa, Fla.-based power generator TECO Energy Inc. was heard to have sold $100 million of floating-rate senior notes due 2010 via joint book-running managers UBS Investment Bank, Citigroup Global Markets Inc. and Morgan Stanley.

The notes priced at par, at an interest rate of 200 basis points over 3-month Libor. Proceeds of the bond deal will go to partially fund the retirement of the company's outstanding $380 million of 10½% notes due 2007 and its $200 million of 8½% trust preferred securities, along with cash from other sources.

The quickly shopped deal, which was not publicly announced beforehand, was the third drive-by pricing in two sessions, following Wednesday's rapidly-appearing offers from Beazer Homes and Station Casinos Inc.

The new TECO deal did not materialize in Thursday's after-market trading, said one trader, who noted that because of its smallish size, "it was probably just put away."

Meanwhile, Beazer's new 6 7/8% notes due 2015, which priced Wednesday at 99.096, were seen Thursday remaining at 99.5 bid, par offered. Station's new 6 7/8% 2016 bonds, sold as an add-on to an existing issue, were "pretty much unchanged" from their 120.25 issue price, a trader said, at 102.5 bid, 103.5 offered.

Fimag starts roadshow

From out of Europe came word that Austrian-based Fimag Finanz Industrie Management AG plans to sell €75 million of five-year notes to investors there, primarily in its home country. The deal will be brought to market by two Austrian banks - Erste Bank and RZB - and was being shopped to investors via a roadshow that began Thursday in Vienna. Pricing is expected sometime in the middle of next week.

Proceeds from the bond deal will be used to finance the company's expansion in central and Eastern Europe.

Rumored price talk on the deal calls for a spread over swaps of 165 to 175 basis points.

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