French Lick, Saskatchewan deals price; Bombardier, Movie Gallery gain; funds see $200 million outflow

By Paul Deckelman and Paul A. Harris

New York, March 30 - French Lick Resorts and Casinos LLC Corp. was heard by high yield syndicate sources Thursday to have successfully priced its restructured offering of eight-year notes. Saskatchewan Wheat Pool Inc. was also heard to have brought a new deal to market during the session, a downsized Canadian-dollar denominated offering of seven-year notes.

In the secondary market, the bonds of Bombardier Inc. were booming in the wake of strong quarterly numbers reported by the Canadian transportation equipment maker after the close on Wednesday.

Also up - and up big, traders said - were Movie Gallery Inc.'s bonds, paralleling a rise in the Dothan, Ala.-based home video rental and sales chain operator's stock, probably spurred by short-covering.

Delphi Corp. bonds were lower, as the United Auto Workers union said that the company would likely carry out its promise to ask the federal judge overseeing its bankruptcy proceedings for permission to void labor contracts covering some 34,000 hourly workers - a step which the union warns will bring about a potentially devastating strike.

Overall sources marked the broad high-yield market unchanged to slightly lower on Thursday.

And late in the day, 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 $199.8 million more left those funds than came into them.

That outflow more than wiped out the $48.9 million inflow seen in the previous week, ended March 22, which had been the first inflow seen after six straight weeks of outflows, dating back to early February. Over the last eight weeks net outflows have totaled some $931.3 million, according to a Prospect News analysis of the AMG statistics.

Counting the latest week's result, outflows have now been seen in 10 weeks out of the 13 since the start of the year, totaling about $1.3 billion in that time, up from the previous week's $1.1 billion total, according to the Prospect News analysis.

The latest outflow is part of a broader negative pattern seen in 12 of the last 16 weeks, dating back to mid-December. In that time, net outflows have totaled $2.146 billion, the analysis indicated.

Those results, in turn, confirm the continuation of the predominantly negative trend that was in evidence throughout most of 2005, when $11.483 billion more left the funds than came into them, according to the Prospect News analysis - much more severe than the $3.236 billion net outflow seen in 2004.

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 between 10% and

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 hedge funds.

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

Primary quieter after $4.1 billion

In the backwash of Wednesday's $4.1 billion equivalent of issuance, the primary market passed the session in comparative quiet.

Two issues, from two off-the-run issuers, were priced for a total of $270 million and C$100 million.

French Lick comes at wide end of talk

The only dollar-denominated deal to price Thursday was Indiana-based French Lick Resorts and Casinos LLC's $270 million issue of eight-year first mortgage notes (B3/B-) which came at par to yield 10¾%.

The Merrill Lynch-led construction financing deal came at the wide end of the 10½% to 10¾%.

Saskatchewan Wheat prices

Also pricing Thursday was Saskatchewan Wheat Pool, Inc.'s C$100 million issue of seven-year senior unsecured notes (Dominion Bond Rating Service B/Standard & Poor's B).

The notes priced at par to yield 8%, at the tight end of the 8% to 8½% price talk, according to an informed source.

TD Securities ran the books for the debt refinancing deal from the Regina, Sask.-based publicly traded agribusiness.

The notes issue was downsized from C$150 million, with C$50 million being shifted to a bought deal equity offering, which was completed concurrently with the notes sale.

The source said that 90% of Pool's notes were purchased by institutional accounts, with the remaining 10% taken out by retail investors.

The source added that the notes were broadly distributed, primarily in Canada.

Visant talks notes at 9 3/8% area

In the wake of the five drive-by deals that priced on Wednesday, one quick-to-market issuer appeared on Thursday.

Class ring company Visant Holding Corp. (Jostens Holding) talked its $350 million offering of senior notes due Dec. 1, 2013 (Caa2/expected B-) at a yield in the 9 3/8% area.

Books close at 11 a.m. ET Friday, with pricing expected afterwards.

Lehman Brothers and Bank of America Securities are joint bookrunners.

Proceeds will be used to fund a dividend, with the remainder, if any, pegged for general corporate purposes.

News also surfaced on a deal that is winding up its investor roadshow.

Wood Resources LLC/Finance Corp. is talking its $75 million offering of seven-year senior secured floating-rate notes (B3/B-) at six-month Libor plus 750 basis points.

The Jefferies & Co.-led deal is expected to price late Friday or on Monday.

Two roadshow starts

The forward calendar continued to build on Thursday, with the amount of dollar-denominated business thought to be in the market notching up toward the $3 billion mark.

Basic Energy Services, Inc. began a roadshow for its $200 million offering of 10-year senior notes (B), via UBS Investment Bank, Banc of America Securities and Lehman Brothers.

The Midland, Tex., oil and gas well site services will use the proceeds to repay bank debt related to acquisitions and for general corporate purposes.

Also via UBS, another services provider with a focus on the oil and gas industry, Lafayette, La.-based commercial helicopter services company PHI, Inc., will start a roadshow Friday for its $150 million offering of seven-year notes (existing ratings B1/BB-).

Proceeds, together with the proceeds from a concurrent equity offering, will be used to fund the tender for the company's 9 3/8% senior notes, as well as to fund its fleet expansion.

Buy-sider eyes Autonation deal

A buy-side source reached by telephone Thursday afternoon told Prospect News that four of the deals that priced in the Wednesday burst of drive-by issuance - new bonds from Dynegy Holding, Host Marriott, Newfield Exploration Company and Nevada Power - appeared to be holding in right around their respective issue prices.

"The market seemed to take those deals yesterday in stride," the buy-sider commented.

"Of course it's not like anyone is making a huge amount of money off of them.

"The companies are being opportunistic- especially the double-Bs."

The buy-sider will take a flyer on the above-mentioned Visant deal but expressed an interest in Autonation Inc.'s $800 million offering of senior unsecured notes in two tranches (Ba2/BB+/expected BB+).

The transaction is expected to price next week via JP Morgan, Banc of America Securities and Wachovia Securities.

The buy-side source said that the Florida-based automotive retailer's $400 million tranche of eight-year fixed-rate notes is pro formaed at 7 1/8% while the $400 million tranche of seven-year floating-rate notes is pro formaed at Libor plus 250 to 275 basis points.

"It will be interesting to see how much the volatility in the OEMs affects that," the buy-sider commented.

"These guys are smart. They're getting the deal done now before GM starts ramming cars down their throat."

Most new deals steady in trading

The new French Lick Resorts 10¾% notes due 2014 priced too late in the session for any aftermarket activity to be seen, traders said.

One of them meantime saw the new Saskatchewan Wheat Pool 8% notes due 2013 quoted at par bid, 100.5 offered, not far from their par issue price earlier in the session.

Among issues which had priced during Wednesday's busy, mostly-drive-by-driven session, a trader saw Host Marriott Corp.'s new 6¾% notes due 2016 straddling their par issue price at 99.875 bid, 100.125 offered.

He also saw several other new deals tightly wrapped around their Wednesday par issue prices, including Newfield Exploration Co.'s 6 5/8% senior subordinated notes due 2016, and Dynegy Inc.'s new 8 3/8% notes due 2016.

"A lot of new issue stuff came [Wednesday]," he said, "but it didn't trade a hell of a lot."

One new deal which was seen showing strength was Festival Fun Park's new 10 7/8% senior notes due 2014, which priced on Wednesday at par and then moved up on the break to 101 bid, 101.5 offered. The bonds hung in at those higher levels on Thursday.

Another trader said that "there were better sellers" in Dynegy's new notes, which he also quoted as being wrapped around par.

Bombardier jumps on earnings

Back among the established issues, a market source quoted Bombardier's 6.30% notes due 2014 up nearly a point on the session at 92.25 bid. At another desk, a market source pegged the company's 6¾% notes due 2012 up 1¼ points at 95.75 bid.

A trader also noted that the bonds had firmed about half a point on Wednesday, in apparent market anticipation of good numbers.

The Montreal-based maker of aircraft and railroad equipment reported net income for the 2006 fiscal fourth quarter ended Jan. 31 of $86 million (five cents per share), up from $56 million (three cents per share) a year earlier. For the whole of fiscal 2006, net income was back in the black at $249 million (13 cents per share) versus a fiscal 2005 loss of $85 million (six cents per share).

The company was also able to boast fiscal 2006 EBITDA from continuing operations before special items of $990 million, up from $785 million the previous year. It also strengthened its balance sheet, with free cash flow for the year of $532 million and a Jan. 31 cash position of $2.9 billion, and a debt reduction during the year of some $2.5 billion.

EchoStar, DirecTV weaken

Elsewhere, traders saw slightly easier levels in the bonds of rival satellite television providers EchoStar Communications Corp. and DirecTV Group Inc., following reported comments by DirecTV's chief financial officer to the effect that the El Segundo, Calif.-based DirecTV, the industry leader, would be interested in buying Englewood, Colo.-Number-Two operator EchoStar - but did not think that such a transaction would pass muster with federal anti-trust authorities.

With that latter caveat apparently throwing cold water on whatever sector consolidation speculation might be out there, EchoStar's 7 1/8% notes due 2016 were seen down ¼ point at 98 bid, 99 offered and DirecTV's 6 3/8% notes were ¾ point lower at 98.25 bid, 99.25 offered.

A trader at another shop saw the DirecTV 6 3/8s at 98.75 bid, 99.25 offered, down half a point, and saw EchoStar's 9 1/8% notes also half a point down, at 98.25 bid, 98.5 offered.

Maytag eases after gains

Among other issues affected by merger news or speculation, a trader saw Maytag Corp.'s 5% notes due 2015 lower by ¼ point at 92 bid, 93 offered; he had quoted those bonds up nearly five points on Wednesday on the news that the U.S. Justice Department had given its blessing to the planned acquisition of the Newton, Iowa-based appliance maker by larger rival Whirlpool Corp.

A trader saw little follow-up activity Thursday in the bonds of Adelphia Communications Corp., which had fallen about three points across the board on Wednesday, pushed down by the news that the two cable-TV industry giants who are slated to buy Adelphia's assets, Time Warner Corp. and Comcast Communications Corp., had warned the bankrupt Greenwood Village, Colo.-based cable operator that it might be in breach of that purchase agreement, which would let Comcast and Time Warner back out of the deal if the alleged breach were not cured.

He saw Adelphia's 10¼% notes due 2006 unchanged Thursday at 58 bid, 60 offered, while its 10¼% notes due 2011 were similarly steady at 62 bid, 64 offered.

Lucent Technology Inc.'s bonds were seen slightly easier in line with a generally easier market, a trader quoting the Murray Hill, N.J.-based telecommunications network equipment maker's 6.45% notes due 2029 at 90 bid, 91 offered, down half a point. Lucent's larger French rival, Alcatel SA, said Thursday that it is still in merger talks with the U.S. equipment company. The two companies envision a merger of equals at the market price - meaning no premium over market value to be paid to Lucent shareholders.

Aztar Corp.'s bonds were seen little changed on the day, with its 9% notes due 2011 at 105.5 bid, 106 offered and its 7 7/8% notes due 2014 at 108.5 bid, 109 offered, perhaps half a point lower. Real estate operator Colony Capital LLC emerged as a second potential acquirer for the Phoenix-based gaming company, its reported $41 per share bid for the moment putting it ahead of the $38 per share offering announced last week by rival gamer Pinnacle Entertainment Inc.

Movie Gallery zooms

Outside of M&A-related names, traders saw the 11% notes due 2012 of Movie Gallery Inc. shoot up by about four points on the session to 48 bid, 50 offered from prior levels around 44. One trader even saw the bonds get better than that, going home at around 49.5 bid.

The sharp rise in the company's bonds went hand-in-hand with an equally impressive jump in its Nasdaq-traded shares, which shot up 43 cents (18.35%) to end at $2.77 on volume of about 3.3 million, 1½ times the usual turnover. Movie Galleries shares had held steady around the previous session's $2.34 close for the first two hours of trading - but then climbed sharply on increased volume starting about 11:30 a.m. ET, and they stayed up there for the remainder of the day, bringing the bonds along with them.

There was no firm news seen out about the company, and a lot of speculation on investment-oriented internet bulletin boards that a short squeeze that could last four or five sessions was on. It was noted that going into Thursday's session, short interest in Movie Gallery stock amounted to 18.6 million shares, or fully 72.5% of the company's outstanding float.

Movie Gallery last week released its latest quarterly and year-end numbers, and although the company swung to a quarterly loss from a year earlier, its executives noted on their conference call that on a pro-forma basis, figuring in the revenues derived from its acquisition last year of rival movie rental chain Hollywood Entertainment, Movie Galleries revenues and earnings would be quite respectable. They also noted that the company now has some breathing room on its financial covenants that will let it build up some momentum before those waivers expire at the beginning of 2007. It did warn, however, that at that point it might not be in covenant compliance and might have to go back to its lenders to seek more relief.

Delphi drops on strike fears

In the automotive sphere, Delphi Corp.'s bonds were seen down about two points on the session after the UAW warned that Delphi was likely to go to court on Friday, as promised, seeking to junk its labor contracts with 34,000 hourly workers represented by the UAW and two other unions.

A trader saw Delphi's 6.55% notes due 2006 down 2¾ points on the day at 60.25 bid, 61.25 offered and saw the bankrupt Troy, Mich.-based automotive electronics manufacturer's 7 1/8% notes due 2029 down 1¾ points at 60.5 bid, 61.5 offered.

Delphi's former corporate parent, General Motors Corp., is also vitally interested in what happens with Delphi and its unions, since the unions have threatened to go on strike if Delphi tries to void their contracts and unilaterally impose a lower wage and benefits structure on them. That strike, if it occurs, could in turn massively disrupt production at GM, which relies heavily on its former subsidiary for a steady flow of component parts. GM, the UAW and Delphi have been talking for months about how to relieve Delphi of some of its heavy labor cost burdens, and last week unveiled a plan for the auto giant to pay for buyouts to 13,000 Delphi UAW members and to accept the transfer back to GM of 5,000 more.

Delphi set a deadline of Thursday for having the framework of a labor cost agreement worked out, and had said that it would go to court Friday if it didn't have such an agreement by then - although it should be noted that Delphi had extended that deadline several times over the past few months. Delphi, GM and the union were reported still in talks as of Thursday afternoon, and as of press time on Thursday evening, there had been no official word from any quarter as to the status of those talks.

GM gains on sale talk

GM's bonds and those of its General Motors Acceptance Corp. financial arm were meantime reported firmer on Thursday, apparently helped by investor reaction to a Wall Street Journal story that GM is close to its goal of selling a 51% stake in GMAC to an investor group led by private equity company Cerberus Capital Management for $11 billion. The story said that a lot of technical details remain to be worked out, but the framework for a deal is in place. GM said back in October that it wanted to sell control of GMAC, envisioning a sale to a strong financial company - but several major banks mentioned as potential buyers publicly shunned the idea, leaving the Cerberus-led group, and a second led by buyout specialist Kohlberg Kravis Roberts & Co. as the only two publicly identified buyers.

A trader said that GM's benchmark 8 3/8% notes due 2033 were half a point better at 73.5 bid, 74 offered, while GMAC's 8% notes due 2031 were also up half a point at 92.5 bid, 92.75 offered.

Another trader called the bonds up a point across the board, with the 8 3/8s at 74 bid, 75 offered, the 8s at 92.5 bid, 93 offered, and GMAC's 6 7/8% notes due 2011 at 92 bid, 93 offered, and its 6¾% notes due 2014 at 89 bid, 90 offered.

Imaging names fall back

Apart from the autos, a trader saw a pullback in the bonds of medical diagnostic imaging companies, which he said had recently "been on a tear."

He saw Radiologix Inc.'s 10½% notes give up two points to end at 73.5 bid, 74.5 offered, while Alliance Imaging's bonds dropped to 86.75 bid, 87.75 offered from prior levels at 89 bid, 90 offered.

"They had a nice run," he said of the imaging company bonds' recent rise "but it just got overdone."

© 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.