Rexnord, BMS, upsized TransDigm deals price; Remy up on asset sale news

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

New York, Jan. 31 - Rexnord Global Inc./Rexnord Corp. was heard to have successfully priced a two-part bond offering Wednesday, which included an add-on to an existing tranche of senior notes. Also heard pricing an add-on deal was TransDigm Inc., which upsized its offering. Bankruptcy Management Solutions/BMS Holding Co. brought an offering of floating-rate payment-in-kind notes to market during the session as well.

New-dealers also saw Hilcorp Energy Co. launch, upsize and set talk for a new bond deal. Talk also surfaced on upcoming issues from Yankee Candle Co. and Stena AB, the former a two-part deal and the latter a euro-denominated offering. PNA Holdings LLC was said by high yield syndicate sources to be in the market with an issue of floating-rate toggle notes, while Seitel Inc. was getting ready to hit the road Thursday to market its offering of seven-year notes to prospective buyers.

In the secondary market, Remy International Inc.'s bonds were seen better across the board on the news that the Anderson, Ind.-based automotive components maker had agreed to sell its light and medium truck diesel engine and component remanufacturing business to Caterpillar Inc. for $150 million.

Another name from that same sector making news was Dura Automotive Systems Inc., whose bonds nosedived after the Rochester Hills, Mich. based parts maker released poor financial results, which caused one large bondholder to dump its entire position in the company's senior notes. Those bonds bounced off their lows for the session, but still ended several points down.

Yet another name seen gyrating around was Delta Air Lines Inc., whose bonds bounced crazily around on the news that US Airways Group Inc. had finally thrown in the towel and ended its hostile takeover effort against the bankrupt Atlanta-based airline company. But when all was said and done, the notes were pretty much unchanged.

Overall, traders said that's the way the junk market ended up, following the expected announcement by the Federal Reserve that the central bank's policy-making Federal Open Market Committee had elected to leave interest rates unchanged - even though the Fed's statement that the economy was growing but that inflation was being held in check helped to spur vigorous rallies Wednesday afternoon in both stocks and Treasuries.

But a high yield syndicate official commented that the broad market tightened significantly trailing the Fed's decision.

Meanwhile action intensified in the primary market during the midweek session as three issuers raised slightly less than $921 million of proceeds by pricing four tranches of notes.

One tranche was upsized, one came inside of price talk, two came at the tight end of talk and the other priced on top of the talk.

Rexnord prices two tranches

RBS Global Inc. and Rexnord Corp. completed a $460 million two-part sale of notes (B3/CCC+) on Wednesday.

The Milwaukee-based power train manufacturer priced a $310 million add-on to its 9½% senior notes due Aug. 1, 2014 at 103.0, resulting in a yield to worst of 8.799%. The add-on, which generated $319.30 million of proceeds, priced inside the 102.50 area price talk.

In addition Rexnord priced a $150 million issue of new senior notes due Sept. 1, 2016 at par to yield 8 7/8%, at the tight end of the 9% area price talk.

Credit Suisse, Banc of America Securities LLC and UBS Investment Bank were the bookrunners for the acquisition funding deal.

Transdigm upsizes

Elsewhere Transdigm Inc. priced an upsized $300 million add-on to its 7¾% senior subordinated notes due July 15, 2014 (B3/B-) at 101.0, resulting in a 7.521% yield to worst.

The issue price came at the tight end of the 100.50 to 101.0 price talk.

Credit Suisse and Lehman Brothers led the acquisition financing which was upsized from $250 million.

BMS on top of talk

Finally, BMS Holding Co. (Bankruptcy Management Solutions) priced a $150 million issue of six-month Libor plus 700 basis points floating-rate PIK notes at 99.00 on Wednesday.

The issue, which generated $148.50 million of proceeds, came on top of price talk.

JP Morgan ran the books for the dividend deal.

Hilcorp massively upsizes

As a sources have predicted, the Wednesday session saw drive-by action.

Hilcorp Energy I LP announced a $125 million add-on to its 7¾% senior notes due Nov. 1, 2015 (expected ratings B3/B) early in the morning, and upsized it to $300 million during the afternoon.

The Houston-based company has talked the tap at 98.75 and plans to price it early Thursday.

Deutsche Bank Securities has the books for the debt refinancing and general corporate purposes deal.

Orascom upsizes, tightens talk

Egypt's Orascom Telecom Finance SCA upsized its offering of seven-year senior notes (B2/B-) to $750 million from $500 million, and lowered price talk to 7 7/8% to 8% from the 8¼% area on Wednesday.

That deal, which as been in the market on an investor roadshow, is expected to price on Thursday, via Credit Suisse and Citigroup.

Talking the deals

Elsewhere The Yankee Candle Co. Inc. downsized to $475 million from $525 million its two-part offering of notes (B3/CCC+).

Meanwhile the company upsized its credit facility to $700 million from $650 million.

The South Deerfield, Mass., scented candle company talked a $275 million tranche of eight-year senior unsecured notes at 8 5/8% area, and a $200 million tranche of 10-year senior subordinated notes at the 9 7/8% area.

Both tranches were downsized by $25 million.

The deal, which is being led by Lehman Brothers and Merrill Lynch, is set to price Thursday.

And Sweden's Stena AB talked its €300 million offering of 10-year senior notes (Ba3/BB-) at 6¼% to 6½%.

The JP Morgan-led deal is set to price Thursday.

Roadshow starts

Two prospective junk issuers announced deals on Wednesday that will be marketed via investor roadshows.

Seitel, Inc. will begin a roadshow on Thursday for its $400 million offering of seven-year senior notes (B3/B-), via Morgan Stanley, Deutsche Bank Securities and UBS Investment Bank.

Pricing is expected late next week.

The Houston-based provider of seismic data to the oil and gas industry will use the proceeds to fund an acquisition and refinance debt.

Seitel is one of two seismic companies with deals presently in the market.

France's Compagnie Generale de Geophysique (CGG) plans to price its $600 million two-part offering via Credit Suisse before this Friday's close.

At press time Wednesday no talk on the deal had been heard, according to market sources.

Elsewhwere PNA Intermediate Holding Corp. will begin a roadshow on Thursday for a $150 million offering of six-year senior floating-rate PIK toggle notes (B-).

The roadshow wraps up on Monday, and the deal is expected to price early next week.

Banc of America Securities will run the books for the dividend deal from the Atlanta-based company which processes steel and distributes it to fabricators, manufacturers and distributors.

January sees $12.2 billion issuance.

The month of January came to a close with high yield having seen slightly more than $12.2 billion of dollar-denominated high yield issuance in 39 tranches.

Hence January 2007 issuance significantly lags that of January 2006, the opening month of a year that saw historic issuance in the high yield primary market: January 2006 saw slightly more than $15.3 billion price in 31 tranches.

Rexnord, TransDigm add-ons gain in secondary

When the new Rexnord bonds were freed for secondary dealings, a trader saw the 8 7/8% senior notes due 2016 at 100.25 bid, 101 offered, up from their par issue price, while the 9½% add-on notes due 2014, the original tranche of which had been trading at 102.5 bid, 103.5 offered on Tuesday, were going home quoted about a point higher at 103.5 bid, 104.5 offered. However, the trader noted that the issue hit the market "right around the end of the day, so there was not much activity."

TransDigm's new 7¾% notes due 2014 - an add-on to the existing tranche of those notes - were seen having priced at 101, then having broken a little higher in the 101.25 bid, 101.75 offered area. The notes went out up about a point on the session at 102 bid, 102.5 offered.

Traders said they did not see any aftermarket activity in Bankruptcy Management Solutions' new five-year PIK notes, which priced at 99.

Market little moved by Fed

Back among the established issues, a trader said that the junk market "didn't really do anything" in the wake of the Fed decision to leave rates unchanged, which sparked a rally in equities and in Treasuries. The Dow Jones Industrial Average ended up 98 points, the Standard & Poor's Index was up better than nine points, the Nasdaq index posted a 15-point gain and the Russell 2000 index notched its first close above 800; government bond prices meantime rose, with the yield on the benchmark 10-year Treasury tightening 6 basis points to 4.82% as the central bank said that economy remains healthy while inflationary pressures are easing.

Junk, the trader said, was "maybe up a teeny [i.e. about 1/16th point] on the day across the board. It was very illiquid, with no significant trades, or very few trades." The volume, he yawned "was just pathetic."

At another shop, a trader concurred that "the market was sort of weaker on the opening, as a lower of level of bids came in. It kind of languished most of the day going into the Fed. There was a rush, an attempt to take the market up after the FOMC meeting," in tandem with the rally in stocks and Treasuries, and while he saw the offerings already there "up an eighth [point] or a quarter [point], but there was not a lot of trading. It didn't really have the followthrough that the equity markets did, or the Treasury market did."

He added that "there was some buying, when the market first looked like it was going to move lower," in a continuation of the heavier tone seen Tuesday, "some bids came in and kind of stabilized the market. But it was kind of hard to trade today, actually."

Remy gains on asset sale

One name which was definitively up was Remy International, which rose on the announcement that it plans to sell its light and medium truck diesel engine and component remanufacturing business conducted by Franklin Power Products, Inc. and International Fuel Systems to Caterpillar Inc. for a cash purchase price of $150 million.

A trader saw the company's 11% notes due 2009 up 5 points on the session to 42 bid, 43 offered.

At another desk, a trader saw the 11s at 40 bid, 42 offered, which he called up 2 points, and saw its 8 5/8% notes due 2007 a point better at 88 bid, 90 offered. He saw its 9 3/8% notes due 2012 three points better at 37 bid, 39 offered.

The announced price is subject to adjustment for net investment in the business, including working capital, at closing, expected before the end of the first quarter.

Remy's president and chief executive offer, John Weber, said, in a statement that the sale of the unit to Caterpillar "represents a strategic opportunity to realize value for our stakeholders."

Participants in the distressed-debt market have been eyeing Remy closely, wondering if the company would file Chapter 11 or whether it would manage to turn around its balance sheet with asset sales.

The announcement Wednesday said that $50 million of the sale proceeds will be held in a restricted account, to be used as collateral to senior lenders and withdrawn only with consent of the lenders under its senior credit facility. Outstanding revolver borrowings under the senior secured revolving credit and term loan facility and the revolving lender commitments under the facility, valued at $160 million, will be reduced by $40 million.

Remaining proceeds will be held in the restricted account, and will be available for capital expenditures, to repay revolver borrowings (with a corresponding reduction in the revolver commitment) and general corporate purposes.

Dura drops sharply

While Remy was driving higher, fellow automotive components manufacturer Dura was hitting the skids, driven sharply lower by poor numbers and the news that a large bondholder had bailed out as a result. While the bonds did bounce off their lows, they were still seen well down on the day.

A trader said Dura was "the big name in the morning, falling 10 points, and then ending the day 5 points lower" at 31.5 bid, 32.5 offered for its 8 5/8% senior notes due 2012. The trader said the day's low print on those bonds was 26.5, as "the poor numbers and higher-than-expected cash burn made many people nervous" about the company.

Another trader saw the bonds finish Tuesday at 34 bid, 35 offered, then drop to 27 bid, 28 offered early Wednesday on "pretty poor numbers and some eye-popping legal fees," and then go out around 30 bid, 32 offered.

He saw its 9% subordinated notes due 2009 fall to 4.5 bid, 5.5 offered, down 2 points on the day. Another trader saw those juniors get as low as 4 bid before ending at 5 bid, 6 offered, down a point on the session.

Dura's reported operating loss of $1.95 million for December had put pressure on the bonds on Tuesday, even though the number was an improvement from an operating loss of $12.01 million seen in November. The net loss for December was $20.02 million, which was an improvement from a $38.23 million November net loss, with an uptick in sales to $80.6 million from $70.3 million.

Even so, according to a trader, cash was the kicker in the latest Dura operating report, as cash and equivalents at Dec. 31 had plunged to $14.88 million from $54.2 million a month before.

After those numbers came out, Dura's bonds got "whacked" another trader said, as a buyside shop put its entire position in the 8 5/8% bonds up for sale in a Dutch auction. He said the fund had started the auction at the higher price the bonds had been trading at, but the bids came in sharply before heading back north.

"We saw a lot of drive-by buyers," remarked one trader. He said the investor was selling off Dura because of its latest financial report, saying, "the numbers were absolutely crap."

Traders declined to comment whether there were big buyers.

Nothing doing with Delphi

Also in the automotive area, traders saw little movement in Delphi Corp. paper - even as the bankrupt Troy, Mich.-based parts maker faced a midnight deadline for coming up with an agreement with former parent General Motors Corp. and the United Auto Workers union on restructuring its bloated labor costs - a condition of the planned investment of up to $3.4 billion in the company by a consortium consisting of private equity operators Appaloosa Management LP, Cerberus Capital Management LP and Harbinger Capital Partners Master Fund I - along with Merrill Lynch & Co. and UBS Securities LLC.

However, news reports late Wednesday indicated that those down-to-the-wire talks would likely continue past the deadline and slop into February, with the investors apparently unwilling to walk away from the opportunities they see in a restructured Delphi, provided it can bring its labor costs down.

A Delphi spokesman had said on Tuesday that if no agreement were reached by the Jan. 31 deadline, the parties might agree on a "fallback" plan to extend the negotiations another month.

Delta gyrates - but ends unchanged

A trader saw Delta Air Lines' bonds unchanged at 61 bid, 62 offered for the 8.30% notes due 2029 on the news that US Airways Group had withdrawn its offer to acquire Delta. However, before ending unchanged, those bonds had gyrated wildly during the session in heavy trading, between a high print of 64 and a low print of 58, the trader said.

Another trader, however, called the bonds down about a point at that 61 level.

U.S. Airways - which first offered to buy the Number-Three U.S. airline operator in mid-November for about $8.6 billion in cash and stock and then sweetened its bid several weeks ago to over $10 billion, dropped its hostile takeover bid for Delta a day ahead of schedule. Delta's official committee of unsecured creditors had until Thursday to deliberate on the offer, but after a lot of back and forth speculation on the outcome, the committee released a statement saying it would support a stand-alone reorganization plan, the course preferred by Delta's management. Citing the lack of support among the creditors, US Air grounded its takeover efforts once and for all.

Northwest Airlines Inc.'s bonds, which have been boosted recently by merger and acquisition buzz about the airline industry surrounding the US Air try for Delta, were off 2 points, a trader said, with the 10% notes due 2009 ending at 93 bid, 95 offered, and its 8 7/8% notes closing at 91 bid, 93 offered.

Tembec tumble continues, Bowater better

Tembec Inc. bonds were seen 2 points lower across the board, a trader said, extending the profit-taking-induced losses seen Tuesday.

The Montreal-based forest products company's 8 5/8% notes due 2009 were at 82 bid, 84 offered, while its 8½% notes due 2011 dropped to 72 bid, 74 offered.

Tembec bonds had recently firmed smartly as the lower Canadian dollar was seen boosting export sales, and on top of that had been up more than a point on the news that sector peers Abitibi-Consolidated Inc. and Bowater Inc. would merge, which sparked some forest products-sector consolidation speculation.

The bonds of those two companies, meantime, which had firmed on the merger news Monday - Abitibi up sharply while Bowater gained more modestly - first retreated a little Tuesday on profit-taking. But on Wednesday, Abitibi's 7.4% notes due 2018 were back up a point at 89 bid, while Bowater's 9 3/8% notes due 2021 were seen up 2½ points at 103.5.

Ronda Fears contributed to this report

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