Intergen delays mega-deal pricing; heavy market drags most issues lower

By Paul Deckelman and Paul A. Harris

New York, July 20 - Intergen Group delayed the much-anticipated pricing of its nearly $2 billion multi-currency mega-deal Friday, citing market volatility. It was expected to price Friday but has now been moved back to Monday.

Elsewhere on the primaryside, Myers Industries Inc. launched a $265 million offering of 10-year notes via Goldman Sachs. And Silverton Casino Hotel & Resort set price talk for its $215 million offering of eight-year second mortgage notes at 11¼% to 11½%

In the secondary arena, the flight to safety sparked by the continuing woeful saga of the sub-prime lending sphere caused a generalized downturn in junk, with traders seeing many issues down 1 to 1½ points across the board.

Some retreats were even more pronounced, with Spectrum Brands Inc.'s bonds seen down several points on the day, although there was no fresh negative news out about the Atlanta-based consumer products company.

Another company seen solidly lower, despite no news, was United Rentals Inc., which has been in the process of selling itself and which in fact, was recently reported close to a sale.

With the subprime collapse cutting out a key profit center of the home loan market - borrowers who can be charged higher interest rates because of their shaky credit standing - homebuilder bonds and the bonds of companies which supply materials to the homebuilders were seen lower. Among the names standing out, traders said, were Hovnanian Enterprises Inc., Technical Olympic USA Inc. and Ply Gem Industries Inc.

Sell-side sources were marking the broad high yield market lower again on Friday.

One informed source said that volatility in the market served to forestall pricing of Intergen Group's $1.975 million multi-currency deal, which, although

Week's issuance was $322 million

No issues were priced during the final session of the July 16 to July 20 week and the presently rugged primary market saw only two issuers, Cardtronics, Inc. and LBI Media, Inc., price bonds during the past week, the second lowest weekly total of 2007.

They raised a combined $322 million, each one pricing a single tranche of bonds.

Perhaps as a measure of just how difficult the present primary market conditions are, the past three weeks have put up the three lowest weekly issuance totals of the year: the July 2 to July 6 week was the lowest at $299 million, while the July 9 to July 13 week was the biggest of the three at $394 million.

Year-to-date issuance at Friday's close came to $109.25 billion in 283 tranches, 48% more by dollar amount than the $72 billion that had priced by the July 20 close in the record setting year of 2006.

Risky business

An investment banker told Prospect News on Friday that spreads on bonds rated CCC+ equivalent or lower by at least one rating agency have widened by 100 basis points during the month ending July 19.

However, the source said, at Thursday's 520 basis points spread to Treasuries that sector still has some distance to travel before it reaches the 610 basis points spread of July 19, 2006, whereas the present single-B spread, 320 basis points, has closed the distance between it and the 339 basis points spread of July 19, 2006 much more convincingly.

Should the triple-C sector continue to widen toward that 2006 level of 610 basis points, however, the impact of the widening could be much more dramatic than would have been the case a year ago.

That is because year-to-date triple-C global issuance is $35 billion, more than 82% higher than the $19.2 billion of triple-C global issuance that had been priced by July 19, 2006, whereas overall global issuance is up 47% on a year-over-year basis.

According to this investment banker, total triple-C issuance for all of 2006 was $37 billion. And with just over half of 2007 in the books, triple-C issuance, at $35 billion to Thursday's close, already appears poised to overtake the 2006 total.

Hence, the sell-sider said, continued widening of triple-C paper will have a much bigger impact than it would have had a year ago. Due to a ravenous appetite for risk during much of the first half of this year, triple-C paper figures to represent a much bigger portion of the portfolio.

Intergen delays

Intergen Group has delayed the pricing of its $1.975 billion three-part bond deal until Monday due to market volatility, according to an informed source who added that no changes to the size and structure of the offering have been announced.

Earlier in the week the Burlington, Mass., power generation company backed up price talk on its multi-currency bond offering of 10-year senior secured notes (Ba3/BB-).

A dollar denominated tranche was talked at 8 7/8% to 9%, increased from the 8½% area. The size of the dollar-denominated tranche remains to be determined.

Meanwhile price talk was raised on a €200 million to €300 million tranche to 8 3/8% to 8½%, increased from 8% area.

And talk was also increased on a £250 million to £300 million tranche to 9 3/8% to 9½%, increased from the 9% area.

Merrill Lynch & Co. is the bookrunner.

The week ahead

Intergen is one of a pair of offerings that top the $1 billion mark that are expected to price before Friday's close.

Ceva Group, plc is in the market with a $1.4 billion offering of senior notes, in dollar- and euro-denominated tranches.

Credit Suisse, Morgan Stanley, Bear Stearns, UBS Investment Bank, JP Morgan and Goldman Sachs & Co. are joint bookrunners for the deal, which is expected to price late in the week.

Gaming deals coming

The durable entertainment/gaming sector, said to be among the most prized by high yield investors, should have a chance to demonstrate its durability during the week ahead.

Three project-financing deals from a trio of gaming firms are expected to price before Friday.

Silverton Casino Hotel & Resort set price talk for its $215 million offering of eight-year second mortgage notes (Caa1/B-) at 11¼% to 11½% on Friday.

The Banc of America Securities deal is set to price mid-day Tuesday.

Native American gaming concern, East Valley Tourist Development Authority, is expected to price its $290 million two-part offering of senior secured notes (B+) - eight-year fixed and seven-year floating - via Merrill Lynch.

And the Downstream Development Authority of the Quapaw tribe of Oklahoma is on the road with a $235 million offering of eight-year senior notes (B-) via Banc of America Securities. That deal is expected to price at the end of the week.

The energy sector

Another of the buy-side's perennial favorites, the energy sector, will also be represented in the week ahead.

Parallel Petroleum Corp. is expected to wrap up the roadshow for its $150 million offering of seven-year senior notes (Caa1/B-) on Wednesday.

Jefferies & Co. and Merrill Lynch are leading that deal.

Apart from the energy sector, Aeroflex Inc. is expected to complete its $370 million offering of 10-year senior notes via Goldman Sachs before the end of the week.

And finally, DAE Aviation Holdings Inc. is expected to price its $325 million offering of eight-year senior unsecured notes (Caa2), via Barclays Capital and Lehman Brothers, before the Friday close.

Myers launches $265 million

News of one roadshow start was heard during the Friday session.

Myers Industries will start a roadshow Wednesday for its $265 million offering of 10-year senior subordinated notes (B3/CCC+).

The Goldman Sachs-led acquisition financing is expected to price on Aug. 3.

One high yield syndicate official, acknowledging on Friday that it's presently rough going in the primary market, observed that "the pipeline is pretty full."

Right now, the source added, the sell-side is devoting considerable time to "managing client expectations," with respect to the interest rates the buy-side is presently exacting from issuers who come to the high-yield market.

Spectrum a loser, United Rentals also

Back in the secondary market, Spectrum Brands' 7 3/8% notes due 2015 were seen down almost 4 points on the session to 67.25 in quite busy trading.

There was no immediate indication of why the Atlanta-based maker of Rayovac batteries and Remington electric shares was on the downside.

Also seen in that same boat was United Rentals, whose 7% notes due 2014 were quoted at 97.75 bid, down 3½ points, on no news about the Greenwich, R.I.-based leading equipment rental company.

Homebuilders head lower

One possible explanation - United Rentals is a big supplier of rented or leased construction equipment to the building industry, a sector hurt by the on-again, off-again surfacing of jitters sparked by the failure in subprime lenders.

A trader said that "the market was pretty weak in general," but added that "anything having to do with housing" was especially feeling the pinch.

He saw Technical Olympic USA's bonds down 1 point, for instance, and Ply Gem's 9% notes due 2012 also down a point, at 82 bid, 83 offered. Another materials supplier, Associated Materials Inc.'s bonds had eased to 69 bid, 70 offered, he said.

At another desk, a trader saw the Technical Olympic 9% notes due 2010 off ½ point at 88.5 bid, 89. Fellow homebuilder Hovnanian's 7¾% notes due 2013 were down a whopping 2½ points to 83 bid, 85 offered.

He also saw Beazer Homes' 6 78% notes due 2015 half a point lower at 82 bid, 83 offered.

Little gain from Williams move

Traders said that Williams Cos.' announcement in the morning that the Tulsa, Okla.-based energy operator will buy back shares and put some of its pipeline assets into a master limited partnership had only limited impact on its bonds - and that was mostly negative, which one trader said "seems weird if they announce some good news."

He saw Williams' 8 1/8% notes due 2012 at 105 bid, 106 offered, down 1½ points, while its 7 5/8% notes due 2019 were likewise down 1¼ points at 104.25 bid, 105.25 offered.

Dana delay not seen having much impact

From out of the distressed segment of the market, a trader saw Dana Corp.'s bonds easier in line with the generally heavier market, but apparently not especially impacted by the news of a delay in the signing of the bankrupt Toledo, Ohio-based auto parts maker's agreement with Centerbridge Capital Partners LP - under which the private equity company will put up some $500 million of financing for two healthcare trusts Dana is establishing for its retirees, in return for debt convertible into a 25% ownership stake. That agreement will now be signed on Monday. The trader quoted Dana's 6½% notes due 2009 down a point at 102 bid, 103 offered.

Another trader saw the company's 7% notes due 2029 offered at 100.5 bid, while its 7% notes due 2028 were at 99.5 bid, 100 offered, while its 6½% notes due 2008 were fairly steady at 102.75 bid, 103.75 offered.

Elsewhere among the automotive names, the second trader said that Delphi Corp. was "still strong," after having risen about 6 points on Thursday on news of its financing efforts with Appaloosa Capital and on its ongoing talks with its labor unions. "It's a little bit off the highs [from Thursday], but still strong." He saw the company's 6.55% notes that were to have come due last year at 127.5 bid, down from prior highs at 129.

Elsewhere, a trader saw Calpine Corp.'s 8½% notes due 2008 off 1 point on the day at 121.5 bid, 123 offered, while its 8½% notes due 2011 were at 126 bid, 127 offered, also down a point.

The trader saw Bon-Ton Stores Inc.'s 10¼% notes due 2014 down 1 point at 95 bid, 96.5 offered, but saw no fresh news about the retailer, apart from Thursday's announcement that the company had amended the employment contract of its president and chief executive officer Byron Bergren. Under the new contract, Bergren will continue to serve in his two positions through this coming Jan. 30.

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