AES prices upsized two-part mega-deal; Thornburg, XM bonds up; Tousa gains on Lazard news

By Paul Deckelman and Paul A. Harris

New York, Oct. 9 - AES Corp. priced a hugely upsized $2 billion two-part bond offering on Tuesday, with both tranches coming atop the price talk, high yield syndicate sources said. However, the Arlington, Va.-based global power producer's new bonds came to market too late in the session for any kind of secondary trading.

New-dealers also heard that USIS will start roadshowing a $440 million two-part deal beginning Thursday.

In the secondary arena, Thornburg Mortgage Inc. bonds were being quoted by some sources a little bit better, even though the embattled Santa Fe, N.M.-based lender increased the amount of the loss it will book for the third-quarter from previously announced asset sales. One or two participants, on the other hand, saw its bonds little changed on the day.

In the housing sector, which was also hit hard by the mid-year credit crunch that hurt Thornburg and other lenders, Tousa Inc.'s bonds were seen having firmed on the news, announced over the long bond market holiday weekend, that the Hollywood, Fla.-based homebuilder has retained Lazard Freres & Co. to review its capital structure.

Elsewhere, a trader saw solid gains in XM Satellite Radio Holdings Inc.'s bonds, helped by a good brokerage recommendation on the Washington-based satellite broadcaster's equity.

A high yield syndicate official marked the broad market higher by all measures on Tuesday.

The cash market, high yield credit default swaps and the index advanced as the post-Columbus Day bond market got underway.

The source said that the CDX High Yield 9 index was up ½ point at Tuesday's close: 100 5/16 bid, 100 7/16 offered.

Meanwhile the primary market continued to generate drive-by business.

AES quadruples to $2 billion

In a quick-to-market high yield bond deal that quadrupled in size, AES placed $2 billion of senior notes (B1/B/BB) in two tranches on Tuesday.

The Arlington, Va.-based international power producer priced a $500 million tranche of eight-year notes at par to yield 7¾%, and a $1.5 billion tranche of 10-year notes, also at par, to yield 8%.

Both tranches priced on top of the price talk.

Deutsche Bank Securities, Credit Suisse and Merrill Lynch & Co. were joint bookrunners.

USIS plans $440 million

Elsewhere USIS will start a roadshow on Thursday for its $440 million two-part offering of high yield notes.

The Falls Church, Va., background investigation and security services is offering a $250 million tranche of eight-year senior notes (Caa1/CCC+) and a $190 million tranche of 10-year senior subordinated notes (Caa2/CCC+).

Lehman Brothers and Banc of America Securities are joint bookrunners for the LBO deal.

Otherwise the primary market was quiet on Tuesday.

A sell-side source told Prospect News that First Data Corp. is "still kicking around" the $3.75 billion of cash-pay notes that are part of its hung-up LBO funding.

The source, specifying that the cash-pay tranche could come sooner than later, said that the underwriters are still trying to build a book, and added that they will try to move as much of the $3.75 billion as possible.

Altogether the bond portion of the financing comes to $9 billion. In addition to the cash-pay notes it includes $2.75 billion of PIK notes and $2.5 billion of senior subordinated notes.

Steel Dynamics edges up

The AES deal, as noted, came too late in the session for any meaningful aftermarket activity.

Among recently priced issues, Steel Dynamics Inc.'s 7 3/8% senior notes due 2012, which priced on Thursday at par, hovered just above that level Tuesday, at 100.125 bid, 100.5 offered.

The new Ryerson Inc. 12% notes due 2015, which had priced at par last Wednesday and which then moved up smartly in trading last week, hung onto their gains, trading around the 104 area.

Back among the established issues, with the holiday break over and people who had been in Arizona last week for the Deutsche Bank bond conference back at their desks, there was, as one trader put it, "decent activity - nothing earth-shattering, but there were some things going on."

Among major names, the trader saw General Motors Corp.'s benchmark 8 3/8% notes due 2033 ½ point better at 90.5 bid, 91 offered, while its domestic arch-rival Ford Motor Co.'s 7.45% notes due 2031 edged up 1/8 to 80.25 bid, 80.75 offered.

Another market source saw the Ford bonds up at that same level, but up more than ½ point on the day.

Thornburg firmer despite bigger loss

A trader saw Thornburg Mortgage Inc.'s 8% notes due 2013 at 88 bid, 89 offered, "really unchanged, maybe up ½ point."

However, another source saw those bonds at 88 bid, up 2 points from late last week's levels - despite the company announcement of a wider loss from third-quarter adjustable-rate mortgage asset sales.

Thornburg pushed upward despite its announcement that it had widened its estimate of its third-quarter loss from asset sales to $1.099 billion from $863 million previously. It said also that it now figures it sold some $22 billion of adjustable-rate mortgage assets since Aug. 10, versus its previous figure of $20.4 billion.

Thornburg sold the assets at mid-summer, booking a loss on them, as a means of decreasing its borrowing needs and conserving cash, part of the company's extraordinary efforts to cope with the credit crunch that froze it out from borrowing the funds it needed to continue to write mortgages.

In that same sector, Countrywide Financial Corp's 6¼% notes due 2016 were seen by a market source up a bit less than a point at around the 89 level.

Tousa up on Lazard news

In the housing arena, a trader saw Tousa's bonds "still moving up" on the Lazard Freres news announced Monday. He saw its 8¼% notes due 2011 at 63.75 bid, 65.75 offered, up from 60.5 bid, 63.5 offered on Thursday, the most recent significant trading session. The 9% notes due 2010 rose to 67.25 bid from 65.75 offered.

However, he saw the company's 10 3/8% notes due 2012 "actually looking down" at 25 bid, 26.5 offered, versus 27 bid, 29 offered on Thursday.

He saw its other bonds - the 7½% notes due 2011 and 7½% notes due 2015 - unchanged at 23.5 bid, 25.5 offered and 21.5 bid, 23.5 offered, respectively.

Another trader pegged the company's 9s at 65 bid, 67 offered, also up 2 points.

Tousa - the former Technical Olympic - said it had hired the Lazard investment bank to review the company's capital structure and to assist management in formulating an asset-management strategy.

Tousa, with much of its operations in Florida - one of the states hardest hit by the current real-estate slowdown - has struggled with the fallout from the problems of its troubled Transeastern joint venture there.

Elsewhere on the home front, Hovnanian Enterprises Inc.'s 6 3/8% notes due 2014 were a point better at 81 bid. And a trader saw Beazer Homes USA Inc.'s 8 5/8% notes due 2011 at 79.75 bid, 80.75 offered, up from 78 bid, 80 offered. Its 8 3/8% notes due 2012 were also up nearly 2 points, at 78.75 bid, 79.75 offered, he saw its longer-dated issues unchanged, with the 8 1/8% notes due 2016 steady at 77 bid, 79 offered.

XM bonds gain altitude

A trader saw XM Satellite's 9¾% notes due 2014 up 1½ points to 101.5 bid, 102.5 offered. Another market source saw those bonds up a point at 102.25.

The first trader attributed the gain to better investor feelings about the company - now in the process of merging with rival operator Sirius Satellite Radio - after Jefferies & Co. upped its price target for XM's shares.

Among other names, a trader saw American Media Inc.'s 10¼% notes due 2008 up 2 points at 92 bid, 93 offered, although he had not seen any news out about the supermarket tabloid publisher. At another desk, the bonds were seen as high as 93.5 bid.

And a source saw AK Steel Corp.'s 7¾% notes due 2012 up perhaps a point at 101 bid, helped by the news that the Middletown, Ohio-based specialty steelmaker had reached a settlement of a lawsuit brought by some of its retirees, and will set up a $663 million trust fund to handle their healthcare needs.

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