Cemex shelves bond deal; Greenbrier falls on contract cancellation possibility; Motorola moves up

By Paul Deckelman and Paul A. Harris

New York, March 9 - Mexican cement producer Cemex SAB de CV on Monday made official what some people in the junk bond market were speculating about back on Thursday and Friday - that it will not be bringing its planned $500 million benchmark-sized bond issue to market, or at least, not any time soon.

The company's decision to "indefinitely" postpone the bond offering, while entering into negotiations with its core banks to renegotiate a majority of its outstanding debt was the big news in an otherwise subdued primary market, which on Friday had seen new deals price for Anixter International Inc. and Digicel Ltd. On Monday, traders saw a few scattered quotes, but no real trading in either new issue.

The secondary market was meantime seen as soggy and uninspired as the new-deal arena. One of the few features was a drop in Greenbrier Cos. Inc.'s bonds, as market players fully digested last week's news that a major customer of the Lake Oswego, Ore.-based railroad equipment company wants to "substantially reduce, delay or otherwise cancel" deliveries of new railcars under a long-term contract that represents some three-quarters of Greenbrier's scheduled order backlog.

Another downsider was Rite Aid Corp., although there seemed to be no fresh news out on the Camp Hill, Pa.-based drugstore operator that might explain that slide.

There likewise was no fresh news out on upsider Motorola Inc. whose bonds were seen actively trader and mostly points higher.

And Ford Motor Co.'s bonds were seen generally higher for a third consecutive session in the wake of its recent announcement of a big debt-cutting campaign.

Cemex postpones

The only news to emerge from Monday's primary market was negative news.

Mexico's Cemex, SAB de CV has indefinitely postponed a benchmark-sized, dollar-denominated offering of senior notes (//BB), according to a press release issued by the company on Monday.

The company also announced that it has initiated discussions with its core banks to renegotiate the majority of its outstanding debt, approximately $14.5 billion in syndicated and bilateral obligations.

The notes were to be the first Cemex issue to come with high-yield covenants.

Citigroup had been leading the bond deal in a syndicate that also included BVA Securities, HSBC, RBS Greenwich Capital and Santander Investments.

Proceeds were earmarked for refinancing debt.

Initially the deal-size had been expected around $500 million. However during the time that the offering was in the market the size ultimately shrunk to approximately half that amount, according to a market source.

Cemex is a cement company based in Garza Garcia, Mexico.

Dole on the road

The postponement of Cemex leaves a single deal on the active forward calendar.

Dole Food Co. Inc. continues to roadshow its $325 million offering of senior secured notes due 2014, according to an informed source.

The deal is expected to price this week via joint bookrunners Deutsche Bank Securities and Banc of America Securities.

Proceeds, together with borrowings under its revolver, will be used to purchase its outstanding senior notes due May 1, 2009.

There was no price talk available on Dole at Monday's close, the informed source said.

However market conditions will no doubt play a role in how the deal is printed, the source added.

New issue concessions in the high-yield market, which had ratcheted down to levels below 100 basis points during February, have shot back out to 200 bps since the beginning of March, as evidenced by the last three junk issues to price, the source said.

Those are Anixter International Inc.'s 10% of senior notes due 2014 which priced at 92.625 to yield 12% last Friday, Digicel Ltd.'s $335 million principal amount of 12% senior unsecured notes due 2014 which priced at 89.679 to yield 15%, also on Friday, and Plains Exploration & Production Co.'s 10% senior notes due 2016 which priced at 92.373 to yield 11 5/8% on March 3, the source said.

New issues little seen

A trader said that Digicel's new 12% notes due 2014, which had priced Friday at 89.679 to yield 15%, had firmed a little to 90 bid, 91 offered.

However, another trader said that "nobody has seen it [Digicel]," which a third trader fully agreed with.

As for the Anixter deal, the first trader said that the Glenview, Ill.-based communication products and electrical wire and cable distributor's $200 million issue of 10% notes due 2014, which had priced Friday at 92.625 to yield 12%, "traded up a quarter of a point, and then it was just stopped in its tracks."

Another trader characterized Anixter as "sort of a museum piece kind of bond - it's usually hard to bring out - it's a well-run company, the recession notwithstanding. It's usually the kind of name that's hard to find when you're looking for it."

Market indicators remain under pressure

Back among the established issues, a trader saw the widely followed CDX High Yield 11 index of junk bond performance - which had lost ¼ point on Friday - down again on Monday, quoting it down another ¼ point to 66½ bid, 67 offered.

The KDP High Yield Daily Index meantime lost 58 bps to end at 49.09, while its yield widened out by 25 bps to 14.88%.

In the broader market, advancing issues continued to lag decliners by a more than two-to-one margin.

Overall market activity, measured by dollar-volume totals, fell by around 14% from the levels seen in Friday's session.

A market source called it a "kind quiet day in the market." He noted that of late, "a lot of the accounts have been quiet on the high yield side and have been dabbling in high-grade and crossover. That's been a very active part of the market."

Today has been really, really quiet," another agreed. He characterized the market as "eerie."

A third trader who also saw a quiet market declared that "there were some trades out there - but it seemed like it was pulling teeth. It was very situational."

He said that the market "started out weaker. It was off some, but I don't think it traded down hard on a lot of volume of any sort. Bids were lower, some offerings were higher. It's kind of hard to push a market together that way."

Yet another trader said that "there wasn't a lot of volume." While it was his impression that "it definitely seemed more active than Friday, it was not an active day."

For instance, he said one of the junk market's usual bellwether issues, the Community Health Systems Inc. 8 7/8% notes due 2015, saw only $6 million traded - not much at all for a $3 billion issue - with the bonds down ¾ point.

He saw the same relatively low activity level on the other frequently cited market barometer, the First Data Corp. 9 7/8% notes due 2015, which also saw only $6 million changing hands, with the bonds down ½ point at 50.5.

One of the traders said that "we're in March now, so you're heading for the end of the quarter. All of the stuff that didn't come out of high-grade portfolios that got downgraded or that looks like it's going to get downgraded, might yet still have to come out, and there are guys in high-yield-land that are looking for bargains, and split-rated paper, or BB rated paper is still in demand, in good credits, or certain sectors anyway." For instance, he continued, "I wouldn't make that argument for gaming, but for mining, perhaps."

Greenbrier deal faces derailment

One of the big losers on the day, in fairly active round-lot volume, a market source said, was Greenbrier Cos.' 8 3/8% notes due 2015, possibly due to continued negative investor response to threatened changes in a major contract between the railroad-car builder and one of its biggest customers.

Those bonds were seen going out at 38, down a full 5 points on the session, although the source pointed out, the last round-lot trade was at around 40, making for a 3 point loss on that basis.

The bonds were trading around 49 a week ago, but then fell to about the 43 after the announcement on Thursday by Greenbrier that it is in talks with major customer General Electric Railcar Services Corp. - a unit of industrial conglomerate General Electric Co. - concerning potential modifications to a long-term contract for GE's purchase of 11,900 newly built tank and covered hopper cars over an eight-year period.

Greenbrier said that it was advised by the GE unit that GE desires to "substantially reduce, delay or otherwise cancel" railcar deliveries under the contract. The 11,900 railcars under the contract represent about 75% of Greenbrier's current new railcar manufacturing backlog.

Greenbrier said that it believes the contract contains "adequate protection in the event of an attempted cancellation or renegotiation of railcar deliveries" - but that did not stop the bonds from falling in two steps to their current levels, about 10 points below where they had been before the news of the potential loss of at least some of the big order from GE.

Greenbrier started delivering the railcars to GE in December 2008, "after substantial capital investment and design and engineering resources devoted by Greenbrier over the last 15 months, based on the contract with GE." It said that approximately 500 railcars under the contract are currently scheduled for delivery in fiscal 2009, with the balance to be delivered over the next seven fiscal years.

Rite Aid heads in wrong direction

A trader said that Rite Aid paper "got hit across the board. Call them 'Wrong-Aid' - or maybe better yet, 'First Aid,' because that's what this company needs."

He saw the company's 10 3/8% notes due 2016 fall to 49.5 bid from prior levels at 57.5, on volume of $10 million.

He also saw Rite Aid's 7½% notes due 2017 drop to 38.75 bid from 46 previously on $7 million, while its 9½% notes due 2017 dipped to 19 bid from 22 on Friday, on about $5 million traded.

"Clearly, people were bailing out, or setting up short positions today," he said.

The Rite Aid bonds fell despite lack of any fresh news about the Number-Three U.S. drugstore chain operator.

Motorola move a mystery

A trader said there was "much trading" in Motorola, seeing the Schaumburg, Ill.-based electronics company's three or four long issues in a 2025 to 2037 context, and he saw them trading in low to mid 60s "on a couple of decent blocks in each issue." He quoted the 2037s as trading around 66.

Another trader also saw "a lot of activity" in Motorola, with its 6 5/8% bonds due 2037 having jumped to 65 bid from 59 before, on volume of $14 million, while its 7½% bonds due 2025 were at 62.5 bid - well above the last previous round-lot level of 55, seen on Feb. 18. Some $10 million traded.

"Something must be up in the name," he opined, "because you don't have volume like that across the capital structure without something being up," although there was no apparent fresh news out on the company.

Ford remains favorable

A trader said Ford Motor Co.'s 9½% notes due 2010 "have been moving up" over the last several sessions after the carmaker unveiled its plan to take out a large portion of its current debt, and called the bonds up another 2 points on Monday to 49 bid, 51 offered, after the credit "caught a bid late in the day."

Another trader said that Ford's 7.45% bonds due 2031 were down ½ point on the day to 27.5 bid, 29.5 offered. The carmaker's 8.9% bonds due 2032 fell back by more than 4 points to the 17 area.

Ford Motor Credit Co.'s bonds were meantime mixed, with its 7.80% notes due 2012 rising nearly 3 points to 54, while its 7% notes due 2013 were reported down a deuce at the 46 mark. However, Ford Credit's 7¼% notes due 2011 firmed smartly to 52 bid, a gain of 4 points.

A trader said that while "some of the Fords that are going to be part of the [debt] exchange are up a couple of points over the last few days," but other auto names besides Ford were "trading sideways." He saw General Motors Corp.'s 7.20% notes due 2011 "trading sideways all day and still hovering around" 15 bid 17 offered or 16 bid, 18 offered, "anywhere in there."

At another desk, a trader saw GM's benchmark 8 3/8% bonds due 2033 down ½ point at 12 bid, 13 offered.

GM's 49%-owned GMAC LLC's 6 7/8% notes due 2012 were seen down more than 4 points to the 47 level. However, the GMAC 8% bonds due 2031 gained 2 points to close at 37 bid.

MGM bounce continues

A trader said MGM Mirage "bounced off the bottom after having hit its lows on Thursday. It looked unchanged to me - I didn't see a whole lot of trading in it." He estimated that MGM's senior paper, like the 6 5/8% notes due 2015, the 7½% notes due 2016, the 7 5/8% notes due 2017, were trading at 33-35, "but I didn't see a lot of trading."

He said activity in the recently battered Las Vegas-based gaming giant "was sporadic." He saw some of the company's 6% notes coming due on Oct.1 in the mid to high 40s, while its 6 5/8s were around 35. He said there was "not much trading" in the 71/2s or the 7 5/8s, which stayed around 33-35.

"The market was 33-35, it looks like the trades took place on the offered side," so they might be better [Tuesday]."

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