MetroPCS prices $1 billion deal; Delphi, Lear up; funds see $27.3 million outflow

By Paul Deckelman and Paul A. Harris

New York, Oct. 26 - MetroPCS Wireless was heard by high yield syndicate sources Thursday to have priced $1 billion of new eight-year notes, in a downsized mega-deal that came at the rich end of talk.

And Cablecom Luxembourg SCA priced a new eight-year issue of euro-denominated notes off syndicate desks in London.

Also in the new-issue arena, Host Hotels & Resorts Inc. - the old Host Marriott Corp. - unveiled plans to sell half a billion dollars of new eight-year bonds as part of a debt refinancing. The Griffin Coal Mining Co. was heard to have slated an issue of 10 year notes, while Conexant Systems Inc. will be hitting the road Monday with an issue of four-year bonds.

Traders reported that new bonds sold Thursday and over the previous session were firmer, in line with a generally upbeat junk market.

Among the outstanding issues, Lear Corp.'s notes were seen driving higher, as the Southfield, Mich.-based maker of automotive seating and interior components reported a sharply reduced third-quarter net loss versus a year ago and said that it was making progress on shedding its North American interiors business.

Also in the automotive world, Delphi Corp.'s bonds were once again on the rise, helped by buyout speculation about the bankrupt Troy, Mich.-based parts maker, as well as by indications that its efforts to forge a deal with former parent General Motors Corp. and the United Auto Workers union that would enable Delphi to cut its bloated labor costs, seemed to be making progress.

Trump Entertainment Resorts Inc.'s bonds were among the day's busiest issues, although traders generally saw the Atlantic City, N.J.-based gaming operator's finally plateauing after two straight days on the upside, spurred by news that the company was in talks that could lead to the sale of one of its three casino-hotels to Las Vegas-based gamer Wynn Resorts Ltd.

MagnaChip Semiconductor Ltd.'s bonds were heard to have gyrated wildly as the Korean chipmaker reported earnings, first falling several points from Wednesday's levels and then bouncing back up to end up several points.

Funds back into the red

After trading had finished up for the day, market 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 $27.3 million more left the funds than came into them, in contrast to the $3.2 million inflow seen the previous week, ended Wednesday, Oct. 18.

The latest week's outflow marks the fifth such bleed in the past seven weeks, during which time, a net $135.3 million more has flowed out of the funds than has come into them, according to a Prospect News analysis of the AMG statistics.

Despite that recent reversion to the generally negative trend that has held sway for most of the year, the past roughly two or three months have stood out as the exception, with inflows still seen in seven weeks out of the last 14, with net inflows in that period totaling $407 million, according to the Prospect News analysis, and inflows also still seen in nine weeks out of the past 17, for total net inflows of $503.8 million in that time, according to the analysis.

The latest outflow increased the year-to-date net redemptions that the funds which report to AMG on a weekly basis have undergone to $3.189 billion for 2006 through Oct. 25.

Meanwhile the funds that report to AMG on a monthly basis are solidly in the black year-to-date, having seen $3.284 million of inflows.

Hence year-to-date aggregate flows, which tally the both the weekly and monthly reporting funds, are now positive $94.6 million.

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 10% to 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.

MetroPCS oversubscribed

The primary market saw two tranches from two issuers, totaling $1.0 billion and €300 million, price during the Thursday session.

Thursday's largest deal came from Dallas-based MetroPCS Wireless.

The company priced a downsized $1 billion issue of eight-year senior notes (Caa2/CCC) at par to yield 9¼%, at the tight end of the 9¼% to 9 3/8% price talk.

Bear Stearns & Co., Merrill Lynch and Banc of America Securities LLC were joint bookrunners for the issue, which was downsized from $1.1 billion, with the difference shifted to the company's credit facility. However the size reduction was not as big as previously anticipated. Earlier in the week the issue had been reduced to $900 million.

Proceeds from the offering will be used to refinance existing debt, to fund the purchase of wireless spectrum won in the Federal Communications Commission's Auction 66 and for general corporate purposes.

An informed source told Prospect News that the deal had gone very well and that the order book was oversubscribed.

Cablecom prices €300 million

Cablecom Luxembourg SCA priced a €300 million issue of 10-year senior notes (B3/expected CCC+) at par to yield 8% in a Thursday drive-by deal.

The notes priced on top of the price talk.

JP Morgan was the bookrunner for the bonds, proceeds from which will be used to defease the company's 9 3/8% notes due 2014.

Cablecom Luxembourg is a holding company operating cable communications services primarily in Switzerland through its subsidiary Cablecom GmbH.

Host $500 million for Friday

Host Hotels & Resorts, LP plans to price a $500 million offering of eight-year senior notes (Ba1/BB) in a quick-to-market transaction on Friday via Deutsche Bank Securities and Merrill Lynch.

The Bethesda, Md.-based lodging company will use the proceeds to repay debt - including the $450 million outstanding principal amount of 9½% series I senior notes due 2007 issued by its sole general partner, Host Hotels & Resorts, LP - and for general corporate purposes.

Calendar continues to grow

In addition to the host Thursday-Friday drive-by deal, the crowded new issue calendar took aboard two deals on Thursday which will be marketed via investor roadshows.

Griffin Coal Mining Co. will begin a roadshow Monday in Asia for its $400 million offering of 10-year senior notes (Ba2/BB-).

A U.S. roadshow will begin on Wednesday.

Merrill Lynch & Co. is the bookrunner for the debt refinancing and capital expansion and investments-funding deal.

Griffin Coal operates in the Collie Coalfield, 150 kilometers south of Perth, the capital city of Western Australia.

And Conexant Systems, Inc. will also start a roadshow on Monday for its $250 million offering of four-year floating-rate senior secured notes (B1/B+), via JP Morgan.

The Newport Beach, Calif., provider of semiconductor solutions for broadband communications will use the proceeds to repay convertibles due in 2007.

Owens Corning prices

Also pricing was an investment-grade rated deal for bankrupt Toledo, Ohio-based insulation maker Owens Corning - whose established bonds still carry junk ratings and trade as distressed debt. The new bonds are part of the company's exit financing as it prepares to leave Chapter 11 at the end of the month.

The $650 million of new Owens Corning 6½% notes due 2016, which priced at 99.734, or 180 basis points over the comparable Treasury issue, were seen having tightened by the end of the day to bid levels around 171 bps over Treasuries and offered levels 169 bps over. Its new $550 million of 7% notes due 2036, which priced at 98.023, or 230 bps over Treasuries, likewise tightened to a closing level of 221/219. Owens Corning's established bonds, like its 7½% notes due 2018, continue to trade in the lower 50s.

MetroPCS leads aftermarket action

The secondary market, a trader said, "was pretty firm across the board" in anticipation of the MetroPCS deal, and the new 9¼% seniors notes due 2014 "raced out of the gate" after their par pricing and traded up to around 101.25 before coming back down, he said, selling off "a little bit" to lows around 100.5 bid, 101 offered. He saw the bonds end the day around 100.875 and "holding in."

Even with the slight upsizing from $900 million to $1 billion, "it looks like some guys got cut back a little bit on their allocations, so we saw a little bit of add-on buying on the break. Then we saw that kind of fade out a little bit."

Another trader was quoting the new bonds late in the day at 101 bid, 101.25 offered.

Yet another trader saw them at 100.75 bid, 101 offered, and saw the new Cablecom Luxembourg 8% euro notes due 2016 at 99.25 bid, 99.625 offered, off from their par issue price.

Other recent deals firm

As for issues which came Wednesday, that trader also saw the Michaels Stores Inc. bonds, which priced at par that session for both tranches and then settled slightly below those levels, "doing much better" on Thursday, with its 10% notes due 2014 getting as good as 100.5 bid, 100.75 offered before closing at 100.375 bid, 100.625 offered, and its 11 3/8% subordinated notes due 2016 reaching a high of 100.625 bid, 100.875 offered, before finishing at 100.5 bid, 100.75 offered.

At the same time, the new SuperValu Inc. 7½% senior notes due 2014, which priced at par Wednesday and then moved up slightly to 100.25 bid, 100.75 offered, moved up further on Thursday to 100.625 bid, 100.875 offered. Level 3 Communications Inc.'s new 9¼% notes due 2014, which priced at par on Wednesday and stayed around that level after it broke, firmed to 100.5 bid, 100.75 offered.

Still another trader saw the Michaels bonds better on Thursday, after they had "not been able to get out of their own way" on Wednesday.

The first trader continued that even with the slight end-of-day retreat by the Metro PCS bonds from their prior highs, "the market was firm across the board," especially "a lot of these deals that came in the last couple of days."

He saw the new Buffets Inc. 12½% notes due 2014, which priced at par a week ago, move up to 100.75 bid, 101.25 offered from Wednesday's levels at 100.25 bid, 100.75 offered.

The Berry Plastics Corp. 8¼% notes due 2016, which priced at par, "really didn't go anywhere," but have been holding steady at 100.75 bid, 101.25 since moving up to that level following its par pricing on Oct. 18, " still right there."

At the same time, he saw the new Cricket Communications Inc. (Leap Wireless International Inc.) 9 3/8% notes due 2014, which also priced at par on Oct. 18, at 101.75 bid, 102.25 offered.

"Leap and Metro PCS have very close comps, Leap priced at 9 3/8%, and [Metro PCS] priced at 9¼%." At the two companies' bonds respective levels, "Leap is outpacing Metro PCS."

Looking back somewhat further, he saw the Lyondell Chemical Co. 8% notes due 2014 up a point on the session, at 102 bid, 102.5 offered. The notes priced at par on Sept. 15. "So stuff was up pretty good across the board."

Upcoming HCA deal seen healthy

Looking ahead, to HCA Corp.'s pending $5.7 billion supersized mega-deal, the trader said that "the rumor is that their bank debt deal," which along with the bond offering is part of the Nashville-based hospital operator's financing for its planned leveraged buyout, "could be widening by about 25 basis points, which put a little bit of pressure" on its existing notes Thursday.

"That paper had been fairly well bid at the opening [Thursday] morning, with the rest of the market, and seems to be a little softer going into the close, based on the fact that if the bank debt is wider, obviously, the whole rest of the capital structure will widen out as well, by 25 or 50 basis points."

He saw the outstanding HCA notes initially trading up by ½ to ¾ point, before falling back to close pretty much unchanged, with the company's 6½% notes due 2016, its benchmark issue, opening at around 79 bid, 79.5 offered, getting as high as 80 bid, and then dropping back to around its opening levels, although he saw the bonds finally going home a bit up from their open, at 79.25 bid, 79.75 offered.

"They were probably trading at around 10% [yield] Wednesday, which is probably fairly valued."

The new deal, he predicted, "is probably going to come somewhere around 9% to 9¼%, with some wiggle room that potentially may come a little cheaper." The upcoming second-lien bonds, he said, should be somewhere around 75 to 100 basis points in front of the existing subordinated paper.

With its yield around 10%, the existing subordinated paper "looks very attractive."

As for the new deal, "I think you're going to have buyers of the [new] second-lien paper on the break, and they'll trade probably inside of 9%, if not immediately [on the break], then soon, given the demand in the market. Once you take the uncertainty out, and the paper prices, I think it turns higher."

The trader acknowledged that $5.7 billion - even if broken into several tranches, as the HCA deal will be - is a gigantic amount of paper for the market to digest all at once, but replied that "if you look at the dynamics of the market right now, there's a lot of cash around. You can't buy paper in the high-grade market - everything is trading on the moon."

That fact, he said will translate into not only a lot of high yield buyers being interested in this deal, "but crossover and high-grade debt guys, potentially, looking at this. You're talking about second-lien paper trading at 9%.

"It's worth taking a look at, that's for sure."

Given current market conditions, he said, large size on a deal is not likely to be an inhibiting factor, either to getting a deal done or its successful aftermarket trading,

"Look at all of these [just-priced] deals. Metro PCS gets a $1 billion deal done. Leap Wireless [does a $750 million offering] and the bonds trade up 2 points. The market is unfazed."

Additionally, he said, in the case of HCA, "you're talking about BB hospital paper. This is going to go like hot cakes."

Lear is king among autos

Looking at existing issues without any new-deal implications, traders saw Lear's bonds better after the company reported a third-quarter net loss of $74 million ($1.10 per share), only less than one-tenth of the year-earlier red ink of $750.1 million ($11.17 per share), although it should be noted that the year-ago figures included large restructuring charges.

A market source saw Lear's 5¾% notes due 2014 up 1¼ point at 84.75 bid.

A trader saw Lear's 8.11% notes due 2009 up about a point at 101 bid.

"They had less of a loss, and that made everyone feel warm and fuzzy," he opined.

While Lear's finances are still being dragged down by its close connections with Detroit's sagging "Big Three" domestic automakers, both bond and equity investors seemed cheered by the progress which the company reported in getting rid of its unproductive interiors business, which would allow Lear to concentrate on seating and electronic components.

During its conference call with analysts, Lear reported that it had completed the sale of its European interiors business to billionaire financier Wilbur Ross' International Auto Components Group, and said that it hoped to soon complete a similar shedding of its North American interiors business.

The company also said that its liquidity and flexibility had been boosted by the recent $200 million cash investment it received from another billionaire financier, Carl Icahn.

Other autos gain

Given a boost by Lear, traders said, other automotive names were firmer, with General Motors Corp.'s benchmark 8 3/8% notes due 2033 half a point better at 88.75 bid, and Ford Motor Co.'s 7.45% notes due 2031 a quarter point up at 77.5.

Delphi's bonds continued their recent climb, which has been fueled by buyout speculation about the company after Ripplewood Holdings was reported readying a bid, as well as signs Delphi may be able to reach a consensual agreement with GM and the UAW on cutting the bloated labor cost structure it inherited when the carmaker spun its parts unit off in 1999. Such an accord would avert a potentially ruinous strike which could result if the bankrupt company tries to unilaterally impose a new wage and benefit accord on its hourly workers.

A market source saw Delphi's 6.55% notes that were to have been redeemed earlier this year firm to 104, a 1½ point rise, while its 6½% notes due 2009 were 1¼ point up at 103.25. Delphi's 7 1/8% notes due 2029 firmed to 94.5 from 92.875.

MagnaChip bounces wildly around

While Lear got a boost from its earnings data, MagnaChip Semiconductor was swinging violently from down as much as 5 points, back up to up 2 or 3 after it posted results.

A trader saw the company's 8% notes due 2014 plunge to 47 bid, 48 offered after the results were released, a loss of about 4 or 5 points, he said,

But then, "after a conference call on which they indicated that they had sufficient cash and gave their forecasts for the quarter," the bonds moved back up, to 54.5 bid, 55.5 offered, which he called a gain of about 4 points on the session.

The Korean high-tech firm had a net loss for the fiscal quarter ended Oct. 1 of $47.7 million, sharply wider than $13.2 million in the third quarter of 2005.

Trump active, but little changed

A trader said that Trump Entertainment Resorts' 8½% senior secured notes due 2015 were "one of the most actively traded bonds" during Thursday's session - but at the end of the day, they were seen having ended around the same 97 level at which they had begun.

Those bonds had firmed smartly on Tuesday and again on Wednesday on the news that the company had been holding talks with Las Vegas-based gamer Wynn Resorts about the possible sale of the Trump Plaza gaming resort to Wynn, which wants to build a Boardwalk casino resort on a 12-acre site which includes the Plaza.

The Newark, N.J.-based Star-Ledger newspaper reported that a possible deal might include a parcel of Wynn-owned land in Vegas being swapped to Trump, which is as eager to break into Vegas as Wynn is to get back to Atlantic City, which company founder Steve Wynn had abandoned nearly 20 years ago, piqued at official red tape from state gaming authorities.

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