GM leads autos, market higher but gains lose out to late profit-taking; Medical Services prices $150 million

By Paul A. Harris

St. Louis, June 15 - Various sources marked the high yield market unchanged to slightly firmer on the Wednesday session, noting some early strength in automotive names thought to have been led by General Motors Acceptance Corp.

However, sources added, most if not all of the morning gains had dripped into the oilpan by the close.

The primary market, meanwhile, saw deals price from two off-the-run names. Medical Services Co., which saw its $150 million issue of floating-rate notes price 50 basis points beyond the wide end of price talk, at a discount. And South Africa's Foodcorp (Proprietary) Ltd. saw its €175 million, which priced in London, come tight to talk.

GM drives morning rally

One market source told Prospect News on Wednesday afternoon that bonds in the automotive sector appeared to be hitting on all eight cylinders as the session got underway, giving much of the market a positive tone.

"The market traded up because you had some good news, supposedly, on GM, with GM stock trading above its 200-day moving average," the source said.

"So there was strong movement in autos early on, and I think some people got caught short as far as being underweight in that sector, and were scrambling to get themselves covered early in the day," the source added.

"Towards the end of the day I think you had some profit-taking.

"And the Treasury market has not performed that great lately. It ended basically unchanged on the day but it certainly has not been good for high yield."

The source said that General Motors Acceptance Corp.'s bonds due 2033 had gone all the way up to 88.25 bid, "a two-point move," only to close at 85.40 bid, 86.50 offered.

"The other autos went with it," the source said."

"Delphi and Visteon were up as well, but didn't trade as heavily or as far."

This source marked the high-yield market unchanged on the day after being up a half a point to a whole point during the morning.

A trader, meanwhile, also said that the paper of auto parts makers Delphi Corp. and Visteon Corp. opened a good point to a point and a quarter higher, and gave pretty much all of it back.

The trader said that Delphi's 6½% bonds due 2013 traded between 81 bid and 83.75 bid in the morning, and went out at 80.25 bid, 81 offered.

Meanwhile another source reported seeing considerable activity in the bonds of bankrupt automotive interior accessory company Collins & Aikman Corp. The source said they had been moving around at 42, and added that was not too bad for a defaulted bond.

Calpine continues to rally

The trader went on to say that the bonds of San Jose power producer Calpine Corp. continued to bask in the warm glow of investor approval of the company's Tuesday announcement that it plans to shed four power plants in a sale expected to generate $357 million, and chief financial officer Bob Kelly's Wednesday pronouncement that the company could realize $3 billion of debt reduction in 2005 without having to sell any more assets.

The trader said that Calpine's bonds, which seemed "a little softer" on Tuesday afternoon, opened strong on Wednesday morning, and remained strong throughout the session.

Calpine's 8½% notes due 2011 closed at 69 bid, 69.50 offered, the trader said. Calpine's 8½% notes due 2008 closed at 71.50 bid, 72.50 offered, and the 8¾% notes due 2007 finished the day at 74 bid, 75 offered.

"That's pretty much a quarter to a half better across the board than Tuesday's close," the trader added.

Another source had Calpine's 8½% notes due 2010 spotted at 75.50 bid, 76.50 offered, after closing at 75.25 bid, 76 offered on Tuesday, "up a quarter on the day."

A day for off-the-run names

Another trader told Prospect News that the Wednesday session had been "a day for one-off names.

"The market opened firm," the trader added. "The auto stuff got lifted in the morning and then was offered down in the afternoon."

The trader mentioned seeing a lot of trading in the bonds of drugstore chain operator Jean Coutu Group during the morning, adding that they opened up a quarter to a half point better at the 98.50 bid, 99 offered level, and closed at 98 bid, 98.50 offered.

The source also said that the bonds of Hamilton, Bermuda-registered Sea Containers Ltd. had traded a lot during the session.

"There were a lot of buyers," the trader said, spotting the company's 7 7/8% bonds trading at 97.25 bid, 97.50 offered.

"Retail has been selling them closer to par, and getting a nice piece of change," the source added.

The trader also spotted Sea Containers' 10¾% notes due 2006 at 100.75 bid, 101 offered, also with a lot of buyers.

"There seems to be renewed interest in the name," the trader commented.

The trader added that the bonds of North Atlantic Energy Partners were also active.

Ply Gem eases after Tuesday gains

Meanwhile the bonds of Kearney, Mo.-based door and window maker Ply Gem Industries, Inc., which made a substantial move on Tuesday, gave up a little of that ground on Wednesday.

"They were up 5½ points on Tuesday but gave about a point, with possibly some short-covering going on there," the trader said.

The source commented that Ply Gem's bonds had previously plummeted approximately 20 points on news that it was about to lose its largest customer.

"One of the distressed firms put out a report saying that the bonds were money-good," the trader told Prospect News.

"Ply Gem's biggest customer, a Canadian-based company, was in the process of buying another company that people thought would supply the same product, and thus Ply Gem would lose the contract.

"But it turns out that the company that the company that the customer is buying can't supply enough of the siding and windows and doors to meet the demand. So according to the report from the distressed firm the Canadian company is still going to need Ply Gem to supply the product that they need.

"Now that the smoke has cleared and people have looked a little more closely it appears that the same client is going to need the same product, and they probably won't lose the contract."

Little movement in recent issues

The trader went on to report seeing very little movement Wednesday in recently priced issues.

Tenaska Alabama Partners LP, which priced a $361 million issue of 16-year senior secured notes (B1/B+) at par on Monday to yield 7%, saw its new bonds at 101.25 bid, 101.50 offered Wednesday, unchanged from Tuesday, the trader said.

Another source said the new Tenaska notes had been trading 101 bid, 101.50 offered, "but no change on the day."

The trader, meanwhile, said that some of the other recent issues "never got out of the box.

"We had a bid for Rafaella when it was first priced and never saw an offering," the source said, referring to Rafaella Apparel Group Inc.'s new 11¼% six-year notes (B2/CCC). The company sold $172 million of the notes at 95.00 on Monday to yield 12.459%, via Jefferies & Co.

Wednesday's deals

Two high-yield deals priced Wednesday in the U.S. and European junk markets.

Medical Services Co. priced a $150 million issue of second-priority senior secured floating-rate notes due Oct. 15, 2011 (B3/B-) at 99.00.

The coupon will float at three-month Libor plus 750 basis points, 50 basis points wide of the three-month Libor plus 675 to 700 basis points price talk.

Banc of America Securities ran the books for the acquisition-related debt refinancing deal from the Jacksonville, Fla., medical administrative services provider.

Meanwhile in London, Foodcorp (Proprietary) Ltd. priced a €175 million issue of seven-year first priority senior secured notes (B2/B+) at par to yield 8 7/8%, at the tight end of the 9% area price talk.

Citigroup ran the books for the debt refinancing deal from the South African processed foods company.

New deals announced

Meanwhile three new offerings appeared on Wednesday - one of the drive-by variety and two with roadshows.

Emmis Communications Corp. plans to price a $325 million issue of seven-year senior floating-rate notes (B3/B-) in a quick-to-market Thursday transaction led by Banc of America Securities.

The Indianapolis-based diversified media company plans to use the proceeds to help repurchase up to $400 million of the company's class A common stock.

Elsewhere Chiquita Brands International, Inc. will begin a roadshow Thursday for a $225 million offering (B3/B-) that, according to one source, had parked itself on the horizon in the late-April, early-May period of intense volatility in high yield, and is finally setting sail upon smoother seas - although Chiquita had its own issues, as well, with a European Commission investigation.

Morgan Stanley and Wachovia Securities are joint bookrunners for the acquisition deal from Cincinnati-based banana company.

Finally Commercial Vehicle Group, Inc., will begin a roadshow on Monday for a $150 million offering of eight-year senior notes via Credit Suisse First Boston.

The New Albany, Ohio-based truck parts manufacturer will use the proceeds to repay debt and for general corporate purposes.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.