Downsized Neiman Marcus deal prices; Delphi bounces around on reported request to GM

By Paul Deckelman and Paul A. Harris

New York, Sept. 28 - The Neiman Marcus Group Inc. was heard by high-yield syndicate sources to have successfully priced its two-part mega-deal offering Wednesday - although the upscale Dallas-based retailer's issue had first been sharply downsized from over $2 billion and had a third bond tranche lopped off and replaced with bank debt.

A pricing was also seen from Whiting Petroleum Corp., while price talk emerged on upcoming issues from TIM Hellas and Hornbeck Offshore, while supermarket operator Roundy's was heard getting ready to shop a new deal around.

In the secondary market, traders noted some activity in the bonds of Delphi Corp., on news reports that the troubled Troy, Mich.-based automotive electronics manufacturer had asked former corporate parent General Motors Corp. for a bailout totaling as much as $6 billion.

One source from a hedge fund saw the market continuing to grind higher on Wednesday as the primary market witnessed $1.45 billion price in three tranches from two issuers.

Two of those came as part of the downsized $1.2 billion - from $2.175 billion - offering by Neiman Marcus.

Sources told Prospect News throughout the morning that investors were pressing for covenant changes, which they got, as well as for the removal of a PIK provision on the senior tranche, which they did not.

Those sources also stipulated that investors were pushing for bonds that would pay interest at higher rates than those laid out earlier in the week in price talk.

Score that one for the buy-side as well.

Neiman Marcus sells long-awaited deal

Ranking as one of 2005's vaunted big LBO deals, the long-anticipated Neiman Marcus junk bond offering finally went onto the block, albeit in truncated form, on Wednesday.

The Dallas upscale retailer priced a downsized $700 million issue of 10-year senior notes (B2/B-) at par to yield 9%.

The yield came 12.5 basis points wide of the 8¾% area price talk.

The company has the option to pay the coupon in cash or to pay it in kind plus 75 basis points.

The issue was downsized from $750 million.

Neiman Marcus also priced a downsized $500 million issue of 10-year senior subordinated notes (B3/B-) at par to yield 10 3/8%.

The subordinated notes priced 25 basis points wide of the 10% area price talk. The issue was downsized from $575 million.

An $850 million senior secured notes tranche was dropped altogether.

Credit Suisse First Boston, Banc of America Securities, Deutsche Bank Securities and Goldman Sachs & Co. were the bookrunners.

In spite of the investor pushback that sources reported, both new bonds were seen trading up in the secondary market.

Whiting Petroleum atop talk

Denver-based energy company, Whiting Petroleum Corp., which occupies the red hot oil and gas exploration and production sector, saw its transaction fare somewhat better on Wednesday.

The company priced $250 million of 8.5-year senior subordinated notes (B2/B-) at par on Wednesday to yield 7%, on top of price talk.

Merrill Lynch, JP Morgan and Lehman Brothers were joint bookrunners for the acquisition financing deal.

Hellas talks euro mega-deal

Trailing in the wake of Neiman Marcus's dollar-denominated mega-deal Greek telecommunications company TIM Hellas plans to price a euro-denominated whopper on Friday.

The Greek telecom issued price talk Wednesday on its €1.39 billion equivalent bond thee-part bond offering that is expected to be issued in dollars and euros.

Hellas Telecommunications III talked its €925 million equivalent offering of seven-year senior secured floating-rate notes (B1/B/BB-) at three-month Libor plus 350 basis points.

Hellas Telecommunications II talked its €355 million equivalent offering of eight-year senior notes (B3/B-/B-) at a yield in the 8¾% area.

Meanwhile no price talk was announced on a €110 million tranche of 10-year PIK notes.

JP Morgan and Deutsche Bank Securities are joint bookrunners.

Also talked Wednesday was Hornbeck Offshore Services Inc.'s $75 million add-on to its 6 1/8% senior notes due Dec. 1, 2014.

The notes were talked at 99.00, with pricing expected on Thursday afternoon via Goldman Sachs, Bear Stearns and Jefferies.

Neiman Marcus up in trading

When the new Neiman Marcus bonds were freed for secondary dealings, a trader saw the new 9% senior PIK notes due 2015 offered at 101, after having priced at par, while the new 10 3/8% senior subordinated notes due 2015, which also priced at par, were at 100.125 bid, 101.125 offered.

At another desk, a trader saw both tranches at 100.5 bid, 101 offered on the break, but said that the bonds fell back to close little changed from their issue price, at par bid, 100.5 offered.

Delphi dips, recovers

Back among already established issues, a trader said that from where he sat, the market was "very quiet today," with many portfolio managers and other decision makers away at a Deutsche Bank Securities conference.

Among the relatively few issues that were actually doing anything, the trader said Delphi's bonds "initially fell down" on a report by the Bloomberg News Service that Delphi was asking GM for a bailout package worth $6 billion to help it avoid bankruptcy, "as people said that GM is not going to go along with that."

However, he said, "after they thought about it a little" and decided the notion might not be so far-fetched, the Delphi bonds came up from their lows to "move up a little bit" and end pretty much unchanged.

He saw Delphi's 6.55% notes due 2006 ending the day at 70 bid, 71 offered, about where they started, while the 7 1/8% notes due 2029 also closed out unchanged, at 62 bid, 63 offered.

Another trader saw Delphi's 6.55s trading at 69 bid, 71 offered in the early going, before heading back up to 70 bid, 72 offered, while the 7 1/8s closed at 61 bid, 63 offered, which he considered to be up a point, as were the 6½% notes due 2013, which ended at 65 bid, 67 offered. He saw Delphi's 2009 61/2s unchanged at 66 bid, 68 offered.

Delphi was "all over the place," yet another trader observed, quoting the 6.55s at 70 bid, 71.5 offered, the 2009 bonds at 66 bid, 67.5 offered, and the 7 1/8s at 60.5 bid, 62 offered, all unchanged on the day.

Delphi's New York Stock Exchange-traded shares meantime lost 13 cents, (4.73%) to close at $2.62 - just a penny up from the all-time intraday low of $2.61, set earlier in the session.

Delphi's bonds and shares have been battered by renewed speculation that the company will soon be forced into bankruptcy.

When it was spun off from GM several years ago, Delphi was saddled with burdensome labor costs heavier than those paid by other automotive parts suppliers as part of that deal, and it now wants GM and the union to give it some relief, the way GM competitor Ford Motor Co. and the union recently agreed to left Delphi rival Visteon Corp. get out from under some unprofitable high-labor-cost plants by transferring them back to Ford.

Delphi has set Oct. 17 - when bankruptcy law changes take effect rendering them less friendly to debtor companies - as its informal deadline for an agreement.

CEO Robert "Steve" Miller has openly said that Delphi could well be forced into the courts if GM and the UAW don't help the company out. Despite statements last week which seemed to downplay the urgency of a bankruptcy filing by saying that he would prefer to work things out without getting the courts involved, Miller was quoted in Monday's Wall Street Journal as saying that "I make a new judgment every morning . . . Do we have enough time?" - comments widely interpreted to mean that the turnaround expert has likely concluded that a bankruptcy might be the only choice the company has.

A number of analysts have also indicated that they think Delphi could well go bankrupt; earlier in the week, Deutsche Bank equity analyst Rod Lache said that he now thinks that there is about an equal chance that Delphi could file or would reach a bailout agreement with GM and the UAW. Previously, Lache had believed that Delphi, GM and the union would reach some kind of agreement to keep the company out of Chapter 11. However, with few signs emerging from the three-way talks between the two companies and the UAW, he now rates that possibility a toss-up, at best.

"The primary reason for our change of thinking is that there may be a legitimate argument that GM and the UAW would be better off if Delphi files," Lache said in a research note.

GM ends unchanged

While Delphi's bonds were bouncing around at mostly lower levels Wednesday before finishing unchanged, GM's bonds, a trader said, "were weaker at the beginning, but then buyers showed up, and they ended unchanged," with the Detroit auto giant's benchmark 8 3/8% notes due 2033 at 77.5 bid, 78.5 offered.

Finlay drops on cutbacks

Finlay Fine Jewelry's 8 3/8% notes due 2012 were seen down six points on the session, at 82 bid, 84 offered, after the company - which sells jewelry out of leased space in department stores - said that it would no longer operate in 194 locations, in the aftermath of the big merger of Federated Department Stores and The May Co., which will lead to the consolidation of stores in some markets.

Constellation weak

Constellation Brands Inc.'s 8% notes due 2008 were seen unchanged to perhaps off half a point, at 105 bid, 106 offered, after the Fairport, N.Y. -based wine producer - the world's biggest vintner - made an unsolicited $900 million offer for Canadian producer Vincor International Inc., which the latter company rejected as inadequate. However, it left the door open to considering a better offer from Constellation. The Constellation bid would include the assumption of $260 million of Vincor debt.

Kodak lower

Eastman Kodak Co.'s bonds were seen lower, after the Rochester, N.Y.-based photographic products giant - now in the midst of a restructuring that will take it mostly out of traditional film-based and photography and more into the newer digital imaging technologies - warned that slowing U.S. economic growth will curb its digital-photography profits this year - forcing the company to build fewer digital cameras and home printers for the end-of-year holiday selling season.

A trader saw Kodak's 7¼% notes due 2013 down a point at 97 bid, 98 offered, while another pegged them at 97.25 bid, 98.25 offered. The company's 6 3/8% notes due 2006, were "maybe down 1/4," the second trader suggested, at par bid, 101 offered.

A market source said that the 71/4s were down as much as 1½ points at 98 bid.

Company executives at Kodak's investors' meeting in New York also said that they would work hard to cut debt and try to restore the investment-grade ratings that Kodak lost earlier this year (see related story elsewhere in this issue).

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