American Cellular slates deal; Sirius, XM retreat from gains; auto names move

By Paul Deckelman and Paul A. Harris

New York, Feb. 21 - American Cellular Corp. was heard by high yield syndicate sources on Wednesday to be preparing to shop and market a $425 million issue of notes next week.

Pre-deal market price talk was meantime heard on upcoming issues from American Railcar Industries Inc., and Key Plastics LLC. And traders in both the domestic high yield market and the emerging markets awaited Thursday's anticipated pricing of Digicel Group Ltd.'s two-part eight-year mega-deal.

In secondary dealings, traders saw the bonds of XM Satellite Radio Holdings Inc. and Sirius Satellite Radio Inc. were each seen to have backed off a little from the gains which the two satellite broadcasting companies notched on Tuesday on the news that they will merge.

Bonds of troubled automotive supply companies Remy International Inc. and Dana Corp. were meanwhile seen higher, although there was no fresh news seen out on either company to explain the moves.

Tembec Inc.'s bonds were seen lower, hurt by a surge in the Canadian dollar.

A sell-side source whose activities span both the high yield and leveraged loan markets said that junk ended the session flat to 1/8 point higher on very little activity Wednesday.

Sources around the market, meanwhile, mentioned that trailing the three-day Presidents Day weekend a lot of market participants are on vacation.

A quiet primary market

No issues were priced on Wednesday.

However news surfaced on several deals poised to be priced during the last two sessions of the week.

Digicel Group Ltd. set talk for its $1.4 billion two-part offering of eight-year senior notes (Caa2//CCC+).

The Caribbean wireless telecommunications network operator talked a $1 billion tranche of cash-pay notes at 9% to 9¼%.

Meanwhile Digicel talked a $400 million tranche of PIK toggle notes to price 25 basis points behind the cash-pay notes. Should the issuer elect to make an in-kind interest payment, as opposed to a cash payment, the coupon toggles up by 75 basis points.

The deal, which is being led by Citigroup and JP Morgan, is expected to price Thursday afternoon.

Elsewhere American Railcar Industries, Inc. talked its $250 million offering of seven-year senior unsecured notes (B1/BB-) at 7½% to 7¾%.

The UBS Investment Bank-led deal is expected to price Friday morning.

And Key Plastics Finance Corp. talked its $115 million offering of six-year senior secured notes (B2/B) with a coupon of 11¾% at an issue price range of 99.00 to 99.50.

The Jefferies & Co. deal is expected to price Thursday afternoon.

Expected timing emerged on American Cellular's planned sale of a $425 million of senior notes. Pricing is expected late next week.

Morgan Stanley and Lehman Brothers will be joint bookrunners for the Rule 144A with registration rights offering. One other bookrunner will be named.

Unprecedented interest

The sell-sider who focuses on both high yield bonds and leverage loans said Wednesday that both markets may now be at all-time tights.

The source made mention of the Crown Castle Operating Co. $600 million term loan B which is talked at Libor plus 175 basis points, and agreed that the pricing is aggressive.

"Conditions could not be more favorable for borrowers," the sell-sider surmised, adding that right now deals in both the high yield bond and leveraged loan markets are generating an unprecedented level of interest among investors, who appear to have a lot of cash to put to work.

XM/Sirius gains stall

Tuesday's big story - the rise in XM Satellite's bonds and those of Sirius Radio - did not appear to have much in the way of coattails. If anything, traders, said, the bonds of the two companies, which had risen about 2 or 3 points to the 102-103 area on news of their plan to merge, were seen to have retreated from Tuesday's close.

A trader saw each of them down about ½ point on the session at 101.5 bid, 102.5 offered.

At another desk, however, XM's 9¾% notes due 2014, after having held steady around the same 102.5 level at which the bonds were recorded there having gone home at Tuesday, actually darted higher in light late-session trading to approach the 104 level. Sirius' 9 5/8% notes due 2013 were seen there having held steady around the 102 level.

One factor behind the uncertain direction of the bonds, traders said, was the uncertainty about the deal itself. Structured as a "merger of equals," it "remains to be seen which company is acquiring which and will be the surviving company," one said.

Also less than certain is whether federal anti-trust regulators will even allow such a combination of the two companies which between them dominate the whole satellite radio broadcasting industry in the United States.

The House Judiciary Committee, which oversees enforcement of anti-trust laws, plans to hold a hearing next Wednesday on the ramifications the $5 billion deal may have, particularly on its impact on consumers, who now would have only one satellite broadcasting provider to choose from.

And the Federal Communications Commission may get involved even though it has not in the past taken much of a role in the satellite broadcast industry - lack of such FCC oversight produced a situation where risqué radio bad-boy Howard Stern took his long-running program off the heavily-regulated regular FM broadcast band and brought it to Sirius, allowing him to ratchet up the raunchiness of the show substantially. Other governmental powers that could become involved include the Federal Trade Commission and the Department of Justice.

Several years ago, the regulators grounded a merger effort by satellite TV broadcasters EchoStar Communications Corp. and DirecTV Group Inc., charging that such a combination would effectively result in a "regulated monopoly."

Tembec down as loonie rises

Back on the ground, Montreal-based forest products company Tembec's bonds were seen to have weakened, with a trader attributing the one point across-the-board fall to the rising Canadian dollar, which serves to make the products of Canadian companies more expensive and hence, less desirable, in the U.S. and other export markets.

Tembec's 8½% notes were quoted at 76 bid, 77 offered, down a point.

The Canadian dollar hit a more than seven-week intraday high, pushed upward by a government report showing December retail sales growing at the fastest pace in nine years.

The loonie rose by 0.88% to US$0.8621 at the close, up from Tuesday's finish at US$0.8547, and at one point in the session it hit a peak of US$0.8625, its highest level since hitting US$0.8633 back on Dec. 29.

One U.S. dollar buys C$1.1599.

Auto names up, despite no news

In the automotive arena, a trader said that he saw Dana Corp.'s bonds "up a point across the board," with its 6½% notes due 2008 a point better at 78 bid, 79 offered.

Dana, another trader agreed, "was up a point or two right out of the gate - they started trading higher and kept going." The second trader saw the '08 bonds up 2 points at that same 78 bid, 79 level. Neither trader saw any fresh news out on the bankrupt Toledo, Ohio-based parts manufacturer that might explain the rise.

Delphi Corp. bonds were meantime seen mostly unchanged, apparently little moved by the late-Tuesday announcement that the bankrupt Troy, Mich.-based automotive components company had agreed to sell its interiors business to billionaire investor Ira Rennert's Renco Group for undisclosed terms.

One trader suggested that the Delphi was "up maybe ½ point," with its 6½% notes due 2009 at 111-112. However, other traders called Delphi unchanged on the day, with its 6.55% notes due 2006 continuing to hover around 111.375 bid, 111.875 offered. Delphi's 8¼% notes due 2033 at 123 bid, 125 offered.

One trader did see some movement in Remy International Inc.'s bonds, although he did not know why the Anderson, Ind.-based maker of automotive electrical components was up.

The trader saw the 8 5/8% senior notes due 2007 two points better at 81 bid, 82 offered and its junior notes also improved, the 11% notes due 2004 and 9 3/8% notes due 2012 each up a point, at 30 bid, 32 offered and 27 bid, 29 offered, respectively.

Movie Gallery continues rise

Apart from the autosphere, Movie Gallery Inc. continued to gain in the wake of the company's launch of its new $900 million five-year credit facility. Traders also pointed to a credit upgrade that may be spurring investments in the company.

A trader called Dothan, Ala.-based Movie Gallery's 11% notes due 2012 up a point at 89.5 bid, 90.5 offered, pointing to the company's ratings upgrade from Standard & Poor's. At another desk, a trader pegged the notes at 89 bid, 91 offered, still calling them up a point.

The company's credit rating was boosted to B- from CCC+ with a stable outlook, S&P said. The upgrade was based on the additional financial flexibility and liquidity received from the refinancing of the movie rental chain's credit facility.

The S&P upgrade follows Moody's Investors' Service having lifted its outlook on the credit to positive on Tuesday, citing its improved liquidity and financial flexibility as a result of the refinancing.

Huntsman firmer on debt cut plans

Huntsman Corp.'s bonds firmed, a trader said, citing the chemical company's announced plans to cut debt and boost profit margins in most of its segments.

He saw its 7 7/8% notes at 105 bid, 106 offered, up ½ point on the session.

Another trader, however, called the credit unchanged, with the 11½% notes due 2013 holding steady at 112 bid, 113 offered.

Stephanie N. Rotondo contributed to this report.

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