Intelsat bonds firm on EchoStar/Liberty bid talk; funds see $400 million outflow

By Paul Deckelman and Paul A. Harris

New York, June 14 - News reports that EchoStar Communications Corp. and Liberty Media Holding Corp. will team up to make a joint bid for commercial satellite operator Intelsat Ltd. pushed the latter company's bonds up somewhat on Thursday, even if it didn't really send them into orbit.

Also on the M&A front, Trump Entertainment Resorts Inc.'s bonds were seen pretty much unchanged to just slightly higher - even though the company's shares went up in heavy trading as buyout buzz about the Atlantic City, N.J.-based gaming company intensified.

There were also some gains seen in the bonds of troubled Delphi Corp. on reports that the company, former corporate parent General Motors Corp., and the United Auto Workers union might finally be close to an agreement that would help Delphi reduce its labor costs.

In the primary market, domestic U.S. issuers were unseen, while European borrowers came to the forefront. German broadband provider Versatel AG priced a seven-year issue of euro-denominated notes.

Meanwhile, Codere SA was launching a an eight-year euro-denominated offering of payment-in-kind loan paper, while Rexam plc was hitting the road in Europe to market a £500 million equivalent offering of hybrid securities.

Funds see nearly $400 million outflow

And as activity was winding down 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 $399.6 million more exited those weekly-reporting funds than came into them - the biggest outflow in a year.

A high yield syndicate official said that it is the biggest loss of cash the funds have seen since they underwent a $419 million outflow for the week that ended June 21, 2006.

It was also the first outflow after eight straight weeks of inflows - including the $167.4 million infusion seen the week before, ended June 6, according to a Prospect News analysis of the AMG figures.

Even with the large outflow, on a year-to-date basis, inflows have still been seen in fully 19 weeks out of the 24 since the start of the year.

Funds that report to AMG weekly remain well in the black, year to date, at $1.222 billion.

Meanwhile the funds which report to AMG on a monthly basis saw just over $50 million of inflows during the most recent period, extending their year-to-date positive flows to $4.884 billion.

Hence year-to-date aggregate flows, which tally numbers from both the weekly and the monthly reporting funds, were $6.106 billion to the Wednesday close.

Up until the latest setback, the fund-flow numbers seemed to have successfully regained the positive momentum they showed at the beginning of the year, when an aggregate total of some $862 million came into the funds in the first two months, according to the Prospect News analysis. That stretch run was then interrupted by a choppy four-week period in March, characterized by alternating weeks of outflows and inflows, none larger than $25 million. Over the next 11 weeks, though, with 10 inflows seen in that time, the funds had a net total infusion during that period of $786.9 million, according to the analysis.

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, most recently, hedge funds.

Intelsat bonds move up

Intelsat's bonds moved up on the news that satellite broadcaster EchoStar and Liberty Media - which is in the process of taking over EchoStar's larger rival, DirecTV - will team up to make a joint bid for the Hamilton, Bermuda-based satellite company.

The Wall Street Journal, which first reported the story, said that Intelsat, which has about $11.5 billion in debt, could fetch more than $5.5 billion, although it noted that there was there was no guarantee Liberty and EchoStar would make a formal offer. Final bids for the company - which has been shopped around to potential buyers by its private-equity owners since April - were due on Thursday.

A trader saw Intelsat's 6½% notes due 2013 firm to 85 bid, 85.25 offered from prior levels at 83.75 bid, 84 offered on Wednesday, while its 7 5/8% notes due 2012, which closed out Wednesday at 92 bid, 93 offered, opened about a point higher than that, got as good as 94 bid, and then came down from that peak level to go out at around 93 bid, 93.5 offered.

Another source saw the 7 5/8s up ¾ point at 93, while the company's 5¼% notes due 2008 were up perhaps 1/8 point at 98.125, with both issues traded very actively.

EchoStar, in contrast, traded around but was little moved. That same source saw its 7 1/8% notes due 2016 trade busily, but end unchanged at 99.5.

The first trader said the Colorado-based satellite broadcaster's 6 3/8% notes due 2011 were at 98.5 bid, 99 offered, while the 7 1/8s ended at 99.25 bid, 99.75 offered, with "no difference at all" between Thursday's closing levels and Wednesday's.

Trump rise fizzling out

In another merger-and acquisition-related situation, a trader saw Trump Entertainment Resorts' 8½% notes due 2015 up perhaps ½ point at 102.75 bid, 103.25 offered, even as the gaming operator's shares shot up more than 6% on almost four times the usual volume, pushed upward by market belief that a buyout deal for the company might be near.

Those bonds - which had firmed smartly to above par levels over the past few weeks on the news that the casino company was looking for a buyer - were actually trading below their recent peak levels above 103.

A market source saw the bonds down 1¼ point on the day to 101.75.

Recent news reports have identified at least two potential purchasers, although nothing has been made official yet.

Delphi talks seen nearing fruition

Delphi's bonds were seen having moved higher, apparently helped by renewed market buzz that the bankrupt Troy, Mich.-based automotive components maker might finally be nearing an agreement with former corporate parent GM and the auto workers group on ways of cutting Delphi's bloated labor cost structure, which helped send it skidding into bankruptcy in the fall of 2005.

News reports Thursday said a deal could be inked within a week, although there was nothing official yet.

Delphi investors also noted the separate news that the company and GM have been in negotiations with 7.8% owner Highland Capital Management LP on the possibility of the private-equity firm emerging as the lead investor in a planned bailout deal involving several big investors, aimed at bringing Delphi out of bankruptcy.

A trader said that Delphi's 6½% notes due 2009 were up a point on the day at 118.25 bid, 119.25 offered.

Another trader saw the bonds a little higher on the day at 118.5 bid, 119.5 offered, and said that same price would also apply to its 6.55% notes that were to have come due last year and at the other end of the curve, its 7 1/8% notes due 2029. Still another source saw the '29s up a point on the day at 118.25 bid, 119.25 offered.

Dura heads back upward

Elsewhere among the troubled parts makers, a trader saw Dura Automotive Systems Inc. "going up again," after having been retreat over the past few sessions on profit-taking off the hefty gains which the bankrupt Rochester Hills, Mich.-based components supplier's bonds had racked up last week.

He quoted the Dura 8 5/8% senior notes due 2012 up 3 points on the session at 62 bid, 63 offered, while its 9% subordinated notes due 2009 were a point better at 14.5 bid, 15.5 offered.

The senior bonds had shot up all the way to bid levels around 66-67 last week, and the 9s to as high as 16-17, before falling back over the space of three or four sessions to levels around 58 and 13, respectively.

Another trader called Dura "one of the more active names" that he saw.

Tembec bonds trade actively

Overall, he said that the distressed market was characterized by "volume in some names, but not a whole lot of changes."

Of late, he said, there's been "a little less and less of distressed [price movements], and not much to talk about."

One name which was worth talking about on Thursday, he said was Tembec Inc., whose bonds "were being quoted an awful lot."

He saw the Montreal-based forest products company's 8½% notes due 2011 at 58.5 bid, 59.5 offered, its 8 5/8% notes due 2009 at 69 bid, 71 offered, and its 7¾% notes due 2012 at 56.5 bid, 58 offered, all up between 1 and 1½ points, on "pretty good volume."

Another trader saw the '09s at 67.5 bid, 68.5 offered, but called that up a point on the day.

However, another source quoted the 8½% bonds at 59, but saw that actually down a point from Wednesday's levels.

Echoing that assessment, another trader said that Tembec "has been a mover," and said its bonds were "down - but not much," with the 81/2s at 58.5 bid, 59 offered, the 73/4s at 57.75 bid, and the 8 5/8s at 68 bid, 69 offered.

"Tembec fell a little - but certainly not a whole lot."

Overall, a trader said "secondary was very quiet," with the CDX index of junk bond market performance down 1/8 point at 100 1/16-100 3/16.

El Paso bonds hover below issue

Among newly priced paper, El Paso Corp.'s big new issue - which priced very late Wednesday and thus did not trade around in that session - was seen having eased a little.

Its 6 7/8% notes due 2014, which priced Wednesday at 99.646, were quoted Thursday at 99.55 bid, 99.65 offered, while its 7% notes due 2017, which priced at 99.224, finished the day at 99.15 bid, 99.30 offered.

Versatel prices €525 million

Thursday's primary market session passed quietly, with no dollar-denominated issues pricing.

Virtually all of the session's primary market news came from Europe.

German broadband provider Versatel AG priced a €525 million issue of seven-year senior secured floating-rate notes (B2/BB+) at par to yield three month Euribor plus 275 basis points on Thursday.

The notes were priced on top of the price talk.

JP Morgan and Merrill Lynch & Co. were joint bookrunners for the debt refinancing related to an acquisition.

Rexam starts roadshow

Rexam plc began a roadshow in Europe for its £500 million equivalent offering of euro-denominated 60-year subordinated hybrid securities (BB+) on Thursday.

Barclays Capital and Citigroup are joint bookrunners for the deal, which the London-based packaging and can manufacturer is bringing to help to fund its acquisition of OI Plastic Products FTS Inc.

Codere talks PIK loans

Elsewhere Spain's Grupo Codere set price talk for its €340 million offering of PIK loans due Dec. 15, 2015 at the three-month Euribor plus 750 basis points area at an original issue discount of 99.00.

Pricing is set for Friday.

Credit Suisse has the books for the loans, which will be repackaged into notes.

The Dec. 15, 2015 maturity date is six months outside of Codere's existing senior notes.

Meanwhile the Friday session will get underway with only one issuer, again a European company, thought to possibly be poised to price notes.

Norway-based paper and pulp company, Norske Skogindustrier ASA, is marketing its benchmark-sized inaugural euro-denominated notes offering, via BNP Paribas, Citigroup and Deutsche Bank.

The notes are expected to come with a 10-year maturity.

A two-day roadshow is expected to conclude on Friday.

At Thursday's close, however, it was unclear as to whether or not the Norwegian company would complete the deal on Friday.

$11 billion calendar

With nearly $11 billion of dollar-denominated notes offerings now in the market, a sell-side source told Prospect News early Thursday that the accounts are somewhat "overwhelmed."

For purposes of comparison, the official pointed to the recent week of May 21 to May 25, when the forward calendar was populated with "credit stories."

The source recalled that some of the transactions that were priced during that relatively busy interval included Fontainebleau Las Vegas Holdings, LLC and Fontainebleau Las Vegas Capital Corp.'s $675 million issue of 10¾% second mortgage notes due 2015 (Caa1/CCC+), UHS Merger Sub Inc. (Universal Hospital Services Inc.)'s $460 million of second-lien senior secured notes in two tranches, Neff Corp.'s $230 million of 10% eight-year senior notes due 2015 (Caa2/B-), Psychiatric Solutions Inc.'s $250 million add-on to its 7¾% senior notes due July 15, 2015 (B3./B-) and Bonten Media Acquisition Co.'s $125 million of 9% senior subordinated PIK toggle notes due 2015 (Caa1/CCC+).

During that May week only one transaction came close to the billion-dollar mark: Claire's Stores Inc.'s $935 million three-tranche transaction which priced on May 22.

The official said that the deals now poised on the forward calendar as business expected to price well before the Independence Day holiday in the U.S. also tend to be "story" deals.

The difference is that the present deals are much bigger than those of mid-May.

Community Health Systems Inc. is marketing the biggest of the present deals: a $3.365 billion three-part offering of senior notes (B3/B-).

Thomson Learning, meanwhile, is on the road with a $2.14 billion three-part offering.

Dollar General Corp. is presently marketing its $1.9 billion three-part offering.

And rounding out the billion dollar-plus club is U.S. Foodservice Inc. which started a roadshow on Thursday for its $1.55 billion two-part notes offer.

As with the above-mentioned "story" deals that priced in May, the sell-sider contended, the deals now in the market are ones that "require some thinking" - but are also coming in a much bigger size than May's.

Another sell-side official took issue with the notion that the present $10 billion calendar has accounts feeling "overwhelmed."

Nevertheless, market observers by and large agreed that as the present forward calendar clears, which is expected to happen in the run-up to the Fourth of July, things are going to be interesting in the primary market.

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