EchoStar upsizes mega-deal, AMC prices; autos, except Dana, rebound; funds see $129 million outflow

By Paul Deckelman and Paul A. Harris

New York, Jan. 19 - EchoStar DBS Corp. dished out an upsized billion-dollar-plus offering of new 10-year notes late Thursday in a drive-by offering aimed at funding redemption of some existing debt. Also on the new-deal front, AMC Entertainment Inc. successfully brought a calendar issue of 10-year notes to market while Copano Energy LLC was heard by high yield syndicate sources to be ready to hit the road Friday to market yet another 10-year deal.

In the secondary arena, the recently beleaguered automotive sector bonds were seen turning upward - all of them, that is, except for Dana Corp., whose bonds continued to skid lower in the wake of the poor quarterly numbers reported by the Toledo, Ohio-based automotive systems maker earlier in the week.

A source marked the broad high-yield market up smartly on the session, spotting the CDX 100 at 102 bid, 102.125 offered, up three-eighths.

And after trading had wound down for the day, market participants familiar with the weekly high yield mutual fund low numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday $129 million more left the funds than came into them.

It was the second straight week of outflows, coming on top of the $6.45 million drain seen in the previous week, ended Jan. 11. In those two weeks, outflows have totaled $135.45 million, according to a Prospect News analysis of the AMG figures. Outflows have now been seen in two of the three weeks since the start of the new year, for a cumulative 2006 net outflow of about $126.65 million, according to the Prospect News analysis.

The latest outflow was also the fifth in the last six weeks, dating back to mid-December, during which time outflows have totaled about $977.15 million, according to the analysis. That in turn confirmed the predominantly negative trend that was in evidence throughout most of 2005, when around $11.483 billion more left the funds than came into them, according to the Prospect News analysis. That was a much more severe hemorrhage than the approximately $3.236 billion net outflow seen in 2004.

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 between 10% and 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.

The figures exclude distributions and count only those funds that report on a weekly basis.

Primary springs to life

The primary market ignited on Thursday as EchoStar brought up an upsized $1.5 billion of double-B rated junk in a drive-by, and AMC Entertainment Inc. sold $325 million in a substantially lower-rated deal said to have attracted bank loan investors weary from a relentless struggle for paper said to be taking place in that market.

EchoStar drives through

In a classic breakfast announcement, afternoon pricing drive-by deal, EchoStar DBS Corp. priced a massively upsized $1.5 billion issue of 7 1/8% 10-year senior notes (Ba3/BB-/BB-) at 99.612 to yield 7.18%.

The yield priced within the 7 1/8% area price talk via Credit Suisse and Deutsche Bank Securities.

The deal was upsized from $1 billion.

The use of proceeds for the planned $1 billion issue was to redeem EchoStar DBS's outstanding 9 1/8% senior notes due 2009 and for general corporate purposes. Sources were unavailable late Thursday to specify how the additional proceeds will be used.

Shortly before the terms circulated a market source said that the there had been a little bit of arguing over EchoStar's bond covenants, but nevertheless the deal was seeing healthy demand.

AMC prices oversubscribed $325 million

Also pricing Thursday was AMC Entertainment Inc.'s $325 million issue of 10-year senior subordinated notes (B3/CCC+/CCC+) which came at par to yield 11%.

The yield came at the wide end of the upwardly revised 10¾% to 11% price talk. Earlier the notes had been talked to yield between 10½% to 10¾%.

Credit Suisse, Citigroup and JP Morgan ran the books for the acquisition and debt refinancing deal from the Kansas City, Mo., movie theater chain.

A market source said that investors unhopeful of receiving allocations of AMC's bank loan paper - the company is in the market with an $850 million senior secured credit facility (Ba3/B+/BB) via Citigroup, JP Morgan and Credit Suisse - came slumming to the junk deal, which was "well oversubscribed."

Although the AMC Entertainment deal priced during the session, traders said it came too late in the day for any meaningful aftermarket activity, and the EchoStar deal emerged even later than that, way too late to be seen in the secondary.

A trader said that the Englewood, Colo.-based satellite broadcaster's existing 9 1/8% notes due 2009, which are slated to be taken out using a portion of the proceeds from the new deal, were trading at 104.875, slightly above the 104.563 call price at which the notes are slated to be redeemed. The $442 million of notes have been above 104 for some time, in anticipation that they would be called.

Corrections Corp. up in trading

Among other recently priced issues, Corrections Corp. Of America's new 6¾% notes due 2014, which priced at par on Wednesday, were seen trading Thursday at 100.75 bid, 101.5 offered.

And R.H. Donnelley Corp.'s new 8 7/8% senior notes due 2016 were at 100.625 bid, up from their par issue price last Friday, while the Cary, N.C.-based telephone directories publisher's new 6 7/8% senior discount notes due 2013 were at 91.125 bid, 91.625 offered, up from last Friday's 90.081 issue price.

Auto names gain

Back among the established issues, "the autos seemed to be getting better," a trader said, with General Motors Corp.'s benchmark 8 3/8% notes due 2033 seen up ¾ point at 70.5 bid, while the carmaker's 7 1/8% notes due 2013 were seen a point better at 73.5 bid.

The bonds of GM's financing arm, General Motors Acceptance Corp., were likewise higher, with GMAC's flagship 8% notes due 2031 up 1½ points on the day at 100.75 bid, 101.75 offered, and its 6 7/8% notes due 2012 a point better around 93.

Moody's Investors Service said Thursday that it was maintaining a "developing" outlook on GMAC's Ba1 credit rating, meaning it could either be downgraded or upgraded, depending on the outcome of GM's widely publicized efforts to find a deep-pocketed financial services company to buy a 51% stake in GMAC.

Visteon gains

Elsewhere in the automotive sphere, former Ford Motor Co. subsidiary Visteon Corp.'s 8¼% notes due 2010 were seen by a trader to have climbed two points in the early going, before coming slightly off that peak level to end a point higher on the day at 83.5 bid, 84.5 offered.

Another trader saw the Van Buren Township, Mich.-based automotive components maker's bonds "up a skosh," with its 7% notes due 2014 at 77 bid, 77.5 offered, half a point higher on the day.

Tenneco Automotive Inc.'s 10¼% notes due 2013 and TRW Automotive Holdings Corp.'s 9 3/8% notes due 2013 were each up a quarter point, at 110.75 bid, and 118.75 bid, respectively.

Showing the broadly-based nature of the auto-sector upturn, even bankrupt supplier companies were higher Thursday, with a trader seeing Delphi Corp.'s 6.55% notes due 2006 at 55 bid, 56 offered, up ¼ point on the day, and its 7 1/8% notes due 2029 up half a point at 56 bid, 57 offered.

Tower Automotive Inc.'s 12% notes due 2013 were "up a couple of points" at 74 bid, 76 offered, a trader said, after the issue had fallen to around a 70ish context on Wednesday. Another trader pegged Thursday's advance at 3½ points to 74 bid, 75 offered. The traders had no ready explanation for the gyrations on the Novi, Mich.-based vehicle frame maker's bonds.

And yet another bankrupt supplier, Troy Mich.-based Collins & Aikman Corp., was also seen better Thursday, its 10¾% notes due 2011 "up a couple" of points to a 35-ish context from the lower 30s, a trader said. Yet another source actually saw those bonds a point lower on the day, at 32 bid, 34 offered, but did see Collins & Aikman's extremely distressed 12 7/8% subordinated notes due 2012 up two points at 8 bid, 9 offered, although he joked that "at that low level, where else can it go? It doesn't take much to move such an issue."

Dana down again

The one exception to the otherwise rosy rule Thursday was Dana Corp., whose bonds - which fell earlier in the week on its poor third-quarter numbers - kept right on sliding. A trader pegged its 5.85% notes due 2015 down ¾ point at 66.5 bid, 67.5 offered, while its 6½% notes due 2008 lost even more, down 1½ points to 74.5 bid, 75.5 offered.

At another desk, a trader saw the 5.85s down even further, pegging them at 64 bid, down 1½ points on the session.

However, yet another trader saw little movement on the day in the bonds; while acknowledging that the 61/2s were off a point, to around 73.75 bid, 74.75 offered earlier in the day, by the time trading wrapped up, he said, they had climbed back to 74.75 bid, 76 offered, "about unchanged."

Dana's bonds hit the skids after the company reported a net loss of $1.27 billion ($8.50 per share) for the three months ended Sept. 30 - a sharp deterioration from its year-earlier profit of $42 million (28 cents per share), despite sales having edged higher in the latest period to $2.4 billion from $2.11 billion last year.

Most of the loss - well over $1 billion of it - was attributable to very large charges that Dana took in connection with its efforts to restructure its business, which has been badly hurt by soaring raw materials prices and a slowdown in orders from two of its biggest customers, General Motors Corp. and Ford Motor Co.

Dana said that excluding those charges, its loss from operations was $63 million, which still represented a reversal from its $39 million profit a year ago.

Noting that Dana had just filed its third-quarter numbers, which had been delayed because the company had to restate its results for the first half of 2005, analyst Shelly Lombard of the Gimme Credit investment advisory service opined in a research note Thursday that "investors probably wished Dana hadn't issued any financials at all - its third quarter results were terrible. . .What's worse, however, is that the earnings call [that followed the release of the results] didn't inspire any investor confidence. Management talked about its planned restructurings but admitted that past restructurings have been ineffective. The company refused to give any guidance and was vague about what kind of earnings investors could expect from a restructured Dana. And it is putting several noncore assets up for sale in a market where sellers outnumber buyers."

Outside of the auto names, "the market was pretty sticky, with not a lot of movement," a trader said.

Premier Biloxi gains

Premier Entertainment Biloxi LLC's 10¾% notes due 2012 were seen up half a point at 96.75 bid, 98.25 offered, apparently not much affected by the afternoon news that the Mississippi-based gaming company got a default notice on those bonds. Standard & Poor's lowered its ratings to CCC from B- previously, with a negative outlook, citing uncertainty surrounding the company's ability to resolve insurance claims from Hurricane Katrina and refinance the bonds, as well as the possibility that Premier could face difficulties making interest payments after February.

© 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.