Noranda prices 7.5-year floaters; Solectron up, Flextronics off on deal; Bally keeps firming

By Paul Deckelman and Paul A. Harris

New York, June 4 - Noranda Aluminum Holding Co. successfully priced an issue of 71/2-year floating-rate notes on Monday, high-yield syndicate sources said. The new bonds were not seen immediately trading around in the aftermarket.

Elsewhere in the primary arena, price talk emerged on Pinnacle Entertainment Inc.'s planned $350 million offering of eight-year notes.

In the secondary market, the major development of the day was the agreement by Flextronics International Ltd. to acquire Solectron Corp. in a $3.6 billion cash and stock deal. Solectron's bonds, normally not much traded, were seen sharply higher on the news, while Flextronics' notes were being quoted several points lower. Both Moody's Investors Service and Standard & Poor's reacted warily to the deal.

And Bally Total Fitness Holding Corp.'s bonds continued to firm, picking up where they left off on Friday. Among the catalysts for the continued rise on Monday were news reports indicating that several private equity companies have expressed interest in acquiring or restructuring the company before it formally files a pre-packaged Chapter 11 bankruptcy case.

Noranda prices $220 million

The primary market saw one issue price on Monday, as Franklin, Tenn.-based Noranda Aluminum returned with a quick-to-market dividend-funding holdco deal more than three weeks after the operating company priced its $510 million issue backing the acquisition.

Noranda Aluminum Holding Corp. sold a $220 million issue of six-month Libor plus 575 basis points 7.5-year senior floating-rate toggle notes (Caa1) at 99.00, on top of price talk.

Merrill Lynch & Co. was the bookrunner for the quick-to-market dividend funding deal.

On May 10, 2007 Noranda Aluminum Acquisition Corp. (the operating company) priced a $510 million issue of eight-year senior unsecured floating-rate PIK toggle notes (B3/B-) at par to yield six-month Libor plus 400 basis points.

The proceeds from that deal went to help finance the purchase of Noranda by Apollo Management from Xstrata AG.

Pinnacle Entertainment sets talk

Meanwhile Pinnacle Entertainment Inc. set price talk for its $350 million offering of eight-year senior subordinated notes (B3/B-) at the 7¾% area on Monday.

Lehman Brothers, Bear Stearns & Co., Deutsche Bank Securities are bookrunners for the deal which is expected to price on Tuesday.

Japan's NIS dollar deal

Tokyo based financial services company NIS Group Co. Ltd. is marketing a dollar-denominated offering of senior notes (B+) with an expected maturity in the range of three years to five years.

The expected size is approximately $300 million, according to a market source.

The Regulation S deal is on a brief, Asia and Europe roadshow that is expected to wrap up on Wednesday.

Barclays Capital and Goldman Sachs & Co. are joint bookrunners.

Edcon to bring €1.83 billion

Meanwhile a Europe-only roadshow is underway for Edgars Consolidated Stores (Edcon)'s €1.83 billion three-part deal.

The South African clothing retailer plans to sell €1.18 billion of seven-year senior secured floating-rate notes, and €650 million of senior unsecured notes in fixed-rate and floating-rate tranches.

Barclays Capital, Credit Suisse and Deutsche Bank Securities are joint bookrunners.

Proceeds will be used to help fund the $3.5 billion LBO of the company by Bain Capital, according to a market source, who added that the Edcon transaction is largest-ever LBO deal in South African history.

Solectron gains on planned acquisition

Back among the established names, the Solectron-Flextronics deal was a key topic of conversation.

A trader saw Solectron's normally lightly traded 8% notes due 2016 jump to 108 bid, 109 offered, a 7 point gain on the session. He also saw Flextronics' 6½% notes due 2013 down 2 points on the day at 98 bid, 99 offered, while its 6¼% notes due 2014 were a point lower at 95.5 bid, 96.5 offered.

A trader at another desk saw the 61/2s at 98.375 bid, 98.875 offered.

Yet another source saw the bonds a little easier at 98.875 bid for the '13s and 95.75 for the '14s.

Singapore-based Flextronics - the world's second-largest contract electronics manufacturer - is offering to pay Solectron's shareholders either 0.345 share of Flextronics or $3.89 in cash for each Solectron share.

It has lined up $2.5 billion of bank financing for the planned purchase - and that kind of increase in leverage is viewed with some concern by the major ratings agencies. Moody's put Flextronics' ratings, including its Ba1 corporate family rating and Ba2 senior subordinated rating, under review for a possible downgrade, citing the potential for increased financial leverage to result if the transaction closes as planned, the agency said.

The agency will also review Milpitas, Calif.-based Solectron's ratings, including the B3 on its senior subordinated and convertible notes, for a possible upgrade, reflecting the potential increased scale and client diversity provided by the merger.

Standard & Poor's expressed similar concerns, saying that whether it affirms Flextronics' current BB- ratings or cuts them would depend upon the exact mix of cash and equity contribution, which will be determined when the deal closes. S&P noted that at least 50% and a maximum 70% of Solectron's stock will be converted into Flextronics stock, leaving the rest to be paid in cash.

The agency noted that the cash portion of the agreement, in addition to the $650 million needed to refinance Solectron's existing debt, will require external funding, ranging anywhere from $1.75 billion to $2.35 billion.

S&P said that if the equity contribution to the deal is at the high end of expectations - and assuming operating trends at Solectron are not adversely affected - it will probably affirm Flextronics' debt at current levels. But it warned that if the equity contribution is on the low end of the range, the ratings could be cut by a notch.

Flextronics is buying its smaller competitor, Solectron, in order to beef up and be able to narrow the sales gap with larger rival Hon Hai Precision Industry Co.

Bally bonds continue climb

Bally Total Fitness bonds were meanwhile continuing to muscle upward in the wake of last week's announcement by the Chicago-based Number-One U.S. fitness chain operator that it will file for Chapter 11 in a prepackaged deal, in order to implement a restructuring agreement with its bondholders, who will get the bulk of the equity in the reorganized company.

On Monday, a new element was added into the mix - The New York Post reported that several private-equity firms are sizing up Bally, possibly in hope of putting together a plan of restructuring or even a buyout for the company before it goes into bankruptcy.

The paper said that J.H. Whitney & Co. and TPG Capital LP are talking with investment bankers and others to explore a possible transaction. Representatives of Whitney and TPG had no immediate comment on the story.

But it was enough to boost Bally's Pink Sheets-traded shares sharply - and to push the bonds up as well.

A trader said that Bally's subordinated 9 7/8% notes slated to come due on Oct. 15 were up a point at 97 bid, 98 offered. Last week, they had risen over the course of several sessions to around 96, from prior levels before all of the news in the upper 80s.

Meanwhile, its 10½% senior notes due 2011 were being quoted anywhere from 101.875 bid to 103 bid, all higher on the day.

A source said that the subordinated notes gyrated around wildly, from lows in the 92 area, to highs above 98, before settling in in a 97ish context. Trading was considered active.

Besides the possible private-equity involvement, company also announced Monday that it had closed on the $18 million sale of its Toronto, Canada facilities to Extreme Fitness, Inc. and GoodLife Fitness Centres Inc.

Apart from such specific news-driven movements, a trader said that overall, ""there are always price changes - but nothing really is going on."

Another agreed that "it was pretty quiet, with not much activity."

He saw the widely followed CDX junk bond performance index down 1/8 point at 100.625 bid, 100.75 offered.

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