Edison Mission mega-deal prices, along with Dune, Atlantic; Solutia soars, then plunges

By Paul Deckelman and Paul A. Harris

New York, May 1 - Edison Mission Energy was heard to have successfully priced $2.7 billion of new bonds in a three-part deal which then received only a modest welcome when it began trading in the secondary market.

Also pricing - and doing somewhat better in aftermarket action, traders said - were upsized offerings from Dune Energy Inc. and Atlantic Express Transportation Corp.

A busy primary session also saw a quickly shopped add-on offering price from United Refining Co., while price talk emerged on upcoming issues from Local TV Finance LLC and Saint Acquisition Corp., which will be merged with Swift Transportation Co. Inc.

In the secondary market, apart from the movements of the new issues, the bonds of bankrupt St. Louis-based chemical maker Solutia Inc. saw wild gyrations that dwarfed even Monday's 10-point swing after a court ruled that holders of those bonds do not have secured claims against the company.

Elsewhere, the bonds of Delta Air Lines Inc., in what could be their last day of trading before they are equitized as part of the company's emergence from Chapter 11, were seen down several points, as were the securities of the still-reorganizing Northwest Airlines Corp.

Sources marked the broad market flat on Tuesday.

A senior sell-side official said that the high yield-tracking CDX 100 index ended the day flat, at par and three-sixteenths, after being down one-sixteenth in the early afternoon.

"The market still feels pretty good," said the official, following the close of a session that saw four issuers combine to price six tranches of notes, raising a combined total of slightly more than $3.3 billion.

The primary market, sources say, continues to steam right along, evinced, perhaps, by the fact that three of Tuesday's six tranches came upsized.

Edison Mission 2.5-times oversubscribed

Tuesday saw the completion of Edison Mission Energy's mammoth $2.7 billion three-part senior notes deal (B1/BB-).

The company priced a $1.2 billion tranche of 10-year notes at par to yield 7%, on top of price talk.

In addition Edison Mission Energy priced an $800 million tranche of 12-year notes at par to yield 7.2%, within price talk that had the 12-year notes talked an eighth of a point to a quarter of a point behind the 10-year notes.

Also the company priced a $700 million tranche of 20-year notes at par to yield 7 5/8%, on top of price talk.

Citigroup, Credit Suisse, Deutsche Bank Securities, Goldman Sachs & Co., JP Morgan, Lehman Brothers and Merrill Lynch & Co. were joint bookrunners for the debt refinancing and dividend-funding deal from the Rosemead, Calif.-based electric power generator.

A source close to the deal told Prospect News that the order books for the $2.7 billion of issuance were 2.5-times oversubscribed.

The source saw the new Edison Mission Energy 7% notes due 2017 and the 7.2% notes due 2019 wrapped around 100.50 bid late Tuesday afternoon, while the 7 5/8% notes due 2027 were slightly higher.

Dune prices upsized $300 million

The remainder of Tuesday's business took place well below the billion-dollar threshold.

Three issuers each priced single tranches - all three of which came upsized.

Houston-based energy company Dune Energy priced an upsized $300 issue of five-year senior secured notes (Caa2/B-) at par to yield 10½%, on top of price talk.

The acquisition and debt refinancing deal, via Jefferies, was upsized from $285 million.

Atlantic Express tight to talk

Jefferies & Co. was also at the helm as Atlantic Express priced an upsized $185 million issue of six-month Libor plus 725 basis points five-year senior secured floating-rate notes (Caa1/B-) at 98.50 on Tuesday.

The debt refinancing and general corporate purposes deal, which was upsized from $165 million, had been talked at six-month Libor plus 725 to 750 basis points with a reoffer price of 98.00 to 98.50.

Hence it priced tight to talk, both with respect to the coupon and the reoffer price.

Atlantic Express Transportation is a Staten Island, N.Y., provider of student transportation.

United Refining upsizes add-on

In quick-to-market action, United Refining priced an upsized $125 million add-on to its 10½% senior notes due Aug. 15, 2012 (B3/B) at 104.25 on Tuesday, resulting in a yield to worst of 8.966%.

The reoffer price came in the middle of the 104.00 to 104.50 price talk.

The sale, which was upsized from an initial face amount of $100 million, generated $130.313 million of proceeds, which will be used for general corporate purposes including capital expenditures.

Morgan Stanley was the bookrunner.

The original $200 million issue priced at 98.671 to yield 10¾% on Aug. 3, 2004.

The Warren, Pa., refiner and operator of gas stations and convenience stores previously priced a $25 million add-on at 103.0 to yield 9.781% on Feb. 10, 2005.

Timely ratings boost

As the Tuesday session got underway, United Refining's announcement that it would tap its 10½% notes due 2012 for the second time was the day's first news nugget.

A sell-side source who was not in the deal, but was watching nonetheless, told Prospect News that the 10½% notes had lately been trading in a 103.50 bid, 104.25 offered context, but added that a few odd-lots traded at 107.0 bid on Monday.

This source, who spoke well before the price talk on the United Refining add-on surfaced, expected that tap to price at 103.50 to 104.00.

Much later in the day a source close to the deal concurred that, indeed, that is how it likely would have gone were it not for the fact that both Moody's and S&P boosted the company's ratings - Moody's to B3 from Caa1, and S&P to B from B-.

Partly as a result, the source said, the add-on deal was several times oversubscribed, and the deal priced at 104.25.

Regarding what's left

In the wake of the Edison Mission Energy deal, the forward calendar for the week to Friday is considerably reduced.

Only two more deals are expected to price before the end of the April-May crossover week.

Saint Acquisition Corp., which will be merged with Swift Transportation Co., Inc., set the price talk on Tuesday for its $835 million two-part offering of second-priority senior secured notes (B-).

The Phoenix-based freight company is talking its eight-year floating-rate notes at Libor plus 650 basis points. Meanwhile talk on its 10-year fixed-rate notes is 11½% area.

Morgan Stanley is the left bookrunner for the acquisition financing.

Elsewhere Local TV Finance, LLC, set price talk for its $190 million offering of eight-year senior toggle notes (Caa1/CCC+) at 9¼% to 9½%.

UBS Investment Bank is the left bookrunner for the acquisition deal that is expected to price Wednesday. Deutsche Bank Securities is the joint bookrunner.

New Edison bonds up trade up a little

When the new Edison Mission bonds were freed for secondary dealings, a trader saw the bonds all higher - but just a bit, in contrast to the strong gains, in some cases for multiple points, which bonds of some other recent new issuers had notched when they began to trade.

The Edison Mission 7% notes due 2017 and its 7.20% notes due 2019 were each seen up only marginally, at 100.125 bid, 100.375 offered, versus each tranche's par issue price. The 7 5/8% notes did a little better, ending at 100.75 bid, 101.25 offered, up from par.

In contrast, Dune Energy's new 10½% senior secured notes due 2012 firmed smartly to 101.75 bid, 102.25 offered, up from par, while Atlantic Express's new floating-rate notes due 2012, which had priced at 98.5, finished the session at 99.5 bid, par offered.

The new United Rentals add-on bonds to its existing 10½% notes due 2015 priced too late in the session for any aftermarket dealings.

Solutia solution not to bondholders' liking

Back among the existing issues, Solutia's bonds were rocking and rolling - and by the end of the day, bondholders were reeling, after a bankruptcy judge ruled in favor of the chemical manufacturer, stating that the company did not improperly refinance debt before filing for Chapter 11 protection in order to avoid securing notes worth $450 million.

The bottom line of the judge's ruling was that the bondholders could expect no special treatment, allowing Solutia to group those senior debt holders in with the rest of its unsecured creditors.

The news prompted major movement in the company's 7 3/8% notes due 2027 and its floating-rate notes due 2037, which had both jumped about 8 to 10 points on Monday's dealings to levels above par on the news that the holders were challenging the company.

In Tuesday dealings, those bonds pushed as high as the 108 level in the early going - but then fell off the cliff to close around 85. The company's floating-rate notes were seen topping off in the 106 area, but then tumbling down to the 88-89 levels.

A trader said the company's floaters and its 7 3/8s both fell from the 107-108 level to as low as 83 bid, 84 offered, before coming a little bit back from the lows to finish at 88 bid, 90 offered.

JP Morgan Chase Bank NA, the lead trustee for $300 million in notes due in 2027 plus $150 million in notes due 2037, had sued the company on the grounds that the debt should be paid in its entirety. News of the effort by the bondholders to challenge the company had caused the paper to shoot up as much as 10 points on Monday. But as a result of the ruling Tuesday by the New York bankruptcy judge overseeing Solutia's ruling, the notes will be paid as unsecured debt - rather than as a secured claim - meaning bondholders will only get a partial recovery when Solutia emerges from reorganization.

The Official Committee of Equity Security Holders and an ad hoc noteholders' committee also lost out on their attempts to quash yet another exclusivity extension request made by Solutia. The judge approved the extension, extending the exclusive periods to July 30 and Sept. 28.

'Nondescript day'

Apart from the wild gyrations of Solutia, a trader said, "there was nothing going on in the secondary."

Just about all of the market's focus was on the considerable new-deal activity, while from a secondary viewpoint, "it was a nondescript day."

Delta, Northwest fly lower

A trader heard that Delta bonds were "still trading" ahead of their expected equitization, which is part of the Atlanta-based Number-Three carrier's successful emergence Monday from Chapter 11 after some 1½ years there. However, he said while there was trading activity, it was "not much."

He saw Delta's 8.30% notes due 2029 fall to 49.5 bid, 50.5 offered, down from 52.5 bid, 53.5 offered on Monday.

The Delta bondholders are slated to receive shares of the company's new equity - which replaced the now-worthless existing stock. Those new shares will begin trading Thursday on the New York Stock Exchange under the symbol "DAL," the same as the old shares did before Delta's bankruptcy filing in fall 2005.

Also up in the air, Northwest Airlines' bonds were likewise seen down several points, with the trader quoting Northwest's 10%notes due 2009 at 73 bid, 74 offered, well down from 77 bid, 79 offered. He saw the airline's other bonds "in line" with that, with its 8 7/8% notes down 3 points at 73 bid, 74 offered, and its 9 7/8% notes 4 down at 75 bid, 76 offered.

At another desk, its 7 7/8% notes due 2008 were quoted down 5 points at 73.

That slide followed a similar downside move on Monday, when the bankrupt airline submitted a supplement to its reorganization plan, lowering its estimate of the amount of unsecured claims to $8.2 billion to $8.8 billion from $8.75 billion to $9.5 billion previously.

MagnaChip bonds push upward

Elsewhere, bonds of Korean computer chip maker MagnaChip International Ltd. firmed during Tuesday's session, although by just how much was subject to question.

Its 8% notes due 2014 were seen by a market source having moved up to 66.75, higher by 2½ points on the session, in fairly busy trading, although another source saw the bonds drop back to end at around 65, up only ½ point, after having gotten as high as 67 earlier in the session. The first source saw its 6 7/8% notes due 2011 firm by 1½ points to 84.5, but the second said the gain was only half that, with the bonds ending at 84.25.

There was no fresh news seen out about the company, which last week reported that its sales fell and its loss widened from a year-earlier in the fiscal first quarter ended April 1. Its net loss was $67 million, versus $3.9 million in the year-ago period, while revenues fell to $151.8 million from $213.1 million in the first quarter of 2006 - but were ahead of prior guidance.

Stephanie N. Rotondo contributed to this report.

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