Bombardier, Sally, Griffin deals price; Remy bonds nosedive

By Paul Deckelman and Paul A. Harris

New York, Nov. 11- Bombardier Capital Funding LP (Bombardier Inc.) successfully priced an upsized €1.9 billion equivalent ($2.45 billion) three-part, dual-currency offering on Friday - the third consecutive mega-deal in as many days, following billion-dollar-plus pricings for HCA Inc. on Thursday and NRG Energy Inc. on Wednesday. When they were freed for secondary dealings, the new dollar-denominated Bombardier notes were reported by traders to have firmed by more than a point.

Also pricing Friday to bring a busy week in the primary arena to a close were a $710 million deal for Sally Holdings LLC and a $400 million offering for Griffin Coal Mining Co.

In the secondary market, apart from the rise in the new Bombardier bonds and further aftermarket upside for HCA's well-received issues, Remy International Inc.'s bonds fell sharply, after the Anderson, Ind.-based manufacturer of automotive electrical systems announced a wider third-quarter loss versus a year ago, and said that it had retained Rothschild Inc. as an advisor to help it explore various refinancing alternatives.

Moving in the other direction were the bonds of the bankrupt San Jose, Calif.-based power producer Calpine Corp., which posted its first quarterly profit in two years as it benefited from hotter weather.

Also on the upside was Avondale Mills Inc., although traders saw no fresh out about the Monroe, Ga.-based textile producer, which is in the process of liquidating its assets.

A high yield syndicate official said on Friday that the broad market remains firm in the face of a massive new issue supply currently being seen in junkland.

Friday's primary market saw three issuers price six tranches of notes totaling $1.495 billion of dollar-denominated issuance and €1.6 billion in euros.

Sally oversubscribed

Sally Holdings LLC (Sally Beauty) priced Friday's largest amount of dollar-denominated issuance: $710 million in two tranches.

The Melrose Park, Ill., beauty supplies company priced a $430 million tranche of eight-year senior notes (B2/CCC+) at par to yield 9¼%, at the tight end of the 9¼% to 9½% price talk.

The company also priced a $280 million tranche of 10-year senior subordinated notes (Caa1/CCC+) at par to yield 10½%, on top of price talk.

Merrill Lynch & Co., Banc of America Securities LLC, JP Morgan and Morgan Stanley were joint bookrunners for the deal, proceeds from which will be used to help fund the special cash dividend that Sally Beauty will be paying Alberto-Culver as part of the spinoff of Alberto-Culver's Sally/BSG Distribution business.

A source close to the deal said that it was well oversubscribed.

Griffin completes $400 million

Also issuing dollar-denominated bonds on Friday was Australia's Griffin Coal Mining, which priced a $400 million issue of 10-year senior notes (Ba2/BB-) at par to yield 9½%.

The yield came at the wide end of the 9¼% to 9½% price talk.

Call protection was extended to cover the life of the bond, from an initial five year lockout.

Merrill Lynch & Co. ran the books for the debt refinancing and capital expenditures-funding deal.

Informed sources told Prospect News that the Griffin Coal deal, because it was a debut issue from an Australian company which was using part of the proceeds to fund capital expenditures, was somewhat of a challenge.

One source said that the company had to pay a "new issue premium" in order to entice investors to do credit work on the deal, especially in light of the fact that the market is currently inundated with paper from familiar issuers that are doing billion-dollar-plus - and therefore highly liquid - deals, and are pricing the paper to move.

Bombardier upsizes

Canada's Bombardier Inc. priced an upsized €1.9 billion equivalent of senior notes (Ba2/BB) on Friday, according to an informed source.

The Montreal-based company priced an increased €800 million tranche of seven-year floating-rate notes at par to yield Euribor plus 312.5 basis points, in the middle of the Euribor plus 300 to 325 basis points price talk. The floating-rate notes were raised by €300 million.

Bombardier also priced a $385 million tranche of eight-year fixed-rate notes at par to yield 8%, on top of price talk.

In addition, the company priced a downsized €800 million tranche of 10-year fixed-rate notes at par to yield 7¼%, also on top of price talk. The 10-year notes tranche was cut from €1 billion.

Deutsche Bank Securities, JP Morgan and BNP Paribas led the debt refinancing deal from the aerospace and rail transportation equipment, and financial services company.

2006's biggest week

Tallying Friday's dollar-denominated business, the week came to a close having seen $9.658 billion of proceeds raised in 22 tranches.

That makes the Nov. 6-10 week the biggest so far in 2006, topping the previous week - now the second biggest of the year - which saw $7.689 billion price in nine dollar-denominated tranches.

Plugging in Friday's $1.495 billion of dollar-denominated issuance, the year-to-date total comes to slightly more than $126.36 billion.

Hence on a year-over-year basis 2006 is now running more than 46% over 2005 which, at the Nov. 9 close, had seen slightly less than $86.52 billion.

Interestingly, year-over-year deal volume is almost dead even: 2006 to date has seen 332 dollar-denominated tranches while 2005 had seen 335 priced by the Nov. 9 close.

5 billion-pound gorrillas

Actaully they are five billion-dollar gorrillas.

The one that priced this past week, the Citigroup-led Hercules Holding II/HCA Inc. $5.70 billion three-part LBO transaction, was the all-time biggest from a U.S. issuer, according to a sell-side source.

However HCA may not have long to bask in the light of the distinction of having done the biggest U.S. junk deal.

Firestone Acquisition Corp. (Freescale Semiconductor Inc.), is expected to price its bigger five billion-dollar gorilla (actually almost $6 billion) this week.

The $5.95 billion equivalent multi-tranche offering is comprised of $4.35 billion equivalent of eight-year dollar-denominated and euro-denominated senior notes (B1/B) that will come in floating-rate, fixed-rate and PIK tranches, and $1.6 billion equivalent of 10-year dollar-denominated and euro-denominated senior subordinated notes (B2/B).

Credit Suisse, Citigroup, JP Morgan, UBS Investment Bank and Lehman Brothers are joint bookrunners for the LBO deal from the Texas semiconductor company.

The week ahead

In addition to Freescale, the market expects to see several transactions - all expected to be shy of the $1 billion mark - priced before the Friday close from the following:

• Coming just under the $1 billion mark is The Mosaic Co., with its $950 million two-part offering (B1/BB+). The Plymouth, Minn.-based phosphate and potash crop nutrients producer will sell two tranches, each sized at $475 million, of eight-year and 10-year senior notes.

The JP Morgan and Merrill Lynch led deal is expected to price on Thursday;

• Rental Services Corp. looks to price its $620 million offering of eight-year senior notes via Deutsche Bank Securities and Citigroup. The roadshow ends Thursday;

• GNC Corp./GNC Parent Corp. is expected to price its $325 million offering of five-year floating-rate PIK notes on Wednesday, via JP Morgan and Goldman Sachs;

• AmeriCast Technologies, Inc. wraps up a roadshow on Friday for its $100 million offering of eight-year senior notes (B3/B-), via Jefferies; and

• Elan Finance Corp. is in the market with a $500 million offering of seven-year notes (B3/B) in two tranches via Goldman Sachs, which is expected to price late in the Nov. 13 week or early the following week.

Bombardier bonds boom

When the new Bombardier bonds were freed for secondary market dealings, a trader said the company's dollar-denominated 8% notes due 2014 shot up to 101.5 bid, 102.25 offered from their par issue price earlier in the session.

The two new issues of euro-denominated bonds were heard to have done less well, with both the floating-rate notes due 2013 and the 7¼% notes due 2016 seen at 100.375 bid, 100.75 offered, up from par.

Sally, Griffin bonds up on break

Among other newly issued bonds, Sally Holdings' 9¼% senior notes due 2014 and 10½% senior subordinated notes due 2016 were both seen having broken at 101 bid, 102 offered, up from their respective par issue prices. After that, the bonds advanced further, each finishing at 101.375 bid, 1101.875 offered.

Griffin Coal Mining's 9½% notes due 2016 moved up to 100.5 bid, 100.75 offered, up from their par issue price.

HCA makes upside try, falls back

HCA's gigantic new issue of bonds began actively trading around, initially pushing higher on top of the handsome gains the Nashville-based hospital company's bonds had notched Thursday in their initial secondary foray after their highly successful, well-oversubscribed issue earlier in the session.

A trader saw the company's new 9 1/8% notes due 2014, which had finished Thursday at 103 bid, 103.25 offered, well above their par issue price, pushing up still further in early Friday dealings to 103.625 bid, 103.875 offered. After that, however, they came down to end only a little bit above their starting point, at 103.125 bid, 103.625 offered.

It was the same story for the other tranches of HCA's humongous issue as well. The new 9¼% notes due 2016, which had also ended at 103 bid, 103.25 offered on Thursday after a par pricing, got as good as 103.875 bid,104.125 offered in Friday morning dealings before falling back to the same 103.125 bid, 103.625 offered level as the 9 1/8s.

HCA's new 9 5/8% toggle notes due 2016, which had ended Thursday at 103.25 bid, 103.625 offered, well up from their par issue price, jumped to 104 bid, 104.375 offered in early Friday dealings, but retreated from that peak to close at 103.25 bid, 103.75 offered, little changed on the day

Remy in retreat

Outside of the newly issued bonds, which dominated the secondary arena for a second straight session, trader said, one of the few big movers among the existing bonds was Remy International.

A trader saw the company's bonds "go on quite a ride," with its 8 5/8% notes due 2007 opening at 88 bid, 90 offered, falling as low at 80 bid, but then coming part of the way back to end at 83 bid, 85 offered, still down 5 points on the day.

The 11% notes due 2009 opened at 46 bid, 48 offered, fell as low as 33 bid, and then closed at 38 bid, 40 offered.

The trader also saw Remy's 9 3/8% notes due 2012 open at 41 bid, 43 offered, drop as low as 27 bid, 29 offered, and then finish at 35 bid, 37 offered.

The Remy bonds fell after the company - which makes and markets automotive electrical and electronic components under the well-known Delco Remy brand - reported an operating loss of $3 million for the third quarter ended in September, a deterioration from the $1.5 million operating income in the comparable quarter in 2005. Net loss for the third quarter increased by $2.5 million to $30.5 million compared with a net loss of $28 million for the same period last year.

Remy also announced that Rothschild Inc. has been retained to provide advice and assistance regarding refinancing alternatives. Remy's president and chief executive officer, John Weber, said the company "continue[s] to make progress on the potential divestiture of non-core businesses. Rothschild's role is to assist us in the optimal application of proceeds from such divestitures. It is important we access the best advice we can to help us make the right decisions."

A trader noted that several weeks ago, Remy bonds had traded off on market speculation that Rothschild had been hired, with some investors apparently feeling that the investment bank was being brought aboard in preparation for a possible bankruptcy filing - strictly unofficial and unconfirmed speculation which has not panned out.

The Remy bonds moved back up after the conference call at which Weber and the other executives reassured investors about the company.

The CEO went on to emphasize that Remy continues to make its scheduled interest payments as required by its loan agreements and indentures.

Remy reported debt, net of cash-on-hand, of $725 million at Sept. 30, compared to $722 million at Dec. 31, 2005, according to Kerry Shiba, the company's chief financial officer.

Available liquidity, including unrestricted cash of $25 million, was $119 million at the end of the third quarter.

"Our liquidity remains strong," Shiba said.

Calpine gains

Calpine bonds were seen firmer following the company's report of its first quarterly profit in two years.

The company reported net income of $1.7 million, or nil per share, compared with a net loss of $216.7 million, or 45 cents per share, a year ago. Calpine cited spark-spread improvement in the face of unseasonably warmer temperatures, which spurred demand for power to run air conditioners.

A trader saw its 8½% notes due 2008 up 3 points at 69 bid, 71 offered, and its 7¾% notes due 2009 two points up at 75 bid, 77 offered.

Avondale gains on no news

Avondale Mills' 10¼% notes due 2013 were pegged at 111 bid - well up from recent levels at 99.75, a market source said.

No news was seen out on the company, which is in the process of liquidating its operations and shutting down following a disastrous railroad accident near one of its textile plants in early 2005.

Avondale is distributing a $215 million insurance settlement it collected for damages arising from the railroad crash and chemical spill near one of its South Carolina textile factories. The toxic spill killed nine people, including six employees, disrupted production and forced the company to spend large sums trying to unsuccessfully clean up the factory.

Avondale has said that it will liquidate its assets, and pay its bondholders and other creditors in full.

Bally slightly firmer despite loss

Bally Total Fitness Holding Corp.'s bonds firmed slightly, even as the Chicago-based nationwide fitness-club operator reported a wider third-quarter loss from a year ago, as it tries to turn itself around and adapt to a new corporate culture under its recently installed senior management team.

The company's 9 7/8% subordinated notes due 2007 were quoted at 89.25 bid, 90.25 offered, up ¼ point on the session, while its 10½% senior notes due 2011 were also up ¼ point, at 96.5 bid, 97 offered.

Bally reported that in the third-quarter ended Sept. 30 it suffered a loss of $5.7 million (14 cents per share), widening out from its year-earlier red ink of $214,000 (one cent per share). It blamed an increase in interest costs, as well asset-impairment charges and the costs of its separation agreement for recently resigned chairman and chief executive officer Paul A. Toback, who abruptly quit the company in August after a long and bitter battle with disgruntled shareholders who had staged an unsuccessful - at the time - proxy challenge to the underperforming company's leadership.

Company executives reported on their conference call that they were in the process of instituting new procedures aimed at shifting the company's focus from pure new-member acquisition to also trying to cater to, and thus hold onto existing members.

They also said the company was continuing its efforts to determine how to deal with the 9 7/8% notes, which are slated to mature next October 15 (see related story elsewhere in this issue).

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