ArvinMeritor climbs on tender news; Longview deal hits the road

By Paul Deckelman and Paul A. Harris

New York, Feb. 28 - Bonds of ArvinMeritor Inc. were seen solidly better Tuesday on the news that the Troy, Mich.-based automotive components maker is offering to buy back up to $450 million of its outstanding notes via a tender offer.

That helped give a relatively firm tone to the recently beleaguered automotive sector - except for Dana Corp., whose bonds, after having risen smartly on Monday in response to news that the company was in talks with its lenders and had obtained a necessary covenant waiver, gave back some of those gains.

Apart from the auto names, Millennium Chemicals Inc.'s bonds, which had fallen Monday in the wake of a Rhode Island court verdict against the company and several other paint producers, bounced back Tuesday on the news that those companies - former producers of lead paint - won't be hit with punitive damages on top of being ordered to pay for a lead-paint cleanup.

The final session of February found the primary market still in the deep freeze, with no issues pricing on Tuesday. Longview Fibre Co. was heard by syndicate sources to be getting ready to begin a roadshow Wednesday for the Longview, Wash.-based forest products company's planned offering of 10-year notes.

However sources are saying that frozen February is about to give way to a moderate March in terms of new deal volume.

Meanwhile one high-yield syndicate official marked the broad market unchanged to slightly firmer.

A buy-side source had the high yield unchanged to up a quarter of a point, and said that the tone is still firm.

"The markets are very quiet because of the lack of new issuance and the lack of volatility," the source added.

A trader called the session "relatively sloppy, with a little softness based on the equity markets being down about a hundred points" on the bellwether Dow Jones Industrial Average.

He said it was pretty much "non-eventful," except for issues that actually had some news developments attached to them.

One such name was ArvinMeritor; he saw the company's bonds "up about five points," especially in its shorter-dated paper. He said its 6 5/8% notes due 2007 firmed to 100.5 bid, 101.5 offered, while its 8¾% notes rose to 97 bid, 99 offered.

Another trader saw the 6 5/8s at 101.25 bid, 101.75 offered, but only called that a two point rise on the session.

ArvinMeritor said that it would buy back up to a total $450 million face amount of four series of bonds out of the $693 million outstanding. The four series - in the order of priority under which the company will buy them should the offer be oversubscribed - are the 6 5/8s, its 6 ¾% notes due 2008, its 7 1/8% notes due 2009, and its 6.80% notes due 2009.

Auto names better

The ArvinMeritor move was seen giving a little bit of firmness to the auto sector, which can certainly use all of the good news it can get.

The second trader saw upside movement in such names as Delphi Corp., whose 6.55% notes due 2006 were ¾ point better at 54 bid, 55 offered, although he saw Visteon Corp.'s 8¼% notes due 2010 softer by ¼ at 79 bid, 80 offered.

The trader saw General Motors Corp.'s benchmark 8 3/8% notes due 2033 at 70.25 bid, 71 offered, its General Motors Acceptance Corp. unit's 8% notes due 2031 at 91.25 bid, 91.75 offered, Ford Motor Co.'s 7.45% notes due 2031 at 71.25 bid, 72 offered, and the Ford Motor Credit Co.'s 7% notes due 2013 at 88 bid, 88.25 offered, all four of them up ¼ point on the day.

Another trader said that GM and GMAC "were moving around a little, but were still within a framework," before breaking out of their range to end a little bit better on the session.

He saw the GMAC 8s move up a point to 92 bid, 93 offered, while the financing arm's 6¾% notes due 2014 and 6 7/8% notes due 2011 were each up half a point, at 88.5 bid, 89.5 offered and 89.5 bid, 91.5 offered, respectively.

A market source at another desk saw the GMAC 6 7/8% notes due 2012 also half a point higher, at 89.75.

Dana heads down again

Some of the autos were on the downside, notably Dana, which gave back some of the gains the Toledo, Ohio-based auto components maker had notched Monday, helped by the news that it was still in talks with its lenders on a new credit facility and hoped to have things wrapped up within two weeks. Dana also got a waiver from its lenders on a covenant relating to minimum credit ratings on an accounts receivable securitization facility.

But all of that was yesterday's news; the Dana 6½% notes due 2008, which had fallen the most last week on market rumors that the effort to line up the financing was in trouble, and then bounced back the most Monday, were again the biggest loser among the company's bonds, with one trader calling them down 1¼ points on the day at 64 bid, 65 offered. He also saw its 5.85% notes due 2015 down a point at 60.5 bid, 61.5 offered, while its 7% notes due 2029 were ¼ point lower at 61.25 bid, 62.25 offered.

Another trader saw the '08s down a point at 64 bid, 65 offered, while seeing the company's other bonds pretty much where they had been on Monday - the 6½% notes due 2009 at 64 bid, 65 offered, the 5.85s at 61 bid, 62 offered, and the 7% notes of 2028 and 2029 at 62 bid, 63 offered.

Yet another trader saw Dana's bonds about a point softer all around, with the 7s at 61.5 bid, 62.5 offered. He said that the retreat from Monday's highs might be on investor reaction to an article in The Wall Street Journal "talking about how they may have to pay their vendors sooner than anticipated; it was viewed obviously as a negative, and bonds were softer."

There was more bad news from Fitch Ratings, which downgraded Dana's senior unsecured notes to CCC from B. Fitch cited its concern that Dana's ability to obtain sufficient secured bank financing "may be constrained by unsecured bond indentures' limitations on liens covenant; a higher risk that liquidity needs could increase if suppliers were to begin to insist on cash terms; the potential for more aggressive restructuring actions, which could increase demands on cash; Dana's reliance on the declining sport utility vehicle (SUV) market; and the company's financial condition heading into a potential commercial vehicle downturn in 2007."

Millennium relief on damages ruling

Apart from the auto names, Millennium Chemicals' bonds were higher, a trader said, as investors breathed a sign of relief that punitive damages will not be imposed in the Rhode Island lead paint case. He saw its 7 5/8% notes due 2026 at 91 bid, 92.5 offered, up a point on the day.

However, at another shop, a trader saw the company's 9¼% notes due 2008 half a point down at 101.5 bid, 102.5 offered, while another market source saw those same bonds two points lower, at 101 and saw parent Lyondell Chemical Co.'s 10½% notes due 2013 at 110.75 bid, down ¾ point.

The case in question saw Hunt Valley, Md.-based paint maker Millennium - a subsidiary of Lyondell - along with industry peers Sherwin Williams Co. and NL Industries Inc. - convicted by a jury of bearing responsibility for lead paint poisoning of young children in the Ocean State. The companies are liable for a cleanup that could cost them hundreds of millions of dollars. But had punitive damages also been imposed on top of the companies' liability for lead-paint poisoning, their costs might be triple that.

State court judge Michael Silverstein will decide later exactly what the companies must do to fix the problems caused by lead paint, which was banned in the United States in 1978 because it can cause brain damage in young children who eat lead-laced paint chips.

Other states are closely watching the Rhode Island case, and could file their own lawsuits against the companies.

A buyside source expressed interest in the ruling, saying that the decision is "a positive."

Elan down on Tysabri worries

Product liability concerns have bedeviled Irish pharmaceutical manufacturer Elan Corp. plc since early last year when it pulled its new Tysabri multiple sclerosis drug off of pharmacy shelves following reports linking the drug to a rare, but sometimes fatal, nerve disorder. That caused its bonds to fall sharply.

Elan and partner Biogen Idec conducted an intensive review of data, and recently announced that the Food and Drug administration will subject the drug to a safety review next week, a key step to getting it back on the market. The bonds have firmed since then.

But on Tuesday, they were again in retreat, following the results of a poll by Piper Jaffray analyst Deborah Knobelman of doctors, many of whom believe the drug should not be put back on the market again - or at least not without heavy safeguards.

Elan, whose bonds were off in tandem with the fall in its stock, presumably on that doctors' poll, which saw 92% of the physicians surveyed believing believe the drug could be a valuable therapy to patients - but only 59% thinking it should return to the market.

A trader saw the company's 7¾% notes due 2011 and its floating-rate notes both down two points, at 92.5 bid, 93.5 offered and 96.25 bid, 97.25 offered, respectively. Another trader, though saw Elan down ½ to one point, calling them "down, but not by much," with the 73/4s at 93-94 and its 7¼% notes at 97-98.

Charter unchanged

Charter Communications Inc. announced plans to sell some cable operations in Virginia, West Virginia, Illinois and Kentucky for $896 million - confirming recent market speculation that such a deal was in the works. That speculation helped to boost the bonds of the St. Louis-based cable operator last week, but the actual deal produced "a lot of noise, a lot of news, but no real movement," a trader said. He saw its 8 5/8% notes due 2009 were unchanged at 75 bid, 76 offered.

Another trader likewise saw Charter's 8¾% notes due 2013 at 97.25 bid, 98 offered, and its 10¼% notes due 2010 at 99.625 bid, 100.125 offered, both unchanged on the day.

Charter executives also announced that the company has "adequate" liquidity to see it through this year, and touted recent efforts to boost liquidity and extend Charter's debt maturities (see related story elsewhere in this issue).

February issuance a ghost of January

With no issues pricing Tuesday the month of February 2006 came to a close having seen slightly less than $5.7 billion price in 21 dollar-denominated tranches, compared to January's $16 billion in 31 tranches.

February 2006 also came in $3.5 billion lower than the $9.2 billion of new issuance that came in February 2005. In terms of deal volume February 2006's 21 tranches ever so slightly topped the 50% mark relative to February 2005's deal volume of 41 tranches.

However sell-side sources said Tuesday that as March gets underway the issuance drought will abate.

One official simply asserted that the calendar will start to build, and added that news is expected at the end of this week, and throughout the first two weeks in March.

"There is demand out there," the official said. "This is favorable time for strong credits to come to the market.

"I think there will definitely be another wave of issuance soon."

Another high-yield syndicate official from another investment bank seemed to concur, and added "It won't be nuts, but we see things picking up."

Longview Fibre brings $150 million

February faded with barely a whisper of news from the primary market.

Longview Fibre Co. will start a roadshow Wednesday for its $150 million offering of 10-year senior notes (B1/BB-) via Goldman Sachs and Banc of America Securities.

The company is also in the market with a concurrent offering of common stock, and will use the proceeds to repay debt and make a distribution to shareholders in connection with the company's conversion to a REIT. The Washington-based lumber and paper company will use any extra proceeds for working capital and other general corporate purposes, including timberland acquisitions.

Quebecor a blowout

One deal is stationed on the new issue calendar as business expected to be concluded by Wednesday's close: Montreal-based commercial printer Quebecor World Inc. plans to sell $300 million of 10-year senior notes (Ba3/BB-) in a deal talked at a yield in the 8¾% area.

Citigroup has the books for the debt refinancing and general corporate purposes deal.

A buy-side source, speaking on background, said: "Quebecor is going to be a complete blowout."

The source added that four-B rated Quebecor trails several conspicuous February four-B deals including Steinway Musical Instruments, Inc.'s $175 million issue of 7% senior notes due 2014 (Ba3/BB-), K. Hovnanian Enterprises, Inc.'s upsized $300 million issue of 7½% senior notes due 2016 (Ba1/BB), and CNH Global NV (Case New Holland, Inc.)'s upsized $500 million issue of 7 1/8% senior notes due 2014 (Ba3/BB-).

"Double-Bs in general are very well bid-for," the buy-sider said.

"I think that people want to get higher in quality, feeling like the credit cycle is going to turn at some point, even though the economy is still strong.

"But they feel like it's coming toward the end, and they want to be positioned for it."

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