GM bounces after CEO sees no bankruptcy; Accellent, SS&C deals price; funds see $162 million outflow

By Paul Deckelman and Paul A. Harris

New York, Nov. 17 - General Motors Corp. bonds went on a wild ride Thursday, traders said, initially gyrating around at lower levels before bouncing off their lows and moving higher on the day, investors apparently encouraged by chief executive officer Rick Wagoner's assurance that the world's largest carmaker won't be steering into the bankruptcy courts any time soon.

GM's rise also towed some of the other automotive names higher - or at least up from their early lows.

There wasn't too much going on in the non-automotive portion of the secondary market, since, as one trader said, "it was pretty much a GM day."

Overall a source marked the broad high-yield market up one quarter of a point on Thursday, trailing advances in the volatile automotive sector.

In the primary sphere, Accellent Inc. and SS&C Technologies Inc. successfully came to market with separate eight-year offerings, although Accellent's deal was downsized. Also being downsized is Team Health's planned eight-year offering, on which price talk was heard, and talk also emerged on Avago Technologies Finance Pte. Ltd.'s three-part mega-deal, as well as Metals USA's upcoming offering of fixed- and floating-rate notes.

There was one casualty, with Orchard Supply Hardware Stores Corp. heard by syndicate sources to have postponed its planned issue of eight-year notes.

But TUI AG stepped into the market with a €1 billion offering - a forerunner of what a source in Europe characterized Thursday as an expected "dramatic" €9 billion-plus build-up of the euro new issue calendar taking shape for early 2006.

And after the market had called it a day, participants familiar with the weekly junk bond mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif. told Prospect News that $162.3 million more left those funds in the week ended Wednesday than came into them.

It was the 10th straight weekly outflow, following the $138 million hemorrhage seen in the previous week, ended Nov. 9; in that time, outflows have totaled $3.056 billion, according to a Prospect News analysis of the AMG figures. Outflows have now been seen in 11 weeks out of the last 12 and in 17 weeks out of the past 19. During that latter timeframe, net outflows have totaled about $3.929 billion - up from the previous week's $3.767 billion total, according to the Prospect News analysis.

For the year so far, outflows have now been seen in 37 weeks of the 46 since the start of the year, against only nine weekly inflows. Cumulative net outflows for the year total $10.968 billion, according to the Prospect News analysis, up from $10.806 billion last week.

It is now pretty clear that the junk funds have reverted to the trend seen earlier in the year, when outflows totaling about $6.776 billion were seen in 15 straight weeks from mid-February through late May, according to the analysis. After that, there was a short period in which no clear trend could be seen, with about a month of inflows and outflows showing up on alternating weeks - but since July money has been almost consistently flowing away from the funds.

While the mutual funds only comprise between 10% and 15% of the total monies floating around the high yield universe, far less than they used to, they are still watched by market participants, since they are considered a generally reliable barometer of the overall liquidity trends - and 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.

Two at the wide end

Two junk issues priced during the Thursday session. Both came at the wide end price talk.

Accellent Inc. priced a downsized $305 million issue of 10 ½% eight-year senior subordinated notes (Caa1/B-) at 98.672 to yield 10 ¾%.

Talk was 10½% to 10¾%. The deal was cut from $325 million.

Credit Suisse First Boston and JP Morgan ran the books for the acquisition deal from the Wilmington, Mass.-based medical device manufacturer.

Elsewhere SS&C Technologies, Inc. priced a $205 million issue of eight-year senior subordinated notes (Caa1/CCC+) at par to yield 11¾%, again at the wide end of the 11½% to 11¾% price talk.

Wachovia Securities, JP Morgan and Banc of America Securities were joint bookrunners for the acquisition financing from the Windsor, Conn., company financial management software company.

The run-up to Thanksgiving

With four sessions remaining before the bond market calls time-out to baste its turkey, information surfaced Thursday on business expected to be priced during the run-up to Thanksgiving.

Avago Technologies Finance Pte. Ltd. issued price talk Thursday on its three-part deal. The company is selling $750 million of senior notes (B3/B) in two tranches, with tranche sizes to be determined. The tranche of eight-year fixed rate notes, which comes with four years of call protection, is talked at 9¾% to 10%. Meanwhile the tranche of 7.5-year floating-rate notes is talked at Libor plus 525 to 550 basis points.

Avago is also offering $250 million of 10-year senior subordinated notes (Caa2/CCC+) which it is talking at a yield in the 11½% area.

Pricing is expected on Monday via Lehman Brothers, Citigroup and Credit Suisse First Boston.

Talk also surfaced on Metals USA Inc.'s $275 million two-part offering of senior secured notes (B3/B-).

The Houston-based manufacturer and processor of metal components talked its $75 million offering of seven-year floating-rate notes at Libor plus 600 to 625 basis points. The floating-rate notes come with two years of call protection.

Metals USA, meanwhile, talked its $200 million offering of 10-year fixed-rate notes at 11% to 11¼%. The fixed-rate notes come with five years of call protection.

Pricing is expected on Monday afternoon via Credit Suisse First Boston and CIBC World Markets.

Elsewhere Greektown Holdings LLC talked its $185 million offering of eight-year senior notes at 9¾% to 10%.

The Merrill Lynch-led deal is also expected to price Monday.

Nearer at hand, Team Health Inc. talked its downsized $215 million offering of eight-year senior subordinated notes at 11% to 11¼%.

The offering, which was downsized from $265 million, is expected to price Friday via JP Morgan, Lehman Brothers and Merrill Lynch.

TUI plans €1 billion

Also on Thursday German-based tourism company TUI disclosed plans to start a roadshow next week in Asia and Europe for approximately €1 billion of high-yield securities.

Citigroup, Deutsche Bank Securities, HVB and The Royal Bank of Scotland will lead the deal which is related to TUI's acquisition of London-based container ship company CP Ships Ltd.

The transaction is expected to include approximately €700 million of senior notes in two tranches (Ba2/BB) that will be sold via Rule 144A and Regulation S: a five-year floating-rate bond and a seven-year fixed-rate bond.

TUI also expects to issue €300 million of cumulative perpetual preferred securities (B1/B+) as a Regulation S-only transaction.

One source in Europe, noting that Italian telecom Wind Acquisition Finance SA is also presently in the market with €1.250 billion equivalent deal, which is expected to price next week, said that the two deals are precursors of what is expected to be a €9 billion-plus build-up of the euro calendar in early 2006.

This source, noting that the build-up appears to be getting underway against a technical backdrop in which global high yield accounts have seen eight straight outflows (as of early Thursday morning, New York time), wondered if some "digestive problems" might not an inevitable result.

SS&C firm in trading

When the new SS&C Technologies 11¾% senior subordinated notes due 2013 were freed for secondary dealings, they edged up slightly to 100.5 bid, 101 offered from their par issue price earlier in the session, a trader said.

Accellent's 10½% senior subs due 2013 were seen having hit the market too late in the session for any kind of appreciable secondary dealings.

A trader said that E*Trade Financial Corp.'s new 7 7/8% senior notes due 2015 were trading around par, the same level at which the bonds had been priced on Wednesday, while El Pollo Loco Inc.'s new 11¾% senior notes due 2013, which priced on Tuesday, were trading at bid levels around the 98.74 issue price.

"There hasn't been a rocking [secondary] new-issue market," he said. "Deals kind of come and go and guys get what they get [in allocations] and there's not a lot of trading going on."

GM gains

Back among the established issues, "GM got a real nice bounce," a trader said, quoting the Detroit automotive giant's benchmark 8 3/8% notes due 2033 as having firmed 1¼ points to 68.5 bid, 69.5 offered, after having hit lows earlier in the session around 65.

He also saw General Motors Acceptance Corp.'s flagship 8% notes due 2031 swinging wildly up and down, opening at 95 bid, 96 offered, then falling as low as 94 bid, 94.5, bouncing off that nadir to get as good as 99.25 bid, par offered, and then coming off that peak to finish the day at 97.75 bid, 98.5 offered.

He saw the 8 3/8s' spread against the comparable Treasury issue come "in by about 30 basis points, and Ford Motor Credit improved by about 25 bps, as the whole auto sector caught a bid and people started taking on risk," after Wagoner "said that thoughts of them going into bankruptcy were greatly overblown."

"We've heard that a million times, from a zillion other issuers," another trader said of Wagoner's assertions, "but still it gave some solace, I guess, so [GM and other auto sector bonds] rebounded a bit."

The GMAC 8s, especially were "getting walloped" early in the session, getting as low as 92.5 bid, 93.5 offered, before firming smartly from that low point to finish out at 98 bid, 99 offered.

Parent GM's 8 3/8s, he said, had been as low as 65.5 bid, 66.5 offered at the open, but ended at 67.5 bid, 68.5 offered, "basically up about a point from [Wednesday] but up two points from the low."

"GM was the big name," yet another trader said, "going down and then up, in a five-point swing," that saw the 8 3/8 bonds, from his view, go as low as 62 bid before bouncing back to end at 67 bid, 68 offered. "They opened lower," he said, "and went down five points, but improved in the afternoon.

The GMAC bonds, he said, "went on a similar ride, through not as severe." He saw the 8s of '31 start "in the lows 90s," fall as low as 91 bid, 92 offered, but then rebound strongly after Wagoner's remarks to finish at 98.

GM's New York Stock Exchange-traded shares closed up $1.34 (6.29%) at $22.63, on volume of 45.7 million shares, more than four times the norm.

GM's bonds and its shares have struggled recently, roiled by the combination of big third-quarter losses, the company's admission that it would have to re-state its 2001 results, sagging sales that forced the carmaker into another customer incentive plan, the possibility of a strike at former GM unit Delphi Corp., which is still GM's largest components supplier, and market scuttlebutt that a bankruptcy filing was near, compounded by credit default swaps market action that would seem to point in that same direction.

Despite all of those problems, though, Wagoner, who also serves as the company's chairman, asserted in a letter to company employees circulated on an internal GM website that despite GM's recent problems, "there is absolutely no plan, strategy or intention for GM to file for bankruptcy." He said that the company has "a robust balance sheet," with $19 billion in cash and $16 billion in trust fund assets earmarked for retiree health care.

Other auto names follow GM

"The whole auto sector opened pretty sloppy," one of the traders said, "but then regained its composure," following GM northward after its CEO's declaration was publicized.

He saw ArvinMeritor Inc.'s 8¾% notes due 2012 drop two points on the open to 88 bid, 89, but then rebound most of the way back to end down only half a point at 89.5 bid, 90.5 offered.

"It was pretty much the same pattern" at such other automotive names as Lear Corp. or Tenneco Automotive. He saw Lear's 8.11% notes due 2009, which closed at 90 bid on Wednesday, dip to 88.5 bid, 89.5 offered in the early going but then rebound to 89.5 bid, 90.5 offered, down just half a point on the day, while Tenneco's 8 5/8% notes due 2014 sank to 90.5 bid, 91.5 offered at the open, but finished at 91.25 bid, 92.5 offered, also half a point down.

And he saw Dura Automotive Systems Inc. actually higher on the session, its 9% notes due 2009 a point better at 57 bid, 58 offered.

Delphi's bonds were also seen better, having risen to about 55.25 from prior levels around 54.5 bid, 55.5 offered.

Little change in Calpine

Outside of the automotive arena, a trader said that Calpine Corp.'s bonds "looked pretty blah," in the absence of a definitive ruling one way or another on the San Jose Calif.-based independent power generating company's lawsuit against the collateral trustee for some of its bonds, revolving around the bank's effort to keep Calpine from accessing some of the proceeds from a recent asset sale.

Calpine and the defendant trustee, Bank of New York, presented closing arguments in the case Thursday at the state Chancery Court in Wilmington, Del., but the judge hearing the case, Leo Strine, did not immediately issue a ruling.

The trader saw Calpine's 8½% secured notes due 2010 at 73 bid, 74 offered, while its 8½% unsecured notes due 2008 "didn't look much different," ending at 46 bid, 47 offered.

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