Upsized Accuride deal prices; Magnum Hunter up on acquisition agreement

By Paul Deckelman and Paul A. Harris

New York, Jan. 26 - Accuride Corp. was heard by high-yield syndicate sources Wednesday to have successfully priced an upsized offering of 10-year bonds, which traded up smartly once it went in to the aftermarket. Also in the primary market, Cincinnati Bell Inc. was heard to have restructured its planned bond offering, now dividing it into two tranches. And price talk emerged on several upcoming deals, including Novelis Inc.'s $1.4 billion 10-year mega-deal, expected to price Friday.

In secondary dealings, Magnum Hunter Resources Inc.'s bonds were quoted up several points on news that the Irving, Tex.-based independent oil and gas exploration and production company has agreed to be acquired by Cimarex Energy Co.

The high-yield market maintained the firmer footing that it had found on Tuesday into the early part of the Wednesday session, according to a buy-side source.

In the primary market, one deal priced Wednesday, as Evansville, Ind. truck-wheel maker Accuride upsized an oversubscribed 10-year issue to $275 million.

Elsewhere talk of 7% area was heard on one of the week's mammoths: Novelis Inc.'s $1.4 billion single-tranche offering, which is expected to price by Friday's close.

And the forward calendar took aboard more passengers during the mid-week sessions, with Valor Telecommunications announcing a roadshow start and Hexcel Corp. was seen coming with a drive-by.

Liquidity despite outflows

A sell-side source, speaking to Prospect News late in the session, commented that in addition to Intelsat Bermuda Ltd.'s $2.55 billion three- tranche deal (B1/B+/B+) that priced on Monday and the massively upsized Tenet Healthcare Corp. $800 million issue of 9¼% 10-year senior notes (B3/B) that priced in a Tuesday drive-by, the forward calendar still contains $5 billion worth of new issuance that is expected to price before the week's end.

"That's pretty phenomenal," the source added, specifying that the 10-year Treasury closed Tuesday at a level that seems generally supportive to high yield.

"Where is the liquidity coming from?" the sell-sider demanded to know, adding that high-yield mutual fund flows remain firmly in the red, with the most recent week reported - the week ending Jan. 19 - seeing $445.6 million leaked from the funds, according to AMG Data Services (eight of the past nine weeks of high-yield fund flows have been negative ones).

Having asked the question, the source whispered the answer:

"Hedge funds," the sell-sider said, adding that they are roundly believed to remain quite active in the high-yield new issue market.

Accuride upsizes to $275 million

Wednesday's sole primary market transaction came from Accuride Corp., which priced an upsized $275 million issue of 10-year senior subordinated notes (Caa1/B-) at par to yield 8½%, in the middle of the 8 3/8% to 8 5/8% price talk. The offering was increased from $225 million.

Lehman Brothers, Citigroup and UBS Investment Bank were joint bookrunners for the deal.

Accuride downsized its term loan B by $65 million to $550 million from $615 million. Of that $65 million, $50 million was added to the bond deal. The remaining $15 million that is coming out of the term loan B will be covered by cash on hand.

A market source told Prospect News that the deal had been oversubscribed.

7% area talk on Novelis

In the Jan. 24 week's second billion dollar-plus transaction, Novelis Inc.'s $1.4 billion of 10-year senior guaranteed notes (B1/B) were talked Wednesday at the 7% area, with pricing expected mid-day Friday.

Citigroup, Morgan Stanley and UBS Investment Bank are joint bookrunners for the offering from the Montreal-based aluminum and packaging producer, and aluminum recycler.

Elsewhere price talk on AMR Holdco Inc./EmCare Holdco Inc.'s $250 million of 10-year non-call-five senior subordinated notes (Caa1/B-) is 9½%-9¾%, with pricing expected on Thursday afternoon via Banc of America Securities and JP Morgan.

And Gregg Appliances Inc.'s $165 million of eight-year non-call-four senior notes (B2/B) are talked at 8 7/8% to 9 1/8%, with the offering expected to price on Thursday via Wachovia Securities.

Roadshows for Valor, Hexcel

An already crowded forward calendar took aboard more passengers on Wednesday as two new deals were announced.

Valor Telecommunications Enterprises LLC, in conjunction with Valor Telecommunications Enterprises Finance Corp., will begin a roadshow Thursday for $280 million of 10-year non-call-five senior notes (B1/B).

Pricing is expected early in the week of Feb. 7.

Banc of America Securities, JP Morgan and Merrill Lynch & Co. will be joint bookrunners for the debt refinancing deal from the Irving, Tex.-based provider of telecom services.

Meanwhile, in quick-to-market action Hexcel Corp., a Stamford, Conn.-based manufacturer of composite materials for aerospace, defense, electronics and industrial purposes, plans to price $200 million of 10-year non-call-five senior subordinated notes (Caa1) on Thursday, via Goldman Sachs & Co.

Hexcel will also use the proceeds from its deal to refinance debt.

Three in the wings

In addition to the Hexcel drive-by and the Valor roadshow start, three other prospective issuers were spotted nesting in the primary market wings on Wednesday.

American Commercial Lines announced that it plans to sell $200 million of 10-year senior notes (B3).

UBS Investment Bank and Banc of America Securities will run the books for the debt refinancing deal from the Jeffersonville, Ind.-based barge company, although no timing was heard.

Elsewhere Masonite International Corp. is expected to bring approximately $825 million of junk bonds in a multi-tranche U.S. dollar-denominated deal. Scotia Capital expected to be involved.

Timing was sketchy, although the deal is expected to be February business.

And Dallas-based Holly Energy Partners announced in a Wednesday press release that it plans to make a $150 million private placement of senior unsecured notes to help fund its acquisition of the pipeline and terminal assets of Alon USA.

Holly Energy will pay $120 million in cash and put up 937,500 Holly Energy Partners class B subordinated units.

Accuride gains in trading

When the new Accuride 8½% senior subordinated notes due 2015 were freed for secondary dealings, "they did really well," said a trader who saw the bonds firm to 102.25 bid 102.75 offered at the close, well up from their par issue price earlier in the session.

"They opened up two points" on the break, said a trader who saw the bonds go out at 102.25 bid, 103.25 offered. "People have an appetite for new paper."

Tenet new bonds dip, then rise

That was also true in the case of Tenet Healthcare Corp.'s new 9¼% senior notes due 2015. The trader saw those bonds - which had priced on Tuesday at 98.406 - experiencing "a little dip" in early trading Wednesday, down to 98 bid 98.375 offered. But then they "shot up more than a point" to close at 99.25 bid, 99.75 offered.

The first trader also saw the Santa Barbara, Calif.-based hospital operator's new bonds "better on the day," pushing up to 99.125 bid, 99.625 offered, from earlier levels around 98.375 bid, 98.625 offered.

He also saw the new Intelsat Bermuda Ltd. bonds, which priced Monday in a humongous $2.55 billion offering for the most part little changed, with both the floating-rate notes due 2012 and the 8¼% notes due 2013 both hanging around 102.75 bid, 103 offered, not far from the levels to which they had moved on Tuesday. The third new Intelsat bond, the 8 5/8% notes due 2015, had moved up slightly to 103.25 bid, 103.75 offered, up from 102.75 bid, 103.75 offered.

The other trader saw Intelsat's existing bonds "come in about 1½ points on the day," with the 7 5/8% notes due 2012 dropping to 90 bid, 91 offered from prior levels around 92 bid, 93 offered Tuesday. "It was just people digesting the new deal and positioning these [existing] things a little lower, since the existing holdco bonds are a lower claim than the opco bonds that just priced."

Magnum Hunter gains

Away from new-issue linked bonds, Magnum Hunter's 9.60% notes due 2012 were "up a good two points on the day," the trader said, quoting those notes at 114 bid, 115 offered. Another trader saw the bonds go out at that level, but pegged them up 1½ points from 112.5 bid 113.5 offered, pre-news.

Magnum Hunter and Cimarex, a Denver-based energy concern, announced that Cimarex will acquire Magnum Hunter for $1.5 billion in Cimarex stock, plus the assumption by Cimarex of $645 million of Magnum Hunter debt. Magnum Hunter shareholders will receive 0.415 share of Cimarex common stock for each Magnum Hunter share in the all-stock offer.

Magnum Hunter's New York Stock Exchange-traded shares jumped $1.61 (12.16%) on the takeover news, to $14.85, on volume of 19 million, about 20 times the usual activity level.

Beverly edges up

Tuesday's big takeover story - Beverly Enterprises Inc. - was meanwhile only slightly higher Wednesday, following its big run up the previous session on the news that the Fort Smith Ark.-based nursing home operator had received a $1.53 billion buyout bid from Formation Capital LLC, an investment group including Appaloosa Management LP, Franklin Mutual Advisors LLC and Northbrook NBV LLC.

That news had sent the company's 7 7/8% notes due 2014 up about five to six points on the session, depending on who was being quoted, with the bonds ending in the 111-112 area. On Wednesday, a market source quoted them up perhaps another quarter point at 111.25, while its 9 5/8% notes due 2009, which had already been hovering around 116.5 before the news and went nowhere Tuesday, were also up ¼ on Wednesday, to 116.75 bid,

Earnings news

On the earnings front, Reader's Digest Association Inc. earned $57.8 million (or 58 cents a share) in the 2005 fiscal second quarter ended Dec. 31, down about 13% from year-earlier earnings of $66.5 million (67 cents a share). Wall Street had been looking for 72 cents a share of profit.

The Pleasantville, N.Y.-based publisher of the venerable Reader's Digest magazine also said that it had cut its debt by $203 million during the quarter, and anticipated further reductions in its debt load and its leverage ratio (see related story elsewhere in this issue).

Mother's Work Inc.'s 11¼% notes due 2010 were seen up about a quarter point to 102.25 bid, even though the Philadelphia-based maternity wear company reported that it earned just $100,000, (one cent per share) in the 2005 fiscal first quarter ended Dec. 31 - well down from $2.1 million (37 cents per share), a year earlier. On the upside, the company cited improved quarter-over-quarter sales trends, and stuck to its previous financial guidance of 70 cents to $1 per share of fiscal 2005 earnings.

"The numbers weren't so hot," a trader said, "but they were better than expected."

Abitibi-Consolidated Inc.'s 6% notes due 2013 were half a point better at 93 bid, 93.5 offered, even as the Vancouver, B.C.-based forest products company's fourth-quarter loss widened to C$108 million (24 Canadian cents a share) from C$81 million (18 Canadian cents per share) a year earlier. The company said that it will it will cut costs and look at closing more mills to bring expenses in line with earnings.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.