Ingles to bring deal; new Jarden issue treads water; Ford rises again, but GM falls by wayside

By Paul Deckelman and Paul A. Harris

New York, April 28 - Ingles Markets Inc. - which on Tuesday announced plans to buy back its existing bonds from their holders via a tender offer -- was heard by high yield syndicate sources to be getting ready to price a $500 million issue of new notes later this week, a deal which at least one market source said was likely to be "well received."

Meanwhile, Jarden Corp.'s new offering of seven-year notes, which priced on Monday, was seen to be struggling in the aftermarket, plagued by lackluster investor demand for the Rye, N.Y.-based consumer products company's deal.

Another recent new deal, for giant meatpacker JBS USA, LLC, continued to retreat, apparently hurt by investor fears about what the swine flu outbreak might do to a major pork producer like JBS. The bonds, which priced last week at a sizable discount to par, had already been struggling just to stay at or above their issue price - before the swine flu scare walloped the bonds and shares of a number of meatpacking companies, including rival Smithfield Foods Inc.

Back among the established issues, General Motors Corp.'s bonds were seen lower, with Monday's gains now seen only through the rear-view mirror, amid new bankruptcy warnings, given the emerging analyst consensus that its offer to give about 10% of a restructured GM to its bondholders in exchange for nearly all of their $27 billion of debt is a non-starter.

GM arch-rival Ford Motor Co.'s bonds, however, kept on climbing, on investor relief that the Number-Two domestic car manufacturer is in effect, the "un-GM," not requiring a government bailout and not expected to go into Chapter 11 any time soon.

Apart from the autosphere, traders saw lower levels in the recently junked commercial lender CIT Group Inc.'s bonds.

As the dough keeps rolling into risk, junk outperformed stocks as well as high-grade bonds on Tuesday, market sources said.

Cash bonds were flat to slightly positive, said a high-yield mutual fund manager who added that the bonds of HCA Inc. ended the session 1/8 to ¼ point higher.

"We're still getting flows," the investor remarked on the cash that has been pouring into the high-yield asset class; AMG Data Services has reported weekly inflows averaging $500 million-plus over the past month.

"It's still coming in at that volume, and it may even have accelerated," the fund manager said.

Ingles plans $500 million

In the primary market, meanwhile, the news flow remained light in the face of forecasts for heavier volumes.

Asheville, N.C. supermarket chain Ingles Markets will host a Wednesday investor call for its $500 million offering of eight-year senior notes.

The deal is expected to price on Thursday afternoon or Friday morning via joint bookrunners Banc of America Securities and Wachovia Securities.

Credit ratings remain to be determined.

Proceeds will be used to fund the tender for the company's existing 8 7/8% senior subordinated notes due 2011, as well as to repay certain other debt, fund capital expenditures and for general corporate purposes.

New issue buzz

Starwood Hotels & Resorts Worldwide Inc., a former investment-grade name, is expected to come with a high-yield offering, perhaps before the end of the week, according to a buy-side source who expects JP Morgan to do the bell-hopping.

The White Plains, N.Y.-based hotel and leisure company amended its credit facility on Tuesday, revising pricing and increasing the consolidated leverage ratio to 5.5 times from 4.5 times, according to an 8-K filing with the Securities and Exchange Commission.

Deutsche Bank is the administrative agent on the amendment.

An analyst who covers the sector noted that Starwood is a fallen angel with four outstanding issues, all rated triple-B and higher, and added that the company does need to raise capital.

Meanwhile El Segundo, Calif.-based dialysis services provider DaVita Inc. continued to surface as a potential near-term issuer in conversations with both buy-side and sell-side sources.

"The technical bid is strong," an investor asserted, pointing to the formidable amount of cash flowing into junk.

"As long as your company is not a total disaster, as far as margins and cash flow, and it's a stable business, I think you can get a lot done in this market."

Meanwhile a pair of energy deals appear headed to the primary in the near-term, according to a syndicate source who was not able to provide names.

An investment banker expects this week and next week to become relatively busy, so long as the fundamental backdrop - including the stock market - remains relatively firm.

"We continue to see down days in equities, but the high-yield market seems pretty good," the banker said.

"You would expect that as companies come out of their blackout periods we'll start to see even more deals.

"But it's still relatively slow."

New issue concession

Debate surfaced Tuesday as to whether the new issue premium is remaining steady or declining.

Predictably, perhaps, the buy-side and the sell-side represented the two contesting parties in this debate.

Nielsen Corp.'s new 11½% senior notes due May 1, 2016, which priced late last week at 92.173 to yield 13¼%, were at 92¼ bid on Tuesday, according to an investor who added that this premium to the new issue price is not exactly cause for celebration.

"The new issue premium has been getting less and less," the source said.

However a high-yield syndicate official said that new issue premiums are presently 50 to 75 basis points, and are unlikely to go lower.

New Jarden bonds seen struggling

Among recently priced offerings, a trader on Tuesday said that the 8% notes due 2016 which Jarden Corp. priced on Monday "didn't do well." He saw the upsized $300 million of new bonds, which came to market late in Monday's dealings at 97.401 to yield 8½%, stay anchored around the issue price at 97 3/8 bid, 97 5/8 offered.

At another desk, a market participant said his shop was trading the bonds at 97 1/8, actually below issue.

The first trader said that investor demand for the issue was tepid, at best.

"Everybody who put in [for an allocation of bonds] got what they wanted, which isn't a good sign." Normally, he said, if a bond is at all hot and in demand, "an account will put in for $5 million, hoping to get $1 million or $2 million. If something is in demand, and you put in for $5 million, sometimes you're lucky if you get $500,000."

That was definitely not the case with the Jarden offering, which seemed to generate no sense of urgency or scarcity among potential investors. And he said that this, in turn, limited its upside potential once it crossed over for secondary dealings, since a desire to get a piece of a coveted deal or to add to a too-small allocation usually acts as a powerful driver for aftermarket activity.

"So the bonds are trading" about where they came, he said.

'The caution flag is up'

The failure of the new Jarden deal to excite investors, the trader said, is one sign that "the caution flag is up, just a little bit in junk right now."

After two exciting weeks which saw over $3 billion of new bonds pricing in one week, ended April 17, and nearly $3 billion pricing the following week, ended this past Friday, the market, he indicated, may have gotten a little ahead of itself and needs a chance to digest all of that paper. "The market is taking a second look right now after the recent run, and even though there's demand, bonds still have to be priced on the cheap side a little bit," to attract buyers."

New non-Jarden deals hang in

A trader at another desk, also seeing Jarden's new issue trading at 97 bid, 97½ offered, said that the other recently priced deals, for such names as Encore Acquisition Co. and Lennar Corp., "were pretty much where they were" on Monday.

Miami-based homebuilder Lennar's $400 million of 12¼% senior notes due 2017 were seen continuing to hold above the par level, "hanging in" a trader said, at 100½ bid, 101 offered, about where the bonds had gone home the previous session.

The company had priced the issue, upsized from $250 million originally, at 98.098 last Thursday to yield 12 5/8%. The bonds had shot up sharply on Friday when they were freed for secondary dealings, moving as high as 101 3/8 bid before backing off and anchoring around 100½ bid.

Encore, meantime, was still being quoted at 95 bid, 95¼ offered. The Fort Worth, Tex.-based energy company had priced an upsized $225 million of its 9½% senior subordinated notes due 2016 on Wednesday at 92.228, to yield 11 1/8, and the bonds had immediately begun firming as soon as they were freed for secondary dealings.

New JBS bonds hogtied at lower levels

However, the other recent new deal, for Greeley, Colo.-based pork producer JBS USA, retreated further on Tuesday, losing another point to end at 92½ bid, 93½ offered. The company had sold an upsized $700 million offering of the 11 5/8% five-year bonds on Wednesday at 95.046 to yield 13%.

However, after some initial upside later that session that took them up to 96½ bid, the bonds came back down to around the 95 mark, just below their issue price.

There things stood until Monday, when reports of the spreading swine flu infection knocked JBS's bonds, and those of such competitors like Smithfield Foods for a loss. Smithfield's 7¾% notes due 2013 hovered below 70 bid, while its 7% notes due 2011 were seen around 82 bid, both easier on the session.

Market indicators firm up

Back among established issues, a trader saw the CDX Series 12 High Yield index - which had lost ½ point on Monday - up ¼ point Tuesday to end at 75½ bid, 76 offered.

Meanwhile, the KDP High Yield Daily Index, which rose by 8 bps on Monday, gained another 22 bps Tuesday to 57.04, while its yield tightened by 5bps to 12.29%.

Advancing issues, which on Monday had led decliners by about a five-to-four margin, continued to hold that the advantage Tuesday.

Overall market activity, measured by dollar-volume totals, rose by 41% from Monday's levels.

GM bonds in retreat

Monday's busiest name, General Motors, was again active, although nowhere near as it had been on Monday. A trader saw GM paper "just hanging in" around a 9-10 level for its benchmark 8 3/8% bonds due 2033 on "a lot of volume." He said that "the bonds were seen around 10 [Monday] and they're around 9 today, bouncing around in a range."

Another trader saw the GM long bonds down 1½ points on the day to 8 bid, 10 offered, observing that Monday's gains in the immediate wake of GM's announcement of its offer to give bondholders equity had now faded.

A market source saw the GM benchmarks down 1 point at 91/4, on mid-afternoon volume of some $17 million, keeping GM as one of the day's most active issues, although that volume was less than half of what was traded in the credit on Monday.

The GM bonds backpedaled amid a growing chorus of analysts, quoted in news stories, who are decrying the company's current plan to give new stock in what will be a reorganized GM to its bondholders, in return for their tendering their debt to GM. The company hopes to take out at least 90% of its $27 billion of bonds that way - but has warned that if the exchange offer fails, bankruptcy is the likely option. Analysts have said the plan is likely to fail because the bondholders will get only around 10% of the company - with the government and the United Auto Workers union getting the rest. GM bondholder groups decry the exchange offer the way it is now structured as unfair.

GM's 49% owned GMAC LLC's bonds were meantime mixed, its 7¾% notes due 2010 up nearly 2 points to the 81 level and its 6 7/8% notes due 2012 a point higher at 61 bid, but its 6 7/8% notes due 2011 quoted at 62 bid, down several points on the session.

Ford upside ride continues

A trader said that Ford Motor Co.'s 7.45% bonds due 2031 were 2 points better at 48 bid, 50 offered, while a second said the bonds were "hanging in unchanged to up," to around 48-49, on decent volume.

Ford, despite reporting a sizable loss for the just passed quarter, has managed to firm on investor perception that the carmaker, unlike key domestic rivals GM and Chrysler LLC, is likely to emerge from the current turmoil pretty much intact, while GM and Chrysler are probably going to undergo an in-court restructuring..

CIT seen lower

Newly junked CIT Group Inc.'s 5% notes due 2014 were being quoted down as much as 6 points on the day at the 46 level.

Meantime credit-default swaps used to protect holders of CIT debt against a possible default widened to their highest cost in almost six months, hitting an up-front price of 35.5%, up from 32% on Monday, plus 500 bps annually to insure debt for five years. That debt protection cost has ballooned by 12 percentage points since the major ratings agencies last week unceremoniously dumped the New York-based commercial lender into junk territory.

Saks firm as CEO promotes company

Back on the upside, a trader noted that Saks Inc.'s bonds "were up again," with the 9 7/8% notes due 2011 in a 91 bid, 92 offered context. He suggested the New York-based luxury retailer may have had a conference call - and sure enough, Saks' chairman and chief executive officer, Stephen I. Sadove, made a presentation Tuesday, broadcast over the web, at the first annual Barclays Capital Retail and Restaurants Conference, in New York.

Sadove touted the company's recent efforts to cut costs and maintain sales in the face of the severe economic downturn, which has had a particularly sharp impact on the retailing industry.

Saks' NYSE-traded shares rose 8 cents, or 1.74%, to end at $4.52, on volume of 4 million, 25% over the norm.

Cott sparkles lately

The trader also noted that Cott Corp.'s bonds were being buoyed by speculation that the Mississauga, Ont.-based private-label beverage bottler might be an attractive acquisition target for one of the bigger players in the soft-drink industry.

"Something is going on" with them, he said. "They're doing very well with Wal-Mart" - Cott cans and bottles the giant retailer's "Sam's Choice" private-label soda line - "and we're hearing that they're a prime takeover [target] for one of the larger companies." However, he took pains to note that "this is rumors," that have not been officially acknowledged or proven by anyone. "It's certainly helping the bonds" - he said the Cott 8% notes due 2011 were bid at 71 Tuesday, without any offered side, but noted that they had rallied "14 or 15 points in the last month or so."

That takeover talk, if that is what it is, has also added some fizz to the soda-pop makers stock, which "even though it was off a little bit today, has gradually moved up" to current levels above $2, more than double where it was in early April. "You look at the map, and it's pretty significant."

O'Charley's on consolidation menu?

The trader also saw consolidation scenarios pushing up the bonds of Nashville-based restaurant chain operator O'Charley's Inc. "Look at the stock," he said, "and look at the bonds."

The company's Nasdaq-traded shares ended Tuesday up 46 cents, or 8%, at $6.21, on volume of 375,000, double the usual activity level.

On the bond side of the fence, he said, the company's 9% notes due 2013 was 75 1/8 bid, although he noted there had recently been "very little volume." Even so, he explained, just a bit more than a week ago, on April 20, the bonds were trading at 67. However, by last Friday, those bonds had moved up to 75 1/8, on volume of over $1 million.

"It's a one-off name" that's not seen around often. "If people are talking about consolidation in the restaurant industry, they have good real estate, prime locations. " As of the end of 2008, the company was operating 232 of its company-owned flagship O'Charley's restaurants in 16 states in the east, southeast, and the Midwest regions, along with 116 Ninety Nine restaurants in 9 states throughout New England and the Mid-Atlantic states and 11 Stoney River restaurants in seven states in the east, southeast, and the Midwest regions, in addition to other outlets operated on a franchise basis.

Crown Holdings 'well received'

Elsewhere, a trader said that Crown Holdings Inc. "is trading a lot. They're not moving up, but they are at least holding their own," he said of the Philadelphia-based packaging company.

"People are well receiving it."

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