Verso, Phibro hitting road to sell deals; Ford off on dividend cut; funds see $72 million inflow

By Paul Deckelman and Paul A. Harris

New York, July 13 - Phibro Animal Health Corp. was heard Thursday to be getting ready to hit the road Friday to begin marketing a planned offering of seven year notes.

High yield syndicate sources meantime also saw Verso Papers Holdings LLC getting ready to roadshow a $900 million two-part deal. That marketing effort is expected to begin on Monday.

In secondary dealings, Ford Motor Co.'s bonds retreated after the struggling automotive giant said that it would cut the dividend that it pays to stockholders - a drastic move indicating that things are not well with the Number-Two domestic carmaker.

There meantime wasn't much in the way of price movements in General Motors Corp. bonds ahead of Friday's scheduled summit meeting in Detroit between GM chairman and chief executive officer G. Richard "Rick" Wagoner and Carlos Ghosn, his opposite number at French carmaker Renault SA and that company's 44% owned affiliate, Japanese auto producer Nissan Motor Co. They are expected to talk about a comprehensive three-way alliance between the car companies, with Renault and Nissan taking as much as a 20% equity stake in the troubled GM.

Sources from the buy-side and sell-side marked the broad high-yield market lower with equities on Thursday - one of them noting that the Dow Jones Industrial Average fell by more than 165 points on the session.

A source from a hedge fund said late in the session that junk was off 3/8 to ½ point.

Another source from the buy-side, just after the close, said high yield had a "heavy tone" and marked it down ½ point.

Syndicate officials, meanwhile, just commented the market was lower on the day.

And late in the day, market participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday, $71.6 million more came into the funds than left them - the second straight week in which inflows have been seen, following the $97.5 million infusion reported in the previous week, ended Wednesday July 5.

The inflow soaks up a little of the red ink the funds have amassed year-to-date, according to one source, who said that AMG trimmed the year-to-date flows among funds that report on a weekly basis ended the most recent period to negative $3.467 billion.

Another source told Prospect News that funds which report to AMG on a monthly basis chalked up $36.6 million of inflows during the most recent period. Contrary to the weekly reporting funds, the funds that report on a monthly basis remain solidly in the black for 2006 to date: $1.849 billion, according to AMG.

Year-to-date aggregate flows, tallying both kinds of funds, ended the week at negative $1.620 billion.

In the past two weeks, inflows have totaled $169.1 million, according to a Prospect News analysis of the AMG figures - although that modest winning streak is absolutely dwarfed by the $1.181 billion cumulative outflow seen over the previous three weeks, according to that analysis.

Even with the two inflows in the most recent weeks, there have still been outflows in 11 weeks out of the last 14.

Outflows have now also still been seen in 21 weeks out of the 28 since the start of the year, against only seven inflows, according to the Prospect News analysis, excluding distributions and counting only those funds that report on a weekly, rather than on a monthly, basis.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise between 10% and 15% of the total monies floating around the high yield universe, far less than they used to - 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.

Verso Paper to sell $900 million

Meanwhile in the primary market no new issues were priced. However two new offerings were launched.

Verso Paper Holdings and Verso Paper Inc. plan to start a roadshow on Monday for $900 million of notes in three tranches.

The company plans to sell $600 million of eight-year second lien senior secured notes (B1/B+) in fixed- and floating-rate tranches.

Verso is also offering a $300 million tranche of 10-year senior subordinated notes (B3/B-).

Credit Suisse and Lehman Brothers are joint bookrunners for the notes which are being sold to help fund the $1.4 billion acquisition of International Paper Co.'s coated and supercalendered papers business by Apollo Management.

Phibro $240 million debt refinancing

Also Phibro Animal Health will begin a roadshow on Friday for its $240 million offering of seven-year senior notes (B3/B-).

UBS Investment Bank has the books for the debt refinancing deal from the animal health and nutrition products manufacturer.

Friday's deals

The Friday session could see terms emerge on as many as four deals.

Rexnord Corp.'s downsized $785 million two-part offering is expected to price.

On Wednesday the Milwaukee-based motion technology products manufacturer downsized to $365 million from $420 million its offering of 10-year senior subordinated notes (Caa1/CCC+), and talked them at 10¾% area.

Meanwhile Rexnord increased its credit facility by $55 million to compensate for cutting the bond deal from $840 million.

The company left unchanged its $420 million tranche of eight-year senior notes (B3/CCC+), which are talked at the 9¼% area.

Credit Suisse, Merrill Lynch & Co., Bear Stearns & Co. and Lehman Brothers are joint bookrunners for the LBO deal.

On Thursday a buy-side source told Prospect News that Rexnord had been in discussions with potential bond investors about possibly tightening up the bond covenants including the restricted payments basket and the bank debt carve out covenant.

This source added that talk on the deal had not changed, but that the heaviness in the market, at present, could cause the bonds to price wider than talk.

Also expected to price Friday is Avis Finance Co. plc (Avis Europe plc)'s upsized €250 million offering of seven-year senior floating-rate notes.

Barclays Capital, The Royal Bank of Scotland, Dresdner Kleinwort and Societe Generale are joint bookrunners for the unrated notes that were talked at the three-month Euribor plus 275 bps area earlier in the week and increased from €200 million.

In addition to Rexnord and Avis Europe, Enterprise Products Partners LP could price its $300 million offering of 60-year fixed-rate to floating-rate junior subordinated notes (Ba1//BB+) via Wachovia Securities.

No talk had been heard on those notes as Prospect News went to press on Thursday.

Finally Toronto-based mining, exploration and development company Coalcorp Mining Inc., whose interests are all located in Colombia, is expecting to price its dollar-denominated units comprised of a $1,000 senior unsecured note maturing in five years and one day and 190 common share purchase warrants.

GMP Securities is leading the deal.

An informed source said Thursday that the deal size and price talk remain to be determined. However Coalcorp is in the market to help fund investments in infrastructure projects in Colombia totaling $125 million.

Iron Mountain old notes ease

Back in the secondary market, a trader saw the new Iron Mountain Inc. 8¾% notes due 2018 that priced late Wednesday at par break into the aftermarket and trade around that same level - but he said that the Boston-based information storage company's existing 7¾% notes due 2015 were down ½ point at 95 bid, 96 offered.

Ford off on dividend cut

Back among the established issues, Ford's bonds were trading lower, after the Dearborn, Mich.-based carmaker announced that it will halve its quarterly dividend to five cents per share from 10 cents. That may sound like nickels and dimes - but the move is expected to save the company $92 million per quarter.

Ford - faced with slumping auto sales and trying to keep its turnaround plan on track - also said that it would cut the compensation it pays its board members in half as well.

A trader pronounced Ford's benchmark 7.45% notes due 2031 as having fallen a point on the news to 71.75 bid, 72.25 offered, and saw its Ford Motor Credit Co. financing arm's 7% notes due 2013 down ¼ point at 86.5 bid, 87 offered.

Another trader, who also estimated the 7.45s down a point at 71.5 bid, 72.5 offered, said that "on the surface, this seems like a positive" because the company is saving money, "but I think it's more negative than positive, if you dig down deeper into it, because everyone knows they're having trouble, but for them to announce it now may point to the fact that their restructuring efforts aren't doing as much as they would like and maybe [they have to] just ramp it up a bit."

Ford's turnaround strategy includes cutting its workforce by 30,000 jobs and closing 14 facilities by 2012.

The trader also saw the 7% notes due 2014 of what he called Ford's "partner in crime" - Visteon Corp., a former Ford subsidiary still very dependent on its former parent for orders and financial support as it tries to make its own turnaround - "take a little beating," falling a point to 81 bid, 82 offered.

GM slips

Also in the automotive sector, he saw GM's bonds "drifting lower with the market," which was generally lower, quoting its flagship 8 3/8% notes due 2033 down between ½ point and a point at 79 bid, 80 offered. He noted that there were news stories out in advance of Friday's sit-down between GM boss Wagoner and Renault/Nissan chieftain Ghosn, quoting the latter as saying that the two carmakers are only interested in a wide-scale alliance with GM, which would involve them taking as much as a 20% stake in the American company, and cooperating on various cost-saving initiatives that could benefit all three of them.

However, Ghosn sought to downplay speculation that bringing GM into Renault's and Nissan's existing partnership might be a way of greasing the skids under Wagoner and having Ghosn himself - widely praised for bringing Nissan back from the brink of insolvency several years ago - step in to run GM. Ghosn told CNBC in an interview that "I'm not going to run any other third company and that's not what's at stake here."

There has been some speculation that GM's largest single shareholder - and the man who has been acting as the matchmaker between GM and its would-be alliance partners - billionaire financier Kirk Kerkorian, a sometimes vocal Wagoner critic, was trying to maneuver the GM CEO out and replace him with Ghosn. Kerkorian, who holds 9.9% of GM's stock through his Tracinda Corp., has been unhappy with the pace of GM's turnaround efforts, and also is displeased that Wagoner is GM's point man in its talks with Ghosn; the cantankerous billionaire wanted the board to appoint a committee independent of current management that could also draw on outside financial and legal expertise in evaluating the merits of any possible deal with Renault and Nissan.

Even though Ghosn's declaration that he is not interested in Wagoner's job did make headlines, the trader said that in his view, Ghosn "didn't have much of importance to say regarding the potential alliance. It's still not clear, to say the least," what such a linkup might mean, "so the bonds sank a little bit on that as well."

Chiquita, Mirant lower

Among other names he saw heading lower were Cincinnati-based banana importer Chiquita Brands International Inc., whose 7½% notes due 2014 were a point lower at 84 bid, 85 offered, and Mirant Corp., whose 8.30% notes due 2011 were 1½ points down at 96.5 bid, 97.5 offered, in the wake of Moody's Investors Service downgrading its ratings. The agency expressed dismay with the Atlanta-based power generating company's plans to unload its Caribbean and Philippine operations and to use cash to pay a special dividend to shareholders.

On the upside, he said, were Sea Containers Ltd.'s notes, which drew "some buyers, though on no news." The Bermuda-based maritime and railroad transportation company's 7 7/8% notes due 2008 were a point better at 91 bid, 92 offered.

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