GMAC sells $1 billion five-years; airlines lose altitude; Six Flags off after call

By Paul Deckelman, Paul A. Harris and Ronda Fears

New York, Dec. 12 - For the second time in as many days, the financing arm of a major carmaker tapped the high-yield market with a quickly shopped mega-deal, as GMAC LLC priced $1 billion of new five-year notes. The new bonds, which priced on the heels of Monday's $3 billion of new paper from Ford Motor Credit Co., moved up slightly when they were freed for secondary dealings.

New deals were also heard to have priced for ESCO Corp. and for China Fishery Group Ltd. The ESCO bonds firmed smartly from their par issue priced when they moved into the aftermarket.

In the secondary sphere, it may have been the Wright Brothers who legendarily said that "what goes up, must come down" - but it was Northwest Airlines Inc.'s bonds that proved that maxim on Tuesday, as the bankrupt Eagan, Minn.-based air carriers' notes, which had risen to nosebleed levels in the mid-90s over the past week or so on takeover, buyout and merger and acquisition speculation, gave back a small portion of those gains, descending by about 2 to 3 points across the board, traders said.

They cited profit-taking off the recent hefty gains - which saw issues like Northwest's 8 7/8% notes that were to have come due this past June 1 rise well into the 90s from levels around 82 on Dec. 1 - and around 62 on Nov. 1. Another factor mentioned was a slight cooling of some of the airline merger-mania speculation that had been stoked to a fever pitch, particularly after bankrupt rival Delta Air Lines Inc. got an unsolicited takeover offer from US Airways Group Inc. Delta's bonds, which have also recently been on a tear, likewise retreated in Tuesday's dealings.

Back on terra firma, Dana Corp.'s bonds were seen better after the bankrupt Toledo, Ohio-based automotive components maker announced the locations of four plants it plans to close as an economy measure, half of the eight plants which the troubled company envisions shuttering in order to bring its costs better into line with reduced sales.

Outside of the distressed names - which seem to have dominated the junk bond secondary in recent days, in the absence of much else really going on - Six Flags Inc.'s bonds were seen lower after the New York-based theme park operator outlined its plans for the coming year - including efforts to sell nine of its parks, an effort that may or may not come to fruition.

Trailing Tuesday's announcement that the Federal Reserve's Federal Open Market Committee would leave its benchmark fed funds rate unchanged, a trader who deals in junk bonds as well as in bank loans said that the market had been "a little scratched up" on the session.

The trader, who marked junk down "perhaps ¼ point," professed to feel a little sloppiness on the heels of the high volume of new junk issuance currently taking place.

With regard to the Fed, which stayed its hand on Tuesday, the trader said that there is no clear cut signal that it will not raise rates again in the future.

"They're on hold," said the trader, "but people are still watching the inflation numbers very closely."

Primary continues to crank

Meanwhile on Tuesday the primary market saw issuance topping $1.5 billion, dominated by a $1 billion drive-by from GMAC LLC.

In all, Tuesday saw three issuers price deals, two of which were upsized.

The session's tranche total came to four. Two priced at the tight end of price talk while the other two came in the middle of talk.

GMAC follows Ford

One day after Ford Motor Credit Corp. priced a massively upsized $3.0 billion two-part deal - an offering increased from $1.5 billion - its counterpart, GMAC, announced a $1 billion deal early on Tuesday, and specified that it would not grow.

The finance arm of GM priced that $1 billion issue of 6% five-year fixed-rate notes (Ba1/BB+/BB+) at a 167 basis points spread to Treasuries on Tuesday, on the tight end of the Treasuries plus 167 to 170 basis points price talk.

The issue price was 99.443 resulting in a 6.131% yield to maturity.

Banc of America Securities, Citigroup and JP Morgan led the deal.

A couple of market sources suggested that the GMAC deal might have been partly driven on reverse inquiry.

A buy-sider said that the initial buzz had the GMAC paper coming in a spread range of 170 to 175 basis points, and added that 167 bps pricing level indicated the deal must have gone well.

"There is demand for everything right now, if the name is good," the source commented.

ESCO upsizes

Elsewhere on Tuesday, ESCO Corp. priced an upsized $300 million two-part seven-year senior notes transaction (B2/B).

The Portland, Ore., metal parts manufacturer priced a $200 million tranche of fixed-rate notes at par to yield 8 5/8%, in the middle of the 8½% to 8¾% price talk.

In addition Esco priced a $100 million tranche of floating-rate notes at par to yield three-month Libor plus 387.5 basis points, also in the middle of price talk of Libor plus 375 to 400 basis points.

Goldman Sachs & Co. and Morgan Stanley were joint bookrunners for the LBO deal which was upsized from $275 million.

China Fisheries tight to talk

In addition, CFG Investment SAC in conjunction with China Fishery Group Ltd. priced an upsized $225 million issue of seven-year senior notes (B1/B+) at par to yield 9¼%, on the tight end of the 9 3/8% area price talk.

HSBC ran the books for the Rule 144A issue of notes from the Hong Kong-based fishing fleet operator. The deal was upsized from $200 million.

Whopper Wednesday

The Wednesday primary market session figures to see well in excess of $3.0 billion of bonds pricing.

News circulated Tuesday on several of those deals.

Georgia-Pacific talks $1.0 billion

Georgia-Pacific Corp. put out price talk on both tranches of its $1 billion offering of senior guaranteed notes (Ba3/B) on Tuesday.

A tranche of notes due January 2015 was talked at the 7% area and a tranche of notes due January 2017 was talked at the 7¼% area.

One sell-side source was expecting the Banc of America Securities, Citigroup and Deutsche Bank Securities-led deal to price on Tuesday. However as Prospect News was going to press on Tuesday night, a market source said that no terms had emerged.

Joining Georgia-Pacific in the billion-dollar club, Aleris International Inc. is expected to price its downsized $1 billion two-part offering on Wednesday via Deutsche Bank Securities and Goldman Sachs.

UCI brings $235 million

Also expected to price a deal on Wednesday - in quick-to-market fashion - is UCI Holdco Inc., the ultimate parent of Evansville, Ind., vehicle replacement parts supplier United Components Inc.

The company is talking its $235 million offering of seven-year senior floating-rate PIK notes (Caa2) with a Libor plus 700 basis points coupon at an issue price of 99.00.

Lehman Brothers and Goldman Sachs are leading the dividend-funding deal.

The Wednesday deals

The following are also expected to price on Wednesday:

• Navios Maritime Holdings Inc.'s $300 million offering of eight-year senior notes (B2/B) via Merrill Lynch and JP Morgan;

• Tristan Oil Ltd.'s $300 million offering of five-year senior secured notes, via Jefferies; and

• Quebecor World Inc. with a $400 million offering of eight-year senior notes (B2/B+) led by Citigroup, Banc of America Securities, RBC Capital Markets and Scotia Capital.

GMAC paper edges up

When the new GMAC 6% notes due 2011 were freed for secondary dealings, a trader said that the bonds had firmed slightly to 99.5 bid, 99.75 offered from their 99.443 issue price earlier in the session. Another trader saw the bonds at 99.5 bid, 99.875 offered.

GMAC's existing 8% notes due 2031 were seen up a point at 114, although its 6 7/8% notes due 2012 eased a touch to 103.25. GMAC former parent and now minority owner General Motors Corp.'s benchmark 8 3/8% notes due 2033 moved up to 89.625 from prior levels around 88, while the Detroit giant's 7 1/8% notes due 2013 were ½ point lower at 93.25.

Ford Credit paper treads water

The new Ford Credit bonds that priced late Monday - too late for any real secondary activity that session - "didn't do that well," said a trader, who pegged the 8% notes due 2016 at 98.5 bid, 98.75 offered, up slightly from 98.322 at issue, while the Ford Motor Co. financing arm's new floating-rate notes due 2011 also finished at that level, versus their 98.758 issue price.

Ford Credit's existing 7¼% notes due 2011 were down about 7/8 point at 97 bid, while its 7% notes due 2013 were ½ point down at 95.75. Ford's own 7.45% notes due 2031 were ¼ point down at 77.75.

Dana gains on plant-close plans

Also in the autosphere, Dana's bonds were seen up about a point on the session, following the company's announcement about its plant-closing plans. A trader saw the company's 6½% notes due 2008 at 78.5 bid,79.5 offered, its 5.85% notes due 2015 at 73.5 bid, 74.5 offered and its 7% notes due 2029 at 75 bid, 76 offered.

The company on Tuesday announced plans to close four plants in the United States and Canada to consolidate operations or shift to lower-cost areas, cutting 440 jobs. Dana will shutter its factories in Syracuse, Ind., Cape Girardeau, Mo., Guelph, Ont. and Thorold, Ont.

Dana had said in November that it expected to close eight additional plants - these four are the first installment - and to reduce capacity at three others, as part of its reorganization.

The company expects to finalize its plans for closing the remaining four targeted plants next year.

Dana - which has been reorganizing under Chapter 11 since March - expects total pretax charges of $45 million from this year through 2009 for the four closings.

Delphi bonds on the rebound

Meanwhile, bankrupt Troy, Mich.-based parts maker Delphi Corp. was "bouncing back up like it did the other day," a trader said, with the company's 6.55% notes that were to have matured this year up 1½ points to 110 bid, 111 offered, its 6½% notes due 2009 a point better, also at 110 bid, 111 offered, and its 6 ½% notes due 2013 and 7 1/8% notes due 2029 each up ¾ point, at 108.75 bid, 109.75 offered and 109.75 bid, 110.75 offered, respectively.

Airline bonds flying less high

But the big mover in the junk market on Tuesday was Northwest, whose bonds lost several points, with Delta also pushed lower amid word circulating in the market of a meeting of rival airline operator UAL Corp.'s creditors and plans for Delta's top executives to be in meetings again with its own creditors Wednesday.

One trader saw Northwest's bonds "down a few" points, with its 8 7/8% notes due 2006 off 3 points at 92.5 bid, 93.5 offered, its 8.70% notes due 2007 off 3 points at 93.5 bid, 94.5 offered, and its 9 7/8% notes due 2007 off 2½ points at 95.5 bid, 96.5 offered.

Northwest's bonds were described by another trader as having fallen by as much as 3 points on the session, with the company's 10% notes due 2009 ending at 92 bid, 93 offered, versus 95 on Monday, and the 9 7/8s at 92.5 bid, 93.5 offered, down from 96.

A market source saw Northwest's 7 7/8% notes due 2008 at 93 bid, down 3 points, while the 8 7/8s were down 2¾ points at 93.

Yet another trader said Northwest was "not down that much - but they were down," locating its 10s at 93.5 bid, 94.5 offered, down half a point to a full point. At another desk, a trader saw the 8 7/8% notes at 92 bid, 93 offered, down from a 94.25 level previously, and saw Delta "down too," with the bankrupt Atlanta-based Number-Three U.S. airline carrier's 8.30% notes due 2029 at 65 bid, 66 offered, down 2 points.

Another trader said Delta's 8.30s traded as high as 70.75 early Tuesday but drifted steadily lower to settle at 65.75 bid, 66.5 offered, while the company's 7.90% notes due 2009 off to 65.5 bid, 66.5 offered from 67.5.

The traders cited profit-taking off the impressive gains that the two companies' bonds - particularly Northwest's - had racked up over the last few sessions. "They had run too far," as one trader put it.

Also a factor, as one trader said, "some of the luster has come off the [M&A] rumors," citing UAL boss Glenn Tilton's refusal during the Elk Grove Village, Ill.-based company's investors' meeting to definitively outline what role UAL's United Airlines unit expects to play in the airline industry's consolidation trend.

The UAL chief executive officer's comments may have disappointed some industry observers, who perhaps were expecting a stronger statement indicating that United will be a player in the coming wave of consolidations. UAL even at one point in the not too distant past had contacted Delta about a possible merger, only to be rebuffed. The second biggest U.S. airline has long made it clear that it would like to be part of any industry consolidation.

Takeover talk roils financial markets

Even though UAL's near-term intentions remain unclear at this point, merger speculation among airline-watchers remains rampant, as the market expects consolidation far beyond just Delta and Northwest.

There was some buzz Tuesday in the financial word that Delta - even mired in the throes of bankruptcy - could be looking for private equity backing to buy Northwest, or its hostile suitor US Airways Group, or even another carrier like Continental Airlines Inc. There was some speculation in the markets Monday about the possibility of a linkup between Houston-based Number-Five carrier Continental and Northwest. The latter has meantime asked for bankruptcy court approval to hire Evercore Group LLC as an advisor in an effort to explore strategic alternatives such as a merger or acquisition.

It all sounds like a giant game of musical chairs, involving most of the nation's traditional large network carrier airlines, with everyone carefully eyeing everyone else and no one wanting to be left standing around when the music abruptly stops.

"UAL creditors are supposed to be meeting, but we don't know exactly what that's about," said one distressed bond trader. "All the names are in the mix now. It's frenetic. Just about the only airline not mentioned in this fray is the top dog, [AMR Corp. unit] American Airlines. So that might be worth watching."

Delta's top management reportedly is going to pitch its case for remaining independent to creditors on Wednesday, following a board meeting Monday. In a similar two-day meeting almost two weeks ago in New York, US Airways management formally pitched its bid for Delta. The US Airways bid, which emerged in mid-November, is valued roughly at $8.8 billion, consisting of $4 billion in cash plus US Airways shares.

Delta has pledged to file its reorganization plan before year-end. Management has insisted, ever since getting the takeover bid from Tempe, Ariz.-based US Air, that its preferred option has been to emerge from bankruptcy as a standalone company. While the official creditors committee has pretty much gone along with management on this, other creditors have formed an unofficial creditors committee, hoping to pressure management to take the US Air overture more seriously.

Delta recoveries aided by noise

While the general sentiment is that some sort of deal involving Delta will come to pass, players said their opinion of whether it will be beneficial will hinge on whether Delta is the hunter or hunted.

"The feeling is that the unofficial unsecured creditors committee [an ad hoc group separate from the unsecured creditors committer in the bankruptcy] will be pressuring for the US Airways deal and recovery for these bonds will be in the neighborhood of 70-80%," one trader said.

"There is growing speculation about another offer, but I don't know any details. I suppose the obvious conclusion is that they would be looking to boost recoveries."

Indeed, but the process has motivated Delta to find a way to pay more.

"Delta's 'plan' before US Air's bid was to shaft the unsecured creditors to the tune of several billion dollars. Delta will have to revise its plan to shaft the unsecured creditors to a lesser extent," said a buyside market source.

"As an unsecured creditor I want the bidding to keep on going up. I am not involved in the discussions directly, but the most interesting thing I have heard is that, I guess, Delta could get its own backers and bid for US Airways and/or Northwest. That would turn the tables."

Six Flags off despite plan

Among the non-distressed bonds, Six Flags were seen having softened even as the company said that it expects to come to a decision soon about whether to go forward with plans to sell nine of its more than 30 amusement and theme parks.

A trader saw its 9 5/8% notes due 2014 about ½ point lower at 91.75 bid, 92.75 offered, while its 8 7/8% notes due 2010 were a point lower at 97. At another desk, the 9 5/8s were seen down 1½ at 91.

Six Flags CEO and president Mark Shapiro said on a conference call with investors that the company expects to reach a decision on the possible sale of those parks by year-end - but whether the company decides to sell the parks or keep them, it will not close the properties in question down.

"We've concluded the operational value exceeds the current real-estate value and therefore regardless of the ownership of the park, those nine parks under consideration will be operational for 2007 and beyond," Shapiro said.

While Six Flags has had talks with potential buyers on various alternative deal structures, its preferred option remains the sale of all nine parks in a package deal.

Granite unmoved by filing

The news that Granite Broadcasting Corp. had filed for Chapter 11 late Monday had little impact on the troubled New York-based television station ownership group's 9¾% notes due 2010, which were seen pretty much steady around the same 90.75-91 bid context they'd already been holding. However, traders noted that the bonds are now trading flat, or without their accrued interest - effectively, a loss of several points, despite the steadiness in the bonds' nominal price.

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