Majestic Star, Spansion, Eurofresh deals price; GMAC off as Citigroup drops out

By Paul Deckelman and Paul A. Harris

New York, Dec. 16 - High yield primaryside players on Friday wrapped up one of the biggest, busiest weeks in recent memory - with just under $8 billion of dollar-denominated bonds priced - with three more deals, for Spansion Inc., Eurofresh Inc, and Majestic Star Casino LLC. At the same time, revised price talk emerged on Paxson Communications Corp.'s two-part, $1 billion-plus mega-deal, as well as on Comstock Homebuilding Cos. Inc.'s considerably smaller offering. Omega Healthcare Investors Inc. was heard getting ready to sell a quickly marketed issue of 10-year notes on either Monday or Tuesday.

Secondary market activity once again played second fiddle to the new-deal arena on this, the last session of the last full trading week of 2005 (the final two weeks of the year will each feature a pre-holiday abbreviated Friday session, and the debt markets will be closed on Monday, Dec. 26). One of the few features seen was a retreat in the bonds of General Motors Acceptance Corp. on news reports that Citigroup - rumored to be one of the potential buyers for a controlling stake in the General Motors Corp. financial arm-indicated that it would play no role in any such deal.

Overall the high-yield market traded flat during a very quiet Friday session, according to one sell-side source.

The six deals that priced in primary activity generated $706 million of proceeds.

That brought the week to a close having seen $7.935 billion of junk price - the highest weekly volume going back at least to the start of 2001, the limit of Prospect News' records.

Majestic Star completes three tranches

The session's biggest volume of issuance came from Majestic Star Casino, LLC, which raised $285 million by selling three tranches of high-yield bonds via Jefferies & Co.

The company, in conjunction with Majestic Star Casino Capital Corp. II, priced a $200 million tranche of five-year senior notes (B3/B-) at par to yield 9¾%, tight to the 9 7/8% area price talk.

Meanwhile, in conjunction with Majestic Star Casino Capital Corp., the company priced a $40 million add-on to its 9½% senior secured notes due Oct. 15, 2010 (B2/BB-) at par.

The original $260 million issue priced at par in September 2003.

Rounding out the Friday transaction, Majestic Holdco, LLC and Majestic Star Holdco, Inc. priced a $63.5 million issue of senior discount notes due Oct. 15, 2011 at 71.069 to yield 12½%, wide of the price talk which had the discount notes coming 250 basis points behind the senior notes.

Spansion downsized deal at deep discount

Elsewhere Friday, Spansion priced a downsized $250 million issue of 11½% 10-year senior notes (Caa1/B/B-) at 90.302 to yield 13%.

That yield came 187.5 basis points wide of the 11% area price talk and was reduced from $400 million.

Citigroup and Credit Suisse First Boston were joint bookrunners for the debt refinancing deal from the flash memory producer.

Two tranches from Eurofresh

Greenhouse tomato producer Eurofresh Inc. priced $195 million of high-yield bonds in a Friday transaction via Banc of America Securities.

The Willcox, Ariz., company priced a $170 million tranche of seven-year notes (B3/B-) at par to yield 11½%, on the wide end of the 11¼% to 11½% price talk.

Eurofresh also raised $25 million of proceeds with its sale of eight-year senior subordinated discount notes (Caa2/CCC+). The discount notes priced at 56.594 to yield 14½%, on top of the price talk that had them coming 300 basis points area behind the senior notes.

Just shy of $8 billion on the week

Friday's business, trailing the Thursday session which, at $4.8 billion was the biggest in over six years, brought the week's total to $7.935 billion in 25 dollar-denominated tranches.

That is the highest weekly issuance volume going back at least as far as Jan. 1, 2001.

The next biggest week was the Jan. 24, 2005 week with $7.00 billion followed by the Nov. 15, 2004 week with $6.85 billion and the Dec. 12, 2004 week with $6.75 billion.

And the Dec. 12 week finally took 2005 new issue volume above the $100 billion level: at Friday's close the market had seen $102.69 billion price in 395 tranches.

Massive though it was, the week ended with the 2005 new issue market trailing 2004, year-over-year, by more than $38 billion.

At the Dec. 16, 2004 close the market had seen $140.81 billion price in 568 tranches

Omega Healthcare coming

Throughout the week sources had been forecasting the wind-down of the 2005 primary market.

However the Dec. 19 week figures to see at least $2 billion of issuance. And sell-side officials who spoke to Prospect News late in the Dec. 12 week declined to rule out a smattering of drive-by activity.

Omega Healthcare Investors, Inc. announced plans to bring a quick-to-market deal.

The Timonium, Md., REIT is in the market with a $175 million offering of 10-year senior notes (B1/BB-), a debt refinancing deal that it plans to price on Monday or Tuesday via Deutsche Bank Securities, Banc of America Securities and UBS Investment Bank.

Late Friday one senior sell-side official - one that declined to rule out drive-bys altogether - said that whatever happens in the pre-Christmas week it will likely happen either on Monday or Tuesday. Come Wednesday the ranks will be noticeably thinned, the source maintained.

Paxson talks $1.130 billion

With terms of the Hertz Corp. and Cablevision Systems Corp. mega-deals in the books, the market has one whopper left to price in 2005.

Paxson Communications Corp. issued price talk Friday on its $1.130 billion two-part bond deal.

The company talked its $700 million offering of seven-year floating-rate first-priority senior secured notes (B2/CCC+) at Libor plus 325 basis points.

Meanwhile Paxson talked its $430 million offering of eight-year floating-rate second-priority senior secured notes (B3/CCC-) at Libor plus 625 basis points to price at 99.00.

Pricing is expected early in the week.

Citigroup, Bear Stearns & Co., CIBC World Markets, Goldman Sachs & Co. and UBS Investment Bank are joint bookrunners.

Meanwhile Comstock Homebuilding revised price talk on its $150 million offering of five-year senior subordinated notes to 12% from 11% to 11¼%.

Bond covenants will likely be tightened.

The Friedman Billings Ramsey-led deal is expected to price on Tuesday.

The early part of the week could also include terms on Mirant North America LLC's $850 million of eight-year senior notes (B1/B-), via JP Morgan, Deutsche Bank Securities and Goldman Sachs. Price talk is 7½% to 7¾%.

And terms are expected on National Coal Corp.'s $80 million offering of seven-year senior secured notes via Jefferies, which is talked at 10½% with warrants for common stock.

Spansion rises, Majestic soars

When the new Spansion 11¼% notes due 2015 were freed for secondary dealings, traders saw the new bonds firm to 91.5 bid, 92.5 offered, up a bit from the heavily discounted 90.302 at which the Sunnyvale, Calif., high-tech company's issue had priced earlier in the session.

The "star" performer of the day was Majestic Star's new 9¾% senior notes due 2011, which were seen by a trader to have moved up to 101.25 bid, 101.75 offered from their par issue price. The Las Vegas-based gaming company's other two tranches - its 9½% senior secured notes due 2010, which had priced at par, and its zero-coupon/12½% senior discount notes due 2011, which had priced at 71.069 - were not seen in the aftermarket.

Eurofresh's 11½% senior notes due 2013 were seen by a trader to have firmed to 100.5 bid, 101 offered from their par issue price. The Wilcox, Ariz.-based greenhouse tomato producer's other new tranche, its zero-coupon/14½% senior subordinated discount notes due 2014, which had priced at 56.594, were unseen in the secondary.

Traders meantime said that the two billion-dollar-plus deals that came to market on Thursday - for Hertz Corp. and for Cablevision Systems Corp. - hung in around the same levels to which they had moved later that session after having been freed for secondary dealings.

That meant that Park Ridge, N.J.-based vehicle rental giant Hertz's 8 7/8% senior notes due 2014 stayed around 102 bid, 102.5 offered, while its 10½% senior subordinated notes due 2016 remained at 103 bid, 103.5 offered. The company's euro-denominated 7 7/8% senior notes due 2014, which had moved up to the 103 area on Thursday, were not seen trading around Friday, a trader said. All three tranches had priced earlier Thursday at par.

Meantime, Bethpage, N.Y.-based cable operator Cablevision's new CSC Holdings Inc. 8 3/8% senior notes due 2015, which also priced at par on Thursday and then straddled par when freed for aftermarket dealings, were seen hanging in around that same 99.75 bid, 100.25 offered level on Friday.

Quiet away from new deals

Apart from new-deal related activity, traders reported that not much was going on in dealings among established issues. "It's been a real grind of a week," one said. "I'm glad it's Friday."

"Nothing really jumped out at you," said a market source at another shop.

GMAC slips

A trader did see some weakness in the automotive sphere, particularly in GMAC bonds, after Citigroup - rumored to be one of the financial institutions that might be interested in acquiring a controlling stake in the GM financial division - was reported to have said "thanks - but no thanks."

GMAC and GM were "definitely not up - definitely moderately weaker on the news," he said, quoting GMAC's flagship issue, the 8% notes due 2031, as having lost a point to 97.5 bid, 98.5 offered, while GM's benchmark 8 3/8% notes due 2033 were half a point easier at 70 bid, 71 offered.

The banking giant's chief executive officer, Charles Price, indicated to an investor conference Friday that taking a big slice of GMAC didn't fit with the company's strategy, saying it would be "hard to see" his company getting involved in "an extend-the-franchise kind of transaction."

Citi thus joins Bank of America and Wells Fargo & Co. in having officially taken itself out of the GMAC sweepstakes. There has still been no word one way or another from the other major financial player widely rumored to be a potential GMAC-stake buyer, GE Consumer Finance, a unit of General Electric Corp.

GM announced some weeks ago that it planned to sell a controlling stake in its lucrative financing business - about the only part of GM's North American operations that's making any money these days - in order to bring GMAC's debt ratings back up to investment grade from their current junky levels, thus lowering the unit's financing costs. Such a transaction would also mean a windfall of between $10 billion and $15 billion for GM, which has racked up some $4 billion of losses so far this year.

Oddly, several other traders queried saw GM and GMAC either unchanged or even up, despite the Citigroup news; one quoted the GMAC 8s and the GM 8 3/8s at those same 97.5 bid, 98.5 offered and 70 bid, 71 offered levels, but characterized both bonds as being up a point on the day.

GMAC, said a source at another desk, "was up nicely," to the 98.5 level, while GM was "kinda mixed, with some down half a point, some up half a point."

Another source said the company's bonds "don't look like they've moved that much" - a sign of the secondary market's lassitude.

Dana down on S&P cut

The first trader meantime saw Dana Corp.'s bonds lower by a point or more in the wake of Thursday's downgrade by Standard & Poor's - just as the market was closing up shop that session.

He pegged the Toledo, Ohio-based automotive systems maker's 5.85% notes due 2015 at 69 bid, 70 offered, down from 70.5 bid, 71.5 offered before the downgrade, and its 6½% notes due 2009 at 79 bid, 80 offered, down a point post-news.

S&P on Thursday lowered Dana's corporate credit rating two notches to B+ and cut its senior unsecured debt four notches to B-, both down from BB previously.

The ratings agency cited weak operating performance due to difficult industry conditions for light-vehicle production, and also noted the "operational inefficiencies within Dana's automotive systems and commercial vehicle groups that will take time to fix."

It further warned of modest levels of free cash flow, at best, over the next two years, as well as large writedowns ahead that will increase Dana's leverage.

Different views on Albertson's

On the merger and acquisitions front, a market source saw little real movement in the bonds of Baa3/BBB- rated supermarket operator Albertson's Inc., despite a Wall Street Journal story indicating that a Cerberus Capital-led group would likely win control of the Boise, Idaho-based nationwide grocery chain for around $9.6 billion; including debt assumption, such a deal would be valued around $16 billion.

The source saw Albertson's bonds all perhaps 1/8 point changed from prior levels, with its 6.95% notes due 2009 at 99.75 bid, its 8.35% notes due 2010 at 102.875, its 7½% notes due 2011 at 97.875, and its 7¼% notes due 2013 at 94.875.

Another trader, though, saw the Albertson's bonds off, with its 8% notes due 2031 at 88 bid, 89 offered, down 1½ on the session, perhaps reflecting market unease at the prospect that should Cerberus and allies Kimco Realty Corp. and grocer SuperValu inc. win control of the underperforming Number-Two U.S. supermarket operation, they will finance the acquisition by loading the balance sheet up with additional debt via a leveraged buyout transaction.

That prospect has also caused the cost of protecting Albertson debt holders from a default to balloon out to around 325 basis points per year on the credit default swaps market - about 30 basis points wider than recent levels.

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