Nevada Power prices 12-year bonds, Europcar upsized; GM gains on CEO's Delphi remarks

By Paul Deckelman and Paul A. Harris

New York, May 9 - A pair of deals involving power generating companies electrified junk bond primary market participants Tuesday, syndicate sources said, as Edison Mission Energy announced plans to sell as much as $1 billion in new senior notes and Nevada Power Co. successfully priced a quickly-shopped $250 million offering of 12-year secured bonds Tuesday.

Elsewhere in the primary market, European issuer Europcar Amag Services AG was heard to have priced an upsized two-part euro-denominated issue, while Lottomatica SpA's 60-year hybrid securities deal was heard on track to price Wednesday, with the closing of the order books; pre-deal market price talk on the deal was unchanged from Monday levels.

Back among the domestic names Unifi Inc. was heard getting ready to hit the road Wednesday to market its offering of eight-year notes, while Dobson Communications Corp. announced plans late Monday to tender for a series of existing floating-rate notes, amend the notes' indenture with the consent of the holders, re-sell the notes subsequently, and possibly issue more of them to replace any untendered notes.

In the secondary arena, General Motors Corp.'s bonds were seen firmer, helped by comments from the Detroit-based automotive giant's chief executive officer indicating that some progress was being made in talks with GM's bankrupt former subsidiary Delphi Corp. and with Delphi's labor unions in the hopes of averting a union walkout against the Troy, Mich.-based parts supplier - a walkout that could have a disastrous impact on GM.

Elsewhere, Sea Containers Ltd. bonds were seen higher, in line with a big jump in the Hamilton, Bermuda-based maritime container company's equity, fueled by investor hopes for major asset sales.

From out of the distressed markets, bankrupt Toledo, Ohio-based insulation maker Owens Corning's bonds shot up anywhere from five to seven points, traders said, to levels around par. There were various market rumors going around about the company, including talk that it might raise capital via a rights offering.

Source marked the broad high-yield market unchanged after Tuesday's session.

Meanwhile the primary market saw three completed tranches from two issuers totaling $250 million and €550 million.

Nevada Power drives through

Tuesday's sole dollar-denominated tranche came from Las Vegas-based regulated public utility, Nevada Power Co., which priced a $250 million issue of 6½% 12-year general and refunding mortgage notes, series O (Ba1/BB/BB+) at a 140 basis points spread to Treasuries.

The spread came on top of price talk.

The issue came at a dollar price of 99.703 to yield 6.536%.

Bank of New York had the physical books with Banc of America Securities LLC, Barclays Capital as joint bookrunners for the drive-by debt refinancing. The deal was priced off the investment-grade syndicate desk.

Upsized Europcar at revised talk

Meanwhile Europcar Groupe priced an upsized €550 million two-part notes transaction on Tuesday.

The Paris-based car rental arm of Volkswagen priced an upsized €300 million issue of seven-year senior subordinated secured floating-rate notes (B1/B) at par to yield three-month Euribor plus 350 basis points, on top of price talk that had been revised from Euribor plus 375 to 400 basis points. The floating-rate notes tranche was upsized from €250 million.

Europcar also priced a €250 million issue of eight-year senior subordinated unsecured fixed-rate notes (B2/B) at par to yield 8 1/8%, again on top of price talk which, in the case of the fixed-rate notes had come in from 8 1/8% to 8 3/8%.

Deutsche Bank Securities, Societe Generale, BNP Paribas and Calyon Securities ran the books for the acquisition financing deal, the overall size of which was upsized from €500 million.

A market source said that the order book was massively oversubscribed, with the preponderance of demand seen in the floating-rate paper.

Lottomatica revises timing

Also from Europe, a market source said that the books closed Tuesday, a day earlier than anticipated, for Lottomatica's €750 million offering of 60-year hybrid securities (Ba3/BB).

Price talk remains at 8¼% to 8½%, with pricing expected on Wednesday.

Credit Suisse is the bookrunner for the acquisition deal from the Rome-based manager and operator of lottery games.

Unifi for the road

News of one roadshow start was heard during the session.

Unifi will begin a roadshow on Wednesday for its $225 million offering of eight-year senior secured first-lien notes (expected ratings Caa1/CCC+).

Lehman Brothers has the books for the debt refinancing deal from the Greensboro, N.C.-based diversified producer and processor of multi-filament polyester and nylon textured yarns.

Dobson to tap 8 3/8% notes

Elsewhere Oklahoma City-based wireless provider Dobson Cellular Services, Inc. plans to price an expected $250 million add-on to its 8 3/8% first-priority senior secured fixed-rate notes due Nov. 1, 2011 as early as this week.

Proceeds will be used to fund a tender for the company's $250 million issue of three-month Libor plus 475 basis points first-priority senior secured floating-rate Notes due 2011.

Morgan Stanley is the dealer manager for the tender and is expected to run the books for the add-on.

Both the 8 3/8% notes and the floating-rate notes were priced in an overall $825 million transaction, including a $325 million tranche of 9 7/8% second-priority notes tranche, on Oct. 26, 2004.

According to the indenture on the first-priority notes, in order to refinance either one of those first-priority tranches with new first-priority notes, the company must redeem a sufficient amount of the old notes and exchange them for new ones so as not to create new liens, an informed source commented.

Therefore the company is tendering for the floating-rate notes, will amend them and then resell the notes as an add-on to the fixed-rate issue. Any floaters not tendered will be redeemed, with funding coming from the sale of additional fixed-rate notes.

The timing of the add-on depends upon the results of the tender, but could take place later this week, the source said, adding that Dobson Communications Corp., the parent, will announce its earnings on Wednesday, and host an earnings call on Thursday, after which the add-on to the 8 3/8% notes could be priced.

GM gains as CEO talks

Back among the secondary issues, GM's bonds were better, with its benchmark 8 3/8% notes due 2033 seen by one trader at 74.5 bid, 75.5 offered, which he said was a point up on the day.

Meantime, he said, "the stock was up 10%" - technically speaking, it gained 9.55% on the day, or $2.25, to close at $25.50 on the New York Stock Exchange; volume of 25.2 million was better than twice the norm - "and it's almost at $26 now, which is quite impressive. The bonds and shares, he said, had risen "strictly on [GM chairman and CEO Rick] Wagoner's comments regarding having a positive outlook on negotiations with Delphi."

The GM chief, speaking to reporters Tuesday in Detroit, was quoted by news services as having said that "we have made some progress."

He added that "I can't really give you a prediction right now as to when that might be resolved, but we think it's important for all of us that we get it resolved in a constructive way."

He further said that GM has stockpiled some parts in case Delphi's workers go on strike - but he believes a strike can be avoided.

"We strongly believe there are solutions that will work for all the parties," he added.

GM's fate is seen closely entwined with that of Delphi, its former parts subsidiary, which was spun off in 1999.

Delphi, which filed for Chapter 11 protection from its junk bond holders and other creditors last fall, contends that the wage-and-benefit structure that it inherited from GM at that time is economically unsustainable and was a factor in forcing it into bankruptcy.

Delphi wants to void the union contracts covering over 33,00 hourly workers and replace them with what it calls more manageable terms, including wage and benefit cuts of up to 40% from current levels.

Delphi and its unions were squaring off Tuesday in front of the U.S. Bankruptcy Court for the Southern District of New York, which is overseeing the company's reorganization.

The components supplier was asking bankruptcy judge Robert Drain for permission to junk the contracts - but the unions, for their part, strenuously object to any suggestions that the hourly workers' pay be cut. They argue that doing so would unfairly punish the hourly employees for the mistakes of management, and have threatened to strike if the company is granted the authority to void the contract and moves to do so.

UAW members are in the process of voting on whether to authorize a strike, with the voting expected to be completed within the week, while members of another Delphi union, the International Union of Electrical and Communications Workers, have already given their leaders the power to begin a walkout.

Such a strike, should it occur, would be disastrous for GM, which is heavily dependent on a smooth flow of parts from its former subsidiary to sustain production at a time when it is trying to turn its fortunes around, partly via the introduction of new vehicles that it hopes will become strong sellers. GM and Delphi combined lost some $2 billion the last time Delphi was struck, back in 1998, when one of the company's plants was shut down for nearly eight weeks, and analysts and other observers warn that, with GM having been weakened in recent years by sagging sales, reduced market share and its own high labor-related costs, any kind of prolonged Delphi strike this time around could cause an event once thought to be virtually unthinkable - a bankruptcy filing by the world's largest carmaker .

Tuesday's hearing was the first of three days of hearings this week that the court has scheduled on the company's motion, with the possibility of extending the hearing by adding additional dates. A separate motion that would allow Delphi to reject unprofitable GM contracts will take place next month.

The trader said that it was Wagoner's comments that really pushed the GM bonds and shares up, with little real impact from the revised first-quarter earnings figures GM released after the close on Monday. While GM had initially reported a loss for the quarter, it now classifies the result as a profit.

"Maybe the bonds were up a quarter-point" early in the session on the revised numbers," he said, "but nothing great. The real movement was based on his comments, not on the restatement news."

"They magically snatched victory from the jaws of defeat," another trader quipped in reaction to the revised GM earnings data.

GM - which on April 20 had reported a net loss for the quarter ended March 31 of $323 million (57 cents per share) - said in a filing with the Securities and Exchange Commission that after making certain changes to the results to reflect the accounting for a health care settlement and other adjustments, it actually turned a profit for the period instead of a loss - $445 million (78 cents per share).

GM said it changed the way it accounted for an initially reported $681 million ($1.20 a share) charge related to a health-care settlement with blue-collar retirees after discussions with securities regulators.

Excluding special items, GM reported adjusted net income for the quarter of $184 million (32 cents per share) versus its initially reported adjusted loss of $529 million (94 cents per share).

Sea Containers rises

Elsewhere, traders saw strength in the bonds of Sea Containers, which rose in tandem with a jump in the company's NYSE-traded shares.

One quoted its 10¾% notes due 2006 up half a point at 97.5 bid, 98.5 offered, but "there was more impact in its longer ones," he said, with the company's 7 7/8% notes due 2009 and 10½% notes due 2012 each up ¾ point, at 93.5 bid, 94.5 offered, and 94.5 bid, 95.5 offered, respectively.

"The stock is up on all kinds of rumors of asset sales, and the bonds are up strongly," he said.

The shares jumped $1.17 (14.94%) to an even $9. Volume of 564,000 was nearly twice the usual turnover.

"It's on a roll," he said, adding that he had heard that a hedge fund specializing in distressed names had bought in.

Another trader also mentioned a hedge fund taking a sizable equity stake as a catalyst behind the stock's move, and said the bonds were "continuing the rally" seen last week on developments in its efforts to shed non-core assets.

British newspapers were reporting over the weekend that Sea Containers - which last week said it was moving forward on its plans to sell its Baltic ferry assets as part of an effort to unload its non-core operations - is planning a comprehensive financial restructuring that would see a debt-for-equity swap following the sale of all of its ferry operations later this year.

Published reports quoted the recently installed chief executive officer, Robert McKenzie, as saying that he hopes to enter negotiations with its shareholders and bondholders in the United States once the ferry sale is completed, with an eye to converting some of the company's $1.3 billion debt into equity.

The key to Sea Containers' turnaround plan is for the Hamilton, Bermuda-based transportation conglomerate - which also leases maritime cargo containers and operates railroads in the United Kingdom - to successfully sell its eight-vessel Silja ferry operations, which serve various Baltic Sea cities from its base in Helsinki, Finland, as well as its other ferry operations elsewhere, including in New York and the Adriatic Sea region. It hired Societie Generale to shop those assets to potential buyers.

The company - which last year sold off its hotel interests - is hoping to get as much as $630 million for the Baltic ferries, and about another $250 million from the sale of its other ferries, and would use the proceeds to pay down much of its existing debt, and then, the reports say, could follow that up with a debt-for-equity exchange to further cut debt.

Sea Containers' leaders envision the company remaining in the container-leasing business and the U.K. railroad business, but getting out of its various other non-core operations, which besides the ferries include such varied businesses as fruit farms, business travel and property management operations, publishing the Illustrated London News and holding the license to operate the Corinth Canal that links the Greek port of Piraeus with the Adriatic.

Separately, the company's founder, James Sherwood, who gave up the chairmanship of Sea Containers last year and stepped down from the CEO position in favor of McKenzie earlier this year, was quoted Sunday as having said that GE Sea Co. - Sea Containers' container-leasing venture with General Electric Corp.'s financing arm, GE Capital - could be worth as much as $1 billion, value which could be unlocked by a partial or full spin-off.

The joint venture with GE Capital is the largest container-leasing operation in the world. Discussions on a float of the business had taken place in the past without reaching any conclusion.

"What is clear is that it is a significant company. I mention it because people who look at Sea Containers look at its problems and are not taking into account that major asset," Sherwood was quoted by the Times of London as saying over the weekend.

Friendly gains

Elsewhere, a trader said that Friendly Ice Cream Corp., "despite being downgraded" on Monday by Moody's Investors Service, was higher, with its 8 3/8% notes due 2012 at 90.5 bid, a gain of ¾ point.

A market source at another desk also saw the bonds rise to that level, but called it a half point advance.

Moody's on Monday lowered the Wilbraham, Mass.-based restaurant operator and ice cream producer's downgraded Friendly's corporate family rating and its senior unsecured notes alike to B3 from B2, although it kept the outlook stable.

The agency said that the downgrades "reflect the continuation of weak operating performance, high financial leverage with limited free cash flow available for debt reduction, heavy reliance on one geographic region (Northeast U.S.) and the fact that Friendly operates in the mature, highly competitive family dining category."

Chiquita up despite earnings

The first trader saw Chiquita Brands International Inc.'s 8 7/8% notes due 2015 up ¾ point, to 93.5 bid, 94 offered, and at one point, the bonds got as good as 93.75 bid, 94.25 offered before coming down from that peak. Just a couple of days ago, he noted, those bonds were around 89.75.

"There's a different psychology going on in this market," he said, "with a lot of hedge funds that are shorting stock and buying bonds right now, like Chiquita," which he noted reported "terrible earnings" last week. At that point, the Cincinnati-based banana importer's bonds retreated several points, to that 89.75 level.

"Now, they're up four points from when the earnings were announced - and the earnings were terrible."

He also saw Chiquita's 7½% notes due 2014 at 86.5 bid, 87.75, "not up as much - so you don't know what's [going up on] short covering, and what's guys shorting the stock and buying the bonds.

There's different factors in the marketplace right now."

Land O'Lakes rises

The trader further saw a rise in the bonds of Land O' Lakes Inc., with the 9% notes due 2010 at 107 bid, 107.25 offered and its 8¾% notes due 2011 at 105 bid, 105.25 offered, each up half a point, and its 7.45% notes due 2028 up ¾ point at 28.75 bid.

He said that the Arden Hills, Minn.-based dairy producer "is deleveraging," with talk in the market that they could redeem bonds, "and their [recently reported quarterly] numbers were decent, so the bonds have shot up."

Owens Corning strong

Out of the distressed market, a junk bond trader saw Owens Corning's bonds up seven points on the day, citing rumors that the bankrupt Toledo, Ohio-based insulation market will raise capital through a rights offering to its equity holders.

He saw Owens Corning's 7½% notes due 2018 at 100.5 bid, 101 offered.

A second trader saw those notes also up seven points, at par bid, 101 offered, and saw its 7% notes due 2009 at 99 bid, par offered, also up seven points.

Another trader saw the 7½ notes at 99 bid, 100 offered, and quoted them up five points on the day, while the 7s were also up five points, at 98 bid, 99 offered.

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