Pogo, Beazer price upsized deals; GM, Dana lead autos up; funds see $244 million outflow

By Paul Deckelman and Paul A. Harris

New York, June 1 - Pogo Producing Co. and Beazer Homes USA Inc. were heard by high-yield syndicate sources to have each priced quickly-shopped, upsized drive-by deals - the sole activity seen in the primary market.

In the secondary realm, automotive issues were better, paced by firmness in General Motors Corp. following the release of May sales figures by the giant carmaker. Although sales continued to decline, the extent of that decrease was about in line with what market players had been expecting. Also in the automotive world, bonds of the bankrupt components maker Dana Corp. were firmer, with at least one trader opining that the numbers could have been worse and that the market picked up on that. And storage battery maker Exide Technologies Inc.'s bonds and shares were higher, likely in response to a relatively relaxed schedule of payments of a $27.5 million fine that Exide has to pay under a 2002 government prosecution of one of the company's subsidiaries in a fraud case. Exide has through 2011 to pay the fine in small installments, and without having to pay interest.

A high yield syndicate official marked the broad market a touch softer on Thursday.

And near the end of the trading 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, $244.2 million more left the funds than came into them.

According to one source the most recent outflow extends the year-to-date flows among funds that report on a weekly basis to negative $2,492.7 million.

However among funds that report to AMG on a monthly basis, year-to-date flows remain in the black at $1,775.7 million, the source added.

Hence year-to-date aggregate flows stand at negative $717.0 million.

Sources from both the buy-side and sell-side maintain that there continues to be a lot of cash to put to work in the high-yield asset class, although it is not "retail" money, as is reflected in the AMG numbers, but rather institutional money from hedge funds, insurance funds and pension funds.

Still, it was the eighth consecutive weekly outflow, including the $345.6 million hemorrhage seen in the previous week, ended May 24. Over that eight-week period, outflows have totaled $1.232 billion, according to a Prospect News analysis of the AMG figures.

Outflows have now also been seen in 15 weeks out of the last 18, dating back to early February, during which time some $2.114 billion more has left the funds than has come into them, according to the Prospect News analysis.

Outflows have now also been seen in 18 weeks out of the 22 since the start of the year, against only four inflows, and net outflows during that time have totaled $2.492 billion, up from $2.248 billion the week before, according to the Prospect News analysis, excluding distributions and counting only those funds that report on a weekly, rather than on a monthly, basis.

Those results confirm the continuation of the predominantly negative trend that was in evidence throughout most of 2005, when $11.483 billion more left the funds than came into them, according to the Prospect News analysis - much more severe than the $3.236 billion net outflow seen in 2004.

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.

Pogo well oversubscribed

Meanwhile the primary market, dormant since the Memorial Day recess, yawned and stretched into action on the first day of June as a par of drive-by offerings - both of them upsized - were priced.

Pogo Producing Co. priced an upsized $450 million issue of seven-year senior subordinated notes (B2/B+) at par to yield 7 7/8%, in the middle of the 7¾% to 8% price talk.

Goldman Sachs & Co. ran the books for the debt refinancing deal which was upsized from $400 million.

The Houston-based oil and gas exploration, development and production company's deal was well oversubscribed, according to an informed source.

Beazer Homes upsizes

In an a.m. to p.m. drive-by, Beazer Homes USA Inc. priced an upsized $275 million issue of 10-year senior notes (Ba1/BB) at par to yield 8 1/8%, on the wide end of the 8% to 8 1/8% price talk.

UBS Investment Bank and Citigroup were joint bookrunners for the debt refinancing and general corporate purposes deal from the Atlanta-based home builder, which was upsized from $250 million.

A quiet Friday

Only one deal remains parked on the forward calendar as business for the post-Memorial Day week.

Late Thursday sell-side sources not involved with the deal told Prospect News that Libbey Glass Inc.'s $400 million offering via JP Morgan and Bear Stearns appears to still be in the market.

One source said that its status is "day to day."

The company originally proposed a single tranche of eight-year senior notes (B). However in the run-up to the Memorial Day weekend Libbey Glass was rumored to have been contemplating a different structure: a $300 million tranche of second-lien secured notes and a $100 million tranche of unsecured PIK notes, both to be issued at the operating company level.

The Toledo, Ohio glass tableware manufacturer has come to the high-yield market to finance its purchase of the 51% equity interest it does not own in its Mexican joint venture Crisa with Vitro SA de CV, and to repay debt.

No official price talk has been heard on the deal. One sell-sider said that it has been "radio silence" on the deal for the past week.

However sources would not rule out the possibility that there could be news Friday on the Libbey Glass deal.

New Beazers steady, olds dip

When the new Beazer Homes 8 1/8% notes due 2016 were freed for secondary dealings, traders saw the bonds straddling their par issue price, at 99.75 bid, 100.25 offered. "They came," a trader said, "and then they went," with not much seen in the way of real activity. The company's existing 8 3/8% notes due 2012 were meantime seen having eased to 102.75 bid from prior levels at 103.625, while its 6 7/8% notes due 2015 lost half a point, to end at 94.

The Pogo Producing 7 7/8% notes due 2014 priced too late in the session for aftermarket activity. Its outstanding 8 ¼% notes due 2011 were seen down 1½ points, at 102.

GM, Ford gain on sales figures

Back among the established issues, a trader said, "GM and Ford [Motor Co., along with other carmakers] were out with their sales numbers," which he said showed industry leader GM pretty much "in line" with market expectations of a continued decline, though Number-Two domestic producer Ford's were weaker than anticipated. GM posted a 16% slide in monthly sales, while Ford reported a 6% drop.

Still, bad as they were, "the numbers didn't scare anybody, really. We just saw some buyers on weakness, and the bonds actually rose about a half a point.

He saw GM's benchmark issue, the 8 3/8% notes due 2033, at 76 bid, 76.5 offered, up half a point, while GM arch-rival Ford's flagship 7.45% notes due 2031 were likewise half a point better, despite the weaker numbers, at 73 bid, 73.5 offered.

Dana, Delphi higher

The trader said that Dana's bonds, and those of another bankrupt parts producer, Troy, Mich.-based Delphi Corp., "were up two points on the heels of Dana's good monthly numbers."

While Dana reported a first-quarter loss of $126 million, versus a $16 million year earlier profit, its numbers seem to be improving. The company also reported a net loss of just $16 million - and $13 million of that from continuing operations - in the month ended April 30, versus a $62 million loss in the previous month.

The trader saw Dana's 6½% notes due 2009 up two points at 88 bid, 89 offered, while Delphi's 6½% notes due 2009 were likewise up a deuce, at 84 bid, 85 offered.

He said the Delphi bonds rose Thursday solely on sector sympathy with Dana, rather than because of any fundamental developments.

"Yesterday [Wednesday, GM chairman and chief executive officer Rick] Wagoner had already mentioned his thoughts about [negotiations for] a deal between GM and Delphi to be on the right track - but there was nothing new today [Thursday]."

GM, its former subsidiary Delphi, and the United Auto Workers union have been negotiating for months in an effort to reach a consensual agreement that would allow Delphi - saddled with costly labor contracts when it was spun off by GM in 1999 - to lower its employee costs without provoking a union strike. Delphi's unionized hourly workers make an average of $27 per hour. The company wants to cut that to $16.50 with the help of a GM subsidy, but says that if GM won't pony up that money it will cut wages to $12.50 per hour.

Delphi, another trader said, "seemed to have broken out of the high-70s range that it had been in."

He saw the 6.55% notes that were to have matured in exactly two weeks from now trading as high as 84 bid before settling in at 83.3.

Exide strong

Another automotive name seen higher was Alpharetta, Ga.-based vehicle battery maker Exide, whose 10½% notes due 2013 were seen up two points at 87 bid, 88.5 offered. Exide's Nasdaq-traded shares meantime rose 30 cents (6.71%) to $4.77, although volume of 409,000 was actually slightly below the usual pace.

Exide reported in an 8-K filing with the Securities and Exchange Commission that an Illinois federal court had given final approval to an amended settlement between the company and the government, which had prosecuted Exide's Illinois subsidiary in 2002 on allegations it conspired to commit wire fraud. Exide agreed to pay $27.5 million to settle the case - but the court, recognizing Exide's liquidity problems, said that it does not have to come up with all the money at once, setting up a quarterly payment schedule that stretches through 2011. Exide also does not have to pay interest on the money which it owes.

El Paso better

Outside of the autosphere, a trader saw El Paso Corp.'s bonds trading tighter, apparently in response to the announcement by Moody's Investors Service that it had raised the Houston-based energy pipeline operator's debt ratings by two notches, upping the company's senior unsecured notes to B2 from Caa1 previously and raising its corporate family rating to B1 from B3. Moody's cited the progress that the company has been making at reducing its debt, with some $2 billion of such reductions since the start of the year.

"A lot of the pipeline names moved when the Kinder Morgan deal [a $13.4 billion buyout of the investment-grade rated pipeline operator] was announced, in sympathy, because it's going to come with a lot of debt."

He said that El Paso bonds, and those of competitor Williams Cos., Inc., "had moved out 10, 15 or 20 basis points, right along the [maturity] curve, especially along the longer end, Then, when El Paso got upgraded, things seemed to tighten a little bit, maybe 5 or 10 bps, but there seemed to be people who won't take a shot again, especially in the corporate [holding company] bonds."

He saw El Paso's 7.80% notes due 2031 and 7¾% notes due 2032 trading at a spread of 275 bps over the comparable Treasuries, about 15 points tighter.

No change in NRG, Mirant

The trader saw no movement Thursday in the bonds of either NRG Energy Inc. or Mirant Corp. The latter made an unsolicited - and unwelcome - offer to acquire Princeton, N.J.-based NRG for about $8 billion. NRG rejected the offer as inadequate, with Mirant then filing suit saying that NRG had acted improperly in doing so.

"NRG moved back up to par" on the acquisition proposal news on Wednesday, "then they stalled there, while Mirant's 8.30% [notes due] 2011, the one that trades the most, was trading at 102-103 before the news. It went right back down to par, and it's been hanging around par" since then.

Abitibi dips

The trader also saw weakness in the forest products sector, with Abitibi-Consolidated Inc.'s 8 3/8% notes due 2015 trading down to 94.25 bid from prior levels at 95 bid, 95.5 offered.

"Generally, the [junk] market seemed to be ebbing and flowing with the strength and weakness in the equity market," a trader asserted. "It looked like it was going to get hit, then it firmed up, and looked like it was going to get lifted. Then it turned weak again, again, and it was just back-and-forth all day."

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