CGG prices deal; GM rebounds; AK Steel firmer on Mittal-Arcelor news

By Paul Deckelman and Paul A. Harris

New York, Jan. 27- Compagnie Generale de Geophysique priced a quickly shopped add-on issue of new nine-year bonds Friday, closing out a week which saw NRG Energy Inc. come to market with a $3.6 billion two-part mega-deal, as well as pricings for such familiar high-yield names as Charter Communications Inc. and Boyd Gaming Corp., among others.

In the secondary arena, General Motors Corp.'s bonds and those of its General Motors Acceptance Corp. financing subsidiary were seen having turned higher Friday, rebounding after having moved lower on Thursday - the day the automotive giant announced whopping losses of $4.8 billion for the 2005 fourth quarter and $8.6 billion for the full year.

AK Steel Corp. bonds were seen by some traders to have firmed a bit on Friday, as investors digested the news that the world's largest steel producer, Mittal Steel Co. NV, had made an unsolicited takeover bid for rival steeler Arcelor SA, sparking speculation about a new wave of consolidation in the industry, which could involve the Middletown, Ohio-based specialty steels producer.

Overall, a market source reported that high-yield felt firm on Friday and added that the CDX 100 was up an eighth of a point on the session.

Meanwhile in the primary market only one issue priced.

French geophysical services provider Compagnie Generale de Geophysique did a $165 million add-on to its 7½% senior notes due May 15, 2015 (Ba3/BB-) which came at a dollar price of 103.25.

The resulting yield to worst is 6.9% and the yield to maturity is 7.016%.

Credit Suisse and BNP Paribas ran the books.

The original $165 million issue priced at par in April 2005, so the yield on the company's add-on notes is 60 basis points lower than that of the original issue.

CGG is a Massy, France-based provider of geophysical services to the petroleum industry.

2006 issuance up nearly 25% on '05

Tallying Friday's CGG add-on, the week of Jan. 23 came to a close having seen more than $5.8 billion of issuance in 10 dollar-denominated tranches. That compares to the previous week's $2.6 billion in five tranches.

The year-to-date issuance at Friday's close stood at approximately $13.7 billion, up 24.6% from the $10.33 billion that had priced by the Jan. 27, 2005 close.

The 2006 tally has been boosted by recent mega-deals including R.H. Donnelley Corp.'s $2.1 billion and EchoStar DBS Corp.'s $1.5 billion.

The most recent - and biggest - of the mammoths came on Thursday when NRG Energy Inc. priced $3.6 billion.

To recap, the Princeton, N.J.-based independent power producer priced two tranches of senior fixed-rate notes (B1/B-/B): a $2.4 billion issue of 10-year notes at par to yield 7 3/8%, and a $1.2 billion issue of eight-year notes at par to yield 7¼%.

Both tranches came tight to price talk.

Speaking on background, an informed source told Prospect News on Friday that NRG was the second biggest junk bond deal in the history of the market, trailing the deal that helped finance the RJR Nabisco LBO in the late 1980s.

The source added that people are considering NRG "a huge success because the bonds are trading really fluidly in the aftermarket, and hanging in at a consistent bid." The official spotted the eight-year notes closing Friday at 101.75 bid, while the 10-year notes were 102 bid.

The source added that there was $11 billion to $12 billion in the order books for the combined $3.6 billion of issuance.

A buy-side source had told Prospect News Thursday afternoon that some accounts had been "zeroed," meaning that even though those accounts had put in orders for bonds when the allocations were complete they went away without any bonds at all.

The official conceded that "a very few" accounts did get zeroed, but specified that people who "participated in the bridge facility and those who tendered bonds were treated well."

Brief roadshow for Linens 'n Things

News of one new roadshow start circulated Friday's comparatively quiet primary market.

Linens 'n Things Inc. will begin a brief roadshow on Monday for its $650 million offering of eight-year senior secured floating-rate notes.

The roadshow is scheduled to conclude on Thursday.

Bear Stearns & Co. and UBS Investment Bank are joint bookrunners for the LBO-financing deal from the Clifton, N.J., retailer of home accessories.

Linens 'n Things is a significant piece of what figures to be a week of substantial issuance, as January crosses over into February.

The market anticipates seeing $2.1 billion and €2.625 billion of new deals.

The largest amount is expected to come from U.K.-based chemical company Ineos, which is expected to price its downsized, restructured €2.355 billion equivalent of senior fixed-rate 10-year notes (B2) in dollar-denominated and euro-denominated tranches via Merrill Lynch & Co., Barclays Capital and Morgan Stanley.

The dollar-denominated notes are talked in the 8½% area, and the euro-denominated notes are talked in the 8% area. Tranche sizes remain to be determined.

The deal was downsized from €3.105 billion equivalent, with $750 million shifted to the company's bank facility. Meanwhile the company abandoned proposed dollar-denominated and euro-denominated floating-rate notes tranches.

One other euro-denominated offering is poised on the forward calendar as business expected to be completed during the Jan. 30 week.

Spain-based cable TV company Grupo Corporativo ONO SA is in the market with €270 million of eight-year senior notes (B3), via JP Morgan.

With regard to the Jan. 30 week's dollar-denominated deals, the following transactions are expected to price:

• Compano Energy LLC's $225 million of 10-year senior notes (B2/B), via Banc of America Securities;

• RathGibson Inc.'s $200 million of eight-year senior notes (B2/B-), via Bear Stearns;

• Covalence Specialty Materials' $495 million in two-part offering via Banc of America Securities, Credit Suisse, Merrill Lynch and Morgan Stanley; and

• French shipping firm CMA-CGM Groupe's $250 million of non-rated seven-year senior notes via BNP Paribas.

In addition to those, Indalex Aluminum Solutions is also in the market with a twice-restructured $280 million offering (B3/B-).

The company added second-lien security to the notes that were initially being marketed as senior unsecured notes. Subsequently a proposed tranche of floating-rate notes was abandoned.

Some observers had expected the JP Morgan-led deal to price Friday. However well after the session's close market sources told Prospect News that no terms had been heard.

An investor told Prospect News that there is an "anchor order," in the Indalex deal that is seeking "some amendments to the covenants."

CGG steady, NRG up in trading

When the new CGG 7½% notes due 2015 were freed for secondary dealings, they were quoted at 103.25 bid, 103.75 offered, unchanged from their 103.25 issue price earlier in the session.

NRG Energy's new 7 3/8% senior notes due 2016 and 7¼% seniors due 2014 - which each priced at par on Thursday and then were seen having moved up to closing levels that session around 101.5 bid, 102 offered - were seen up another half a point, a trader said, quoting the 7 3/8s at 102 bid, 102.25 offered, and the 71/4s at 101.75 bid, 102 offered. Another trader saw the 7 3/8s get as good as 101.875 bid, 102.375 offered, while the 71/4s were at 101.375 bid, 101.875 offered.

Charter Communications' new 10¼% notes due 2010, which had priced Thursday at 97.75 bid and then firmed to 98.75 bid, 99.25 offered, were seen slightly easier at 98.5 bid, 99 offered.

And Exopack Holding Corp.'s new 11¼% senior notes due 2014, which priced at par late in the day Thursday, too late for any meaningful secondary activity, were at par bid, 101 offered Friday.

A trader characterized the day's secondary market for new issues as "not very eventful" - in contrast to the strong gains notched earlier in the week by CRC Health Corp.'s new 10¾% senior notes due 2016, which priced Wednesday at 98.51 bid, and then were seen pushing upward over the next two sessions to 101.25 bid, 101.75 offered.

GM mostly higher

Back among established secondary issues, GM was "kinda up and down, and all around," said a trader, who pegged the beleaguered automotive giant's benchmark 8 3/8% notes due 2033 at 72.5 bid, 73.5 offered - well up from the 71.5 bid, 72.5 offered area those bonds held on Thursday, after the company announced its gigantic losses for the fourth quarter and for the full year. However, he saw GM's 6 3/8% notes due 2008 fall to 81.5 bid, 82.5 offered from 82.5 bid, 83.5 offered on Thursday, although he had no insight as to why the 8 3/8s were higher while the 6 3/8s were going in the opposite direction.

"They had been lower [on Thursday], but they kind of trickled back up," he said of the 8 3/8s' movement in Friday's dealings. There had been "a couple of rumors going around, about [GM getting closer to selling] GMAC," although he characterized such scuttlebutt as "more of the same, nobody was mentioned specifically" as a likely potential buyer. He said that he had also heard that there had been renewed buzz about a GMAC sale in the bank loan market, pushing the company's debt up.

At another desk, a trader saw the 8 3/8s at 73 bid, 73.5 offered, which he called up a point, but saw the GMAC 8% notes due 2031 unchanged at 99.5 bid, 100.5 offered.

Yet another trader, who also saw the GM benchmarks up a point to the 73 area, saw the GMACs a quarter-point lower, at 99 bid, 99.5 offered.

GM said back in October that it would sell a majority stake in GMAC, presumably to a deep-pocketed financial buyer, which would lift GMAC's now-junk level credit ratings back to investment grade, in line with the new majority owner's, allowing it to substantially cut its borrowing costs. Such a transaction would be expected to also put anywhere from $10 billion to $15 billion into GM's coffers; although GM ended 2005 with some $20 billion of cash on hand, it has been feeling the effects of sharply reduced sales and the ocean of red ink in which it has been wallowing.

However, since that optimistic beginning to the sale process, nothing has happened, other than several potential buyers, such as Bank of America, Wells Fargo & Co. and Citigroup, publicly distancing themselves from the idea. On GM's fourth-quarter conference call following the release of its quarterly and year-end results Thursday, GM executives such as chairman and chief executive officer G, Richard "Rick" Wagoner and chief financial officer Frederick A. "Fritz" Henderson offered no real updated progress report on the potential sale, except to say that GM was still working on it. Statements by the executives that GM could get by, sale or not, while meant to reassure investors that GM was in no imminent danger of insolvency, at the same time created the impression of less urgency on management's part to do a deal, according to published reports.

Wagoner, making an appearance Friday at the Houston Auto Show, declined to comment on the status of the GMAC sales negotiations.

Also in the automotive realm, GM arch-rival Ford Motor Co.'s flagship issue, the 7.45% notes due 2031, were a quarter point better at 72.25 bid, 73.25 offered, while its Ford Motor Credit Co. financial arm's 7% notes due 2013 were unchanged at 89.5 bid, 90.5 offered.

Delphi steady

Former GM subsidiary Delphi Corp. - whose bonds were seen having climbed a point or so on Thursday amid speculation that GM might be nearing an agreement with Delphi and the United Auto Workers union on the extent of possible GM help to its bankrupt problem child, after GM on its call quantified its likely liability - were seen little changed in Friday's dealings. The Troy, Mich.-based automotive electronics manufacturer's 6.55% notes due 2006 were quoted Friday at 57.5 bid, 58.25 offered, while its 7 1/8% notes due 2029 were steady at 58 bid, 58.75 offered.

All told, a trader said, the automotive sector, which had recently been hopping, with many sector players such as GM, Ford, Lear Corp., ArvinMeritor Inc. and Dana Corp. reporting quarterly numbers, was "pretty quiet" Friday.

AK Steel gains

Outside of the autosphere, there was some movement seen in AK Steel's bonds, apparently on the assumption that Mittal Steel's $23 billion takeover bid for French rival Arcelor - they are the Number-One and Number-Two steel producers in the world, respectively - certainly puts smaller steel names like AK into play as potential acquisition targets.

That was certainly the feeling of equity investors, who lifted AK's New York Stock Exchange-traded shares 80 cents (7.72%) to $11.16 on volume of 8.2 million, about three times the norm.

On the bond side of the fence, a trader said that "there's a lot going on in the [steel] sector" and that "more rumors abound" about AK. Although the Ohio-based steeler has been talked of as a takeover target for a while now, that buzz intensified this week when Arcelor beat out German rival ThyssenKrup AG in efforts to gain a foothold in the North American steel industry by acquiring Canadian producer Dofasco Inc.; the conventional wisdom was that ThyssenKrup would then cast its eyes southward to AK as a possible "Plan B" way to get into North America.

The trader said that he saw AK's 7¾% notes due 2012 up perhaps ¼ point to ½ point at 96.5 bid, 97.5 offered, while AK's 7 7/8% notes due 2009 were unchanged at 98.5 bid, 99.5 offered.

At another desk, a trader saw the 7 3/4s as having risen a point on Thursday and another half point Friday to 96.5 bid, 97.5 offered, while the 7 7/8s were jumping 3¼ points on Thursday but losing ¼ point Friday to 98 bid.

In a research note Friday, RBC Dain Rauscher reiterated its "buy" recommendation on both series of AK bonds, noting that the spreads on those bonds had tightened over 100 basis points after the company reported better-than-expected fourth-quarter numbers on Tuesday, and "investors conjectured that AK might be the next acquisition target after Dofasco."

But not everyone necessarily shares that point of view. A trader, in reporting that AK's bonds were up a point, with the '12s at 96.5 bid, 98.5 offered, and the '09s at 98.5 bid, 99.5 offered, opined: "I don't know why" they would be up.

He expressed agreement with the contrarian theory that, notwithstanding the renewed AK acquisition buzz, the day's news might actually be unfavorable in terms of AK being a takeover target. He noted that since Mittal said that assuming Arcelor completed its planned acquisition of Dofasco for C$5.4 billion and Mittal was successful in taking over Arcelor, it planned to sell Dofasco to ThyssenKrup for about the same price the German steelmaker had offered for the Canadian company. ThyssenKrup said Friday that it had agreed to acquire Dofasco from Mittal under those conditions - meaning that it now might be less likely to view AK as its means for entering the North American steel market. "I think that consolidation story [powering AK's bonds and shares higher] is gone," he declared.

The Mittal-generated consolidation speculation also helped push the shares of United States Steel Corp. higher by $2.46 (4.37%) in NYSE trading Friday to $58.73, but the Pittsburgh-based top U.S.-based steelmaker's bonds "are already fully priced," the trader said, quoting its 9¾% notes due 2010 unchanged at 109 bid, 110 offered.

MTR Gaming holds at lower levels

A trader saw MTR Gaming Group Inc.'s 9¾% notes due 2010 at 105.75 bid, 106.75 offered, unchanged on the session.

Those bonds had fallen to those levels Thursday from Wednesday's finish at 107 bid, 108 offered, after a special committee of the Chester, W.Va.-based gaming company's board of directors rejected a $9.50 per share management-led buyout bid. The directors said the proposal did not give the shareholders adequate value but invited the management-led TBR Acquisition Group LLC to submit a better proposal, while saying the company would also explore "a range of strategic alternatives."

Moody's Investors Service affirmed the B2 ratings on the bonds and the B1 corporate rating, while revising MTR's outlook from negative to developing, citing the rejection of the buyout bid, which likely would have added debt.

Also on the ratings front, Standard & Poor's dropped Affiliated Computer Services Inc.'s corporate credit and senior unsecured debt ratings to BB+ from BBB+ previously, and placed it on CreditWatch with negative implications. S&P cited the Dallas-based information technology outsourcing solutions provider's plan to buy back up to $3.5 billion of its common stock, funding the repurchase with new debt. Pro forma total debt-to-EBITDA will rise to about the 5 times range from under 1 times currently, the agency added.

Affiliated's 5.2% notes due 2015 - which swooned to 86.5 bid, 87.5 offered Thursday from prior levels around 90 bid on news of the massive stock repurchase, and a Moody's downgrade - although Moody's kept it investment grade at Baa3 - were seen up half a point Friday, to 87 bid, 88 offered.

Apart from such activity in selected names, things overall were seen as pretty quiet. A trader said "the market tailed off a bit this afternoon [Friday] - but it was a good close for the week."

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