Phibro deal prices; Dura bonds slide on poor numbers; funds see $56 million inflow

By Paul Deckelman and Paul A. Harris

New York, July 27 - Phibro Animal Health Corp. was heard to have successfully priced a restructured $240 million two-part bond offering Thursday.

Junk market primary sources also saw U.S. Shipping Partners LP having downsized and restructured its planned offering, while Shackleton Re Ltd. upsized its. MxEnergy Holdings Inc. restructured its deal, and issued price talk. Talk also emerged on US Shipping's offering, and on VNU NV's gigantic multi-tranche mega-deal. New deals were seen coming soon from Allis-Chalmers Co. and from Textron Fastening Systems.

In the secondary market, Dura Operating Corp. proved to be anything but durable, as the struggling Rochester Hills, Mich.-based automotive parts manufacturer's parent company Dura Automotive Systems Inc. reported a sharp deterioration in the company's finances during the second quarter versus a year ago. As Dura slid deeply into the red, its bonds and shares nosedived.

However, Dura's troubles were seen having not too much impact on such other automotive sector names as Dana Corp. and Delphi Corp., which were down only modestly.

And traders saw the bonds of hospital industry leader HCA Corp. trying to fight their way back to good health, after having fallen for a full week on the company's planned leveraged buyout by several private equity firms.

Overall the high-yield market opened mixed on Thursday morning, but ended the session up about 1/8 point, according to a senior high yield syndicate official.

The source specified that there is currently a lot of focus on second quarter earnings, and added that for market observers the $1.67 billion equivalent multi-tranche mega-deal from Netherlands-based VNU NV is a "looming" entity.

As the session was winding down, 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 $56.1 million more came into the funds than left them, mostly reversing the $72.3 million outflow reported in the previous week, ended Wednesday, July 19. The money moving in represented 0.08% of assets under management and brought the year-to-date figure for funds reporting on a weekly basis to negative $3.486 billion, 4.62% of assets under management.

It was the third inflow in four weeks - a rarity in a fund-flow landscape so far this year that has been almost completely dominated by outflows.

Even with the latest gain, outflows have still now been seen in 12 weeks out of the last 16, for a net total outflow in that time of around $2.217 billion, a Prospect News analysis of the AMG figures indicated, and have also now been seen in fully 22 weeks out of the 30 since the start of the year, against only eight inflows, counting the latest.

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.

Phibro prices restructured deal

Thursday's sole issuer was Phibro Animal Health, which priced a restructured $240 million two-part notes transaction.

The company priced a downsized $160 million tranche of seven-year senior notes (B3/B-) at par to yield 10%. The yield came on top of price talk that had been revised from the 10¾% area. The tranche was reduced from $240 million.

Meanwhile the company shifted the $80 million from the senior notes into a new tranche of eight-year senior subordinated notes which priced at par to yield 13%, 37.5 basis points wide of the 12½% area price talk.

UBS Investment Bank had the books for the debt refinancing deal from the Ridgefield Park, N.J., animal health and nutrition products company.

Traders said that Phibro Animal Health's late-afternoon ET pricing did not allow for any kind of aftermarket activity Thursday.

The looming Nielsen deal

News surfaced Thursday on the deal that the above-quoted senior high yield syndicate official characterized as "looming" on the present forward calendar.

Price talk was heard on the massive VNU NV/Nielsen Finance LLC combined $1.67 billion multi-tranche deal.

At the operating company level, Nielsen Finance talked an $835 million tranche of eight-year notes (B3/CCC+) at a yield in the 9¾% area. Meanwhile the $600 million tranche of 10-year senior subordinated discount notes (Caa1/CCC+) was talked at 225 to 250 basis points behind the senior notes.

At the holding company level VNU talked its €200 million tranche of 10-year fixed-rate senior subordinated discount notes at the equivalent of Euribor plus 625 to 650 basis points.

The books will close on Monday, with the offering expected to price on Tuesday.

Deutsche Bank Securities, JP Morgan, Citigroup, ABN Amro and ING are bookrunners for the acquisition deal from the Haarlem, Netherlands-based market research company.

Talking the smaller deals

Price talk was also heard Thursday on several of the smaller deals in the market.

MxEnergy Holdings has restructured its $200 million offering of five-year senior floating-rate notes (CCC+) and talked the notes at six-month Libor plus 700 to 750 basis points.

The Stamford, Conn., natural gas and electricity marketer has extended the call protection to the life of the notes from the previously announced two years. Meanwhile the equity clawback, for 35% of the issue at par plus the applicable coupon, has been extended to three years from two years.

The roadshow continues through Monday, with pricing expected to take place on Tuesday.

Deutsche Bank Securities and Morgan Stanley are joint bookrunners.

Elsewhere TFS Acquisition Corp. (Textron Fastening Systems) talked its $190 million offering of 10-year senior secured notes (Caa1/B-) at the 11¾% area on Thursday.

The Credit Suisse-led offering is expected to price on Monday.

Meanwhile U.S. Shipping Partners downsized to $175 million from $200 million its offering of eight-year second-lien senior secured notes (Caa1) and talked it at 11¾% to 12%.

The company shifted the $25 million of financing to its credit facility, the source added.

The Lehman Brothers and CIBC World Markets deal is expected to price Friday.

Also expected to price Friday is Brazil's JBS SA (Grupo Friboi)'s $200 million offering of 10-year senior notes (B1/B+). It was talked Thursday at 10½%.

JP Morgan and ING are leading the beef processor's deal.

In addition, H&E Equipment Services is expected to price its $250 million offering of 10-year senior notes (B3/B+). Bookrunners are Credit Suisse and UBS Investment Bank. The deal was talked earlier in the week at 8¼% to 8½%.

And terms are expected to circulate Friday on the Shackleton RE Ltd. upsized $125 million 1.5-year floating-rate first event California earthquake notes (Ba3/BB), earlier talked at Libor plus 800 basis points. The securities have been increased from the original $75 million.

Goldman Sachs & Co. is leading the deal.

Allis-Chalmers brings add-on

Only one new roadshow start was heard during Thursday's session.

Allis-Chalmers Energy Inc. will launch an $80 million add-on to its 9% senior notes due Jan. 15, 2014 (B3/B-) on Tuesday.

RBC Capital Markets has the books.

Proceeds, along with a concurrent follow-on equity offering of 2.5 million shares, will be used to fund a portion of the pending acquisition of Argentina-based DLS Drilling, Logistics & Services Corp., to repay existing debt and for general corporate purposes.

The Houston-based provider of oilfield services and equipment priced the original $160 million issue priced at par on Jan. 12, 2006.

Dura plunges on earnings

Back among the established issues, Dura, a trader bluntly put it, "got its ass kicked after an abysmal quarter." He saw the company's 9% notes due 2009 in freefall, plummeting as much as 26 points on the day to finish at 28.5 bid, 30.5 offered, and saw Dura's 8 5/8% notes due 2012 down 8 points on the session at 75.5 bid, 76.5 offered.

Another trader pegged the subordinated 2009 bonds' slide at 22 points, from 48 bid in the morning down to 26 bid, 28 offered.

Its Nasdaq-traded shares meantime plunged 87 cents (55.77%) to close at 69 cents on Thursday. Volume of 6.03 million shares was nearly 65 times the average daily turnover.

Dura reported that revenues for the fiscal second quarter ended July 2 fell to $573.3 million from $623.8 million in the year-earlier period, and the company suffered a net loss of $131.3 million ($6.96 per diluted share) - a sharp deterioration from its $3 million (16 cents per diluted share) of net income in the 2005 second quarter. Dura's adjusted loss from continuing operations for the quarter, which excludes facility consolidation charges and a deferred tax asset valuation allowance, totaled $38.3 million ($2.03 per diluted share) versus adjusted income of $1.6 million (nine cents per diluted share) a year earlier.

Even so, Dura executives sought to put the results in the best possible light. While calling the numbers "extremely disappointing," Dura's chairman and chief executive officer, Lawrence Denton, characterized them on a conference call with analysts as "a temporary shortfall in earnings" and said that he has "great confidence" that Dura will successfully complete its turnaround plan, announced earlier this year. Denton and Dura's chief financial officer, Keith Marchiando, also pronounced themselves "comfortable" with the company's liquidity position, despite the poor earnings figures (see related story elsewhere in this issue).

No impact on other auto names

A trader, when asked whether Dura's troubles had much effect on the bonds of other automotive supplier companies, replied "not really, as far as I could tell." He said that bankrupt Toledo, Ohio-based parts manufacturer Dana Corp.'s bonds "were maybe down on the long end, a little," its 5.85% notes due 2015 ending at 74.5 bid, 75.5 offered, but he said that activity levels were light.

A trader at another desk agreed, characterizing those Dana bonds down a point - though he saw them at 73.5 bid, 74.5 offered - but said that this was "on relatively low volume."

He also saw Delphi's bonds off perhaps a point and said that Tenneco Automotive Inc.'s notes were unchanged, at 99 bid, 99.5 offered.

"Its numbers were as expected," he said of the latter company, which also reported earnings. "Kind of ham on rye, nothing special."

Sanmina rises

Among the tech names, the second trader said, Sanmina-SCI Corp.'s 8 1/8% notes were up about 1¼ points at 97.25 bid, 97.75 offered - even though the San Jose, Calif.-based provider of electronics manufacturing services reported that revenues fell to $2.71 billion in the fiscal third quarter from $2.83 billion for same quarter last year - and also said that it could not give a full financial report because of an ongoing investigation regarding its stock options.

The company is working with an independent committee to investigate stock-option policies and activity dating back to 1997.

"The news was - that they really didn't give you any news," since the company couldn't release its full numbers. "I would have expected that the bonds would be down - but they were not."

MagnaChip plunges

Another tech name which didn't get off so easily was MagnaChip International, whose bonds, he said, got whacked after "they missed their numbers - by a lot. Trading was pretty active."

He saw the semiconductor company's 6 7/8% notes and its floating-rate notes - both of which had been quoted around 92 on Monday and at around 89-90 at the close Wednesday - fall down to about 80 bid at Thursday's close.

He also saw its 8% notes, which ended at 78 on Wednesday, drop to about 67 on Thursday.

The company reported revenues for the three months ended July 2 at $197.6 million - well down from $236 million in the second quarter of 2005. Its operating loss was $129.3 million during the quarter. Excluding one-time items like restructuring and impairment charges, the operating loss was $35.6 million, versus operating income of $3 million before special charges in the prior year's second quarter.

HCA steadies

A trader said that HCA Corp. bonds were "kind of stabilizing at lower levels" after a wild week which saw the Nashville-based largest U.S. hospital operator's paper widen out from around 250 basis points over Treasuries more than a week ago to bid levels as much as 500 bps over on Wednesday as investors reacted badly to the notion that the proposed big leveraged buyout deal for the company will dump lots of new debt onto its already swollen balance sheet.

On Thursday, he said, "we started to see some buyers," as the spread tightened somewhat, to about 480 bps off.

"There was better buying in the name," another trader agreed, quoting its 6.95% notes due 2012 at 87.25 bid, 88 offered, up a point on the session.

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