Metaldyne up on sale, GM off on York remarks; Westlake, Nevada Power, AmeriGas in first '06 deals

By Paul Deckelman and Paul A. Harris

New York, Jan. 10 - Metaldyne Corp.'s bonds were seen having firmed smartly on Tuesday after the Plymouth Mich.-based automotive metal-forming and -machining company released some asset-sale news. Although the bonds came off their intraday highs, they still ended up several points on the session.

On the other hand, the recently robust automotive sector seemed to shift into neutral, and was maybe even slipping into reverse, on sobering comments about industry leader General Motors Corp. by former auto executive Jerry York - now billionaire investor Kirk Kerkorian's right-hand man at Tracinda Corp., a large GM shareholder.

Outside of the autosphere, investors in metapacking giant Swift & Co. seemed to be having a cow over the Greeley, Colo.-based company's latest quarterly results, which saw a major slide in earnings as its beef operations continued to struggle.

Overall two phenomena appeared for the first time Tuesday in the 2006 junk market: 1) the first deals of the year priced and 2) the market underwent its first pullback of the year.

The new deals came after a week of calendar building - and there should be more action out of the new-deal sector on Wednesday, when a calendar offering from Inergy Finance Corp. and a quickly shopped transaction from Quebecor Media are expected to come to market.

Three tranches from three issuers priced in the primary market generating $808.5 million of proceeds. All three were quick-to-market deals. For comparison's sake, by the Jan. 10, 2004 close the market had seen more than $2 billion price in seven tranches.

And for the first time in the new year a source marked the broad market down, with the CDX 100 off by an eighth of a point, as junk bonds were said to have tracked Treasuries lower.

Quick-to-market

AmeriGas Partners priced Tuesday's biggest deal - a $350 million issue of senior notes due May 20, 2016 (B1/BB-/BB+) - at par to yield 7 1/8%.

The debt refinancing deal, via Citigroup, Credit Suisse First Boston and Wachovia Securities, came at the wide end of the 7% to 7 1/8% price talk.

Elsewhere Westlake Chemical Corp. priced a $250 million issue of 6 5/8% 10-year notes (Ba2/BB+) at a 225 basis points spread to Treasuries and a dollar price of 99.674 to yield 6.67%.

The spread was tight to the Treasuries plus 237.5 basis points price talk.

Deutsche Bank Securities, Banc of America Securities and JP Morgan ran the books for the Houston company's debt refinancing deal, which had been announced late last week.

Finally Nevada Power Co. drove through Tuesday, pricing $210 million of 5.95% 10-year senior notes (Ba1/BB) at 99.741 to yield 5.982%.

Credit Suisse First Boston and Merrill Lynch & Co. were the bookrunners for the debt refinancing and acquisition funding deal.

Inergy, Quebecor for Wednesday

Elsewhere the stage was set for a Wednesday session that figures to see at least two deals price.

Inergy Finance Corp. talked its $200 million offering of 10-year senior unsecured notes at the 8 3/8% area.

Lehman Brothers, JP Morgan and Wachovia Securities are joint bookrunners for the debt refinancing deal from the Kansas City, Mo., propane marketing company.

And Quebecor Media Inc. plans to price a quick-to-market $525 million offering of 10-year senior notes on Wednesday via Citigroup, Banc of America Securities and Credit Suisse First Boston.

At press time no price talk had been heard on the debt refinancing deal from the Montreal diversified media company.

News also was heard on expected Thursday business.

Allis-Chalmers Energy Inc. talked its $150 million offering of eight-year senior notes (B3/B-) at 8¾% to 9%.

RBC Capital Markets is the dealrunner for the acquisition financing.

Westlake up in trading

When the new Westlake Chemical 6 5/8% senior notes due 2016 were freed for secondary dealings, they got as good as 100.5 bid, 100.75 offered "at one point," a trader said, before dropping from that peak level to end at around 100.125 bid, 100.375 offered - still up from their 99.674 issue price earlier in the session.

The new Nevada Power 5.95% notes due 2016 appeared too late in the session for any real aftermarket activity.

Metaldyne jumps

Back among the established issues, Metaldyne "was the big gainer," a trader said, quoting its 11% notes due 2012 as having firmed to 85 bid, 86 offered from opening levels around 80 bid, 81 offered. The bonds came off those highs, but still ended with a respectable gain at 83.5 bid, 84.5 offered.

Metaldyne said that it had agreed to sell the assets of its North American forging business for $129 million to Forming Technologies Inc. of Royal Oak, Mich., a company formed by several veteran automotive forging industry executives from other companies, including Lance Harris, former operating executive with MascoTech, the predecessor company of Metaldyne's forgings business. He will be chief operating officer.

The deal, slated to close sometime during the current first quarter, encompasses $79.2 million in cash, about $42 million in accounts receivable and $7.5 million of assumed debt.

Metaldyne had previously said it wanted to exit the North American forging business, which contributed 55% of its revenue in 2000 but which is now down to just 14% of total revenues. Rumors that a deal was afoot were the likely catalyst behind a sharp move in the company's bonds on Friday when the 11s jumped three points to around the 80 bid level and Metaldyne's 10% senior notes due 2013 inched higher to around the 93.25 bid, 95.25 offered level, up slightly from prior bid levels around 93.

"They had already announced the intention of selling [the business]," a trader said, "and now they just announced the details of that sale, with a little higher proceeds than originally expected."

Metaldyne "can clearly use the cash," declared analyst Shelly Lombard of the Gimme Credit investment research service in an afternoon research note, since "very tight liquidity has been one of our concerns." Lombard noted that the deal proceeds will be used to pay down debt, "hopefully freeing up more of the revolver since liquidity is especially tight."

Gimme Credit rates Metaldyne a stable holding, neither presently improving or declining. While Lombard noted that Metaldyne's big advantage is that "Chrysler is its largest customer with Ford and GM contributing only 20% of sales," and EBITDA has been improving, the company's liquidity is "especially tight. We are only comfortable with the senior bonds."

GM rally ends

Metaldyne seemed to be about the only really strong performer Tuesday in an automotive sector that had been steadily rising since the turn of the year, led by General Motors, whose bonds had firmed solidly as recently as Monday on optimistic projections, including hopes for a sale of a controlling stake in GM's General Motors Acceptance Corp. financing arm laid out by CEO Rick Waggoner at the North American International Auto Show.

But on Tuesday, investors seemed to cool their headlong enthusiasm for the troubled Detroit giant, sobered perhaps by Moody's Investors Service's warning late Monday that failure to sell that majority GMAC stake "would likely result in Moody's re-linking the ratings of GM and GMAC, and leave GM with a limited set of options to choose from if it is to shore up GMAC's capital market access."

And later on Tuesday, a trader pointed out, "Kerkorian's guy, York, basically said that GM wouldn't be able to sell a majority stake of GMAC - they would have to sell pieces, rather than the majority stake, which sort of defeats the purpose" of selling that controlling interest in the financing arm, which is to get GMAC's ratings back to investment grade and thus lower its borrowing costs, by selling control to a secure, investment-grade financial entity.

Former Chrysler exec York also said in a speech to automotive analysts that GM should adopt a "crisis mode" because of the urgency of its situation, should cut its dividend and sell its Saab and Hummer divisions.

The trader saw GM's flagship issue, the 8 3/8% notes due 2033, down a point at 70.5 bid, 71.5 offered, while GMAC's 8% notes due 2031 "were down almost two points" at 100.5 bid, 101.5 offered.

At another desk, a market source called GM "kinda mixed," with the 8 3/8s down ¾ point to 70.5 and GM's 8¼% notes due 2023 ¼ point lower at 69, but its 7 1/8% notes due 2013 half a point better at 70.5.

He also saw the GMAC 8s dip to 101 bid from prior levels at 102.25.

Auto sector broadly weak

The first trader saw that GM weakness translated pretty much throughout the auto and automotive parts sector, outside of Metaldyne, with GM rival Ford Motor Co.'s benchmark 7.45% notes due 2031 down a point at 70 bid, 72 offered, and Toledo, Ohio-based automotive systems maker Dana Corp.'s 6½% notes due 2009 off half a point at 85.5 bid, 86.5 offered.

A market source quoted GMAC's 6 7/8% notes due 2012 down half a point at 94, and saw tiremaker Goodyear's 7.857% notes due 2011 also down half a point, at 99.

Swift drops on earnings

Outside of the auto area, a market source saw Swift & Co.'s 12½% notes due 2010 swoon to 101 bid from 105.5 previously, and its 10 1/8% notes due 2009 a point lower, after the company said that fiscal second-quarter EBITDA plummeted to $2 million from $44 million a year earlier, while sales were off 6%. However, Swift - which attributed the decline to weakness in its domestic beef unit and its Australian unit, said that the re-opening of foreign markets closed to U.S. meat imports by the mad cow disease epidemic in 2003-2004 would help its results, and its executives said the company's liquidity picture is strong (see related store elsewhere in this issue).

Horton higher

D.R. Horton Inc.'s bonds were marginally higher, after the Fort Worth based homebuilder released bullish guidance, with first-quarter orders running 19% ahead of year-earlier levels and the company on track to achieve record full-year performance.

Horton's 6 1/8% notes due 2014 were at 99.75 bid and its 5¼% notes due 2015 at 93.625, each up 1/8 point.

"They're so close to investment grade now that they're not going to really move much," he said, "unless the Treasuries move a lot." He noted that Treasuries Tuesday "are probably off a little bit - but this is positive news, so they kind of balanced each other out."

Sirius edges higher

He saw Sirius Satellite Radio's 9 5/8% notes due 2013 up ¼ point on the day to 99, and up perhaps 1/8 before that, as the Howard Stern era kicked off Monday at the upstart satellite radio broadcaster, which is paying the self-styled "King of All Media" a veritable king's ransom, including $220 million of company stock, and has hyped his no-holds-barred, non-censored new show heavily.

Another source said the bonds stayed around 98.75 bid, 99.75 offered, "about where they had been. There was not much Howard Effect seen here."

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