Huntsman bonds fall as merger talks end; talk emerges on Stratos, Drummond deals

By Paul Deckelman and Paul A. Harris

New York, Feb. 6 - Bonds of Huntsman International LLC were seen down about three points on the session across the board, in line with a sharp fall in the Salt Lake City-based chemicals maker's stock after corporate parent Huntsman Corp. said it had ended talks with several prospective buyers.

Bonds of General Motors Corp. and its General Motors Acceptance Corp. financing subsidiary were being quoted roughly unchanged to slightly lower as a meeting of the carmaker's board of directors failed to shed much light on how the planned sale of a controlling interest in GMAC was going. Deutsche Bank meantime lowered its recommendation for the company's bonds.

A high-yield syndicate official said that although Monday's market sold off slightly during a very quiet session, there had been a firm tone to the day's trading.

In the primary arena, no issues were seen having priced before the close, although price talk did emerge on two prospective deals - Stratos Global Corp.'s planned issue of eight-year notes and Drummond Co.'s upcoming offering of 10-year bonds.

Fiat talks €1 billion maximum deal

Also in primary action, talk of 6 5/8% to 6¾% was heard on Fiat Finance & Trade Ltd.'s €1 billion maximum offering of seven-year bullet notes (Ba3/BB-).

It is the Italian car-maker's first bond deal since losing its investment-grade credit ratings in 2002, according to one market source.

Citigroup, Barclays Capital, BNP Paribas and UniCredit Banca Mobiliare are the underwriters for the debt refinancing and general corporate purposes deal, which is expected to price on Tuesday.

Drummond $400 million at 7¼% to 7½%

Elsewhere Birmingham, Ala., coal mining and trading firm, The Drummond Co. Inc., talked its $400 million offering of 10-year senior notes at 7¼% to 7½%.

The offering (Ba3/BB-) is expected to price on Tuesday.

Citigroup and Merrill Lynch & Co. are joint bookrunners for the debt refinancing.

Stratos Global at 9¾% area

Talk of a yield in the 9¾% area surfaced on Stratos Global Corp.'s $150 million offering of seven-year senior notes (B2/B-), which are expected to price Wednesday afternoon.

RBC Capital Markets and Banc of America Securities are joint bookrunners for the acquisition deal from the St. John's, Newfoundland, global provider of remote telecommunications services.

Drummond and Stratos Global comprise two of the four dollar-denominated offerings that were known to be in the market at the Monday close.

Talk of a 240 to 245 basis points spread to Treasuries was heard last Friday on Windsor Financing LLC's $50 million tranche of 10-year subordinated amortizing notes (Ba2/BB), which are part of an overall $316 million two-tranche transaction being led by Goldman Sachs & Co.

That deal is also expected to price on Tuesday.

An investment-grade $266 million offering of senior amortizing notes due July 2017 (Baa3/BBB-) is talked at Treasuries plus 140 to 145 basis points.

Meanwhile there was no news Monday on the largest dollar-denominated deal expected to price this week: Linens 'n Things Inc.'s $650 million offering of eight-year senior secured floating-rate notes (B3/B) via Bear Stearns & Co. and UBS Investment Bank.

Copano firm in trading

A trader said that HCA Inc.'s new 6½% notes due 2016 were anchored at 99,25 bid, 99.75 offered, about straddling Friday's 99,57 issue price.

He saw Copano Energy LLC's new 8 1/8% notes due 2016 continuing to hold their own at 102 bid, 102.5 offered, well up from last Tuesday's issue price at par.

Also hanging onto its gains was Sanmina-SCI Corp.'s new 8 1/8% notes due 2016 at 101.25 bid, 101.75 offered; those bonds had priced at par early last week.

And Covalence Specialty Materials' new 10¼% notes due 2016 also continued to trade at a premium to Thursday's par issue price. They were quoted at 101 bid, 101.5 offered.

Huntsman sinks

Back among the established issues, Huntsman was "down a little on the news that the company is not going to be sold," a trader said, quoting its 7 3/8% notes due 2015 at 101 bid,102 offered, well down from Friday' close around 104 bid, 105 offered. He saw all of the company' bonds down at least a point or two on the news, with its 9 7/8% notes due 2009 down a point at 104 bid, 105 offered, while its 11½% notes due 2012 retreated about two points to 114 bid.

At another desk, a trader said that the 7 3/8s were "down a lot" to 100.5 bid, 101.5 offered, although he saw only restrained dealings in the company's other series of notes.

The slide in the bonds was in tandem with the fall in Huntsman's New York Stock Exchange-traded shares, which tumbled $1.90 (8.3%) to $21.05 following the company's announcement that it had ended talks with several different parties on the possible sale of the company.

Huntsman declined to name the would-be purchasers or say what kind of money was involved, other than to declare that none of the several offers it had received was in the interest of Huntsman shareholders.

Chairman Jon M. Huntsman said in a statement that while the last proposals "were above the price of our IPO last year I believe they were not adequate, particularly in light of the risks, uncertainties and extended timing of the proposed transactions."

GM slips

Elsewhere, General Motors bonds were seen down a little in the absence of any definitive news on whether the troubled Detroit giant was any closer to selling a controlling stake in its GMAC financing unit. There was also no word during the session as to whether the company's board had decided to accede to the demands of key shareholder Kirk Kerkorian and cut the money-losing company's fat $2 per share annual dividend. The one piece of firm news that did emerge from the meeting was the election of Kerkorian aide Jerome York to GM's board, giving the billionaire investor an official voice in the board's deliberations.

Also weighing on the bonds was the news that Deutsche Bank Securities had lowered its recommendation on GM's bonds to "hold" from "buy" previously, citing concerns about the company's ability to sell a 51% stake in GMAC.

A trader saw GM's benchmark 8 3/8% notes due 2033 dipping as low as 72 from prior levels at 73.5 bid, 74.5 offered, before coming slightly up from that nadir to finish at 73 bid, 74 offered, down half a point.

He also saw GMAC's 8% notes due 2031 at 99 bid, 99.5 offered, down from their opening level around par bid. He called trading in the bonds "pretty volatile."

Other traders saw a similar easing in GM's position.

GM has been trying since October to sell a 51% stake in GMAC, preferably to a deep-pocketed investment-grade rated financial entity, a move that would kill two birds with one stone by unchaining GMAC from GM so the finance unit's borrowing costs would be greatly reduced as its credit rating went back to investment grade, in line with those of its new majority owner; at the same time, the sale would pump between $10 billion and $15 billion into GM's coffers, depleted by the company's heavy losses, which totaled over $8 billion last year.

However, the going has been slow, and while at least two potential buyers have emerged - the team of Cerberus Capital LLC and Citigroup, and that of Wachovia Bank and The Blackstone Group - sale prospects got a jolt of bad news Friday when Standard & Poor's and Fitch Ratings each said that a sale to Cerberus/Citigroup would likely not result in an upgrading of the company's debt ratings.

Also in the automotive area, a trader saw GM arch-rival Ford Motor Co.'s 7.45% notes due 2031 lower by ¼ point at 72.75 bid, 73.75 offered, while its Ford Motor Credit Co. 7% notes due 2013 were also a quarter-point off, at 90 bid, 91 offered.

InSight rebounds

From the distressed-debt precincts, traders saw the 9 7/8% notes due 2011 of InSight Health Services Holding Corp. bouncing off their lows after having fallen sharply on Friday on market concerns over the impact expected cuts in Medicare reimbursements are likely to have on the company.

The Lake Forest, Calif.-based diagnostic imaging services provider's oversold bonds were seen having moved up two points on the day to 47 bid, 49 offered.

Movie Gallery stronger

Movie Gallery Inc.'s 11% notes due 2012 were seen about half a point better at 70 bid, 71 offered after the Dothan, Ala.-based Number-Two video rental store chain operator assured investors that fourth quarter numbers will come in line with previous expectations.

On Monday morning, Movie Gallery reaffirmed its guidance for the 2005 fourth quarter of revenues between $675 million and $705 million and same-store revenues in the range of 5% to 9% above fourth-quarter 2004 levels.

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