Bombardier bonds boom on asset sale to GE; Brown Shoe ready to price deal

By Paul Deckelman and Paul A. Harris

New York, April 18- Bombardier Inc.'s bonds were seen up about a point or two Monday, after the Montreal-based aircraft and transportation equipment manufacturer announced the pending sale of part of its finance division to General Electric Co. for more than $1 billion. Elsewhere, Saks Inc. debt was downgraded after the Birmingham, Ala.-based retailer failed to file its annual report on time with the Securities and Exchange Commission, but little real impact was seen on its bonds.

In the primary market, Ziff-Davis Holdings Inc. successfully priced a $205 million issue of seven-year floating-rate notes. Meantime, price talk emerged on Brown Shoe Co. Inc.'s planned offering of seven-year notes, which is expected to price Tuesday. Meantime, roadshows are expected to begin shortly for bond issues from Gardner Denver Inc. and Compagnie Generale de Geophysique.

In the secondary realm, Bombardier's 6¾% notes due 2012 were seen by a trader up two points at 90 bid, 92 offered on the news of the company's planned sale of Bombardier Capital's Inventory Finance Division to GE Commercial Finance.

At another desk, the 63/4s were quoted at that same 90 bid level, but that was only considered up a point, while Bombardier's 6.30% notes due 2014 were half a point better at 86.

GE Commercial Finance will pay $1.4 billion in cash, and will assume $1 billion in debt and other liabilities as part of the deal. The Canadian company said it stands to realize $825 million of proceeds from the sale, which could close as early as sometime during the current quarter.

Bombardier Capital will reduce the recorded debt and other net liabilities related to the inventory financing business by about $1.6 billion.

The inventory finance business is comprised of trade receivables in the marine, recreational products, recreational vehicles and manufactured housing industries.

Its sale is the continuation of Bombardier Capital's orderly portfolio wind-down, initiated in 2001, and is in line with Bombardier's objective of maximizing shareholder value.

Saks lower

Elsewhere, Saks bonds were seen down a little, but "nothing crazy," a trader said, after the department store operator's debt ratings were cut two notches by Standard & Poor's, which lowered its corporate credit rating to B+ from BB previously.

He saw the company's 7 3/8% notes due 2019 dipping to 90 bid, 92 offered from 91 bid, 93 offered. "Not much of a big reaction there," he opined.

"It doesn't look like they were affected too much," a source at another shop said. He quoted the 7 3/8s at 91.25, with its 7½% notes due 2010 at 99.5, its 8¼% notes due 2008 at 107, and its 7% notes due 2013 at 93.5 bid, 94 offered.

The first trader saw those levels about a point lower across the board, with the 7s at 92 bid, 94 offered, "vacillating between that and 91 bid, 92 offered." He also saw the 81/4s at 105 bid, 107 offered, and the 71/2s at 98 bid, par offered.

He said that the 7 3/8% notes, in particular, "are down 12, 13 points in the past couple of weeks - so I don't know how much further they had to drop."

S&P lowered Saks' ratings, and revised the CreditWatch implications on the ratings to "developing" from "negative."

It cited Saks' disclosure that it did not file its annual 10-K report with the SEC by the prescribed April 15 due date - and that it does not expect to make the filing by the April 29 extended deadline.

The failure to file in a timely manner is related to a previously disclosed internal investigation into accounting for vendor allowances, which has now been broadened to include other related accounting and financial matters.

S&P also cautioned that if there are findings that any individual with direct responsibility for accounting and financial reporting matters has been found to have acted improperly, the 10-K would likely not be available before July, and the first-quarter 10-Q filing would also be delayed.

The first trader pointed out that according to the indentures of some of its loan instruments, "if they don't file the 10-K on time, they go into technical default - and then, they need 25% of the bondholders to approve the relief [from default], so that they can continue having lines of credit and other good stuff. And if they don't approve [that waiver], they would go into some sort of default, which would make it difficult to get credit to pay for their merchandise - they would have to pay for it up front.

"People were looking at the indentures of some of the paper, to see what would happen. In a worst-case scenario, this is what would happen - but I don't think many people think that all of those things are going to happen, concurrently."

The trader said that he had read reports indicating that "the banks are already going to give them that relief." But as for the bondholders, "some [of the bonds] do fall into what we talked about and some do not - and nobody seems to know so far which is which."

All of the Saks bonds, he said, had fallen sharply from their recent highs on investor fears of a leveraged buyout for the business, which would load the company up with new debt to pay for the acquisition - probably new debt that ranks senior in the capital structure to its existing debt. Those fears were fanned by similar concerns about rival retailer J.C. Penny & Co. Inc., as well as by the real news of a big leveraged buyout for toy retailer Toys "R" Us Inc.

Since then, he said, "it looks like they are less likely to be LBO'ed, and more likely to sell some of their assets piecemeal and use proceeds to pay off debt - I don't know whether it would be the bonds or the bank line or whatever it might be - but it now looks less and less likely about an LBO."

However, he cautioned, "the bonds didn't regain anywhere near the levels that they were [before all of the LBO speculation]. So they didn't bounce back at all, and are still way, way at the lows."

MCI steady as Verizon holds

Elsewhere, MCI Inc. bonds were seen virtually unchanged on the session - even as would-be purchaser Verizon Communications Inc. indicated that it was standing by its current $7.8 billion offer to acquire the Ashburn, Va.-based long-distance telecommunications carrier.

"We have a good bid on the table," news reports quoted Verizon boss Ivan Seidenberg as having said at an industry conference.

That apparent refusal to up the ante is sure to rile up many shareholders who wanted Verizon to raise the amount it will offer them for their shares to the same amount it paid the company's biggest holder, Mexican telecom billionaire Carlos Slim Helu, for his 13% stake.

Verizon agreed to pay Slim $25.72 a share in cash - far more than the $23.50 in cash and Verizon stock it is offering to the other shareholders. Some of the larger institutional holders have denounced such different treatment for the non-Slim holders, and have called on MCI's board to end its engagement with Verizon and instead take Qwest Communications International's Inc.'s higher cash and stock bid for MCI.

However, Seidenberg also said Monday that there were fewer such dissident holders than news reports might indicate.

MCI's bonds were unchanged, with its most volatile and active issue, the 8.735% notes due 2014, at 108.75; its 7.688% notes due 2009 at 103.25; and its 6.908% notes due 2007 at 101.5.

Sirius unchanged

Also unchanged Monday were the bonds of Sirius Satellite Radio Inc., even as the upstart satellite radio broadcaster made big news with its announcement that it will team up with domestic diva Martha Stewart to offer listeners a 24-hour channel aimed at women listeners offering advice on cooking, gardening, decorating and entertaining.

Sirius' bonds were "doing nothing," a source said, quoting its 14½% notes due 2009 at 105.75, unchanged on the day, and its 15% notes due 2007 steady at 106.5.

Sirius' hook-up with the goddess of good living is the latest high-profile addition to its lineup, as it attempts to catch up with larger and more established satellite radiocaster XM Satellite. Last year. Sirius showed that it was indeed serious about challenging XM, by wooing top-rated shock-jock Howard Stern away from Infinity Broadcasting, starting next year, by giving him a big bucks contract and promising the self-styled "King of All Media" the absolute freedom to say whatever he wants on the air, no matter how risqué, unhindered by the Federal Communications Commission, which currently regulates conventional radio - but not satellite broadcasting. Sirius also hired highly respected broadcast executive Mel Karmazin - who is also a long-time Stern friend and mentor, and also inked a weekly talk-show deal with former basketball star-turned U.S. Senator Bill Bradley.

XM reacted to its rival's announcement by saying that it had already held talks with Stewart's company, Martha Stewart Omnimedia, about a similar venture - but had decided it did not make economic sense for XM.

1 deal prices, calendar builds

During Monday's primary market session New York technology publisher Ziff Davis Media Inc. completed the only junk deal, pricing a restructured $205 million wide of the price talk.

And the forward calendar continued to build.

However, sell-side sources told Prospect News that while the backlog of deals - $4 billion-plus dollar-denominated and €2.35 billion euro-denominated - is impressive, the high-yield syndicate desks are becoming anxious to see the deals actually start to price.

Meanwhile on Monday, in very light trading, the junk market continued to languish as sources pointed to an unconvincing equity market and the uncertain prospects of earnings reports still to come.

Justified correction?

One sell-side official said Monday that the high yield is currently undergoing "a little correction in sympathy with a slumping equity market.

"And I think this correction is well justified in light of some of those junk-y deals that we saw during the first two months of the year," the source added

"Those deals took a lot of liquidity out of the market, which will now have to resume a normal pace with the more traditional deals. The equity sponsors were getting way too aggressive.

"This correction is necessary if we are to have a good run for 2005," the source added.

"There are a lot of big deals in the works right now."

The run of outflows

Another sell-sider was focused on the negative technical forces now at play in high yield, particularly the nine consecutive outflows from high-yield mutual funds reported by AMG Data Services, amounting to more than $5 billion of net outflows thus far into 2005.

The most recent weekly report had $196 million draining from the market for the week to April 13.

This sell-sider said that it is necessary to turn back the calendar almost half a decade in order to track a longer consecutive run of outflows: 13 consecutive negative weeks from Sept. 22, 2000 to Dec. 15, 2000.

Ziff Davis prices wide but holds steady

Monday's only completed deal was Ziff Davis Media's restructured $205 million of seven-year senior secured floating-rate notes (B3/CCC+) which priced at par to yield three-month Libor plus 600 basis points, 75 basis points wide of the 500 to 525 basis points price talk. Bear Stearns & Co. ran the books for the debt refinancing deal. Call protection was extended to two years from 18 months.

One informed source told Prospect News late Monday that the new Ziff Davis floater, when released for trading in the secondary market, was bid at par.

Talk on Brown Shoe

Meanwhile Brown Shoe Co. Inc. talked its $150 million offering of seven-year senior notes (B1/BB-) at 8½% to 8¾%. The deal is expected to price on Tuesday via Banc of America Securities.

Elsewhere two roadshow starts were heard.

A roadshow will take place during the present week for Compagnie Generale de Geophysique's $150 million offering of 10-year non-call-five senior notes (Ba3/BB-) via Credit Suisse First Boston and BNP Paribas.

The Paris, France-based provider of geophysical services to the petroleum industry will use the proceeds to repay debt.

And Quincy, Ill., compressor manufacturer Gardner Denver Inc. began a roadshow on Monday for its $125 million offering of eight-year non-call-four senior notes (B), via Bear Stearns & Co. and JP Morgan.

Proceeds will be used to help fund the acquisition of Thomas Industries Inc., a Louisville, Ky., compressor company.

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