Ford bonds, other autos up on CEO news; Lyondell slates giant deal

By Paul Deckelman and Paul A. Harris

New York, Sept. 5 - The surprise announcement from Ford Motor Co. that chairman and chief executive officer William Clay Ford Jr. has given up the latter post - with Ford bringing in long-time Boeing Co. executive Alan Mulally to run the troubled carmaker - sent Ford's bonds up Monday and contributed to a general firmness in the automotive sector.

One auto name seen particularly robust was Metaldyne Corp.'s 11% senior subordinated notes due 2012, which were being quoted up about 2 or 3 points from the levels to which they had fallen Friday following the official announcement that the company is to be bought and those bonds tendered for - but at sharply lower levels.

Outside of the autosphere, Cenveo Corp.'s bonds were seen lower as the Stamford, Conn.-based printing company raised its unsolicited - and apparently unwelcome - bid for rival Banta Corp., which so far has rejected Cenveo's overtures. Banta declared last month that Cenveo's offer for the company "merits no further discussion." Cenveo declared that it has lined up financing commitments to fund its takeover bid, answering a key Banta objection.

A market source marked the broad market a quarter of a point higher on Tuesday, citing news that Ford Jr. turned over the wheel of Ford to Mulally.

The source added that at the long end of the maturity curve Ford bonds were a point higher on the news.

Meanwhile the post-Labor Day primary market began to take shape.

Although no issues were priced during the Tuesday session, two launches of sizable deals were announced, with more suspected of being close at hand, as one syndicate source forecast that the junk market would see issuance of between $30 billion and $35 billion by year-end.

Berry Plastics launches

Berry Plastics Holding Corp. will begin a roadshow on Wednesday for its $750 million two-part offering of eight-year second-priority senior secured notes (B2/CCC+).

The Evansville, Ind., manufacturer of plastic packaging products plans to sell a tranche of fixed-rate notes and of floating-rate notes, with tranche sizes to be determined.

Deutsche Bank Securities, Credit Suisse, Citigroup and JP Morgan are joint bookrunners for the acquisition financing.

Impress Metals lines up €1 billion

Meanwhile in Europe a roadshow will get underway on Wednesday in Amsterdam for Impress Holdings BV (Impress Metals)'s planned €1 billion two-tranche offering of notes.

The offering will be comprised of a €730 million tranche of seven-year senior secured floating-rate notes (B1) and a €270 million tranche of eight-year fixed-rate senior subordinated notes (B3).

JP Morgan is the bookrunner for the Deventer, Netherlands-based can-maker's deal.

A portion of the proceeds will be used to repay term debt, including funds drawn down to finance the company's recently completed acquisition of the European aerosol and food can operations of US Can.

Lyondell expected this week

One source told Prospect News that another mega-deal, Houston-based Lyondell Chemical Co.'s $1.775 billion offering of senior unsecured notes, is expected to launch later this week.

JP Morgan will lead the deal in a syndicate that includes Morgan Stanley and others.

Proceeds from the notes will be to fund the tender for $849 million of the company's 9 5/8% senior secured notes due May 1, 2007, and to repay part of the seven-year term loan used to finance Lyondell's acquisition of Citgo Petroleum Corp.'s 41.25% interest in Lyondell-Citgo Refining LP.

Agile in Asia, Europe and U.S.

Elsewhere, China's Agile Property Holdings Ltd. will begin a roadshow Wednesday in Hong Kong for its $350 million offering of seven-year senior notes (Ba3/BB).

The Rule 144A/Regulation S deal, via Morgan Stanley and HSBC, will subsequently be marketed in Europe and the United States.

Proceeds will be used to fund the acquisition and development of land, and for general corporate purposes.

Agile is a property developer in the Pearl River Delta region in China.

Junk versus bank loans

One of the abiding stories in the leveraged markets beginning in late 2005 and running through much of 2006 to date has been the tendency among issuers to favor the bank loan market over the high-yield bond market.

In some cases prospective bond issuers have pulled or downsized their high-yield note offerings, electing to raise capital instead in the leveraged loan market.

Among the reasons that sources have cited is increased demand among investors for bank loan paper creating more favorable terms for borrowers in the loan market than in the junk market.

As the first post-Labor Day capital markets session unwound Prospect News contacted two sources - one at an investment bank, the other a buy-sider, and both tuned into junk bonds as well as bank loans - to see if this reported flight to the loan market from the junk market remains in play.

The buy-sider reasoned that borrowers may once again be looking more closely at raising capital in the junk market.

"When you have a flat yield curve, as a borrower you ought to be terming out debt," the buy-sider said.

"The junk market doesn't seem like a bad place. It's almost strange that so much financing came in the loan market because the returns in the high yield market have been okay. The economy looks okay. The default outlook is okay. The Fed is theoretically done raising rates, and that's okay.

"Those factors suggest that the high-yield market should be just fine."

The buy-sider said that the high-yield market has been underappreciated by borrowers during much of 2006.

However that may be changing, the source added, citing knowledge of "between six and eight large, billion-dollar plus junk bond deals expected to come in the fall, all of them LBO financings.

"I don't see why the high yield market should be particularly reluctant to take down that paper," the source said.

Meanwhile a sell-sider who, during the mid-summer sell-off in the leveraged loan market, said that borrowers had begun taking a closer look a the junk market, said Tuesday that at present the balance between leveraged loans and high-yield bonds is now more even, primarily because of a larger high yield pipeline.

This source anticipates that during the run-up to the end of the year the junk market will see between $30 billion and $35 billion of issuance, which would easily take 2006 over the $100 billion issuance threshold.

If the junk market tops $100 billion of issuance for 2006, as is roundly projected to happen, it will only be the fifth time that it will have done so since 1992.

Lyondell little moved, despite news

In the secondary market, the news that Lyondell will sell nearly $2 billion of new bonds and take out its existing 9 5/8% notes had little impact on that bond or the company's other outstanding debt.

Lyondell, a trader said, "doesn't move any more. They've been doing so much reshuffling of their balance sheet, taking out all of that big-coupon [old] debt with new stuff that it all trades right around the call [price], and I'm seeing no change today."

Lyondell's 9 5/8% notes that are to be tendered for were seen steady at 101.875, the anticipated take-out level.

There was "nothing doing" in the credit, another trader said, quoting the 9 5/8s at 102 bid, 102.5 offered, which he called a gain of ¼ point. The company's 6½% notes due 2008 were unchanged at 102, while its 10½% notes due 2013 continued to hover about the 110 area.

Ford CEO steps down

The big news of the day, a trader said, was Ford's afternoon announcement that its namesake chairman and CEO, Bill Ford, will relinquish the latter post after five years of fighting a losing battle trying to stabilize the Number-Two American carmaker's operations and finances.

Ford "popped up here," a trader said. "It was the big mover."

He quoted the company's flagship 7.45% notes due 2031 as having moved up a point or more after the news of the CEO shakeup hit the tape late in the session, to end around 80 bid, 80.75 offered. If the bonds were trading around 80.25, he said, "that would be about a two point gain" from the levels they held late last week. Comparisons are difficult due to the thinness of real trading in Friday's abbreviated pre-holiday break and the closure of U.S. debt markets on Monday.

The trader also saw the company's Ford Motor Credit Co. financial arm's 7% notes due 2013 up 1¼ points on the session at 94 bid, 94.75 offered.

The news that the great-grandson of company founder would relinquish day-to-day control of the company after five years at the helm - although he will stay on as chairman - followed a week in which all kinds of other scenarios about Ford's future were being bandied about. These included news reports and market rumors that it might sell a substantial stake in its valuable and profitable Ford Credit business , might sell its prestigious but money-losing Jaguar operations, might partner up with foreign rivals the way chief competitor General Motors Corp. is trying to do, or that the Ford family - which controls a commanding 40% of the company's voting power - might decide to take Ford private, giving the top leadership greater flexibility to solve the company's problems without having to answer to public stockholders. Bill Ford's announcement was unexpected by most in the marketplace.

Perhaps just as surprising as the fact of the Ford heir's resignation from the day-to-day running of the company is the identity of his replacement: Alan Mulally, a man of extensive industrial corporate experience - but no direct background in the automotive industry, which usually develops its senior management cadre from within. He comes to Ford after nearly 40 years with aerospace giant Boeing, and is widely credited with directing the resurgence in the latter company's commercial plane division after the sharp decline that followed the 9/11 attacks.

While analysts called Ford's action of going outside the relatively insular automotive industry to pick a CEO a radical step, the move was seen as an admission by Ford of the need for bold action to keep the struggling company's situation from deteriorating much further and turning its fortunes around.

They noted that in helping Boeing bounce back from the downturn that hit the airline industry - and supplier companies like Boeing - in the aftermath of 9/11, Mulally faced challenges not unlike those confronting the venerable U.S. auto industry, such as the loss of market share to aggressive foreign rivals like Airbus, the difficulties of dealing with established industrial unions, and the need for new and innovative products. In the latter case, he was project manager for Boeing's successful 777 jetliner and oversaw development of its ground-breaking 787 model. He also overhauled Boeing's manufacturing process - ironically using auto factories' production lines as his model.

GM, auto suppliers better

News that a new man will be in the drivers' seat at Ford was cited by traders as an energizing development that helped the auto names pretty much across the board.

General Motors' benchmark 8 3/8% notes due 2033 were seen up 2 points on the day, a trader said, at 85.5 bid, while its General Motors Acceptance Corp. financing arm's 8% notes due 2031 were up a point at 101.25 bid, 102.25 offered.

Among the supplier names, a trader said "the parts makers were stronger."

He cited such names as Cooper Tire and ArvinMeritor Inc. The latter's 8¾% notes due 2012 were a point better at 98.75 bid, 99.75 offered. He also saw Goodyear Tire & Rubber Co.'s 9% notes due 2015 up ½ to ¾ point at 100.25 bid,, 101.25 offered, citing the fall in the prices of petroleum and other chemical feedstock commodities in recent days.

Metaldyne moves back up

A trader quoted Metaldyne's 11% notes as having moved back up on Monday to levels around 93.5 bid, 94.5 offered, which he called a 3½ to 4 point gain over the levels to which the bonds fell in abbreviated, but still busy dealings on Friday.

And trading levels were just as intense Tuesday, with a source seeing the bonds actively trading around, at prices ranging from 90 to 96, before settling in around the 93.25 level.

Metaldyne's junior bonds have been bouncing crazily around for several days, rocketing up into the mid-90s last week from prior levels in the upper 70s on speculation - which later turned out to be true - that the Plymouth, Mich. parts maker would be bought by Asahi Tec Corp. in a $1.2 billion deal.

Bondholder assumptions seemed to be that the deal would trigger change-of-control covenants, forcing the company to offer to let the bondholders put those bonds back to it at 101. But the bonds fell back into the upper 80s to around 90 on Friday on the official announcement of the deal - which included a company statement that the 11% notes and its 10% subs due 2014 would be tendered for at a level reflecting their "preannouncement" trading range - in the upper 70s.

Traders said they saw no fresh news out that would explain the rebound back into the mid-90s.

Cenveo steady after Banta

Outside of the automotive area, the news that Cenveo is still pursuing rival printer Banta despite the latter's assertions so far that it wants no part of any takeover bid was seen as a setback by a trader, who took its 7 7/8% notes due 2013 down a point to 94 bid, 95 offered.

Cenveo - the former Mail-Well - first broached the idea of an acquisition to a reluctant Banta last month, offering $46 per share. Banta called the Cenveo bid "highly conditional and ambiguous" and rejected the idea out of hand.

Cenveo on Tuesday announced that it had raised its offer to $47 per share, and also attempted to counter the assertions in Banta's rejection letter that the deal might never take place.

Cenveo said in a letter to Banta which it publicized that it has obtained a commitment from Lehman Brothers and Wachovia to provide financing to allow it to complete the acquisition of all of Banta's outstanding shares.

"We are certain that the commitment removes any purported concerns you might have about our ability to finance the transaction," the Cenveo letter declared.

Low interest in high tech

Traders said that there was little or no movement in such high-tech names as Amkor Technology Inc., Advanced Micro Devices Inc. or SCI-Sanmina to reports - later confirmed by news stories - that high-tech bellwether Intel Corp. will cut 10,500 jobs.

A trader saw Amkor's 9¼% notes due 2016 unchanged at 95 bid, 95 bid, 96 offered.

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