Williams unit plans deal; GM, Delphi continue rise on UAW accord

By Paul Deckelman

New York, June 12 - Williams Partners LP, a unit of Tulsa, Okla.-based natural gas and pipeline operator Williams Cos. Inc., was heard by high yield syndicate sources Monday to have begun marketing a $150 million five-year bullet issue, along with a common units deal, to fund its acquisition of gas assets from its parent.

The sources also saw FleetPride Corp. getting ready to hit the road to sell an offering of eight-year notes, to help repay debt incurred when the company was recently bought out.

And details emerged on Libbey Glass Inc.'s issue of senior subordinated secured pay-in-kind notes which the Toledo, Ohio-based glass tableware manufacturer priced Friday as part of its restructured two-part $408 million note sale.

In the secondary market, the bonds of General Motors Corp. and GM's former parts subsidiary, Delphi Corp., continued to firm, carrying forward the momentum they exhibited on Friday on the news that the bankrupt Troy, Mich.-based parts maker Delphi had reached an accord with GM and with the United Auto Workers union on extending the program of buyouts Delphi is offering to its hourly workers in hopes of cutting its labor costs.

Bonds of Mirant Corp. were seen firmer - and those of NRG Energy Inc. were seen easier - after Mirant, under pressure from its shareholders, abandoned its efforts to acquire NRG. The latter company had opposed Mirant's offer anyway.

And there were some gyrations going on in the bonds of Sea Containers Ltd. after the Hamilton, Bermuda-based maritime container company and ferry operator announced that it had agreed to sell its Baltic Sea ferry business - though for less than the sums recently bandied about the market and in the financial press - and also disclosed some credit facility covenant problems.

Williams Partners launches $150 million

Williams Partners announced plans to sell $150 million of five-year senior unsecured notes, and to concurrently sell 6.6 million common equity units representing limited partner interests. Junk market sources said that the equity deal would likely be priced on Wednesday and the bonds - being marketed via a roadshow that began Monday - will probably come to market Thursday via joint book-running managers Citigroup and Lehman Brothers. The non-callable bonds are being sold to investors under Rule 144A.

Proceeds from the two offerings will be used to fund Williams Partners' purchase for $360 million of a 25.1% stake in Williams Four Corners LLC, another subsidiary of Williams Cos. A source said that depending on how much money was raised from the equity offering, some of the bond deal proceeds might also go to general corporate purposes.

FleetPride plans $150 million

Also heard joining to forward calendar was another $150 million offering - this one a tranche of eight-year senior notes for FleetPride Corp., a Woodland, Tex.-based distributor of aftermarket heavy-duty truck and trailer parts. FleetPride was recently acquired by Investcorp, Banc of America Capital Investors, and members of the company's management team, on undisclosed terms, from an investor group led by Aurora Capital Group. The bond deal proceeds will repay senior unsecured bridge loan debt which partially financed that acquisition.

The syndicate sources said that the Rule 144A deal, non-callable for the first four years after issue, is being brought to market via joint bookrunners Banc of America Securities and Deutsche Bank Securities. It will be marketed to potential investors via a roadshow that starts Tuesday, with pricing expected sometime late next week.

Also in the primary market, participants heard details emerge on the $102 million of PIK notes sold Friday by Libbey Glass as part of its two-part bond deal late Friday. The company disclosed those details in a filing with the Securities and Exchange Commission.

The 51/2-year notes were priced with a 16% coupon and were sold at 98, and came with warrants for 3% of the company, exercisable at a 10% premium over the average market price of Libbey common stock over a specified number of trading days before issuance, the filing said.

The PIK notes were part of the restructured two-part offering that priced Friday via bookrunners JP Morgan and Bear Stearns and co-manager BNY Securities. The company also priced a $306 million tranche of five-year senior secured second-lien floating-rate notes (B2/B) at six-month Libor plus 700 basis points. They priced at 98.00 for a 756 bps discount margin. Proceeds of the offering will go to fund Libbey's buyout of its partner in a Mexican joint venture, and to repay debt.

HealthSouth floaters dip in trading

Traders said that they did not see either tranche of the new Libbey bonds trading around on Monday. One said that the only recently priced paper he did see in a fairly quiet session was HealthSouth Corp.'s new two-part offering of senior notes, which also priced on Friday. He said that the Birmingham, Ala.-based outpatient surgery, rehabilitation and diagnostic clinic operator's new 10¾% notes due 2016 "hung in there" at 98.75 bid, better than its 98.505 issue price. However, he saw its floating-rate notes due 2014, which had priced at par, "trading wrapped around issue or off a touch," before finishing down about ¾ point at 99.25 bid, 99.75 offered.

Junk weak

Apart from that, he said, "the overall tone that I could see was of weakness" on the back of the continuing slide in stocks, with the Dow Jones Industrial Average finishing off nearly 100 points on the day due to late slippage, "and the [government] bond market dead flat."

He said that "high yield was quiet, with a little buying in the morning, but from what I could see, it just softened up." He said that among the sectors he regularly watched, "there were no major movers and no major change from opening to close on a lot of the paper."

Autos head higher

One area where there was some activity going on - to the upside, in fact - was in the autos, with GM leading the way.

While one trader saw GM's benchmark 8 3/8% notes due 2033 doing no better than just "hanging in," and holding steady at the same 77 bid, 79 offered level he had seen the bonds at on Friday, and its General Motors Acceptance Corp. financing unit's 8% notes due 2031 likewise staying put at 95 bid, 96 offered - though he said "that's good" compared with declines elsewhere - another trader saw the 8 3/8% notes at 77.5 bid, up half a point, while GM's 7 3/8% notes due 2013 advanced all the way to 81.25 bid from 78.5 offered on Friday.

A market source at another desk saw those '13s at 81.5, which he called up almost two points, while its 7.40% notes due 2025 were seen up nearly a point at 72 bid. However, the GMAC notes had only edged up to 94 bid, up half a point, at that desk.

Another source saw them a little higher, at 94.875 bid, up from prior levels around 94.5, although here and there were "odd lot trades outside of those levels."

The second trader saw Delphi's 7 1/8% notes due 2029 at 82 bid and its 6.55% notes slated to come due on Thursday at 86, both up a point on the day, while its 6½% notes due 2013 rose to 82.25 bid from 81.5 previously.

Delphi and GM were seen continuing to benefit from Friday's announcement by Delphi that it had reached agreement on an expanded buyout program covering all 22,000 of its UAW-represented hourly workers - the majority of its more than 30,000 unionized hourly employees.

Delphi said that Friday's agreement greatly expands the early retirement incentives announced by the company, the UAW and GM in March - and effectively means that all UAW-represented employees will be offered something if they want to leave the company, which is seeking to drastically reduce its labor costs as it reorganizes under Chapter 11 by slashing the size of the workforce covered by costly labor pacts.

The agreement announced in March offered retirement incentives for workers with at least 27 years of service, totaling about 13,000 of its 33,000 total hourly workforce, and offered another 5,000 workers an opportunity to return to GM, which owned Delphi until the latter's spin-off in 1999. The new agreement would offer lump-sum buyouts of $140,000 to workers with at least 10 years of service, while those with less than 10 years would receive $70,000 to leave the company and give up all benefits except for vested, accrued pension benefits.

Even though GM will have to put up much of the money being offered to the Delphi workers, it is worth it to the giant carmaker, which wants to keep the peace between Delphi and the latter's unions, who have threatened to strike if Delphi makes any unilateral move to abrogate their union contracts and impose a less-generous pay scale. Delphi asked the bankruptcy court overseeing its reorganization for permission to do that, and there have been several days of hearings, but no decision from the judge yet.

Mirant higher, NRG lower

Elsewhere, Mirant's bonds were up after the Atlanta-based power generating company said it would scrap its efforts to try to take over its Princeton, N.J.-based industry rival NRG. The latter had resisted Mirant's efforts ever since the May 30 announcement of Mirant's nearly $8 billion offer, which NRG said was inadequate, relied too heavily on Mirant's relatively weak stock as currency, and came at a time when there is no incentive for NRG to sell out. Mirant's own shareholders were annoyed with the proposal, feeling the company should better use its resources to sell itself, and the credit rating agencies expressed skepticism about the offer, which would have been largely debt funded had it gone through.

Mirant Americas Generating Inc.'s 8½% notes due 2021 rose to 97 bid and its 9 1/8% notes due 2031 firmed to 100.75 bid, each up a point on the news, while the MAGI 8.30% notes due 2011 were at 101 bid, up half a point. Bonds issued by other Mirant subsidiarioes showed smaller increases.

NRG's bonds initially fell solidly, its 7 3/8% notes due 2016 at 97.5 bid at midday, down ¾ point, but by the day's end it had crept back up to 98.125, only down about 3/8 point, about in line with the company's 7¼% notes due 2014.

Sea Containers volatile

Sea Containers' bonds were bouncing around in choppy waters after the company announced plans to sell its ferry operations for about $594 million - less than the $630 million figure that was generally expected and well down from recent estimates that could peg its take ah high as $670 million.

Sea Containers also announced some potential covenant problems, and said it was in talks with its various lenders and creditors.

A source initially put the bonds lower, with its 12½% notes due 2009 falling to 97.25 bid from 99 earlier and its 10½% notes due 2012 dipping to 96.25 from 97. He said that the market seemed "confused" about the impact of Sea Containers' lengthy announcement, which also included updates on its general financial condition.

Another trader, though, saw the bonds actually blip higher, although he said that by the end of the day, "they'd run up a little bit, but gave it all back and closed flat" to their opening levels, with the 7 7/8% notes due 2008 ending at 94.5 bid, 95.5 offered. Another source, however, put that particular bond up a little on the day at 95.5 bid.

Se Containers' New York Stock Exchange-traded shares sank $1.15 (15.23%) to $6.40 in busy trading of 719,000 shares, almost twice the usual turnover.

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