Quebecor bonds, loan lose ground; Tousa, Standard Pacific better; Delphi, Metaldyne firmer

By Stephanie N. Rotondo

Portland, Ore., Jan. 30 - The general marketplace eagerly awaited a decision from the Federal Reserve Wednesday, which resulted in light trading in the bond market.

"In general, activity was on the quiet side in anticipation of what the Fed was going to do," a trader said.

"Everything was slightly better before the Fed decision," another trader said, citing the news that the central bank had cut interest rates again, this time half a percentage point. After the cut announcement, "there was a quick burst; then it went down the drain."

"It was a crazy day," he said. "A lot of people were positioning in front of the Fed [decision]."

Quebecor World Inc.'s corporate and bank debt lost steam during trading. According to one trader, the printer's bonds have been "artificially" high recently, which accounted for the steep losses on the day.

Homebuilders have been feeling a bit better of late - even Tousa Inc., which filed for bankruptcy on Tuesday. Tousa, along with Standard Pacific Corp., both saw their bonds gain about 2 points during the session.

Though still without exit financing, Delphi Corp.'s paper has been slowly but steadily increasing, and Wednesday was no different. Elsewhere in the automotive parts supplier sector, Metaldyne Corp.'s subordinated debt was about 4 points firmer, though it was not clear what caused the move.

Quebecor bonds, loan lose ground

Quebecor World's debt - corporate and bank - slipped during Wednesday's session, with the bonds losing as much as 7 points.

A trader said the printing company's 6 1/8% notes due 2013 were down 6 points to 44 bid, 45 offered.

The trader also noted that CDS traders have "artificially" held up the bonds for the past few days.

Another trader agreed that could be the case, adding, "They do that quite often."

The second trader quoted the 4 7/8% notes due 2008 at 44 bid, 45 offered, which he deemed 7 points weaker. The 9¾% notes due 2015 fell 5 points to 48 bid, 50 offered.

Another trader said that Quebecor's bonds "went on a ride," with its short-dated paper, like the 4 7/8% notes and the 6 1/8% notes, at 44 bid, 45 offered, down 5 points and the longer paper, like its 9¾% notes and 8¾% notes due 2016, at 47.5 bid, 49.5 offered, also down 5 points.

Another trader quoted the 4 7/8% notes at 44 bid, 46 offered, which he called down 7 points on the day.

Trading levels on Quebecor's debtor-in-possession term loan widened as the bid inched lower, a trader said.

The term loan was quoted at 98¾ bid, 99¾ offered, compared to Tuesday's levels of 99¼ bid, 99¾ offered, the trader said.

The $600 million DIP term loan, which just broke for trading this week, is priced at Libor plus 500 bps, with an original issue discount of 98.

Pricing on the term loan was originally expected to be Libor plus 375 bps, based on court documents.

The company's $1 billion 18-month DIP facility also includes a $400 million ABL revolver.

Credit Suisse and Morgan Stanley acted as the lead banks on the deal that is being used to fund operating needs, including wages, benefits and other operating expenses.

Quebecor is a Montreal-based provider of marketing and advertising solutions to retailers, catalogers, branded-goods companies and other businesses, as well as complete, full-service print solutions for publishers.

Tousa, Standard Pacific gain

Tousa's bonds "continued marching up," a trader said, just one day after a bankruptcy filing sparked hope in the hearts of investors.

The trader called the 9% notes due 2010 up another 2 points over the week to around 50. Another trader echoed that figure.

At another desk, a trader said the 9% notes were "up a little" at 50 bid, 52 offered. He added that he did not see much action in the subordinated debt.

Another trader saw the 9% notes at 49 bid, 51 offered, which he said "seems to be the quote. That's where they stuck." He said there was "not a lot of activity in that name."

However, he did see "some activity" in its shorter bonds like the 10 3/8% notes due 2012 at levels between 7 and 7.5.

Another trader saw the subordinated bonds like the 7½% notes due 2011 down a point at 6.5 bid, 8.5 offered, while its senior paper, like the 9% notes, moved up a point at 49.5 bid, 50.5 offered.

A group of subordinated noteholders has objected to Tousa's claim that it urgently needs DIP financing, stating that the filing "seeks approval of DIP financing for an 'emergency' that simply does not exist," - and they have proof that there is substantial cash reserves.

But more importantly, the group alleges that Tousa committed fraudulent conveyance in relation to the settlement for its Transeastern JV. The subordinated group said Tousa subsidiaries were "forced" to grant bank lenders a $500 million guarantee.

"Tousa sacrificed the Tousa subsidiaries," a filing says. "Tousa incurred $500 million in new financing to repay the JV debt, but caused the Tousa subsidiaries to become liable for the full amount of this new debt."

If the group can win its fraudulent transfer case, the subordinated debt holders can "significantly increase" their recoveries, a trader said.

Elsewhere in the struggling housing sector, several rumors are circulating about the fate of Standard Pacific. One trader said he had heard a bundle of buzz but was not sure what was the real deal. Another trader said the scuttlebutt last week was that the Irvine, Calif.-based company would file for Chapter 11 protection sooner rather than later.

"Obviously that was not true," he said, adding that the dirt now is that a debt-for-equity swap - "a la Tousa" - was in the works.

Still, the trader speculated that a bankruptcy would be in the homebuilder's future.

"It's not a question of if; it's a question of when," he said.

The trader quoted Standard Pacific's 6½% notes due 2010 at 68 bid, 70.5 offered, the 7% notes due 2015 at 67 bid, 68 offered and the 5 1/8% notes due 2009 at 77.5 bid, 79.5 offered, all up about a point.

Delphi, Metaldyne firmer

Delphi paper "continues to pick up a bit," a trader said, though the automotive parts supplier is still searching for exit financing.

The trader quoted the 6½% notes due 2013 at 39.5, while another market source placed the 2013 issue at 38.5, up just under 2 points. The source also pegged the 7 1/8% notes due 2029 at 38.5, up half a point.

Meanwhile, Metaldyne's subordinated debt drove up 3 to 4 points, a trader said, placing the 11% notes due 2012 around 50. Another trader called the bonds up 4 points at 51 bid, 53 offered and the 10% notes due 2013 at 73.25, up 2 points.

"I don't quite understand why [the bonds are better]," he said.

Dana modifies term loan

In the rest of the autosphere, Dana Corp. modified its $1.35 billion seven-year term loan B (Ba3/BB) in an attempt to gain some momentum in syndication, according to a market source.

Under the changes, pricing on the B loan was flexed up to Libor plus 375 basis points from original talk at launch of Libor plus 350 bps and the original issue discount was raised to 92 from the initially proposed 97 area, the source said.

Furthermore, hard call protection of 102 in year one and 101 in year two was added to the term loan B. The only time the call premiums don't apply is when it relates to cash flow sweep, the source continued.

Dana's $2 billion exit financing credit facility also includes a $650 million five-year asset-based revolver (Ba3/BB+) that is priced at Libor plus 200 bps, with a commitment fee of 37.5 bps.

Upfront fees on the asset-based revolver are 25 bps for $25 million, 50 bps for $50 million and 75 bps for $75 million.

According to the source, syndication on the revolver "went very well."

Citigroup, Lehman Brothers and Barclays are the lead banks on the deal that will be used to repay the company's DIP credit facility, to make other payments required upon its exit from bankruptcy and to provide liquidity to fund working capital and other general corporate purposes.

Dana is a Toledo, Ohio-based supplier of components, modules and systems to vehicle manufacturers and related aftermarkets.

Sara Rosenberg and Paul Deckelman contributed to this article.

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