MGM moves up on asset-sale reports; Ford gains on debt cutting; new Frontier bonds better; Ventas slates deal

By Paul Deckelman and Paul A. Harris

New York, Apr. 3 - MGM Mirage's bonds were seen several points higher across the board on news reports that the Las Vegas-based gaming operator has hired Morgan Stanley to help it look into selling some of its casino properties, particularly those in Detroit and Biloxi, Miss.

Ford Motor Co.'s bonds, and those of its Ford Motor Credit Co. auto-loan financing arm, were seen mostly quoted higher as the Number-Two domestic carmaker announced the successful completion of its recent tender offers and stock conversions, which taken together let Ford slash its debt load by nearly 40%.

Ford was seen also giving a lift to sector peer General Motors Corp., whose bonds rose by about a point all around.

Hertz Corp.'s bonds continued to firm, perhaps helped by the news that its lenders have okayed the Parsippany, N.J.-based car-rental leader's request to buy back some of its term loan debt.

Sprint Nextel Corp.'s bonds remained among the more active issues, a list led by Freeport-McMoRan Copper & Gold Inc.

Frontier Communications Corp.'s newly issued bonds were seen to have traded up from the levels at which they priced on Friday. Meantime, the company's outstanding debt - issued back when Frontier was still known as Citizens Communications Corp. - was seen having firmed.

In the primary arena, healthcare real estate operator Ventas Inc. announced a financing plan which includes a split-rated issue of seven-year notes, as well as an equity offering.

Market indicators keep firming

Back among established credits, a trader saw the widely followed CDX Series 12 High Yield index of junk bond performance - which moved up by ½ point on Friday - gain another ¼ point on Monday to end at 73¾ bid, 74¼ offered.

The KDP High Yield Daily Index meantime was up 7 basis points to 53.91, although its yield widened by 3 bps to 13.16.

In the broader market, advancing issues stayed ahead of decliners by a four-to-three margin.

Overall market activity, measured by dollar-volume totals, fell 29% from the levels seen in Friday's session.

"Not much to report," was how one trader described Monday's session, while a second, also calling things "very quiet," noted that "it's vacation week," with many participants taking the week off, as their kids' schools will be closed in numerous places because of the unusual confluence of religious holidays this week - pre-Easter observances leading up to Good Friday and Easter Sunday coinciding with Passover, which begins on Wednesday night and continues on for the next eight days. The Securities Industry and Financial Markets Association has recommended an early close for U.S. fixed-income markets on Thursday, and a full market close on Friday.

Another trader noted that junk market volume, as measured by the Trace bond-tracking service "just crept over $1 billion on the day" as of late afternoon, heading for the close, so there was 'fairly light activity.

He pointed out that "a lot of the news headlines this morning were about Ford, the results of their tender." He said that Ford's corporate bonds "crept up," while Ford Credit and sector peer GMAC LLC "kind of hung in there."

The broader market, he continued, "kind of felt unchanged, even when equities were down by 180" points on the Dow Jones Industrial Average. In actuality, the bellwether index fell as much as 155 points during the session before coming off its lows to finish down 41.74 points, or 0.52%, at 7,975.85, failing to hold above the psychologically potent 8,000 market it had reached on Friday for the first time in many months. The broader Standard & Poor's 500 index ended down 0.88%, while the Nasdaq composite index fell 0.93%, equity investors worried by upcoming financial reports banks and other companies are scheduled to start releasing in sizable numbers next week. There was also disappointment at the failure of merger talks between computer behemoth IBM Corp. and smaller rival Sun Microsystems Inc.

Even so, the trader said the junk market "really didn't see much of that [negative] follow-through in our market. The broader market was pretty much unchanged.

MGM bonds do Grand on asset-sale reports

A trader saw MGM Mirage's 6% notes due on Oct.1 at 63.5 bid, or a 129% yield to maturity, versus 61 bid on Friday, on volume of $12 million, helped by the news that MGM is exploring possible sales of casino assets, particularly its Detroit and Biloxi, Miss. properties.

He said the MGM 6¾% notes due 2012 pushed up to 41.5 bid from 38.5 Friday, on $10 million of trading, while its 8 3/8% notes due 2011 jumped to 24.5 bid from 18.75, commenting "that really moved." Volume was $8 million.

Another participant quoted the '09s at just under 66, calling that a 4 point gain on the session, while seeing its 6 5/8% notes due 2015 just below the 40 mark, up 2 points on the day.

Those bonds - which were already moving up late last week on news reports that MGM was in talks with Colony Capital LLC on possibly getting the latter firm to make an investment in MGM's financially troubled CityCenter joint-venture development project on the Las Vegas Strip - firmed further Monday on news reports in The Wall Street Journal and elsewhere indicating that MGM had hired Morgan Stanley to evaluate bids on its casinos in Michigan and Mississippi. An unnamed source claimed that potential buyers have expressed interest in the MGM Grand Detroit, the Beau Rivage in Biloxi and the Gold Strike in Tunica.

The asset sales could help MGM reduce its debt, which in turn could help it complete the ambitious CityCenter project. MGM has been working on a funding plan for the project and is hoping to have something in place by April 13.

Besides the stories indicating Colony Capital's interest in the project, which MGM is jointly building with Dubai World, some reports said that Australian gaming operator Crown Ltd. is also interested in such a deal.

Ford has a better idea

That idea: spend money and issue stock to cut debt and reduce interest costs. A trader saw Ford's 7.45% bonds due 2031 up a point to 33.5 bid, 34.5 offered on the news that the company had cut its debt by some $9.9 billion, or 38%, through its recent tender offers and convertible debt conversion.

He also saw General Motors' 8 3/8% benchmark bonds due 2033 a point better at 11 bid, 13 offered.

A second trader quoted the Ford 7.45s at 34.5 bid, 36.5 offered, little changed from Friday, while its 7% notes due 2013 rose to 69 bid, 71 offered from Friday's close around 66, although it was little changed from the final round-lot price earlier Friday.

Another trader saw the Ford long bonds relatively little changed on the day at 34 bid, down ¼ point on the session, on volume of $2 million. He also saw Ford's 6 5/8% bonds due 2028 move up to 30.75 bid from 28.5 on Friday.

And he saw Ford Credit's 7 3/8% notes maturing on Oct. 28 at 91.5 bid, or a 24% yield to maturity, versus 90.75 previously.

Ford announced that under the restructuring transactions that it completed, it reduced its overall debt by $9.9 billion from $25.8 billion at Dec. 31, 2008 - about 38% - and lowered its annual cash interest expense by more than $500 million, based on current interest rates.

As part of the debt initiatives, the Dearborn, Mich.-based carmaker received tenders for approximately $4.3 billion of its 4.25% senior convertible notes due Dec. 15, 2036. Ford will use $344 million to pay a cash premium to convertible note holders who validly tendered. Approximately $579 million of the convertibles remain outstanding.

In addition, the company is using $1.1 billion in cash to purchase $3.4 billion of its unsecured non-convertible debt securities. Approximately $5.5 billion of the notes remain outstanding following the tender.

The convertible conversion offer and the notes tender offer expired on April 3.

Also, on March 23, the company used $1 billion, up from an initially proposed amount of $500 million, to purchase $2.2 billion of its term loan debt at a price of 47. Approximately $4.6 billion of the term loan remains outstanding.

Ford's good news helped to tow others in the auto sector higher. A trader saw Ford domestic arch-rival General Motors' 8 3/8% benchmark bonds due 2033 a point better at 11 bid, 13 offered.

The troubled Detroit giant's 7.20% notes due 2011 bonds meantime gained 2 points to 16 bid, although a market source saw its 7 1/8% notes due 2013 a point lower at 12.

GM financing unit GMAC's 6 7/8% notes due 2012 gained more than a point to the 58 level.

Hertz continues higher

Also in the autosphere, Hertz Corp.'s bonds - which have been firming for most of the last two weeks, except for a minor setback for a session or so following a ratings downgrade from S&P last week - were again seen getting better on Monday, although this time, the main mover was Hertz's 10½% notes due 2016, rather than last week's darling, the 8 7/8% notes due 2014.

A trader saw the 101/2s at 50.5 bid, well up from 48 on Friday, on some $5 million traded. He saw the 8 7/8s - which in the past roughly 10 days have moved up to the lower 60s from staring levels below 50 - as having firmed another point to 64 bid, although he saw only one sizable trade at that level, and even that trade could not be considered a round-lot transaction.

Hertz's bonds have been firming since late March on first speculation, and then news that the company was seeking permission from its lenders to modify its credit facility covenants to allow the company to purchase term loan debt. Hertz disclosed in a Monday filing with the Securities and Exchange Commission that it had completed the amendment to its credit facility that allows it to repurchase up to $500 million of term loan paper through tender offers. Under the amendment, the company has one year to repurchase the term loan debt but can only execute four tenders during that one-year period. In order to be able to tender for the debt, the company has to meet a minimum liquidity test of $1 billion, split between cash and its asset-based revolving credit facility.

Hertz also continued to ride the positive momentum from its having won the bankruptcy auction last week for the assets of former rival Advantage Rent-A-Car, including 25 leases and airport concession agreements, for $30.3 million. The company beat out another competitor, Enterprise Rent-A-Car to also obtain Advantage's web site, as well as some of its trademarks in the auction.

Freeport leads actives - again

As usual, Phoenix-based copper and precious metals miner Freeport McMoRan's bonds placed at or near the top of Monday's most actives list.

A trader saw its 8 3/8% notes due 2017 at 94.625 bid, up 1/8 point, on $27 million traded.

And he saw the company's floating-rate notes due 2015 move up to 84.75, a 1½ point gain, exclaiming: "Wow. That's a nice pop," on $27 million of the bonds traded.

Sprint trading actively

A trader saw Sprint Nextel's bonds continuing to trade actively, a carryover from last week's activity, when the Overland Park, Kan.-based wireless telecommunications company's notes traded mostly higher -- even in the face of Friday's outlook downgrade to negative outlook by S&P. Traders cited short-covering as one possibility, while others pointed out recent speculation among analysts and in the financial media that the company might tender for the Nextel Communications Inc. legacy debt left over when Nextel merged with the company then known as Sprint Corp. to form Sprint Nextel.

Also helping to keep investor interest in Sprint Nextel at a high level was the buzz among some analysts and in the media that Sprint Nextel might be able to sell wireless assets - or possibly even sell itself - to one or more big cable-TV industry players like Time Warner Cable Inc. or Comcast Corp., as the cablers look to beef up their wireless offerings so as to better compete with the old-line telephone companies like AT&T Corp. and Verizon Communications Inc. as one-stop supermarkets for a wide range of broadband services including traditional voice, wireless, data, internet access and TV and video.

The trader saw Nextel 6 7/8% notes due 2013 as having been among the five or 10 most actively traded junk issues, with $14 million traded. He saw the bonds unchanged at 60 bid. However, at another desk a market source pegged those bonds as much as 4 points higher on the day at 64, in busy dealings.

The first trader also saw Sprint Nextel's 6% notes due 2016 at 76 bid, up 1/8 point, though on only $3 million traded.

There was more activity in the company's Sprint Capital Corp. financing unit - its 6 7/8% bonds due 2028 were unchanged at 63.5 bid, on $11 million traded, while its 8 3/8% notes due 2012 eased ½ point to 91.75 bid, on $9 million.

But at another desk, the latter issue was seen up nearly a point on the day at 93 bid, while the 6 7/8s, quoted at 63.5, were called up 1½ points.

Frontier's new bonds move up

Also in the telecom sector, a trader said Frontier Communications' new 8¼% notes due 2014 were going home at 92.25 bid, 92.75 offered, up from the 91.805 price at which the Stamford, Conn.-based telecom company priced its $600 million of paper on Friday - doubled in size from the originally planned $300 million - to yield 10 3/8%.

Another trader quoted the new bonds having gotten as good as 92.5 bid, and said that trading volume in the new issue was an astounding $87 million.

He also saw the company's established 9¼% notes due 2011 - issued by Citizens Communications back before Citizen changed its name to Frontier last summer - firm smartly to 104.375 bid from 102, on $11 million traded, although the Citizens 9% bonds due 2031 actually eased a little to 68.875 bid from 69, on $9 million traded.

AES deal seen firmer

A trader meantime saw the AES Corp. bonds which priced early last week "creeping up a little," to go home at 94.25 bid, 94.75 offered, up from last week's late levels around 94 bid, 94.5 offered.

AES, an Arlington, Va.-based global power producer, priced a $535 million offering of 9¾% notes due 2016 - upsized from the originally planned $350 million - last Monday at 93.977, to yield 11%. Those bonds hovered around or slightly above their issue price during all of last week's trading.

Ventas plans split-rated $200 million

In the primary, Ventas Realty, LP and Ventas Capital Corp. plan to price a split-rated $200 million issue of notes mirroring their 6½% senior unsecured notes due June 1, 2016 (Ba1/BBB-/BBB-) on Tuesday morning.

Banc of America Securities LLC is the lead bookrunner for the notes offer that is being run off of the high-yield syndicate desk.

Citigroup and UBS Investment Bank are joint bookrunners.

The mirror notes will be non-fungible with the existing 6½% notes.

Proceeds along with proceeds from a concurrent common stock offering are expected to be used to fund Ventas' cash tender offers for outstanding senior notes due 2010, 2012, 2014 and 2015, with any remaining proceeds to be used repay debt and for general corporate purposes.

The original $125 million issue priced at 99.50 to yield 6.566% on Dec. 6, 2005, a $75 million add-on priced at 99.50 to yield 6.567% on Dec. 9, 2005. The total existing issue size is $200 million.

Qwest ahead

Qwest Communications International Inc. is also expected to roll out a split-rated deal in the next couple of days, according to a trader from a high-yield mutual fund.

This source had no information beyond the timing.

Sell-side sources have anticipated a notes offer from Qwest for several weeks.

There is speculation on the Street that the Denver-based telecom, which is laboring beneath $14 billion of debt, could be acquired.

Elsewhere on Monday sources reiterated the believe that HCA Inc. will soon re-appear in the new issue market with an offering - possibly sizable - of first-lien notes.

Banc of America Securities is expected to be involved.

In mid-February the company priced a $310 million issue 9 7/8% senior secured second-priority notes due 2017 (B2/BB-/B+) at 96.673 to yield 10½%.

Abbreviated week

The backdrop is positive for increased activity in the high-yield primary market, with conspicuous cash inflows to junk and recent strength in the stock market, sources said Monday.

However a significant increase may not materialize this week, a syndicate official said during the New York morning.

With the Monday session in the books, there are just two full trading days and one abbreviated session remaining before the market closes for Good Friday and the Easter holiday weekend.

In the interim, new issue activity is apt to remain muted, sources say.

"We could see a drive-by," a syndicate official said.

"A well-known issuer might even be able to do a Wednesday deal," the source added.

However roadshow announcements are unlikely during the remainder of the pre-Easter week, the source said, and added that deals marketed via roadshows - which represent less than 30% of the 2009 primary market's year-to-date business - will likely continue to be the exception as opposed to the rule, until Easter and beyond, the official added.

Frontier 'squeezed'

Frontier Communications Corp.'s massively upsized $600 million issue of 8¼% senior unsecured bullet notes due 2014 (Ba2/BB) which priced at 91.805 to yield 10 3/8% in a late Friday drive-by, received a less-than stellar review on Monday from a trader for a high-yield mutual fund. The deal was increased from an original size of $300 million.

Spotting the notes at 92 bid, "basically at issue price," the trader said that "not much was left on the table for investors," in pricing the deal.

"They're squeezing the life out of these things," the trader lamented.

"They announced $300 million, then saw extra demand and just filled it up.

"It's trading around issue price, so there can't have been that much demand," the trader added.

David Whitehouse, senior vice president and treasurer at Frontier Communications, said during a Monday afternoon telephone call that the deal was oversubscribed but declined to specify by how much.

Whitehouse added that the company was pleased by the execution the JP Morgan-led deal received.

Working on deals

Meanwhile the high-yield syndicates are preparing deals for the near-to-intermediate term, sell-side sources said on Monday.

The only names that were mentioned were Qwest and HCA. However other offerings will be rolled out, pending market conditions, sell-siders say.

As to the state of those market conditions, some sources were seeing the glass half-full while others were seeing it half-empty on Monday.

Although the Dow Jones Industrial Average ended the day slightly more than half a percent lower, one high-yield syndicate official contended that this softness comes on the heels of a month-long rally which lifted stocks 20%.

Couple that with the recent reports of strong cash inflows to high-yield mutual funds, as reported by AMG Data Services - -$1.8 billion over the past two weeks - and the high-yield market appears poised to continue to rally, the official asserted.

However another banker was troubled by Monday's move lower in stocks, and said that continued strength in the equity markets is certainly a prerequisite for a healthy high-yield market.

Stephanie N. Rotondo contributed to this report.

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