Seagate slates deal; Sprint runs up, takeover talk boosts Reliant; GM off on bankruptcy buzz

By Paul Deckelman and Paul A. Harris

New York, Apr. 13 - Seagate Technology International on Monday announced plans to bring an offering of five-year secured notes to market, probably later this week. Primary-side players meantime also heard that HCA Inc. will be coming in with its own secured deal - possibly as big as $1 billion - sometime this week.

Back in a mostly higher, though quiet, secondary market coming back from the three-day holiday weekend, Sprint Nextel Corp.'s bonds were both active and improved by several points, possibly on the news that president Barack Obama will allow U.S.-based telecommunications companies to apply for licenses to provide service to Cuba as part of his effort to reverse the decades-long U.S. embargo on economic dealings with the island nation.

Traders saw Reliant Energy Inc.'s bonds better after an energy industry news service reported that the Houston-based power producer had been in talks with potential acquirer Entergy Corp.

MGM Mirage's bonds were seen mostly unchanged to lower, apparently failing to get the same boost its shares got from news reports indicating its joint-venture partner has floated a plan to save the two companies' ambitious Las Vegas development project from likely bankruptcy.

One of the few notable downsiders on the day was General Motors Corp., whose bonds were seen lower by around 2 points pretty much across the board, as new reports indicated that federal officials are actively pushing GM to develop a bankruptcy plan for use in the event that the troubled carmaker cannot come up with a satisfactory turnaround plan by the current June 1 deadline.

Seagate secured deal

In the primary market, Seagate Technology International will begin a roadshow on Tuesday for a $430 million offering of five-year senior secured second priority notes (Ba1/BB+).

Pricing is expected to take place later this week.

Morgan Stanley is left bookrunner for the Rule 144A for life notes offer. Banc of America Securities LLC is joint bookrunner.

Proceeds will be used for general corporate purposes including the repayment or repurchase of all or some of Seagate Technology HDD's $300 million floating-rate senior notes due Oct. 1, 2009 and other debt.

HCA this week

HCA Inc. is expected to roll out a $500 million to $1 billion-sized offering of first-lien notes this week, according to a buy-side source who added that the amount will likely be predicated upon reverse inquiry.

Citigroup will lead the deal, added the source, who agreed to speak on background.

Banc of America Securities is also expected to be involved.

The Nashville-based health care services provider will use the proceeds to repay some of its $10 billion of outstanding bank debt.

On Feb. 11 HCA priced a $310 million issue of 9 7/8% eight-year senior secured second-priority notes (B2/BB-/B+) at 96.673 to yield 10 ½%. Proceeds from that issue were also applied to the company's bank debt.

Active week expected

No junk issues priced during the Monday session

However Toll Brothers Finance Corp. completed a $400 million split-rated issue of 8.9% senior notes due Aug. 15, 2017 (Ba1/BBB-/). The notes, which priced off the high-grade desk, came discounted to 97.975 and yielded 9¼%.

There was some high-yield play in the deal, a market source said.

Meanwhile activity stands to pick up during the post-Easter week, according to a high-yield syndicate official, who has visibility on deals other than the Seagate offering that launched Monday.

Existing HCA bonds move up

Amid widespread speculation that HCA will be bringing a new deal to market this week, participants saw the company's existing bonds move up. A market source saw its 9¼% notes due 2016 having firmed to 95.5 bid, up 1¼ points on the session.

At another desk, a trader saw "quite a few bids and offers" in the hospital company's paper, and pegged those 2016 bonds up ¾ point at 95.25, and "really active," with $17 million changing hands. He saw HCA's 6¼% notes due 2013 move up to 80.5 bid from their last prior round-lot level of 77.5 bid last Wednesday, as $4 million traded. However, he saw no dealings in the company's 5¾% notes due 2014, which were recently trading around the 71 mark.

Ventas seen quietly better

Among recently priced issues, the trader saw Ventas Realty LP/Ventas Capital Corp.'s 6½% notes due 2026 move up to 87.375 bid from 86.625 on Thursday, although volume was a meager $1 million.

Another trader said that he had not seen any dealings Monday in the bonds, quoting them in an 86-87 context and opining that they had been "pretty well put away."

The Chicago-based healthcare real estate investment trust priced $200 million issue of the bonds, mirroring an existing tranche, last Tuesday at 84.25 to yield 9.957%. The bonds had subsequently moved up to the 86 area after their pricing.

Qwest bonds hold steady

A trader saw Qwest Corp.'s new 8 3/8% notes due 2016 at 96.5 bid, 96.75 offered, "about where they were."

A second trader saw them at 96 bid, 97 offered, while another said the last level he had seen was around 95-96 - back on Thursday morning.

Qwest, a Denver-based telecommunications company, priced $810 million of the bonds - greatly upsized from the originally planned $300 million - last Tuesday at 92.498, to yield 9 7/8%. Those bonds, too, had moved up from their issue price last week once they were freed for secondary dealings

Frontier's issue up

Also in that telecom sector, a trader said Frontier Communications Corp.'s 8¼% notes due 2014 were going home up a point at 94 bid, 95 offered.

Back on April 3, the Stamford, Conn.-based company priced its $600 million of paper - doubled in size from the originally planned $300 million - at 91.805 to yield 10 3/8%. Over the next few sessions, the bonds moved up to Thursday's 92.5-93 context

Market indicators point northward

Back among the established issues, a trader saw the CDX Series 12 High Yield index - which had gained ¾ point on Thursday, the final session of the holiday-shortened previous week - up another 7/8 point on Monday, to end at 75½ bid, 75 7/8 offered.

Meanwhile, the KDP High Yield index was up 17 basis points at 54.78, while its yield tightened by 6 bps to 12.95%.

Cash bonds were up ½ point, a source added.

Advancing issues continued to lead decliners, by a better than five-to-four margin.

Overall market activity, measured by dollar-volume totals, jumped 62% from the level seen in Thursday's abbreviated session.

Despite that observed increase, a trader called the session "a typical day after the Easter holiday," noting that "schools in New York are closed" for the spring vacation, "so a lot of people are still out."

"Not much was going on," a second trader agreed, while a third called it "a very quiet day. There was very light volume - we were in that holiday mode."

However, he pointed out that "even when stocks were down 100-plus points [on the Dow Jones Industrial Average], I felt like our market was really hanging in there - I really didn't sense any weakness. It did seem like when stocks started gaining momentum, and improving on the day, our stuff picked up a little bit." After their early declines, equities managed to bounce back, with the Dow cutting its intra-day losses to end down 25.57 points, or 0.32%, on the day at 8,057.81, while the broader indices actually eked out gains on the day -- 0.77% for the Nasdaq composite and 2.17% on the Standard & Poor's 500.

The trader said that there meantime "still seems to be money on the sidelines, waiting to jump in here." Even acknowledging that Monday's session, although busier than Thursday's half-day, still had relatively little activity relative to a normal trading day, he said that "it does feel like the worst is behind us - except, of course, for credit-specific problems" like GM.

He saw the big, widely followed junk bellwether credits like Community Health Systems Inc., First Data Corp. and Aramark Corp. all up slightly, though on light volume. Franklin, Tenn.-based Community Health's 8 7/8% notes due 2015 edged up ¼ point to 97 bid, on volume of $8 million, while Greenwood Village, Colo.-based financial transaction processor First Data's 9 7/8% 2015 bonds were 1½ points better than Wednesday's final price at 63, but on only $2 million traded. Philadelphia-based uniform and food-service provider Aramark's 8½% 2015 notes gained ½ point to 94 bid, on $3 million of turnover.

Sprint springs forward

There was no shortage of volume in Sprint Nextel's bonds, with participants suggesting that the bonds got a boost from the news that Washington will relax restrictions on telecom companies providing service to Cuba - currently, Overland Park, Kan.-based wireless provider Sprint, along with larger rivals like AT&T Inc. and Verizon Communications Inc., are allowed to exchange phone and internet traffic with Cuba, although they are required to do so indirectly. Elimination of that traffic-routing restriction would make it easier for telecom companies to offer service directly to the island - although skeptics say the administration's gesture is mostly symbolic, doubting that Cuba's Communist government will quickly or easily okay any measures that might lead to more open communications with their tightly controlled society, fearing an increase in Western influence.

Even with those doubts, a market source saw a 1 point-plus gain, in active dealings, in the Nextel Communications Inc. legacy 7 3/8% notes due 2015, which Sprint Nextel inherited when the then-Sprint Corp. acquired Nextel in 2005, with the bonds moving up to around the 59 mark.

Another source saw those bonds rise to 58.625 bid, up over a point, on $36 million of activity, while the company's 8 3/8% notes due 2012 firmed to 94.25 bid, up almost 2 points on the day, on $15 million traded, and its 6 7/8% notes due 2013 also gained nearly 2 points to 64.25 bid, on $10 million of turnover.

At another shop, a trader said that not only were the Nextel '15s the most active issue, but they had "a really nice move" to 58.625 bid from 57.5 previously. He said "all" of the Sprint bonds were up by a point or more, on active volume. "There was aggressive buying in Sprint paper during the day."

He saw the 8 3/8s having firmed to 94.5 from 92.375 on Thursday, while Sprints' 6% notes due 2016 jumped to 80.5 bid from 77.5 previously, on volume of some$10 million.

Reliant rockets on Entergy report

Elsewhere, a trader saw Reliant Energy's 7 5/8% notes due 2014 get as good as 90.25 bid from 83 bid, 85 offered on Thursday and from 80 bid, 81 offered a week ago, citing takeover speculation growing out of a report that Entergy Corp. and Reliant have been holding talks about a possible purchase of Reliant.

Another trader saw the bonds go up to 90.25 bid from Wednesday's last round-lot level of 86, on $12 million of volume, while its 6¾% notes due 2014 pushed up to 96.25 bid from 93.5 last Tuesday, on $3 million traded.

The bonds firmed after SparkSpread.com, an energy industry-oriented news service, reported that New Orleans-based Entergy, the second-largest U.S. nuclear power producer, had been in negotiations with Reliant for several months.

The report attributed its information to unidentified sources said to have knowledge of the situation, quoting one as saying that it is not known whether the power producers will agree on a deal. One sticking point, the report said is Entergy's concern that such an acquisition could cause the major ratings agencies to lower the company's credit ratings. While S&P rates its bonds at either BBB+ or A- currently, depending on their position in the capital structure, Moody's Investors Service rates them uncomfortably close to junk, at Baa2 or even Baa3. Fitch Ratings rates the bonds at BBB or BBB+.

A trader meantime said that the prospect of power industry consolidation helped other sector credits; for instance, he said that Houston-based power producer Dynegy Inc.'s bonds were "better bid-for" - however, adding "but not like Reliant's."

GM gyrates at lower levels

While traders saw most junk issues firmer on the session, the once sore spot that really stood out was the autos, as news reports speculated anew that time is running out on General Motors, which is trying to get its bondholders and labor unions to agree to huge concessions demanded by the federal government as a condition of continued funding.

General Motors Corp.'s bonds were seen lower across the board after Friday's S&P ratings downgrade and a rash of weekend stories about the automaker heading for a likely bankruptcy filing.

A trader quoted GM's benchmark 8 3/8% bonds due 2033 down 2 points on the day at 8.5 bid, 9.5 offered.

A second saw GM's 7.20% notes due 2011 likewise down a deuce at 10 bid, 12 offered, on "numerous articles and headlines."

A trader said that GM's bonds were "worse than the reliability of their cars," calling the benchmarks down 2½ points in round-lot trading to 8.5 bid, after having dipped as low as 7.5 earlier in the session, with $13 million changing hands. He saw the 7.20s also fall 2½ points to 11.5 bid, on $6 million traded.

Yet another trader saw the benchmarks unchanged at 8-10. GM's 7 1/8% notes due 2013 dipped a point to 10 bid.

News reports published Sunday in The New York Times and The Wall Street Journal stated that the government is pushing GM to prepare for a bankruptcy filing by June 1. The company has been reworking a viability plan after the first draft failed to get approval from president Obama. The company's new chief executive, Fritz Henderson, has seemed more willing to consider a Chapter 11 filing, though he has also stated that the company's board is working on making more cuts to avoid doing that.

The government is reportedly pushing GM to file for what is being touted as a "surgical" bankruptcy. Under the tentative plans for the filing, certain parts of GM would quickly exit from Chapter 11 protections - those parts being the "good" parts of the automaker - while the "bad" parts could remain under court protections for a longer period.

In more bad General Motors news, on Friday Standard & Poor's cut the rating on the company's $4.5 billion senior secured revolving credit facility to CCC- from CCC and revised the recovery rating to 2 from 1, indicating that lenders can expect substantial (70% to 90%) recovery in the event of a payment default.

"The lowering of the rating on the revolving credit facility reflects our view of persistently weaker demand for light vehicles in North America, as well as declining pools of assets securing the revolving credit facility," said Greg Maddock, Standard & Poor's recovery analyst, in the ratings release.

The rating on General Motors' $1.5 billion senior secured term loan was left unchanged at CCC and the recovery rating on remained at 1, indicating that lenders can expect very high (90% to 100%) recovery in the event of a payment default.

Also, the corporate credit rating on General Motors remained unchanged at CC, reflecting Standard & Poor's view of the likelihood that the company will default either through a bankruptcy or a distressed debt exchange.

But while GM was taking its lumps, a trader said that its 49%-owned automotive financing arm, GMAC LLC, and the latter's sector peer, Ford Motor Credit Co., "continued to hang in there" despite the bad sector news.

But another trader saw the GMAC long bonds down a point on the day at 41 bid, though on volume of only $1 million. However, he saw GMAC's 5 5/8% notes coming due on May 15 at 97 bid, or a 43% yield to maturity, up ¾ point, on $6 million traded.

Ford Credit's 7 3/8% notes due on Oct. 28 gained ¼ point to end at 92.75 bid. Its corporate parent, Ford Motor Co.'s bonds continued to move higher, as investors see the Number-Two U.S. carmaker as the least troubled to Detroit's traditional "Big Three."

A trader called Dearborn, Mich.-based Ford's 6 5/8% notes due 2028 over 6 points better at 25.75 bid, 36.25 offered. The benchmark 7.45% notes due 2031, however, fell a tad to 41.25, while the 8.90% notes due 2032 ended flat at 38.75.

Another source saw the 7% notes due 2013 gaining a point to close at 71 bid.

MGM meanders around

A trader saw MGM Mirage's bonds "pretty much unchanged," despite the news reports indicating that Dubai World had stepped forward with a plan aimed at rescuing the Las Vegas-based casino giant's endangered CityCenter project.

Another trader agreed, calling MGM's 6 7/8% notes due 2016 unchanged to up "maybe ¼ point" at 38.5 bid, 40 offered, and "not heavily traded."

However, another trader saw MGM's most active issues, its 6¾% notes due 2013, fall to 40 bid from 43.5 on Thursday, on $9 million traded. He saw its 6% notes slated to come due on Oct. 1 at 68.25, or a 109% yield to maturity, versus 68.5 on Thursday, with $8 million traded. Its 9¾% notes due 2010 eased to 38.5 bid from 39.75 on Thursday, with $5 million changing hands.

Dubai World, MGM's 50-50 partner on CityCenter, has reportedly submitted a proposal to MGM regarding completion of the nearly $10 billion development project. Under the terms, Dubai - which had previously filed a suit against MGM, claiming auditor comments regarding the casino operator's future constituted a contractual breach of its partnership agreement, absolving it of responsibility for making any further payments - would resume making its share of the payments in return for certain concessions from MGM.

That news - which was followed very late in the day by news that MGM had received a waiver from its lenders, allowing it to avoid a default on a City Center loan by making a scheduled $70 million payment by itself - pushed MGM's NYSE-traded shares up 95 cents, or 17.92%, to $6.25, on volume of 24.9 million, or three times the norm.

Stephanie N. Rotondo contributed to this report.

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