Downsized Hawker Beechcraft deal prices; Bally tranches gyrate wildly

By Paul Deckelman and Paul A. Harris

New York, March 16 - Hawker Beechcraft Acquisition Co., LLC successfully priced a slightly downsized $1.1 billion three-part mega-deal on Friday. The Wichita, Kan.-based aircraft manufacturer's new bonds were reported by secondary traders to have gained a little aftermarket altitude.

Back among the established issues, traders saw Bally Total Fitness Holding Corp.'s two issues of bonds diverging wildly. While the Chicago-based fitness center operator's senior notes due 2011 - which fell substantially on Thursday after the company warned that Chapter 11 was a possibility - were seen bouncing off those lows to finish solidly higher on the day in heavy trading, its subordinated bonds scheduled to mature later this year were "getting massacred," a trader said, plunging more than 20 points down to around the 70 level.

Elsewhere, Hayes Lemmerz International Inc.'s bonds were solidly higher, on the news that the company's board has okayed an equity rights offering, the proceeds of which will be used to take out those bonds.

In Friday's primary market Hawker Beechcraft Acquisition Co., LLC completed the third of the March 12-16 week's trio of billion dollar-plus megadeals.

The Wichita, Kan.-based aircraft manufacturer priced a downsized $1.1 billion three-part high-yield notes transaction, reduced from $1.2 billion with $100 million of the financing being shifted to the company's term loan.

The company priced a $400 million tranche of eight-year senior fixed-rate notes (B3/B-) at par to yield 8½%, 12.5 basis points inside of the 8¾% area price talk.

Hawker Beechcraft also priced a $400 million tranche of eight-year senior PIK election notes (B3/B-) at par to yield 8 7/8%, on top of price talk that had the PIK notes pricing 37.5 basis points behind the senior fixed-rate notes.

In addition the company priced a $300 million tranche of 10-year senior subordinated notes (Caa1/B-) at par to yield 9¾%, on top of price talk that had the subordinated notes pricing 125 basis points behind the senior fixed-rate notes.

Goldman Sachs & Co., Credit Suisse, Citigroup and Lehman Brothers were joint bookrunners for the acquisition financing.

A high yield investor told Prospect News that the deal was a blowout, with an order book that was said to have been 10-times oversubscribed.

The week also saw Freeport McMoRan Copper & Gold Inc. place a record-setting $6 billion of high yield senior notes (B2/B+). And in a quickly shopped deal TRW Automotive Holdings Corp. priced approximately $1.46 billion equivalent of senior notes (Ba3/BB/BB-).

Biggest week year-to-date

Tallying Freeport, TRW and Hawker, the week that ended Friday saw $9.887 billion of bonds priced in 15 dollar denominated tranches.

That is the biggest weekly total of issuance thus far in 2007.

The most recent bigger week was the Dec. 11-15, 2006 week which saw $12.2 billion of issuance in 26 tranches, including $1 billion or more from issuers including Georgia-Pacific Corp., Aleris International, Inc. and Ford Motor Credit Co.

Tallying Friday's Hawker Beechcraft transaction, at the close of the week year-to-date issuance stood at $41.44 billion in 107 dollar-denominated tranches.

The week ahead

Sell-side sources are looking for the March 19-23 week to be a busy one in the primary market.

In addition to known business on the Prospect News High Yield Daily forward calendar, three issuers are poised to launch deals.

Cardinal Health is expected to start a roadshow during the middle part of the week for an $865 million two-part offering of notes, an LBO financing via Morgan Stanley.

MacDermid Inc. will launch its downsized $350 million offering of 10-year senior subordinated notes (Caa1/CCC+) on Monday - an LBO deal via Credit Suisse and Goldman Sachs, with CIBC to be involved.

Finally, Realogy Corp. is expected to launch its $3.65 billion high-yield notes transaction during the March 19 week.

JP Morgan, Credit Suisse, Bear Stearns and Citigroup will be joint bookrunners for that LBO transaction.

Hawker Beechcraft issue takes flight

When the new Hawker Beechcraft bonds were freed for secondary dealings, a trader saw the new 8½% senior notes due 2015 at 101.5 bid, 102 offered, while its new 8 7/8% PIK toggle notes due 2015 were at 101 bid, 101.5 offered, and its 9¾% subordinated notes due 2017 were at 102 bid, 102.5 offered, all up from their par issue price earlier in the session.

Another trader saw the 81/2s at 101.5 bid, 102 offered, the 8 7/8s at 101.25 bid, 101.75 offered, and the 9 7/8s at 102 bid, 102.75 offered.

New Freeport bonds hold gains

Traders meantime saw Freeport McMoRan Copper & Gold Inc.'s gigantic $6 billion new issue holding onto the gains which it notched in two days of trading, after the three-part mega-deal priced at par on Wednesday.

However, a trader said "that was about it for them," with the strong upside surge having plateaued and run its course.

He saw the Phoenix-based mining company's new 8¼% senior notes due 2015 and 8 3/8% senior notes due 2017 both at 103 bid, 103.25 offered, and its floating-rate notes due 2015 at 102 bid, 102.25 offered.

Another trader noted the fact that between those two big deals and several other offerings which came to market during the week, "we've absorbed over $10 billion in new issuance this week, and basically, every deal has broken up."

He said that shows that "there's a lot of money out there, waiting to be put to work."

Bally's bounces around

Back among the established issues, a trader said, "the market was pretty much unchanged," with the widely followed CDX junk bond index "off a teeny."

The exception to that general statement was Bally, whose subordinated bonds "got massacred" a trader said. He noted the drop on Thursday - and the even steeper drop on Friday - in its debt, after Bally warned that it would have to restructure its $827 million of debt - and might have to file for Chapter 11 if it could not do so.

"It was clearly the bond of the day," another trader said, adding "I saw them quoted all day, non-stop. I wouldn't be surprised if $100 million-plus traded."

The report Friday on Bally was a tale of two widely divergent issues.

A trader saw its 10½% notes due 2011 - which on Thursday had dropped from previous levels around par to as low as an 84-85 context in active trading, before firming a bit off that low to end the day at around 89 - go back up to 92 bid, 93 offered. Trading was heavy, with many big block trades of $1 million or more taking place.

"Those bonds were down 7 points on the week," he said, "but they did regain some composure" in Friday's action.

On the other hand, he saw the health club company's 9 7/8% notes due 2007 getting smacked around like the proverbial 98-pound weakling at the beach.

While those bonds pretty much held their own Thursday, hanging in around the mid-90s, even as the seniors were diving as much as 15 points on the day and finishing down 11, Friday was a whole different matter. They completely collapsed, the trader said, being quoted as low as 65, before actually trading around on very active volume to end at 72 bid, 73 offered, off more than 20 points from Thursday's close.

Another trader called Bally "the bond of the day," said they were "quoted non-stop." He estimated that over $100 million traded during the day in the two issues.

The trader saw the 101/2s up 8 points at 93, but saw the 9 7/8s "down a good 27 points" at around 70 from Thursday levels in the mid-90s.

The 9 7/8s have a coupon interest payment due on April 15, and are supposed to completely mature in mid-October, with company repaying principal to holders, but "obviously, there's a thought out there that that's not happening."

Yet another trader called 101/2s better at 91.25 bid, 92.25 offered, and saw the 9 7/8s at 70 bid, 72 offered.

Moody's Investors Service on Friday Service downgraded all of the company's credit ratings, dropping the $235 million of 10½% notes to Caa3 from Caa1 previously, and the $300 million of 9 7/8s to Ca from Caa3.

Moody's also cut the corporate family rating to Caa3 from Caa1 along with its probability of default rating. The outlook remains negative.

The agency said that its downgrade reflects Bally's inability to timely file its 2006 form 10-K with the Securities and Exchange Commission, which resulted in a default under its reporting obligation under both bond indentures, Bally's announcement that it is considering whether or not it will make its next interest payments on its bonds in light of its current financial position, the deterioration of cash collections of revenues and the prospect for further declines during the remainder of 2007; and Bally's decreasing liquidity.

Hayes rolls upward

Elsewhere, Northville, Mich.-based automotive wheel manufacturer Hayes Lemmerz's 10½% notes due 2010 cruised higher, jumping 6 points on the session, a trader said, to 106 bid, 107 offered.

Another market source saw even more appreciation in the bonds, quoting them up nearly 7 points around the 106 level.

The bonds rose on the news that the board of directors had approved an equity rights offering to current shareholders that could raise as much as $180 million, with the company planning to use the proceeds to buy back the notes.

Elsewhere on the automotive front, a trader saw General Motors Corp.'s benchmark 8 3/8% notes due 2033 unchanged at 89.5 bid, 90 offered, while rival Ford Motor Co.'s flagship 7.45 % notes due 2031 were likewise steady at 77.5 bid, 78 offered.

Fremont firms on financing

Fremont General Corp.'s 7 7/8% notes due 2009 - which have gyrated around well below their previous par levels since the subprime mortgage lending industry meltdown began around mid-February - were seen up 2 points Friday at 93 bid, 94 offered.

A trader cited the news that the Santa Monica, Calif.-based financial services company - which has already announced its intentions of getting out of the increasingly risky and volatile subprime business of lending mortgage money to people with poor credit profiles - had gotten a commitment from Credit Suisse to boost its credit facility financing for the company to $1 billion. It also said it has received various offers for additional credit facilities that it could draw upon if needed to supplement its existing $1.3 billion in cash and short-term investments.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.