Tower Auto bonds jump, Nortek also better

By Paul Deckelman and Paul A. Harris

New York, July 29 - Tower Automotive Inc.'s bonds were seen up sharply in otherwise fairly dull trading Friday, with investors apparently encouraged by the bankrupt Novi, Mich.-based automotive farms maker's better cash numbers in its latest monthly financial data.

Also on the upside, helped by better numbers, were the bonds of Providence, R.I.-based building products maker Nortek Inc.

Overall the junk market traded off during Friday's quiet session, as equities drooped.

One source marked high yield down as much as an eighth of a point.

"The market just followed Treasuries this week, so it was just slightly wider," the sell-sider remarked.

But market players also commented that the market nonetheless remains notably strong.

No issues were priced in the primary market, which produced very little news of any kind during the final session of July 2005.

Tower "was the standout of the day," a trader said, quoting the company's R.J. Tower 12% notes due 2013 as having jumped to 81 bid, 83 offered from opening levels around 70 bid, 72 offered. He saw no news moving across the tape, but noted that the company had on Thursday filed its 10-K annual report for the 2004 fiscal year ended Dec. 31.

Another trader quoted the Tower bonds up 10 points on the session, to 81 bid, 83 offered, rhetorically asking "how do you like that?"

He attributed the rise to "the numbers that were out [Thursday] night, they were very good, way better than expected, and people were thinking the recovery values for the bonds are way undervalued, that's the general consensus. Their numbers were great, so being they're in Chapter 11, their recovery values were that much greater. So there you go."

He opined that the bonds "are probably going higher on Monday."

Besides the 10-K late Thursday, Tower also released its June operating results, and while its operating loss for the month widened to $25.22 million, far wider than May's $2.02 million deficit, and the net loss for June was $124.46 million, wider than the $17.73 million net loss in May, revenues rose to $188.01 million from $177.89 million in May. And cash and cash equivalents as of June 30 stood at $5.76 million, up from $2.86 million at the end of May.

Nortek rises on earnings

Elsewhere, Nortek bonds were seen improved, also on better numbers, with the company's 8½% notes due 2014 were seen having gained nearly three points on the session to finish at 98.

Nortek's parent company, NTK Holdings Inc., said that second-quarter sales and operating earnings from continuing operations increased 12% and 26%, respectively.

The company said in a statement that its "major businesses delivered a solid performance in the second quarter, particularly our growing group of home technology companies. Their continued growth led to the strong results achieved in our residential building products segment."

Its chairman and chief executive officer, Richard L. Bready, said that "housing activity maintained its solid pace in the first half of 2005, and it is expected that overall residential housing markets will remain strong for the remainder of the year. For the first six months of 2005, building permits were up 1.8% and housing starts were up 5.2% compared to the same period in 2004.

Bready went on to declare that "we expect, if the strength in housing continues, that 2005 will be a year of improvement in the sales and operating earnings for both our residential building products and air conditioning and heating products segments."

Northwest continues higher

Elsewhere, a trader saw "a little bit of strength" in the longer-maturity issues of Northwest Airlines Corp., which had pushed higher on Thursday on a combination of short-covering and other technical factors, investor relief that Northwest's latest quarterly numbers, released earlier in the week, weren't as bad as had been feared, and gratitude that Northwest is not in anywhere near as bad straits as larger rival Delta Air Lines Inc.

The trader also threw another element into the mix in trying to explain why Northwest's bonds were up, even with oil prices pushing back over $60 per barrel - investor relief that the Senate Finance Committee this past week approved a pension reform measure that includes specific relief for the battered airlines, who collectively face billions of dollars of unfunded pension liability costs.

The trader said that had produced a sense of "continued euphoria," which saw Northwest's bonds firm smartly on Thursday and then continue to gain on Friday.

He quoted the Eagan, Minn.-based Number-Four U.S. air carrier's 10% notes due 2009 up a point to 48 bid, 49 offered, for "no particular reason" other than the factors already cited.

A market source at another desk saw Northwest's 7 7/8% notes due 2008 two points better at 47.5 bid.

Amkor down again

On the downside, the source saw a continued retreat in the bonds of Amkor Technology Inc., whose 7¾% notes due 2013 were down 1½ points to 86 bid.

Another source saw the company's 9¼% notes due 2008 likewise down a point, at 95 bid.

It was the second straight session that the bonds of the West Chester, Pa.-based semiconductor manufacturing services company's bonds were seen off, after it reported a second-quarter loss of $52.4 million (30 cents per share) - a sharp reversal from its year-earlier earnings of about $10 million (six cents per share), although those year-earlier profits did include one-time gains of $16.5 million (nine cents per share), from the sale of an equity investment and a litigation settlement.

In the latest quarter, results were affected by higher costs, lower pricing and product mix, the company said.

Besides posting the loss, Amkor forecast a third-quarter loss of 18 cents to 22 cents per share, despite revenue growth of 8% to 10% above the second quarter.

Insight dips on buyout

Also on the downside, a trader saw Insight Communications Co.'s Inc.'s zero-coupon/12¼% notes "down maybe half a point" at 101 bid, 102 offered, although he really did not see much trading.

The New York-based cable system operator said Friday that it had agreed to be taken private by its two co-founders, Sidney Knafel and Michael Willner, and buyout specialist The Carlyle Group, in an $11.75 per share deal that values the company's equity at $710 million and implies an enterprise value of approximately $2.1 billion, based on Insight Communications' attributable share of indebtedness.

Overall, though the trader said that "all the high-yield market and distressed land is catching a bid, no matter what you're looking at.

Despite having recorded a third consecutive week of outflows in high yield mutual funds, a barometer of market liquidity trends, and being beset with mid-summer doldrums that saw a lot of participants take an early exit Friday, the junk market "is strong," the trader said, ending the session at least with a stable bid. "You can't stop a speeding train."

A Wednesday to remember

Nevertheless the final week of July is one that primary market observers will no doubt remember.

On Wednesday, the new issue arena, said to presently be the beneficiary of a capital markets "Goldbricks effect" - low volatility, manageable inflation and good news on the earnings front - saw four oversubscribed tranches totaling $4 billion price, as it became the biggest day of issuance since the spring of 1999.

In what has thus far been the summer's most talked-about deal, SunGard Data Systems, Inc. sold $2 billion in two tranches of eight-year senior unsecured notes (B3/B-/B-) that had been marketed via an investor roadshow: $1.6 billion of fixed-rate notes priced at par to yield 9 1/8% and $400 million of floating-rate notes priced at par to yield six-month Libor plus 450 basis points.

The ink had hardly dried on the senior notes when SunGard announced it would also sell a surprise $1 billion issue of 10-year senior subordinated notes (Caa1/B-/CCC+). Those came at par to yield 10¼%.

All three tranches were oversubscribed, and sources told Prospect News that a lot of investors who had put in for bonds walked away with none.

The same day L-3 Communications Corp. did a $1 billion deal, pricing its 6 3/8% 10-year senior subordinated notes (Ba3/BB+/BB) at 99.09 to yield 6½%.

A buy-side source who expressed the opinion that SunGard and L-3 represented "welcome issuance," told Prospect News that the L-3 deal had been three times oversubscribed.

The following day, Thursday, FTI Consulting Inc. priced an upsized $200 million issue of 10-year senior notes (Ba2/B+) at par to yield 7 5/8%, inside the 7¾% to 8% price talk.

A market source said Friday that there were in excess of $2 billion of orders in the book.

July ends $25 billion behind 2004 pace

Altogether the final week of July 2005 saw just under $4.2 billion price in five dollar-denominated tranches, far outpacing the previous week's $650 million in three tranches.

Hence July comes to a close with $7.76 billion having been priced in 21 dollar-denominated tranches. That compares to July 2004 which saw $9.39 billion price in 33 tranches.

At the close of July, year-to-date issuance stands at just under $60 billion in 231 dollar-denominated tranches, a full $25 billion and change behind the 2004 pace: $85.8 billion in 347 tranches by the July 31, 2004, close.

Active start to August

Market sources have rendered mixed opinions when quizzed by Prospect News as to whether the presently robust new issue market will set in train a more active than usual month of August.

Some say yes, the market will see steady activity right up until the week leading to the Labor Day break.

Others - some of whom admitted they were packing bags and tidying offices just prior to leaving on vacation - said no, high yield can more or less be expected to endure the lull typical of the August dog days.

Nevertheless as August gets under way the new issue calendar is anything but empty.

Six issuers are in the market with seven tranches that are expected to price by this Friday close.

The week's anticipated big deal is Basell Polyolefins' €1.1 billion equivalent of 10-year senior notes in dollar- and euro-denominated tranches, via Merrill Lynch & Co. and Credit Suisse First Boston.

Also in the market are:

* Acco World Corp. with a $350 million offering of 10-year senior subordinated notes (B2/B) via Citigroup and Goldman Sachs & Co. No talk had been heard by Friday's close, however a buy-side source said that the whisper is 7¾%;

* Stanley-Martin Communities LLC with $125 million of 10-year senior subordinated notes (B3/B-) via Wachovia Securities. Again there was no talk at Friday's close, however a sell-sider said that the deal is pro formaed at around 10%;

* Cardtronics Inc.'s $150 million of eight-year senior subordinated notes, led by Banc of America Securities;

* Lifecare Holdings Inc.'s $150 million of eight-year senior subordinated notes (Caa1/CCC+) via Banc of America Securities and JP Morgan; and

* Caithness Coso Partnerships/Caithness Coso Funding Corp. with $90 million of 10-year subordinated secured notes (Ba2//BB-) via Citigroup.

Finally, Friday's meatiest morsel of news on the primary market front came from Intcomex, a Miami-based information technology company, which is bringing a $130 million offering of five-year second priority senior secured notes via Banc of America Securities. An investor call is set up for Monday, Aug. 8.

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