Service Corp., FTI deals price; auto parts names continue gains

By Paul Deckelman and Paul A. Harris

New York, Sept. 27 - Service Corp. International and FTI Consulting successfully priced new deals on Wednesday. In addition to those two dollar-denominated transactions, British issuer Brake Bros. plc also came to market with a sterling-denominated deal.

Meantime, Georgia Gulf Corp. was heard to have downsized its proposed two part-offering, deciding to instead borrow some of the money from its revolving credit line.

And SemGroup LP was seen by new-dealers as bringing an add-on tranche to its existing 8¾% notes due 2015.

In the secondary market, automotive supplier names were generally higher for a second consecutive session, continuing to ride the momentum built up on Tuesday's news that a big majority Delphi Corp.'s unionized hourly workers have agreed to take early retirement incentives to leave the troubled Troy, Mich.-based parts supplier.

Even the recently badly battered Dura Automotive Systems Inc.'s senior bonds were seen having improved on the session.

Elsewhere, Chiquita Brands International Inc.'s bonds continued their recent retreat, as market participants digested the sobering details of the company's announcement earlier in the week, in which it warned that consumer fears sparked by the current E. coli outbreak as well as problems with its exports of bananas to Europe would significantly impact earnings near-term.

Technical Olympic USA Inc.'s bonds were lower after Moody's Investors Service said that it would scrutinize the Hollywood, Fla.-based homebuilder's ratings for a possible downgrade due to problems with its Transeastern joint venture with the Falcone Group.

Amkor Technology Inc.'s bonds were lower after the company held a conference call with holders of its bonds on Tuesday - with market speculation indicating some holders view the company as being in technical default and so requiring a consent solicitation to remedy the problem.

A buy-side source said that junk outperformed Treasuries on Wednesday, and marked the broad market up ¼ point.

"We were definitely catching a bid this morning, trying to catch up after this Treasury rally over the past few days," the buy-sider commented.

Meanwhile the new issue market saw $715 million of junk priced in three dollar-denominated tranches from two issuers.

All three tranches cleared the market at their advertised sizes. Two of them came on top of price talk. The other one - the longest-dated of the three tranches, with a maturity of 12 years - came tight to the talk.

Service Corp. trades up

Wednesday's largest dollar amount of issuance came from Houston funeral and cemetery firm Service Corp. International, which priced a $500 million two-part senior notes transaction (B1/BB-).

The deal was comprised of a $250 million tranche of eight-year notes that priced at par to yield 7 3/8%, on top of price talk.

Interestingly the longer-dated piece, a $250 million tranche of 12-year notes - with a tenor four years longer - priced at par to yield 7 5/8%, which was the tight end of the 7¾% area price talk.

JP Morgan and Merrill Lynch & Co. ran the books for the acquisition and debt-refinancing deal.

Not long after terms circulated, sources were marking both tranches higher in the secondary market.

A syndicate source allowed that it was safe to assume the longer dated 7 5/8% notes due 2018 saw the greatest demand.

FTI Consulting atop talk

Meanwhile Baltimore-based restructuring services firm FTI Consulting priced a $215 million issue of 10-year notes (Ba2/B+) at par to yield 7¾%, on top of price talk.

Deutsche Bank Securities and Goldman Sachs & Co. led the acquisition deal.

Brake Bros. loan/notes

Elsewhere U.K. food supplier and distributor Brake Bros Holding III Ltd. priced a £275 million six-month Libor plus 775 basis points 5.5-year senior PIK loan at 99.00 on Wednesday. According to a syndicate source the deal will be distributed as notes, via a repackaging.

The price talk was Libor plus 775 to 800 basis points.

JP Morgan, Credit Suisse and Deutsche Bank Securities were joint bookrunners for the deal, proceeds from which will be used to fund a dividend and make a pension deficit payment.

Georgia Gulf downsizes

Georgia Gulf downsized to $700 million from $750 million its two-part offering of high-yield notes, which are expected to price on Thursday afternoon.

The Atlanta-based chemical company will fund the $50 million decrease by drawing upon its $350 million revolver.

The bond offering is comprised of a tranche of eight-year senior notes (B1/B+) which are talked at 9¼% to 9½% and a tranche of 10-year senior subordinated notes (B2/B) which are talked at 125 basis points behind the senior notes.

Merrill Lynch & Co. has the physical books for the acquisition and debt refinancing deal.

A buy-side source told Prospect News that the eight-year notes, talked Wednesday at 9¼% to 9½%, were initially pro forma-ed at 8½%.

SemGroup to tap 83/4s

Tulsa-based SemGroup expects to price a $250 million add-on to its 8¾% senior notes due Nov. 15, 2015 (existing ratings B1//B+) early next week in an acquisition and debt refinancing deal via Banc of America Securities.

The midstream energy company priced the original $350 million issue priced at 98.376 to yield 9% in an upsized transaction early last November.

Service, FTI up in trading

When the new Service Corp. bonds were freed for secondary dealings, a trader saw the company's 7 3/8% notes and the new 7 5/8% notes due 2018 due 2014 at 100.5 bid, 100.75 offered, up from their par issue price earlier in the session.

Noting that the 2018s actually priced inside of talk, he said "that got some people out of the deal. We had a lot of people say that it just came too rich, and they'd prefer to play the bank debt, if they could, at those kind of levels."

The new FTI Consulting 7¾% notes due 2016 closed out the session at 100.75 bid, 101.25 offered, up from their par issue price earlier in the day.

Among other recently priced issues, a trader said that Lyondell Chemical Co.'s new 8% senior notes due 2014 firmed to 101.5 bid, 102 offered from prior levels at 101.25 bid, 101.5 offered. Those bonds had priced on Sept. 15 at par.

And he saw Berry Plastics Corp.'s 8 7/8% notes due 2014 at 100.5 bid, 100.75 offered. That was up about ½ point from Tuesday's levels.

Back among the established issues, the trader said, "the market opened up firm, and you had the CDX indices trading up about a quarter-point, so that really gave a lift to the underlying cash bonds, pretty much across the board."

He said that bonds were generally improved "about half a point, at least.

"A lot of the secondary bonds had just been laying around, and they did better as well."

Auto names better

A trader saw the names of various auto parts companies better, the whole sector having apparently caught a bid after Tuesday's advance, which was fueled by Lear Corp.'s confidence that it would be able to reach a deal with financier Wilbur Ross to sell its interiors business, domestic as well as international, to Ross. Tuesday's surge was also related to Delphi Corp.'s announcement late in the day that most of its UAW-represented hourly workers had agreed to take early retirement, which the company is using to greatly reduce its labor costs going forward.

In Wednesday's trading, he saw Lear's 8.11% notes due 2009 up 1½ points at 97 bid, 98 offered, while its 5¾ notes due 2014 were up ¾ point at 81 bid, 81.5 offered.

Delphi's 6½% notes due 2009 were meantime seen up 1½ points at 87.5 bid, 88.5 offered, while its 7 1/8% notes due 2029 were 2½ points better at 84.5 bid, 85.5 offered.

Among other automotive parts-maker names, Dura's badly battered 8 5/8% senior notes due 2012 were "up a bit," he said, at 44 bid, 45 offered, a 2 point gain, although its 9% notes due 2009 were seen down another ¾ point to just 4.5 bid, 5.5 offered.

Dana Corp.'s bonds were all seen up about 2 points on the session, its 6½% notes due 2008 at 67.5 bid, 68.5 offered, and its 5.85% notes due 2015 at 63 bid, 64 offered.

Chiquita still spinach-spooked

Chiquita Brands "have been trending kind of lower," said a trader who quoted the Cincinnati-based produce company's 7½% notes due 2014 at 85.5 bid, 86.5 offered, down about a point from Tuesday's close.

"My guess is these things are going to continue to go lower. The company already came out and said that the numbers for the quarter were going to be terrible. They cancelled their dividend - but that only saves them less than $20 million a year."

He added that "the salad business for them is a more significant portion of their business than it is for Dole [Foods Corp.]," a sector rival of Chiquita, whose bonds have also been getting pushed lower of late on the E. coli outbreak news.

"There's also the tariff rule changes in Europe for bananas. It's all conspiring against [Chiquita] right now. The bonds are trading at [yields of] 10%, 10¼%. I think they could widen further from here."

As for Dole, the trader said that the Westlake Village, Calif.-based produce company's 8¾% notes due 2013 had "traded off a couple of points" over the previous few sessions on the news that E. coli had been found in tainted packages of fresh spinach, a product that both Dole and Chiquita's Fresh Express business sell.

"My feeling is that [Dole] is really going to go lower as well. They really haven't come out and talked much about their exposure to E. coli." He cited the latest news - that the potentially deadly bacteria had been found in several Dole-branded packages of spinach.

"I think that until people get some clarity on this, some assurances - after all, people are dying - it's really going to cut their sales going forward. These kinds of things turn people off, and they move into alternate directions and it's hard to get them back. I don't think this is as much of a short-term problem as people would like it to be."

However, in Wednesday's trading he saw the Dole bonds actually a little bit firmer, "which is a little bit surprising." He saw the bonds at 93 bid, 93.5 offered, up from 92 bid, 93 offered on Tuesday.

At another desk, a trader saw Dole's bonds unchanged at 97.25 bid, 97.75 offered on its 8 5/8% notes due 2009, and at 92.5 bid, 93.5 on the 8¾% notes due 2013.

Technical Olympic takes tumble

The trader said that Technical Olympic's bonds were sharply lower, its 7½% notes due 2015 falling 3 points to 78.5 bid, 79.5 offered, while its 9% notes due 2010 lost 1¾ points to end at 95.5 bid, 96.5 offered.

That followed the announcement by Moody's that it had placed all of the Technical Olympic paper under review for possible downgrade.

It was the second such announcement this week about the company - on Monday, Standard & Poor's revised its outlook on Technical Olympic to negative, but affirmed the company's ratings.

Amkor off on consent concerns

Among other names that were lower was Amkor Technology, whose 7¾% notes due 2013 were seen down 1¼ points at 91.5 bid, while its 7 1/8% notes due 2011 lost 1½ points to 92.

The company's Nasdaq-traded shares meantime fell 44 cents (7.93%) to end at $5.11. Volume of 16.5 million shares was four times the usual turnover.

There were no news stories out that might explain the movement on the bonds, or the stock.

But one buysider told Prospect News that Amkor had a conference call with holders of its bonds on Tuesday, and the speculation on the Street is that some of the holders held the view that the company was in a technical default. Since Amkor does not have enough liquidity to meet its obligations if all its debts were accelerated, there was new concern about possible bankruptcy if the company could not obtain consents.

Investment-oriented internet bulletin boards also had some chatter Wednesday to the same effect, saying a bondholders committee had met with company officials on Tuesday night in an effort to get Amkor to offer more money to the bondholders in its ongoing consent solicitation, but that the two sides apparently had not come to a meeting of the minds.

The Chandler, Ariz.-based provider of semiconductor packaging and testing services recently announced that due to irregularities in the way in which it recorded stock option grants - an increasingly common accounting problem these days in corporate America - Amkor had not been able to file its 10-Q quarterly report for the period ended June 30 with the Securities and Exchange Commission, raising the possibility that the company could default on its bonds and other debt obligations, which require timely filing. Such default, if uncured, would eventually allow the bondholders to accelerate their debt and force immediate repayment.

Amkor earlier this month announced that it was soliciting the consent of the holders of its various series of bonds to granting waivers of any possible defaults arising from the failure to report. The consent solicitation is scheduled to expire on Friday afternoon, unless extended.

In its press release announcing the consent solicitation, Amkor set a total consent fee for each series of bonds, with participating bondholders to share the total. Among the amounts on offer are $1 million for the $400 million of outstanding 9¼% notes due 2016, $625,000 for $250 million of outstanding 7 1/8% notes due 2011. Overall, the consent fees total not quite $4 million for over $1 billion face amount of outstanding bonds.

On the boards, posters were suggesting that the bondholders were trying to get the company to give them as much as $100 million total for giving their consents to the waivers and thus avoiding any defaults, although the consensus of opinion was that the company would probably be unlikely to go that high.

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