Source Interlink prices; autos fall on Ford warnings, possible ratings downgrade; Thornburg continues slide

By Paul Deckelman and Paul A. Harris

New York, June 20 - Source Interlink Cos. Inc. successfully priced an offering of seven year notes on Friday, high yield syndicate sources said. The new bonds did not make an aftermarket appearance, having priced fairly late in the session.

The sources also heard that AEI was hitting the road starting Monday to sell its upcoming 10-year deal to prospective investors.

In the secondary arena, bonds of Ford Motor Co., domestic arch-rival General Motors Corp. and their respective consumer financing arms were lower, after Ford issued yet another warning about its lower near-term outlook and Standard &Poor's said it was considering downgrading the ratings of the two carmakers and rival Chrysler. That also helped drag other automotive-related names, like Lear Corp., lower.

Thornburg Mortgage Inc.'s bonds dropped for a second consecutive session as the ominous message buried in Wednesday's quarterly report - that the Santa Fe, N.M.-based jumbo mortgage company might not be able to survive the current rocky market conditions - continued to sink into investors' consciousness.

Noting that stocks were trashed on Friday, with all three major U.S. stock indexes off by more than 1.8%, a high yield syndicate official said that junk did not fare so poorly, and added that the CDX High Yield 10 index was down ½ point.

Source Interlink brings bridge refinancing

One issue priced on Friday.

Source Interlink priced a $465 million issue of seven-year senior notes (Caa2/CCC+) at par to yield 11¼%.

Citigroup and JP Morgan were joint bookrunners for the deal, which refinances the bridge loan incurred in the company's acquisition of Primedia Inc.'s Enthusiast Media division.

A modest calendar

Trailing a May high yield market which generally featured no forward calendar whatsoever, for the second consecutive week the market heads into the weekend with a modest forward calendar.

First of all, there were announcements during the Friday session.

AEI, a Houston-based energy services company started by Ashmore Group plc, will begin a roadshow on Monday for a $250 million offering of 10-year senior bullet notes (B2/B).

Credit Suisse has the books for the debt refinancing deal, which is expected to price during the June 30 week.

AEI is one of a pair of deals set to price during the June-July crossover week.

Fox Acquisition Sub LLC will also start a roadshow on Monday for a $230 million offering of eight-year senior notes via Deutsche Bank Securities, UBS Investment Bank and Banc of America Securities.

Fox will use the proceeds to pay for assets it is acquiring.

Prospect News also learned on Friday that Newsday LLC is currently in market with a $650 million secured five-year fixed-rate term loan (B1) - a deal which is being targeted to a high yield audience.

The deal launches with a Thursday bank meeting.

Banc of America Securities, Merrill Lynch and Citigroup are the joint bookrunners for the acquisition deal.

The week ahead

Meanwhile the final full week of June gets underway with a pair of deals on the calendar as business which is expected to price before Friday's close.

Linn Energy, LLC is in the market with a $400 million offering of 10-year senior notes (expected B3/confirmed B+) via Lehman Brothers.

The roadshow for that debt refinancing deal is scheduled to conclude on Tuesday.

And CW Media Inc. is marketing a C$365 million offering of non-cash pay notes via Goldman Sachs and Credit Suisse.

Proceeds will be used to help fund the acquisition of Alliance Atlantis Communications Inc. by CanWest Global Communications Corp. and GS Capital.

Source Interlink unseen, but other new deals trade around

A trader said that the new Source Interlink 11¼% notes due 2015, which came at par, probably had not been freed for aftermarket dealings. "That will be one for Monday morning," he suggested.

Among other issues which priced over the last several sessions, he saw the Lender Processing Services Inc. 8 1/8% notes due 2016 at 100.75 bid, 101.25 offered, "exactly how they went out" in dealings Thursday, when the bonds rose about a point from the par level at which the company - which is being spun off from Jacksonville, Fla.-based Fidelity National Information Services - priced its downsized $350 million of 8 1/8% notes due 2016 late Wednesday.

A trader saw Visteon Corp.'s new 12¼% notes due 2016 at 85 bid, 86 offered, which he said was down ½ point to a full point. The Van Buren Township, Mich.-based automotive parts maker - a former Ford unit - priced $206 million of the bonds on Monday at 91.621 to yield 14½% as part of its exchange offer for a portion of its established bonds.

He also saw the new Petrohawk Energy Corp. 7 7/8% notes due 2015 hanging in at 98.375 bid, 98.875 offered, not far from the 98.75 level at which the Houston-based independent oil and gas exploration and production company priced an upsized $300 million add-on tranche to its existing notes, also on Monday.

Among issues which priced on Thursday, the trader saw Cricket Communications Inc.'s new 10% notes due 2015 at 99.5 bid, par offered, versus the par issue price at which the Sand Diego-based wireless telecommunications company - the operating unit of Leap Wireless International Inc. - priced an upsized $300 million of the bonds.

At another desk, a trader said "the Leaps weren't as volatile" as some new issues, seeing them close at 99.75 bid, 100.25 offered.

And he saw Expedia Inc.'s 8½% notes due 2016 at 97.625 bid, 5 offered, 98.125 offered, down a little from the 98.572 level at which the Bellevue, Wash.-based on-line travel service operator priced a downsized $400 million of the notes. Another trader saw the bonds go as low as 97.25 bid, 97.75 offered, before going home at 97.5 bid, 98 offered.

Market indicators remain in retreat

Meanwhile the widely followed CDX junk bond performance index was down about ½ point on the session Friday, a trader said, quoting it at 95 1/8 bid, 95½ offered. The KDP High Yield Daily Index meantime plunged 44 bps to 74.27, while its yield jumped 11 bps to 9.73%.

In the broader market, advancing issues once again trailed decliners by a nearly five-to-three margin. Activity, represented by dollar volume levels, was nearly 23% below Thursday's levels.

A trader called the session "pretty slow today."

Another trader said that Friday's tone was "definitely weaker. Earlier in the morning, when people were around and there was activity, I would say there was three-to-one ratio of sellers to buyers.

"I think everyone is very discouraged by the weak equity market, the strength in oil [prices]" and the continuing troubles of banks, mortgage companies and others in the financial segment.

"There's very negative sentiment" out there, he added.

GM, Ford, towed lower

A trader said that "the autos got hit" amid the latest bad news to come roaring out of Detroit, as Ford warned that sales will likely slow from its already reduced projections for this year and next, while S&P said it could consider downgrading the bonds of the traditional "Big Three" U.S.-based carmakers, citing the havoc that rampantly rising oil prices have wreaked on its sales already.

He saw GM's 8 3/8% benchmark bonds due 2038 down 2 points on the day, to 64 bid, 66 offered, while the domestic industry leader's 49%-owned GMAC LLC financing arm's 8% bonds due 2031retreated 1½ points to 70 bid, 71 offered.

He saw Ford's 7.45% bonds due 2031 down 2 points at 60 bid, 63 offered.

Another trader saw the GM benchmarks down 2½ points at 64 bid, while the Ford 7.45s fell 4½ points to 65.5

"GM was down a couple," yet another trader said, "and "Ford was down a couple."

A market source at another desk saw the Ford benchmarks as one of the biggest losers of the day, down nearly 5 points to a level below 61, as well as one of the most active established issues in the market. The source also saw Ford Motor Credit Co.'s 8% notes due 2016 fall nearly 3 points in busy dealings to just below 76 bid.

Besides the carmakers themselves, companies that supply them with components were also on the slide, including Lear Corp., whose 5¾% notes due 2014 lost a point to 77 bid, and Tenneco Inc., whose 10 1/8% notes due 2013 were down almost a point to the 105 mark.

Thornburg remains volatile

A trader said that Thornburg Mortgage's 8% notes due 2013 - which slid badly on Thursday, down to the mid 50s from levels above 70 previously - were up ½ point, or perhaps even a point on the day, at 54 bid, 56 offered.

But another trader said the bonds had finished Thursday at 57.75 in round-lot trading, and saw them careen all the way down to levels between 49 and 55 on Friday, although those were in odd-lot dealings rather than the larger round lots. The biggest trades of the day, he said, were about $451,000 of the bonds at 50, $400,000 of the bonds at 54 and $349,000 of the bonds at 49, "so the volatility continues on this one."

He also said that the company's other issue, the 15% notes due 2015 - which he described as "a rare museum piece" because of its usual absence from the day-to-day trading world -"you never see that one bid or offered," he added - was offered at 85, without any bids.

Thornburg, which didn't do subprime loans and which still doesn't - has nonetheless been badly hurt by the credit crunch which began last year in the subprime market and which then spread outward. It recently posted a $3.3 billion quarterly loss and warned in its 10-Q quarterly filing with the Securities and Exchange Commission that the current toxic environment for mortgage companies raises doubts about whether the company will be able to even survive.

Hexion steadies, Huntsman drop continues

A trader saw Hexion Specialty Chemicals Inc.'s 9¾% notes due 2014 at 94 bid, 95 offered, unchanged on the day. That stood in contrast to the wild gyrations seen in the bonds on Thursday, when they fell from prior levels around 108 to as low as 91 bid, before firming a little off that bottom toward the close of trading Thursday to finish in the mid-90s, still down 13 points on the session, on heavy big-block trading. That activity was generated by the news that the Columbus, Ohio-based specialty chemical manufacturer was trying to legally back out of its planned acquisition of a sector peer Huntsman Corp., claiming the latter's finances had deteriorated badly in the nearly 12 months since that $6.5 billion transaction was first announced.

The trader meantime saw the bonds of Salt Lake City-based Huntsman - which were also seen down more than a dozen points, to the low-to-mid 90s on Thursday - continuing to retreat, though in far less dramatic fashion. He saw its 7 7/8% notes due 2014 down 1 point at 93 bid, 94 offered, while its 7 3/8% notes due 2015 also dipped a point to 90.5 bid, 91.5 offered.

Another trader saw Hexion's 93/4s trading between 94.25 and 94.875, slightly below Thursday's 95.25 bid close, down roughly ½ point.

He saw Huntsman's 7 78% 2014s at 92.75 bid, 94offered, "about unchanged" from a day earlier, while the 7 3/8s were a point lower at 90 bid, 91 offered..

Noranda eases again

Noranda Aluminum Holding Corp.'s floating-rate notes due 2014 - which fell about 5 or 6 points on Thursday on investor dismay that the Franklin, Tenn.-based aluminum producer might not use the proceeds of its upcoming initial public offering of shares to redeem debt, as previously expected - were down another point, a trader said, at 82.5 bid, 84.5 offered.

The company plans to raise up to $250 million in an initial public offering - but filed an amended S-1 prospectus with the SEC in which it stated: "All shares of our common stock are being sold by the selling stockholders. We will not receive any proceeds from the sale of our common stock by the selling stockholders" - leaving market players to speculate that Noranda owner Apollo Management LP plans to keep the IPO proceeds for itself.

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