NTL Cable deal restructured to single tranche; Spectrum Brands falls on lower guidance

By Paul Deckelman and Paul A. Harris

New York, July 17 - NTL Cable plc's planned offering of 10-year senior notes - already cut down to half the size of the £600 million deal originally talked around the market earlier in the month - was heard to have been restructured Monday, high yield syndicate sources said, noting that it would now be a one-part offering rather an a two-tranche, dual-currency affair. Those sources also said that pre-deal market price talk had emerged on the upcoming transaction.

Price talk was also heard on Penhall International Corp.'s offering of eight-year second-lien notes, which are expected to price during Tuesday's session. Barrington Broadcasting Corp. was heard launching an offering of eight-year notes, while Shackleton Re Ltd. is expected to include an offering of short-duration floating-rate notes as part of the insurance operator's catastrophe financing package.

In the secondary market, traders saw generally quiet activity levels in most names - but not in Spectrum Brands Inc., after the Atlanta-based maker of batteries and other consumer products said that full-year results would be well down from its earlier projections.

There was also a fair amount of activity among the bonds of distressed automotive parts makers, particularly Collins & Aikman Corp. and Tower Automotive Inc. The bonds of both bankrupt companies ended the day well below where they had began.

Late Monday a high yield syndicate official commented that the overall market continued to show weakness, and added that trading was reported to have been very quiet.

Meanwhile no issues were priced in the primary market, although the stage was set for a pair of Tuesday deal pricings.

NTL drops sterling tranche

NTL Cable plc talked its restructured $550 million offering of 10-year senior notes (B2//B) at a yield in the 9¼% area on Monday.

The company had previously been in the market with a proposed £300 million equivalent offering to be sold in dollar-denominated and sterling-denominated tranches. However the sterling-denominated tranche has been abandoned.

A source said that, based upon the current exchange rate, the deal-size is more or less unchanged, and added that the abandonment of the sterling tranche reflects a preponderance of investor demand for dollar-denominated notes.

The offering is expected to price on Tuesday.

JP Morgan, Deutsche Bank, Goldman Sachs and The Royal Bank of Scotland are joint bookrunners.

Penhall talks $175 million

Also expected to price Tuesday is Penhall International Corp.'s $175 million offering of eight-year second-lien notes (B3).

On Monday the company talked the notes at 11½% to 11¾%.

Deutsche Bank Securities and CIBC World Markets are joint bookrunners.

MxEnergy launches $200 million

One new roadshow start was heard as the week of July 17 got underway.

A roadshow will start Wednesday for MxEnergy Holdings Inc.'s $200 million offering of five-year senior floating-rate notes (CCC+).

Deutsche Bank Securities and Morgan Stanley will be joint bookrunners for the acquisition financing from the Stamford, Conn., natural gas and electricity marketer to consumers in deregulated energy markets.

Shackleton Re to sell 18-month bonds

Finally, Shackleton Re Ltd. announced plans to sell up to $75 million of 18-month California earthquake risk-linked floating-rate notes as part of its tranche A risk-linked financing, via Goldman Sachs.

The tranche is also expected to include a $50 million California earthquake risk-linked term loan A with identical risks and credit ratings. The only difference is that the bonds mature in 18 months while the loan matures in two years.

Although the exact size of the tranche A components remains to be determined the overall tranche size will be $125 million.

Originally the offering was entirely bank debt, with three tranches covering California earthquake risk and U.S. hurricane risk. However the issuer subsequently decided, as part of the A tranche, to make an offering in a bond format.

The two-year first event California earthquake term loan A was downsized from an original size of $125 million, according to a market source.

Both the term loan A and the floating-rate notes are being talked in the Libor plus 800 basis points area, which is where the term loan A has been talked since launch, the market source added.

The risk-linked financing also includes a $50 million first event U.S. hurricane term loan B and a $125 million second event U.S. hurricane and California earthquake term loan C.

Pricing is expected at the end of the present week.

Shackleton Re is an offshore special-purpose vehicle serving as a trust engaged in a swap with the ceding reinsurer, Endurance Specialty Insurance Ltd.

Rexnord firm in trading

Back in the secondary market, traders were quoting the new Rexnord Corp. 9½% senior notes due 2014 at par bid, 100.5 offered, while its 11¾% senior subordinated notes due 2016 were seen at 101 bid, 101.5 offered. Both of the Milwaukee-based industrial manufacturer's new issues had priced at par on Friday afternoon. A trader remarked that the latter issue was doing better despite its subordinated status and longer tenor because its fat double-digit coupon was more attractive to investors reaching for yield.

Spectrum sinks on earnings warning

Back among the established issues, Spectrum Brands' 7 3/8% notes due 2016 were seen by a trader to have dropped 3 points to 76.5 bid, 77 offered, while its 8½% notes due 2013 were at 80 bid, 80.5 offered, which he called a 4½ point loss. Spectrum, he said was "one spot of activity" in what otherwise was a very quiet market. "Really, the only thing was Spectrum, whose bonds got killed," he said.

Another trader saw the 7 3/8s down 2½ points at 76.25 bid, 76.75 offered, and the 81/2s three points lower at 79.75 bid, 80.25 offered.

Spectrum's New York Stock Exchange-traded shares meantime plummeted $3.55 (33.18%), to $7.15 on volume of 9.3 million, more than 12 times the average daily turnover, after the company - which makes such well-known consumer staples as Rayovac batteries, Remington shavers and Cutter insect repellent, as well as pet products and supplies, insect control products and lawn and garden products, said that its preliminary forecast of fiscal third-quarter financial results indicates that full-year 2006 earnings will be "substantially lower than the latest earnings guidance" that the company issued in May. At that time, which coincided with its release of fiscal second-quarter earnings, Spectrum projected full fiscal year net sales of approximately $2.6 billion, as well as pro forma fully diluted earnings per share of between 90 cents and a dollar.

Spectrum said that its anticipated "disappointing" third-quarter performance was attributable in large part to lower-than-expected sales volumes, particularly in its European consumer battery business. Additionally, it said, North American sales were negatively impacted by lower-than-expected results from shaving and grooming products around the Father's Day holiday last month, as well as retail inventory reductions on the part of several large customers in the company's lawn and garden category.

Even though it expects disappointing third quarter results, Spectrum said it anticipates being in compliance with its senior credit facility debt covenants for the fiscal third quarter, based on its preliminary estimates. It will release its full results for the quarter on Aug. 3.

The company also announced that it is has hired Goldman Sachs and Co. as its financial advisor to assist in evaluating potential selective asset sales "designed to sharpen the company's focus on strategic growth businesses, maximize long-term shareholder value, and reduce outstanding indebtedness."

Mothers Work unchanged

While that reduced guidance threw Spectrum's bondholders for a loop, better guidance from Mothers Work Inc. was seen having little or no impact on the Philadelphia-based maternity clothing retailer's bond levels.

A trader saw the company's 8¾% notes due 2012 steady at 105 bid, 105.5 offered, while its 7 1/8% notes due 2016 actually eased ¾ point, he said, to 96.25 bid, 95 offered.

At another desk, its 11 1/8% notes due 2010 were up perhaps ½ point at 104.75.

The company said that it now expects to report diluted earnings per share for the third quarter ended June 30 of between $1.52 and $1.56, after stock option expense - an improvement from its previously announced third-quarter guidance of $1.20 to $1.34 per share.

Mothers Work recently reported that its net sales for the third quarter of $163.9 million exceeded its previous third-quarter sales guidance of $157.5 to $160.5 million, and its comparable store sales increase of 6.4% for the quarter exceeded its previous comparable store sales guidance of an increase of 2.5% to 4.5%.

It announces full results on July 25.

Sea Containers up on sale report

Elsewhere, a trader saw Sea Containers Ltd.'s bonds better, apparently given a lift on news reports that the troubled Bermuda-based maritime and railroad transportation company might sell its London-to-Scotland railroad operations - thought of as one of its core businesses - in order to raise capital to stave off a possible bankruptcy filing.

He quoted the company's 10¾% notes slated to come due on Oct. 15 at 96 bid, 97 offered, which he called up 1½ points.

Another trader saw the company's 7 7/8% notes due 2008 firmer at 92 bid, 94 offered, while its 10½% notes due 2012 advanced to 94.5 bid, 96.5 offered.

A market source at another desk pegged the 7 7/8s slightly lower, at 91.25, but said the 101/2s were up 1 3/8 points at 94.625, and its 103/4s were a point better at 96.

Sea Containers' NYSE-traded shares were up 22 cents (5.13%) in Monday's trading to close at $4.51, although volume of 123,000 shares was less than one-third the usual daily handle.

Newspapers in Europe reported over the weekend that Sea Containers was looking at the possible sale of its GNER unit, which operates the rail service between England and Scotland. Those reports speculating that such a sale could bring the company about £200 million, which would be used to settle debts and boost its liquidity. They said that Sea Containers had breached several lending agreements with its bankers, creating the necessity for such a sale of what was once believed to be one of the company's core businesses, along with its shipping container business.

Those European news reports warned that the only alternative to a sale would be for Sea Containers to file for Chapter 11 protection from its United States creditors - but such a step would lead to a breach of its U.K. franchise requirements, and might end up with Sea Containers losing the right to run the rail line anyway.

If the rail line is sold, it would come on top of the company's recent agreement to dispose of its Baltic Sea ferry operation, a non-core business, for an estimated $594 million, as part of its ongoing out-of-court restructuring.

Collins & Aikman sinks

Among companies that are already restructuring in the courts, traders saw a the bonds of bankrupt Troy, Mich.-based automotive interior components maker Collins & Aikman pushing lower, while those of bankrupt Novi, Mich.-based vehicle frames maker Tower Automotive were bouncing wildly around at lower levels , before finally settling at a closing level down a few points on the day.

Collins & Aikman's 10¾% notes due 2011 were seen down 4 points on the session at 19.5 bid, 20.5 offered. A trader cited market rumors that the company had been forced to seek changes in its debtor-in-possession financing facility, with investors fearing that this could extend the time it has to spend in bankruptcy.

In fact, according to court documents, the company late last week did get bankruptcy court approval for an amendment to that DIP financing that modifies its negative covenants, in order to let Collins & Aikman sell some of its assets.

In a filing Thursday with the U.S. Bankruptcy Court in Detroit, the company said the amendment will allow Collins & Aikman to continue to monetize its non-core assets to make its operations more efficient and to generate additional liquidity to fund future operations and capital expenditures.

Collins & Aikman is seeking to wind down its fabrics business unit, sell its convertibles division and its facilities located in Williamston, Mich., and sell or dispose of other non-core assets, but had to modify the DIP facility, which barred or at least restricted such transactions.

The company hopes to obtain some $75 million of proceeds from the now-permitted transactions, and will be able to use some or all of that money to fund operations and invest in capital expenditures to support awards of new business from one of its major customers. Previously, it had to dedicate all of any such sale proceeds to prepaying its DIP lenders.

Collins & Aikman separately was given a two-month extension of its exclusivity period on Friday, giving it more time to develop financial alternatives. Collins will now have until Sept. 27 to file a plan of reorganization and until Nov. 27 to seek votes for it. Creditors or other stakeholders are barred from presenting their own plans and seeking support for them during this period.

Tower volatile, lower

Tower Automotive's bonds were meantime behaving like a roller-coaster ride Monday, possibly, the trader said, because of investor fears that their eventual recovery would be well below the levels at which the bonds have been trading.

A trader at another desk saw Tower's 12% notes due 2013 open at 61 bid, 63 offered, then plunge to 54 bid, 55 offered, before climbing out of that hole to end the day at 59 bid, 61 offered.

Caroline Salls contributed to this article.

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