Liberty Mutual sells $1 billion hybrid; GMAC up on asset sale; market better after Tuesday debacle

By Paul Deckelman and Paul A. Harris

New York, Feb. 28 - Liberty Mutual priced $1 billion of 30-year hybrid securities Wednesday in a quickly-shopped two-tranche deal, high yield syndicate sources said. There was no aftermarket in the bonds, which priced too late in the session.

Elsewhere in the primary arena, pre-deal market price talk emerged on Univision Communications Inc.'s upcoming mega-deal, while GNC Corp. was seen hitting the road Thursday to market its planned $300 million offering of seven-year notes to prospective investors. Leucadia National Corp. slated a $500 million offering of 10-year notes.

In secondary dealings, most of the recent new issues continued to gamely tread water and try to stay above their respective par issue prices, though with only limited success. However, Seminole Hard Rock Entertainment Inc.'s new seven-year floating-rate notes were seen to have firmed by about a point.

Back among the established credits, General Motors Acceptance Corp.'s bonds - recently in retreat on market fears about the sub-prime mortgage market in which GMAC's Residential Capital unit plays - were solidly higher Wednesday, as the Detroit-based automotive financing company sold a package of loan assets to Prudential Capital Group.

Calpine Corp.'s bonds firmed, a trader said, noting the San Jose, Calif.-based power generating company had updated investors on its restructuring efforts, including its attempt to get bankruptcy court approval for a $5 billion financing package.

Generally speaking, traders said, the junk market seemed to rebound, after having mostly traded lower on Tuesday in tandem with a sharp slide in stocks.

A sell-side source who focuses both on junk bonds and on loans told Prospect News that the market rebounded a little on Wednesday, trailing Tuesday's widespread sell off which took place against a backdrop of steep losses in equity markets around the globe.

"Things were a little better," said the source who specified that strength was especially seen among credits in the technology, media and telecommunications sectors.

"What remains to be determined is how the new issue premium is repriced," the source added.

"The secondary market seems fine and some new issues have traded pretty well.

"Certainly the loan market has been much less affected than the high-yield market."

Liberty Mutual's $1 billion hybrids

Wednesday's only high yield issuance came from Boston-based insurer, Liberty Mutual Group, Inc., which priced a $1 billion two-part offering of hybrid securities (Ba1/BB+).

Citigroup, JP Morgan, Banc of America Securities LLC and Wachovia Securities were joint bookrunners.

The Boston-based insurance group priced a $700 million issue of 7.8% series A securities at 99.801 to yield 7.817%. The series A notes have an 80-year final maturity. The scheduled maturity is in 30 years, after which the series A securities will bear interest at the original Libor spread plus 100 basis points.

The series A securities priced at a 312.5 basis points spread to Treasuries, at the wide end of the Treasuries plus 300 basis points price talk.

Liberty Mutual also priced $300 million of 7% series B securities with a 60-year final maturity and a 30 year scheduled maturity. The series B priced at 99.955 to yield 7.006%.

The series B securities are callable in 10 years, after which the interest rate will float at the original Libor spread plus 100 basis points.

The series B tranche priced at a 245 basis points spread to Treasuries, on the wide end of the 237.5 basis points area price talk.

Quick ones

Two prospective issuers showed up on Wednesday with deals that are expected to price before the end of the week.

Leucadia National Corp. will host an investor call at 10 a.m. ET on Thursday for its $500 million offering of 10-year senior notes (expected ratings Ba2/BB), via Jefferies & Co.

The New York-based holding company will use the proceeds to fund a portion of an investment in a joint venture with Jefferies.

Elsewhere tobacco leaf merchant Alliance One International rolled out a $150 million offering of senior notes due May 15, 2012, which it expects to price early Friday.

Wachovia Securities is the left bookrunner for the debt refinancing deal.

Unvision talks $1.5 billion

Univision Communications Inc. talked its $1.5 billion offering of eight-year senior unsecured toggle notes (B3/CCC+) at 9¼% to 9½%, with a 75 basis points step-up toggle feature in the coupon should the issuer elect to make an in-kind payment.

Pricing is expected late Thursday or early Friday.

Credit Suisse, Banc of America Securities LLC, Deutsche Bank Securities, Wachovia Securities, RBS Greenwich Capital and Lehman Brothers are joint bookrunners.

Roadshow for GNC

General Nutrition Centers, Inc., meanwhile, will begin a roadshow on Thursday for an offering of high-yield notes.

The overall $425 million of proposed issuance includes $300 million of seven-year senior floating-rate toggle notes (Caa1/CCC), which will come with two-years of call protection and a 75 basis points coupon step-up should the issuer elect to make and in-kind, as opposed to cash, coupon payment.

Of the overall $425 million those are the only notes which are being marketed, according to the source.

In addition the issuance includes a $125 million tranche of eight-year senior subordinated notes (Caa2/CCC) which have already been placed.

Terms on both tranches are expected to become available on March 7.

JP Morgan, Goldman Sachs & Co. and Lehman Brothers are joint bookrunners for the LBO deal from the Pittsburgh-based retailer of nutritional products.

Seminole Hard Rock gains

Traders said that the new Liberty Mutual issue appeared too late in the day for aftermarket dealings.

Among other recently priced issues, Seminole Hard Rock's floaters due 2014 - which had priced at par on Tuesday and then had managed to pretty much hang in there in the face of an overall market downturn, unlike several other new deals - was seen having firmed about a point Wednesday to 100.75 bid, 101.75 offered.

However, other new deals that priced on Monday or Tuesday continue to struggle. A trader saw The Reader's Digest Association, Inc.'s new 9% notes due 2017 "still below par" at 99.25 bid, 99.75 offered, pretty much unchanged.

Valassis Communications Inc.'s 8¼% notes due 2015 were at 99.75 bid, 100.25 offered - up about ¼ to ½ point on the day, but still just below Tuesday's par issue price.

Allied Waste Industries Inc.'s new 6 7/8% notes due 2017, which priced Monday at par, were unchanged at 99 bid. 99.5 offered.

However, while the new issues generally were, in the understated words of a trader, "not doing fabulously well," American Axle Manufacturing's 7 7/8% notes due 2017, which priced at par last week, managed to hold above par at 100.25.

Junk market rebounds

"Everything pretty much rebounded in high yield," a trader declared. "Most things are back to where they were before the drop. It was a very calm marketplace, with no panic or anything like that."

In Tuesday's market, the trader allowed, "there was maybe a little bit of panic selling - but everything just bounced back [Wednesday]."

Another trader said that Wednesday's market was "surprisingly quiet. I would say even though some people would say the market was off a little today, I think it was sort of a mixed bag."

The trader said that "some of what I would call the higher-coupon, more difficult-to-find issues were trading up a little bit, while other issues were trading down a little bit." The Nasdaq Trace bond trade reporting system saw decliners outnumber advancers by about seven to five.

"Overall, there was less volume than the usual."

The trader noted that with the Dow Jones Industrials having hovered above 12,000, some sort of equity-market correction was almost inevitable and probably came as no surprise to junk marketeers.

GMAC, GM drive higher

The standout performer of the session was doubtless GMAC LLC, whose benchmark 8% notes due 2031 were seen up 1 3/8 points at 110.375, given lift by a sizable asset sale.

At another desk, those bonds were quoted even better at 111, up 2½ points.

Prudential Capital Group acquired a $607 million portfolio of assets from GMAC's Commercial Finance unit's equipment division. Terms of the deal were not disclosed.

That portfolio includes loans and leases that finance corporate aircraft, marine assets, industrial equipment and project-related assets.

Apart from the benchmark bond, GMAC's 6 7/8% notes due 2011were seen up ¾ point at 101.5.

News of the deal also lifted the bonds of GMAC's former corporate parent - and still 49% owner - General Motors Corp. The auto giant's benchmark 8 3/8% notes due 2033 were seen up ½ point at 92.75, while its 7 1/8% notes due 2013 were a point better at 95.5.

The rise in GMAC and GM helped tow other automaker names higher as well, with GM rival Ford Motor Co.'s flagship 7.45% notes due 2031 up a point at 80.25 bid, and the Number-Two domestic carmaker's 7% notes due 2013 half a point better at 96.25.

Ford's financial arm, Ford Motor Credit Corp., was also better, its 6 5/8% notes due 2008 up nearly a point at 100.375.

Elsewhere among the auto names, a trader called Dana Corp.'s bonds "probably a little better, maybe a point," on what he called "decent volume. The bankrupt Toledo, Ohio-based components maker's 6½% notes due 2009 finished at 75.25 bid, 76.5 offered, although he saw its longer paper, like the 7% notes due 2028 and 2029, at 73½ bid, 74.5 offered, unchanged.

Remy International Inc.'s bonds "bounced around, and went out where they ended pretty much where they ended yesterday," he said, with the Anderson, Ind.-based auto electrical systems maker's Delco Remy 8 5/8% notes due 2007 going home around 82 bid, 83 offered. "It was a lot of blah," he said of the issue's gyrations.

Calpine climbs

Outside of the autosphere, a trader said that amid the general rebound in high yield names following Tuesday's softer market, one of the few names that actually rose on news developments was Calpine.

"They had an 8-K [SEC filing] out basically outlining what they've done so far and what they plan to do in terms of restructuring, and they officially filed for a $5 billion debt refinancing - they knew they were going to do that, but now that it's in the 8-K, it's official."

The trader saw the company's bonds jump about 3 points, with its 8½% notes due 2011 moving up to 102 bid, 103 offered and its 8½% notes due 2008 finishing at 105 bid, 106 offered, up 2½ points on the session.

Another trader said that while the bonds did see some activity, they were "not as active as they should have been," and the closing price "should have been higher."

According to the 8-K filed with the Securities and Exchange Commission, the company is seeking approval from the bankruptcy judge overseeing its restructuring for a proposed $5 billion replacement debtor-in-possession credit facility. The court heard arguments from Calpine on Tuesday, as well as the objections from the deal's opponents, known as the CalGen lenders. However, news reports said the judge withheld an immediate ruling, preferring to rule later. If the judge approves the deal, the facility could close within the next 30 days.

Calpine held a bank meeting on Wednesday, launching its proposed $5 billion two-year debtor-in-possession credit facility to investors.

The facility consists of a $4 billion term loan and a $1 billion revolver with a 50 basis point commitment fee. Proceeds will be used to refinance the company's existing DIP and repay $2.516 billion of operating subsidiary Calpine Generating Co., LLCs secured pre-bankruptcy debt.

With the new DIP, lenders would get a beefed up collateral package through the addition of a direct lien on CalGen assets.

The commitment deadline is set for March 15 and funding and closing is targeted for March 29.

Rite Aid in retreat

Bonds of Rite Aid Corp. were seen lower - but nobody had seen any fresh news on the Camp Hill, Pa.-based drugstore chain operator that might explain the easing.

Rite Aid's 9¼% notes due 2013 were down 1¼ points at 100.5 bid, while its 6 7/8% notes due 2028 slid even more - 3½ points - to 78.25 bid. Its actively traded 8 5/8% notes due 2015 lost ¾ point to end at 97.

Among other retailing names, Pathmark Stores' bonds were up in apparent belated reaction to the news earlier in the week that it was in talks with Great Atlantic & Pacific Tea Co. Inc. that could result in the Carteret, N.J.-based supermarket operator being acquired by the venerable A&P.

Pathmark's 8¾% notes due 2012 moved up to 102.5 bid, up 1½ points on the day.

Stepahanie N. Rotondo contributed to this report.

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