Videotron, PolyOne, Nielsen price deals; call lifts Overseas Shipholding; ResCap up on GMAC infusion

By Paul Deckelman and Paul A. Harris

New York, April 7 - The junk bond primary arena started the new week off with a bang on Monday, with a trio of issuers - Videotron Ltd., PolyOne Corp. and Nielsen Finance - bringing opportunistically timed, quickly shopped deals to market. Videotron and PolyOne were upsized from the amounts originally talked around, while PolyOne and Nielsen were add-on issues to previously priced bonds.

The new deals pretty much grabbed the spotlight away from the secondary. In the latter market, Overseas Shipbuilding Group Inc.'s 8¼% senior notes due 2013 were seen up by several points on the announcement that that the New York-based provider of marine energy transportation services is calling those bonds for redemption.

Another gainer was Residential Capital Corp., helped by the news that that parent company GMAC LLC had in effect given it a $1.2 billion infusion by buying that amount of the Minneapolis-based mortgage lender's debt on the open market and returning it to the subsidiary in exchange for preferred membership interests - a move seen as a continued vote of confidence by GMAC's owners in ResCap's ability to continue operations despite the recent problems faced by mortgage issuers.

Also on the rise was Delphi Corp., bouncing back from the decline its bonds suffered on Friday when an investor group led by Appaloosa Management LP said that it was scrapping its agreement to provide the bankrupt Troy, Mich.-based auto parts maker with some $2.55 billion as part of its emergence from Chapter 11.

The high yield drive-by window opened wide on Monday, as three issuers combined to raise $746.6 million of proceeds.

The flurry of new issue activity took place against the backdrop of a mixed to indifferent market session.

The Texas Competitive Energy Holdings Co. LLC (TXU Corp.) 10¼% senior notes due November 2015 traded at 102 5/8 bid on Monday, after having closed Friday at 102¾ bid, the source added.

Videotron upsizes

Monday's biggest drive-by deal came from Videotron.

The Montreal-based cable operator priced an upsized $455 million issue of 9 1/8% 10-year senior notes (Ba2/BB-) at 98.432 to yield 9 3/8%, on top of price talk.

Banc of America Securities, LLC, Citigroup, RBC Capital Markets and Scotia Capital were joint bookrunners for the debt refinancing and general corporate purposes deal which was upsized from $350 million.

An informed source said that Videotron was a complete blowout, playing to a book containing in excess of $3 billion of orders.

Nielsen taps 10% notes due 2014

Elsewhere Nielsen Finance LLC and Nielsen Finance Co. priced a $220 million add-on to their 10% senior notes due Aug. 1, 2014 (Caa1/B-) at 99.50.

JP Morgan ran the books for the quick-to-market add-on which the media information company brought in order to fund an acquisition.

No price talk was heard on the deal, according to market source.

PolyOne upsizes

Also driving through with a tap of an existing issue on Monday was PolyOne Corp.

The Cleveland-based specialty chemical company priced an upsized $80 million add-on to its 8 7/8% senior notes due May 1, 2012 (B1/B+) at 99.75 to yield 8.947%.

The reoffer price came at the midpoint of the 99.50 to 100.00 price talk. The deal was increased from $50 million.

Morgan Stanley ran the books.

An informed source said that the PolyOne deal, two-times leveraged, seemed to be just what investors want, and added that the notes went out at 101 bid, 101¾ offered.

Technicals open window

Of Monday's burst of primary market activity one high yield syndicate official said "A window of opportunity has opened, here.

"People are going to jump in," the source added, professing knowledge of another corporate deal which should make a midweek appearance.

"Hopefully the window doesn't shut," the source added.

Meanwhile a senior high yield syndicate official cited three predominantly technical factors that paved the way for the early-April burst of issuance in a primary market which produced less than $10 billion of issuance during an extremely anemic first quarter.

First of all, the official said, there is some short covering going on.

"High beta names are up a lot," the banker asserted.

"Also the index has been up, which is telling investors that perhaps high yield has found a near-term bottom.

"So people don't want to miss out on a chance to get a leg up."

Second, the banker said, there is liquidity.

"The accounts are seeing fairly decent cash inflows," the source remarked, making reference to the most recent information from AMG Data Services, noting that the high yield mutual funds which report on a weekly basis saw $373 million of inflows for the week to last Wednesday.

The official claimed to be hearing other anecdotal evidence of pent up cash on the buy-side.

"Also there is a steady stream of coupon payments," the banker said, adding that the high yield primary market has provided an extremely limited amount of new issues into which that cash might be invested.

"Finally you have the equity markets having a nice rally," the banker said, adding that last week the Nasdaq was up over 4%.

"That helps," the official said.

Aside from that, the banker said, Lehman Brothers and UBS were able to raise substantial cash in the equity markets last week, implying that a belief may be emerging among investors that the banks are coming into a position from which they can "put a lid on the subprime mess."

Market indicators keep rising

A trader saw the widely followed CDX index of junk bond performance essentially unchanged on the session Monday at 95 bid, 95½ offered. But the KDP High Yield Daily Index meanwhile rose by 0.39 to end at 74.67, while its yield narrowed by 8 bps to 9.49%.

In the broader market, advancing issues continued to lead decliners by a better than two-to-one margin. Overall activity, reflected in dollar volumes, rose nearly 7% from Friday's levels.

"Friday was brutal," a trader said. "We all kind of ducked out early. Today, things were a little better volume-wise, but it does feel like a Friday, with more focus on the primary calendar than anything."

That having been said, he allowed that things in the secondary market "definitely are better," adding that "they opened up better and appeared to push better for most of the day." Although he did see "a little bit of selling into strength around midday, there were no real earth-shattering moves either way."

He noted the Nielsen deal as indicative of the new, better tone seen in the market over the past week or so. Issuers, he said "keep squeaking these new deals in. They are, obviously, doing better more solid credits at this point to kind of keep the ball rolling. It will be interesting to see what happens over the next week or so with the primary calendar."

"The market's got a new tone here," another trader said, especially in contrast with where it was say two weeks ago, just before an explosion of over $1 billion of new-deal activity signaled that things might be getting better.

However, he cautioned that "although there's a better tone, it definitely seems like the activity level is lower. I think accounts are trying to figure out how they're going to play this current stage of the market - you no longer have the anxious sellers looking for a bid." He opined that much of the activity that is taking place now is "dealers covering some shorts that they had put on during the downdraft of the market."

Overseas Shipholding bonds sail higher on call

Among specific names, a trader saw Overseas Shipholding's 8¼% 2013 bonds rise after the company said that it would redeem all of the roughly $176 million of outstanding paper on May 15 at a price of 104.125, plus accrued and unpaid interest as of the redemption date.

He saw those OSG bonds push up from 100.75 bid, 101.75 offered before the news to 104 bid, 104.5 offered, "wrapped around the call price."

ResCap on the rise

Residential Capital's bonds firmed smartly on the news, contained in a filing with the Securities and Exchange Commission, that parent GMAC had stepped in to buy some $1.2 billion of ResCap debt on the open market, getting the bonds for about 50 cents on the dollar, or $607 million total. ResCap will be able to boost its capital by that amount, and record a gain of almost $600 million on extinguishment of debt - likely enough to hold its bankers at bay, for now.

As part of the complex deal, GMAC, in return for retiring the debt, is getting 607,192 shares of newly issued preferred stock in ResCap; should the latter's financial conditions improve some time in the future to the point that it could resume paying dividends, GMAC would be entitled to dividend payments. GMAC may also exchange a further $340 million of ResCap notes having a market value of $266 million for additional ResCap preferred shares by May 31.

ResCap's bonds - which were already doing better late Friday, when the first word of GMAC's move on behalf of its unit began circulating - continued to gain on Monday.

A trader saw ResCap's 6½% notes due 2013 up 4 points on the day at 58 bid, 60 offered, while its 8 7/8% notes due 2015 were seen as 2 point gainers to 57 bid. A market source at another desk called ResCap's 7% notes due 2011 up nearly 4 points to just below the 60 level.

GMAC's bonds, meantime were also seen moving up, with its 8% bonds due 2031 better than 2 points improved at 77.75, while its 6 7/8% notes due 2012 ended at 81 bid, up a point. GMAC's 5 5/8% notes due 2009 were among the most heavily traded bonds on the session, up a point at 95 bid.

Delphi bounces off lows

The benchmark 8 3/8% bonds due 2033 of GMAC's former parent and still 49% owner, General Motors Corp., were seen up a point at around 74.5 bid, 75.5 offered. GM's former parts unit, Delphi, was also seen riding higher - even though would-be investors led by Appaloosa Management said Friday that they would not continue with their plans to invest $2.55 billion into Delphi, contending that a separate agreement Delphi made with GM so the latter could invest $2.8 billion would give the automotive giant too much control over Delphi.

Although the Delphi bonds slid on Friday, down to the 33-4 bid level from the upper 30s previously, they got it all back on Monday and maybe then some. A trader saw Delphi's 6.55% notes due 2006 at 38.5 bid, 38.75 offered, "up a good couple of points" from Friday's levels around 34 bid, 36 offered after Appaloosa announced it was pulling out of funding Delphi. Another called them up 4 points at 37 bid, 39 offered.

Momentive has momentum

Elsewhere, Momentive Performance Materials Inc.'s 11½% notes due 2016 were seen by a market source to have jumped more than 3 points in busy trading to the 85 level. Another also saw the bonds up there, calling a 3 point gain.

There was no immediate fresh news out on the Wilton, Conn.-based manufacturer of specialty materials. On March 31, the company released its results for fiscal 2007, which were a sort of mixed bag; while its net sales grew to $2.538 billion from $2.414 billion in fiscal 2006, an increase of 5.1%, and its adjusted EBITDA grew 4.5% to $447 million from $427.8 million, operating income fell to $82.2 million versus $100.8 million a year earlier and the company's net loss grew to $254.3 million from $36.9 million a year earlier.

AMD warns on sales results, jobs

A trader noted that towards the end of the day, Advanced Micro Devices Inc. said that it would eliminate fully 10% of its more than 16,000 worldwide jobs and warned investors that first-quarter sales were lower than expected across all business lines.

"Cutting their forecasts and laying off people is not a wonderful sign," he said.

With the news hitting the market late in the day, there was no real activity seen in the Sunnyvale, Calif.-based semiconductor manufacturer's bonds, although the news could be a drag on its bonds and those of other high-tech sector peers like Freescale Semiconductor Inc. and Amkor Technology Inc. in Tuesday's dealings.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.