PNA brings biggest primary week in eight months to a close; Goodyear, Chiquita up on numbers

By Paul Deckelman and Paul A. Harris

New York, Aug 4 - PNA Group Inc. priced its new 10-year deal to close out a week which saw the largest amount of dollar-denominated issuance in well over half a year.

The week's biggest offering, the gigantic drive-by mega-deal from Ford Motor Credit Co., moved up from its par issue price in trading Friday.

Meanwhile eircom and Broadview Networks were seen preparing to hit the road to market planned transactions.

Among the established secondary issues, the bonds of Goodyear Tire & Rubber Co. and Chiquita Brands International Inc. were each seen having moved up, despite what at first glace were disappointing numbers - on the realization that they were better than had been expected.

And Dana Credit Corp.'s bonds, which were getting whipsawed around this week, rose smartly Friday after the financing arm of the bankrupt Toledo, Ohio-based automotive components maker Dana Corp. was reported in a regulatory filing to be in talks with its bondholders on a forbearance agreement.

Overall the Friday session in the primary market passed much as sources expected - in relative quiet. One issue was priced.

PNA Group, Inc. completed its $250 million issue of restructured 10-year senior notes (B3/B-), pricing the notes at par to yield 10 ¾% on Friday.

The yield came at the wide end of the revised 10 5/8% area price talk, which had been increased from earlier talk of 10¼% to 10½%.

Banc of America Securities LLC and Citigroup were joint bookrunners for the issue which was sold via Rule 144A with registration rights. Registration rights were added in a restructuring of the notes, which had initially been marketed without registration rights.

The Atlanta-based steel processor's debt refinancing and dividend funding deal also underwent covenant changes during marketing, according to market sources.

The restricted payments general basket was reduced to $15 million. For any restricted payments for dividends or redemptions, with the exception of the $15 million general basket, leverage is required to be 3.5 times or less. Late in marketing that leverage threshold was lowered from 4.0 times.

A sell side source commented after the terms were printed that covenant changes are becoming a more common theme, with investors pushing back on covenants and baskets sizes.

"You saw that in the VNU deal, where there were a lot of structural changes," the source said, referring to one of the week's mega-deals, the Nielsen Finance LLC, Nielsen Finance Co. and VNU Group BV combined issuance of the equivalent of $1.68 billion in notes on Tuesday.

"It's not surprising that people are pushing these basket sizes smaller," the sell-sider added. "It adds a significant amount of protection in downside credit scenarios.

"It has been a long time since the buy-side was in command of this much negotiating leverage. They are pretty much getting what they want."

$6.25 billion week

Tallying Friday's $250 million PNA deal, issuance for the July 31 week totaled $6.25 billion in 13 dollar-denominated tranches, making it the biggest week for dollar-denominated issuance in well over half a year - since the week of Dec. 19, 2005 which saw $7.73 billion price.

In addition to the above-mentioned VNU-Nielsen transaction, the week's whoppers included Ford Motor Credit Co.'s $2.25 billion two-part transaction, Ashtead Group plc's $650 million issue, Qwest Corp.'s $600 million issue and Station Casinos, Inc.'s $400 million issue.

All of them - Ford, Ashtead, Qwest and Station Casinos - were upsized.

At Friday's close year-to-date issuance pulled up just shy of $81 billion in 232 dollar-denominated tranches, as the dollar amount of issuance continues to outpace 2005 on a year-over-year basis. At the Aug. 4, 2005 close the market had seen just under $63 billion in 243 tranches.

The week ahead

The Aug. 7 week gets underway with an expected $3.79 billion of business parked on the new issue calendar - all of it expected to price before the Friday close.

Two prospective issuers are coming with billion-plus transactions.

Australian iron ore producer Fortescue Metals Group (issuing as FMG Finance Pty.) has been marketing $1.9 billion equivalent of first-lien senior secured notes in maturities ranging from five years to 10 years, with a possible floating-rate tranche to be sold in dollar and euro denominations. Citigroup is leading the transaction which is expected to price late in the Aug. 7 week or early the following week.

Chicago-based commercial travel services company, Travelport (issuing entity: TDS Investor Group) plans to price $1.4 billion in multiple tranches late in the week, via joint bookrunners Lehman Brothers, Credit Suisse, UBS Investment Bank, Citigroup and Deutsche Bank Securities.

Coming with smaller offerings are North Carolina-based chemical coatings company, Reichold Industries, with $195 million of eight-year senior notes (B2), via Banc of America Securities and Wachovia Securities. Also, Savers Inc. expects to price $140 million of eight-year senior subordinated (Caa1/CCC+), in a deal being led by CIBC World Markets.

Smaller still are the Allis-Chalmers Energy Inc. $80 million add-on to its 9% senior notes due Jan. 15, 2014 (B3/B-), via RBC Capital Markets, and Indonesia-based PT Polyfin Canggih's $75 million of five-year senior secured notes and warrants deal, being led by Jefferies.

A pair of roadshow starts

Two prospective issuers announced roadshow starts on Friday.

Broadview Networks Holdings, Inc., a voice and data solutions provider based in Rye Brook, N.Y., hit the road with a $210 million offering of six-year senior secured notes (B-).

Jefferies & Co. is the sole bookrunner for the acquisition, debt refinancing and general corporate purposes deal.

And BCM Ireland Finance Ltd. (eircom Group plc) will begin a roadshow on Monday in London for its €350 million offering of 10-year senior floating-rate notes (B).

Credit Suisse, Deutsche Bank Securities, JP Morgan, Barclays Capital and Dresdner Kleinwort are joint bookrunners for the acquisition deal from the Irish telecom.

A window about to close

A sell-side source who operates in both the high-yield bond market and the bank loan market, speaking late Friday, said that the junk market appeared much stronger this week than in recent weeks past.

This source does not anticipate a big buildup to the high yield forward calendar before Labor Day, and added that the date Aug. 15 represents a kind of end-of-summer boundary beyond which issuers and their investment banks are reluctant to attempt to get deals done before the Labor Day hiatus.

However, the source said, drive-by deals, especially from prospective issuers reporting earnings, are a distinct possibility.

As to the buzz that the Federal Reserve's Federal Open Market Committee might, for the first time in two years, hold its meeting during the Aug. 7 week and not hike interest rates, this sell-sider said the odds appear about even.

Nevertheless, the source said, a halt won't likely cause an immediate "sea change" in the junk market.

"I think it will take some time," the sell-sider added. "People are going to want the economic numbers to play out.

"The degree to which Fed-speak drives market sentiment is on and off. And it has certainly been in an on phase, recently."

This source also suggested that during the most recent week the junk bond market may have gained some more ground on the hard-cranking leveraged loan market.

"The relative value of the high-yield market has gotten better over the past week," the sell-sider asserted.

"The bank market is slow to react. There is still a lot of supply being pumped through it.

"The high-yield bond market reacts much more quickly to moves in the equity market and the Treasury market."

PNA, Ford up in trading

When the new PNA Group 10¾% notes due 2016 were freed for secondary dealings, traders saw those bonds move as high as 101 bid, 102 offered, up from their par issue price earlier in the session.

The traders also saw Ford Motor Credit's $2.25 billion of new paper having improved, with its 9 7/8% notes due 2011 at 100.5 bid, 101 offered, up from their par issue price late Thursday, while the reopened floating-rate notes due 2012 pushed up to 103 bid, 103.5 offered from their 102 issue price.

Among other recently priced issues, Qwest Corp.'s new 7½% senior notes due 2014 were seen quoted at 101.5 bid, 101.75 offered. Those notes - issued by a unit of the Denver-based telecommunications operator Qwest Communications International Inc. - had priced at par on Thursday.

Barrington Broadcasting Corp.'s new 10½% seniors due 2014 were seen at 100.25 bid, 100.75 offered, although one trader saw them bid at 99.5, after having priced at par on Thursday.

TFS Acquisition Corp./Textron Fastening Systems' new senior secured floating-rate notes due 2010, which priced Thursday at 98 bid, were quoted having traded up to 99.75 bid.

HCA dips on financing details

A trader saw HCA's outstanding 6½% notes due 2016 trading off more than a point at 78.25 bid, 78.75 offered, in response to the company's Securities and Exchange Commission filing outlining its plans to borrow heavily to finance its LBO, which is valued at some $33 billion, including the assumption of $11.7 billion of existing debt.

He noted that the new bonds will be structured as second-lien secured debt - meaning that it will be superior in the capital structure to its existing bonds. Since most of HCA's outstanding bonds were issued when the company was investment grade-rated, those debtholders are not protected by restrictive covenants barring such structural subordination to the new debt.

Goodyear strong on earnings

Among names not connected with new-deal issuance, Goodyear "felt good," a trader said, "because the numbers were better than expected."

Goodyear's 7.857% notes due 2011 firmed ½ point to 93.5, while its 9% notes due 2015 moved up to 97 bid, 98 offered, a gain of as much as 2 points on the day.

Although the Akron, Ohio-based tiremaking giant's second-quarter net earnings were sharply lower in the latest period - $2 million (one cent per share) versus $69 million (34 cents per share) in the year-earlier period - its adjusted earnings, excluding special items, were 37 cents per share, much better than the 18 cents per share that Wall Street had been expecting. Sales meantime grew to $5.14 billion - a record level - from $4.99 billion a year ago.

"The company spent $63 million cutting costs," the trader said "and that offset the net earnings downturn in the eyes of bond buyers. The $403 million of EBITDA exceeded expectations.

"They did OK, with modestly positive results."

Cooper loses on earnings

He further noted that Cooper Tire & Rubber Co. "had saggy numbers [Thursday] and lost its CEO, and that cast a pall over the [tire] sector. When Goodyear came out with its results, everyone breathed a sigh of relief."

Findlay, Ohio-based Cooper on Thursday reported a net loss of $21 million (34 cents per share), considerably wider than its loss of $6.9 million (11 cents per share) during the same period in 2005. It also announced that chief executive officer Thomas Dattilo is leaving to pursue another opportunity. The company's 8% notes due 2019 lost more than a point on those numbers, to 84.5 bid, 85.5 offered.

Chiquita rises on relief

Another company reporting less-than-thrilling - but better-than-expected numbers was Cincinnati-based banana importer Chiquita, whose numbers, the trader said, also "caused people to breathe a sigh of relief. The bonds jumped, because investors had expected worse. With some of these companies, you always expect worse."

Chiquita's 7½% notes due 2014 were seen by a market source as having risen more than 3 points on the session to 88 bid.

"Everyone was looking for crappy numbers," another trader said, "and so the bonds were up a couple of points." The company's 8 7/8% notes due 2015 were also up 3 points, at 92 bid, 93 offered.

Chiquita earned $22.9 million (54 cents per share), well down from $63.6 million ($1.36 per share) in the year-earlier period, as sales rose to $1.23 billion from $1.02 billion. Even though the latest earnings were well off the year-ago pace, they beat the Street, which was looking for earnings of 36 cents per share.

Chiquita competitor Dole Foods Co., which is affected by the same industry dynamics as Chiquita and whose bonds frequently move in tandem with it, was also up on Friday, its 8 7/8% notes due 2011 rising 1½ points to 96 bid, 97 offered, and its 8¾% notes due 2013 two points better at 93 bid, 94 offered.

Hovnanian little moved on guidance

Also on the earnings front, Hovnanian Enterprises revised its previously issued guidance downward, in line with recently softer housing sales.

The Red Bank, N.J.-based builder projected third quarter earnings of $1.10 to $1.20 per share, down from previously issued guidance of $1.40 to $1.50 per share. It also said that full-year earnings would now likely come in somewhere between $5 and $5.75 per share, down from its earlier predictions of $7.20 to $7.40 per share.

Even so, the company's 8 7/8% notes due 2012 were quoted down just a quarter point, at 98.5 bid, and its 6½% notes due 2014 were in fact better, at 90.75 bid, up from 90.375 earlier.

Spectrum up again

Spectrum Brands Inc. - whose bonds were solidly higher Thursday on the news that federal probers had apparently ended their investigation of the Atlanta-based consumer products company's past finances, which outweighed lower quarterly earnings - extended its 2 point gains into Friday, its 7 3/8% notes due 2015 adding another point to end at 78.75 bid, 79.75, while its 8½% notes due 2013 - which were 2½ points better Thursday - rose another 1½ on Friday to 83.75 bid, 84.75 offered.

Dana Credit strong

Dana Credit Corp.'s 8 3/8% notes due 2007 "definitely felt better," said a trader who saw those bonds jump to 89 bid "and looking for offers" from 82 bid, 84 offered on Thursday. "They weren't up big time."

Another trader said the movements in the credit were "pretty wacky," noting that the bonds had been as high as 96.5 bid, 97.5 offered when the week opened, and then "traded off every day." After opening Friday's trading at 82.5 bid, 83.5 offered, by noon ET, he said, they had fallen to 79 bid, 80 offered, before bouncing back to end at 90 bid, 91 offered.

Those bonds took off after parent Dana Corp. said in an SEC filing that Dana Credit - which in April had reached an agreement with an ad hoc noteholders committee under which they agreed to work with Dana Credit toward a global consensual restructuring of the notes and to forbear from exercising rights and remedies should there be an event of default under the Dana Credit notes - was in talks with the notesholders' committee again, aiming at reaching a similar agreement, since the original agreement had expired in May.

Dana said that the proposed August forbearance agreement would, among other things, allow Dana Credit to market, sell and thereby monetize the value of its lease and other portfolio assets, and then to use the proceeds of such asset sales to make payments to certain noteholders (See related story elsewhere in this issue).

Parent Dana's 6½% notes due 2008 were meantime up ½ point at 85.25 bid, 86.25 offered, while its 5.85% notes due 2015 were unchanged at 74.5 bid, 75.5 offered.

Metaldyne up on TriMas IPO

Also in that same automotive sector, a trader saw Metaldyne Corp.'s 11% notes up 1½ points to 84.75 bid, 85 offered, while its 10% notes due 2013 were a point up at 97.25 bid, 98 offered on the news that TriMas Corp. - in which Metaldyne holds a sizable stake - has registered for an initial public offering of up to $201.25 million in common stock.

However, another trader said that later in the session, the bonds of the Plymouth, Mich.-based maker of stamped metal products for auto parts makers had given back most, if not all of those initial gains, to end pretty much unchanged. He said, however, that those bonds were still up a total of 3 points on the week, due to the expectations of the coming TriMas spin off.

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