Autos continue fall; Berry Plastics comes back for more

By Paul Deckelman and Paul A. Harris

New York, Sept. 20 - Automotive names continued their downside ride Wednesday, traders said, with Dura Automotive Systems Inc. and Tower Automotive Inc. again doing most of the towing, especially given a Moody's Investors Service downgrade of Dura.

Elsewhere, Premier Entertainment Biloxi LLC's notes moved several points lower but still managed to hold at anticipated takeout levels around par in the wake of the gaming company's unusual Chapter 11 filing.

A high yield syndicate official said that the broad market, which was extremely quiet on Wednesday, ended the session probably unchanged or perhaps slightly better.

The source added that in the junk universe there seemed to be no discernible reaction to the decision on the part of the Federal Reserve's policy-making Federal Open Market Committee to leave short term interest rates unchanged at 5¼%.

Berry Plastics prices $425 million

No new issues were priced during Wednesday's primary market session.

However market sources said that on Tuesday night Berry Plastics Holdings Corp. - on the heels of pricing $750 million of new junk last Friday - sold another $425 million of bonds.

This time the Indiana plastic packaging company priced an issue of non-rated 10-year senior subordinated notes at par to yield 11%.

Goldman Sachs & Co. ran the books for the deal, proceeds from which will be used to partially finance the acquisition of Berry Plastics by Apollo Management, LP and Graham Partners from Goldman Sachs Capital Partners and JP Morgan Partners for $2.25 billion.

To recap, last Friday Berry Plastics priced $750 million of eight-year second priority senior secured notes (B2/CCC+) in two tranches via Deutsche Bank Securities, Credit Suisse, Citigroup and JP Morgan.

That transaction included a $225 million tranche of floating-rate notes that priced at par to yield three-month Libor plus 387.5 basis points and a $525 million tranche of fixed-rate notes that priced at par to yield 8 7/8%.

On Wednesday, as the terms of the new subordinated notes circulated the primary market, sell-side sources noted that Goldman Sachs & Co., which led the Tuesday night issue, was not part of the syndicate of banks that either ran the books or co-managed last Friday's transaction.

American Entertainment starts roadshow

The only other news that the quiet Wednesday primary market turned out was some timing on American Entertainment Properties Corp.'s $250 million offering of eight-year senior floating-rate notes (Caa1/B-).

The company started its roadshow on Wednesday, and the deal, via Bear Stearns & Co., is expected to price late this week or early next week.

Proceeds, together with cash and cash equivalents, will be used to pay a dividend to a newly formed corporation that will become the company's parent.

American Entertainment Properties Corp. is the parent of Las Vegas-based American Casino & Entertainment Properties.

The ultimate parent is American Real Estate Partners, LP. As of Dec. 31, 2005, affiliates of Carl Icahn owned approximately 86.5% of the outstanding preferred units and approximately 90% of the outstanding depositary units of American Real Estate.

Icahn is the chairman of the board of directors of American Property Investors, Inc., American Real Estate's general partner.

A sell-side source suggested on Wednesday that the progress of the dividend-funding American Entertainment Properties deal, with its comparatively low credit ratings (Caa1/B-), would be carefully scrutinized on the sell-side because if it goes well it could flash the "go" signal for other lower-rated companies seeking to raise cash in the junk market.

Dura leads way downward

Back among the established issues, traders saw Dura Automotive's bonds again cruising lower after the troubled Rochester Hills, Mich.-based auto parts maker's Moody's downgrade.

A trader saw Dura's 8 5/8% notes due 2012 knocked down a point on the day to 55 bid, 56 offered, while another trader, who saw those same bonds start higher on the session, saw them fall 1½ points but to a level at 56 bid, 56.5 offered.

Dura's subordinated 9% notes due 2009 dipped a point to 8 bid, 9 offered, a trader said.

Moody's on Wednesday Moody's cut Dura's corporate family rating three notches to Ca from Caa1, along with the rating on the Dura Operating Corp. bonds.

Moody's said that the lower ratings "reflect the company's ongoing operating pressures in the automotive supplier sector which have recently been exacerbated by the announcement of additional production declines in the second half of 2006."

It noted that sales to Ford Motor Co. and General Motors Corp. approximate 23% and 20% of Dura's revenue, respectively, with roughly half of the Ford exposure, and 75% of the GM exposure derived in the United States.

"Combined with the company's announced restructuring program and interest payments on its senior unsecured and senior subordinated notes in the fourth quarter, the lower expected production in the second half of 2006 will increase the cash flow pressure on the company," Moody's declared.

It said that the outlook remains negative, "reflecting the continuing industry pressures of lower Big 3 production in North America, raw material pricing pressures and published reports indicating the company has hired restructuring advisors."

The downgrade was the latest blow for Dura's bonds, which have been sliding badly since speculation of a potential bankruptcy filing surfaced last week. Along with the speculation came rumors that the company was having a hard time lining up debtor-in-possession financing on favorable terms.

Then, late Tuesday, Dura was informed that that it was in danger of being delisted from the Nasdaq Global Market, since its price has been below $1 per share for at least 30 consecutive days. The company has six months to fix the situation.

Tower plunges, Metaldyne lower

Tower's bonds meantime continued to "nosedive," a trader said, seeing its 12% notes due 2013 fall to 22 bid, 24 offered from prior levels around 25 bid, 26 offered on Tuesday - and well down from the mid-30s levels those bonds traded at in the beginning of the week.

Elsewhere in the sector, traders saw Metaldyne Corp.'s 11% subordinated notes due 2012 down 1¼ points to 89.75 bid, 90.75 offered, while its 10% senior notes due 2013 were off ¼ point at 101.25 bid, 102.25 offered.

The bonds were "very volatile," said a trader who saw the 11s trade all the way down to 88 bid, before firming off the lows to close at 90 bid, 91 offered, down a point.

The trader attributed the fall to continued reaction to the news that Chrysler Group of DaimlerChrysler, a major customer of the Plymouth, Mich.-based parts maker, plans to cut its production levels, and to market fears that the news "could jeopardize the deal" under which Metaldyne is to be sold to Japanese partsmaker Asahi Tec.

An odd bankruptcy

Premier Entertainment Biloxi's 10¾% notes due 2012 "cratered," a trader said, in the wake of the Biloxi, Miss.-based casino operator's Chapter 11 filing. He saw the bonds at 101.75 bid, down from 105 before the news, which hit the tape late in the day on Tuesday.

"I would have thought it would be down even more," he said.

Another trader saw those bonds as low as 98 bid, par offered in morning trading, but said that while players "tried to whack it down," the bonds recovered from those lows "as someone tried to cover a short," leaving them around 101. He added that there was "not much doing in it."

Still another trader saw bonds at that same 101 bid level - and quoted with accrued interest, which normally does not happen in a bankruptcy filing. Perhaps this was different because "it looks like they're going to be taken out" and everyone made whole.

Unlike most bankruptcies - in which a company has run out of money or is in the process of doing so, and files to stave off its creditors while it tries to put its financial house in order - Premier Entertainment, the would-be operator of the planned Hard Rock Hotel and Casino in Biloxi, Miss., has the money it needs, but legally cannot get at it, hence the bankruptcy filing.

Premier was literally just days away from opening its glitzy new gaming barge and adjoining hotel complex in early September last year, when Lady Bad Luck stepped in in the form of Hurricane Katrina, and heavily damaged the nearly completed project, forcing the company into extensive rebuilding operations. Those operations are to be paid for with the estimated $160 million for which the casino and hotel was insured - but Premier can't get at the money, because bondholders alleging that the company defaulted by not opening the hotel by the end of last year, as their indentures stipulated, are refusing to release the money. Company management thus filed for court-supervised reorganization to force the release of those funds and allow the contractors rebuilding the project to get paid.

The company says the bondholders have nothing to worry about - since it "intends to pay its creditors 100 cents on the dollar and will not submit or support any plan that proposes otherwise."

Buyout buzz boosts Boyd

Elsewhere in that same sector, Boyd Gaming Corp.'s bonds were better, with a trader citing rumors that the Las Vegas-based gaming company "might be taken private."

Boyd's 6¾% notes due 2014 were seen at 96.75 bid, 97.75 offered, up ½ point on the session, while its 7¾% notes due 2012, which had firmed nearly a point in Tuesday's action, were up another ¼ point Wednesday to 103.

The equity market has also been busy buying Boyd over the past two sessions, particularly on Tuesday, when the stock not only rose about 5%, but there was brisk activity in call options, which speculators buy to lock in a favorable price on a stock on the assumption that its price will rise beyond that level before the option comes due.

Qwest mostly quiet

Qwest Communications International Inc.'s bonds were not harmed by the Denver-based telecommunications company's plans to reward shareholders, possibly with a dividend payment or a share buyback, rather than using the cash to further cut its debt.

A trader saw Qwest's 6 7/8% notes due 2028 at 89.25 bid, 90.25 offered - actually up ¾ point. Its 6 7/8s due 2033 were unchanged at 90.25 bid, 91 offered.

Another trader saw the company's 7¼% notes due 2011 unchanged at 99.75 bid, 100.75 offered, while its 7¼% notes due 2011 were ½ point better at around par bid.

Qwest's chairman and chief executive officer, Richard C. Notebaert, made the disclosure at a Goldman Sachs investors conference - although he did leave the door open for possible future debt reductions, if they were "very opportunistic." (See related story elsewhere in this issue).

Dole doesn't drop

Dole Food Co. - whose bonds have been easing over the past several sessions on investor fears about the Westlake Village, Calif.-based fruit and vegetable producer's possible exposure to the burgeoning E. coli problem with packaged fresh spinach - were seen not much changed Wednesday, said a trader, who quoted Dole's 8 7/8% notes steady at 97 bid, 98 offered, while its 7¼% notes due 2010 were ½ point lower at 93 bid, 94 offered.

Dole's bonds "dropped initially when the spinach stories came out," another trader said, quoting the latter bonds unchanged on the day "but then stabilized."

Dole sells branded spinach produced and packaged by San Juan Bautista, Calif.-based Natural Selection Foods LLC - which issued a voluntary recall of its spinach on Friday and has been linked to the E. coli outbreak.

Standard & Poor's on Tuesday said that it would keep Dole's debt ratings on CreditWatch with negative implications, adding that as "part of our resolution of the CreditWatch listing, we will monitor the [E. coli] investigation for further developments and any impact on future prepackaged salad sales or damage to the Dole brand image."

PSEG powers up

A trader saw PSEG Energy Holdings LLC's 8 5/8% notes due 2008 up a point to 103.5 bid, 104.5 offered, on the news that the Newark, N.J.-based unit of utility operator Public Service Enterprise Group Inc. will redeem up to $300 million of the $507 million of outstanding bonds.

The trader also noted the company's expressed intent to consider separating its regulated utility business from its other non-regulated energy operations.

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