Yankee, Hilcorp, Stena deals price; Wolverine jumps on recap plan; funds see $80 million inflow

By Paul Deckelman, Paul A. Harris and Stephanie N. Rotondo

New York, Feb. 1 - The Yankee Candle Co. Inc., Hilcorp Energy Co. and Stena AB and Orascom Telecom Finance SCA successfully priced new bond offerings Thursday, high yield syndicate sources said. The Yankee deal was a two-parter, and the Hilcorp and Orascom offerings were substantially upsized from their original versions to meet market demand.

The primary arena also saw price talk emerge on several upcoming offerings, for Compagnie Generale de Geophysique, Lecta SA and one of the new bond-style loans for Simmons Mattress.

In the secondary market, Wolverine Tube Inc.'s bonds shot up after the Huntsville, Ala.-based producer of metal industrial tubing products announced plans to recapitalize the company.

Elsewhere, Remy International Inc. bonds firmed for a second straight session, after the Anderson, Ind.-based automotive components maker's announcement Wednesday that it agreed to sell its light- and medium-truck diesel engine and component remanufacturing business to Caterpillar Inc. for $150 million.

Funds see fifth straight inflow

And after activity had wound down for the day, market participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that in the week ended Wednesday, $80.3 million more came into weekly-reporting funds than left them.

That followed the $73.2 million net inflow seen in the previous week, ended Wednesday Jan. 24. It was the fifth consecutive weekly inflow.

Year-to-date inflows among the weekly reporters now total $622.9 million, according to AMG.

Funds that report on a monthly basis have seen $708.3 million of inflows thus far in 2007.

Hence aggregate flows, which tally the funds that report on a weekly basis and a monthly basis, stood at $1.331 billion to Wednesday.

A Prospect News analysis of the figures for weekly reporters shows that the positive note on which the new year has begun, liquidity-wise, with inflows now seen in each of the five weeks since the year's beginning, stands in marked contrast to the way the old year ended, with outflows recorded over the last three weeks of 2006, as well as in 34 out of the year's 52 weeks, against just 18 inflows, for a total net outflow through the period ended on Dec. 27, the final reporting week of the year, of $2.998 billion.

But most of that 2006 outflow took place in the first half of the year, with the year's second half actually seeing a net inflow of some $638 million, the analysis indicated, with that positive trend apparently now carrying over into the new year as well.

The figures exclude distributions and count only those funds that report on a weekly, rather than on a monthly, basis.

The flow of money into and out of the junk bond funds is seen as a generally reliable market barometer of overall high yield market liquidity trends - although they only comprise 10% to 15% of the total monies floating around the high yield universe, far less than they used to - because there is no reporting mechanism to track the movements of other, larger sources of junk market cash, such as insurance companies, pension funds and, most recently, hedge funds.

Yankee Candle tight to talk

Yankee Acquisition Corp. priced $525 million notes (B3/CCC+) in a restructured two-part transaction on Thursday.

The company priced an upsized $325 million tranche of eight-year senior notes at par to yield 8 ½%, at the tight end of the 8 5/8% area price talk. That size was an increase from the planned $275 million.

Meanwhile the company priced a downsized $200 million issue of 10-year senior subordinated notes at par to yield 9 ¾%, at the tight end of the 9 7/8% area price talk. The subordinated tranche was cut from $250 million.

Lehman Brothers and Merrill Lynch & Co. were joint bookrunners for the LBO deal.

An informed source, specifying that the size of Yankee Candle's term loan was unchanged at $650 million - although the pricing had been flexed down to Libor plus 200 basis points from Libor plus 250 basis points - said that by shifting $50 million to the senior notes tranche from the subordinateds the company was able to achieve a lower cost of capital without adversely impacting its credit ratings.

Hilcorp massively upsized

Hilcorp Energy I LP priced an upsized, quick-to-market $300 million add-on to its 7¾% senior notes due Nov. 1, 2015 (expected ratings B3/B) at 98.75 resulting in a yield of 7.948% on Thursday.

The Rule 144A tap, which was upsized from $125 million, priced on top of the price talk.

Deutsche Bank Securities ran the books for the debt refinancing and generela corporate purposes deal.

Stena inside of talk

Finally, Sweden's Stena AB priced a €300 million issue of 10-year senior notes (Ba3/BB-) at par to yield 6 1/8%.

The yield came inside the 6¼% to 6½% price talk.

JP Morgan was the left bookrunner for the debt refinancing and general corporate purposes deal.

Orascom upsized

From emerging markest, Egypt's Orascom Telecom Finance SCA sold a $750 million upsized offering of seven-year senior notes (B2/B-) at par to yield 7 7/8%.

The deal, increased from $500 million, came at the tighter end of revised guidance, which was lowered to 7 7/8% to 8% from the 8¼% area.

Credit Suisse and Citigroup were joint bookrunners for the Rule 144A for life and Regulation S transaction

The issue is guaranteed by Orascom Telecom Holding SAE, a wireless telecommunications provider to the Middle East, headquartered in Cairo, Egypt.

Friday from Europe

Both companies which are expected to price deals on Friday are based in Europe, although one is expected to issue in dollars.

Compagnie Generale de Geophysique (CGG), a seismic data services provider to the oil and gas exploration and production business, circulated price talk Thursday on its $600 million two-part offering of senior notes (Ba3/B+).

The company, which is headquartered in Massy, France, talked the issue price of a $300 million add-on to to its 7½% senior notes due May 15, 2015 at 99.00 to 99.50.

Meanwhile CCG talked a $300 million tranche of new 10-year senior notes at 7¾% to 7 7/8%.

Credit Suisse is the bookrunner.

And French paper manufacturer, Lecta SA, circulated talk on its €648 million two-tranche offering of seven-year floating-rate notes, via Deutsche Bank.

The Paris-based company talked a €473 million tranche of senior secured notes (Ba3/BB-) at a 275 to 300 basis points spread to Euribor.

Meanwhile Lecta talked a €175 million tranche of senior unsecured notes (B1/B) at the Euribor plus 425 basis points area.

Deutsche Bank Securities has the books.

Yankee Candle burns brightly

When the new Yankee Candle two-part deal was freed for secondary trading, a trader saw both tranches of the offering having firmed solidly from their respective par issue prices - the 8½% senior notes due 2015 to 101.5 bid, 101.875 offered, and the 9¾% senior subordinated notes due 2017 to 102.25 bid, 102.625 offered.

Another trader saw the 81/2s "straddling" the 102 mark, while the 93/4s had risen to 102.25 bid, 103.25 offered.

Hilcorp's new 7¾% senior notes due 2015, which had priced at 98.75, were seen having firmed to 99.5 bid, 99.875 offered, while the Orascom bonds were seen having moved up to 100.756 bid, 101.25 offered from their par issue price.

A trader said the new bonds that priced on Wednesday "pretty much stayed where they were," with TransDigm Inc.'s add-on 7¾% notes due 2014 around 102 bid, 102.5 offered, and Rexnord Global Inc./Rexnord Corp.'s 8 7/8% senior notes due 2016 at 100.25 bid, 101 offered, and its 9½% add-on notes due 2014 at 103.5 bid, 104.5 offered.

Wolverine wows market

Among established names, Wolverine Tube was "the big winner" on the session, a trader said, with its 7 3/8% senior notes due 2008 around 95 - well up from the prior levels around 84 bid, 85 offered to which those bonds had sank last week following "a very negative report" on the company issued by the investment bank Miller Tabak & Co. LLC. The 7 3/8s, the trader said "don't trade terribly often, unfortunately." Wolverine's 10½% senior notes due 2009 meantime, traded up to the 96-97 area, well above Wednesday's 84.5 bid, 86.5 offered.

Wolverine's Pink Sheet-traded shares were meantime up 99 cents (119.28%) to $1.82. Volume of about 400,000 shares was some eight times the usual level.

Wolverine announced that an investor group comprised of Plainfield Special Situations Master Fund Ltd. and The Alpine Group, Inc. will pump up to $75 million into the company by purchasing new series A convertible preferred equity and providing a standby commitment to a common stock rights offering to be made to all Wolverine shareholders, which could raise up to $51.1 million. Wolverine will also make an offer to exchange and modify the terms of its existing debt, offering to exchange new debt for its existing 7 3/8% notes.

The new exchange notes will be similar to its existing 10½% notes, but with less restrictive covenants. Plainfield and Alpine have agreed to tender at least $25 million of the 7 3/8s they now hold into the exchange offer.

If the participation of Wolverine's stockholders in the rights offering would cause Plainfield and Alpine to own less than 55% of the company on a fully diluted, as-converted basis, Plainfield and Alpine have an option to purchase additional shares of the series A preferred stock at the same price offered to the other shareholders under the rights offering to bring their collective ownership to 55% on a fully diluted, as-converted basis.

The two investors will also name four of the company's seven members of its board of directors.

"So they get some cash," the trader said, "they get the promise of some [more] cash, and they'll try to push out the debt maturities and they're basically getting new management.

"It's a lot of changes."

James River jumps despite sale delay

The trader saw James River Coal Co.'s 9 3/8% notes due 2012 "significantly better" - even after the Richmond, Va.-based coal producer announced that the pending $24.4 million sale of its Bell County Coal Corp. subsidiary has been temporarily delayed.

The bonds were trading between 88 bid and 89 offered "in round lot size all day" - well up from Wednesday's levels at 82.375 bid, 83 offfered,

James River said the unit's prospective buyer, Weston Holdings Inc. confirmed its intent to complete the transaction on the original terms and has said acceptable financing has been obtained, but requested an extension, which James River granted.

The closing is now expected to occur before Feb. 28.

Investors also shrugged off the announcement by Moody's Investors Service that it had downgraded James River Coal's corporate family and probability-of-default ratings to Caa2 from Caa1 and its senior unsecured rating to Caa3 from Caa2, while affirming the company's B1 senior secured rating and SGL-4 speculative grade liquidity rating.

In also putting the ratings under review for a possible further downgrade, the agency said the downgrade and review were prompted by the announcement of the Bell County sale delay, noting that the transaction is slated to provide the company with much-needed liquidity.

Moody's also cited the release of negative selected fourth quarter data, as well as guidance for 2007 and beyond "that further lowers expectations for the company's performance."

Remy again rolls higher; Delphi dithers

Traders again mostly saw little movement in Delphi Corp. bonds, even though the bankrupt Troy, Mich.-based automotive components maker is continuing its talks with former parent General Motors Corp. and the United Auto Workers union in hopes of cutting its bloated labor costs to a level that prospective Delphi investors led by Cerberus Capital can live with. However one trader did peg the company's 6.55% notes due 2006 up "maybe ½ point" at 110.5

A Cerberus-led group has proposed investing as much as $3.4 billion into Delphi - if it can bring down its burdensome labor cost structure - inherited when GM spun off its parts unit several years ago.

Elsewhere in the automotive realm, the traders saw Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 - which nosedived as much as 10 points in trading Wednesday, and finally ending 5 points lower after poor numbers - up about a point or so from those Wednesday closing levels, firming to 32 bid, 34 offered.

Remy International's bonds - which firmed smartly on Wednesday on the news of the planned sale of its light- and medium-truck diesel engine and component remanufacturing business for $150 million - continued to gain, its 8 5/8% notes due 2007 called 2 points better, at 89 bid, 90 offered.

Delta, Northwest move back upward

A trader saw Delta Air Lines Inc.'s bonds about a point better Thursday, with the market having digested Wednesday's news that US Airways Group Inc. has abandoned its efforts to acquire the bankrupt Atlanta-based airline operator - a big victory for Delta's management, which all along said it planned to restructure Delta and then emerge as a standalone company.

He saw Delta's benchmark 8.30% notes due 2029 at 62 bid, 63 offered, up a point, and also saw bankrupt Delta rival Northwest Airlines Corp. - whose bonds had recently been lifted by airline industry merger and acquisition speculation sparked by the US Air run at Delta - also a point better, at 64 bid, 96 offered for the Eagan, Minn.-based airline operator's 10% notes due 2009.

Tembec better on improved numbers

Back on terra firma, Tembec Inc.'s bonds - which had fallen for two straight sessions on Tuesday and Wednesday on profit-taking off its recent gains - finally turned the quarter on Thursday, with a trader calling the Montreal-based forest products company's 8 5/8% notes due 2009 at 84 bid, 86 offered, its 8½% notes due 2011 at 74 bid, 76 offered, and its 7¾% notes due 2012 at 72 bid, 74 offered, all up 2 points across the board.

Tembec was apparently helped by investor reaction to its fiscal first-quarter numbers. Tembec said that even though consolidated sales revenue was lower in the period ended Dec. 30 at C$724 million, down from C$789 million in the comparable period the previous year, it generated net earnings of C$138 million (C$1.62 per share), versus a year-earlier net loss of C$75 million (88 cents per per share), and a net loss of C$54 million (64 cents per share) in the fiscal fourth quarter ended Sept. 30. EBITDA was C$13 million, versus negative EBITDA of C$32 million a year ago and EBITDA of C$30 million in the prior quarter.

Another trader said that Tembec bonds initially traded down 1½ to 2 points "first thing, but then really started to recover pretty nicely and ended up the day better."

The trader saw the 8 5/8s up 2 points on the session at 87 bid, 88 offered, the 73/4s up 3 points at 75 bid, 76 offered, and the 8½% notes at 76 bid, 77 offered, up a point.

Tembec bonds had recently firmed smartly as the lower Canadian dollar was seen boosting export sales, and on top of that had been up more than a point on the news that sector peers Abitibi-Consolidated Inc. and Bowater Inc. would merge, which sparked some forest products-sector consolidation speculation. It gave up some of those gains on profit-taking on Tuesday and Wednesday.

Elsewhere, Movie Gallery Inc.'s bonds were 3 about three points better at 84 bid, 86 offered, although the trader saw no news out on the Dothan, Ala. video rental chain operator.

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