Dura seniors lower after Chapter 11; downsized Encore deal prices

By Paul Deckelman and Paul A. Harris

New York, Oct. 30 - Dura Automotive Systems Inc.'s senior bonds gyrated around at lower levels Monday after the troubled Rochester Hills, Mich.-based vehicle systems maker announced well before the market opened that its United States and Canadian operations had filed for Chapter 11 protection.

Also out of that same sector, Dana Credit Corp.'s bonds were better after the financing arm of the Toledo, Ohio-based auto parts company Dana Corp. said it was in forbearance talks with its noteholders - who had accelerated those bonds.

A sell-side source said that the broad market had traded lower during Monday's session.

Meanwhile the primary market produced a substantial volume of news, with three issuers completing deals.

Encore Medical Finance LLC was heard to have priced a downsized offering of eight-year subordinated notes. Also pricing was Carlson Wagonlit BV's issue of euro-denominated floating rate notes. And Michael's Stores Inc. - which just last week sold more than $1 billion of new senior and senior subordinated notes - went to the well again with an additional $250 million sale of junior subordinated paper.

Huntsman International LLC unveiled plans to sell $400 million equivalent of dollar- and euro-denominated eight-year notes in a quickly appearing drive-by deal that will probably price Tuesday.

Michael's Stores returns

Michael's Stores priced a $250 million issue of 10-year zero-coupon junior subordinated notes (Caa1/CCC) at 53.254 to yield 13%.

There had been no official price talk on the deal that had been led by Deutsche Bank Securities, JP Morgan, Banc of America Securities and Credit Suisse.

Last Wednesday the Irving, Tex.-based specialty retailer priced an upsized $1.150 billion two-part notes transaction, via the same syndicate of banks.

That transaction had a $750 million tranche of eight-year senior notes (B2/CCC) coming at par to yield 10%, and a $400 million tranche of 10-year senior subordinated notes (Caa1/CCC) pricnig at par to yield 11 3/8%.

As with last Wednesday's transaction, proceeds from Monday's junior subordinated notes will be used to help fund the LBO by Bain Capital and The Blackstone Group.

Encore completes downsized bonds

Elsewhere on Monday Encore Medical Finance LLC priced a downsized $200 million issue of eight-year senior subordinated notes (Caa1/CCC+) at par to yield 11¾%, 12.5 basis points beyond the wide end of the 11½% area price talk.

The offering was downsized by $15 million, with that amount being shifted into the bank loan market.

Banc of America Securities and Credit Suisse were joint bookrunners for the acquistion deal.

Market sources said that the new Michael's Stores notes had also undergone covenant changes.

Carlson atop talk

In the euro market, Carlson Wagonlit priced a €285 million issue of senior floating-rate notes due May 1, 2015 (expected ratings B2/B-) at par to yield three-month Euribor plus 575 basis points, on top of the price talk.

JP Morgan, Lehman Brothers and Morgan Stanley were joint bookrunners for the LBO deal from the Paris-based corporate travel services provider.

Huntsman $400 million drive-by

First thing Monday morning Huntsman International unveiled a $400 million equivalent two-part quick-to-market senior subordinated notes deal (existing B3/confirmed B) that is set to price on Tuesday.

The Texas-based chemical company plans to sell a euro-denominated tranche of seven-year notes, which it has talked at 6¾% to 7%. The euro-denominated notes are being offered via Rule 144A for life.

The company also plans to sell dollar-denominated eight-year notes, which it has talked at 7¾% to 8%. The dollar-denominated notes are being offered via Rule 144A with registration rights.

Deutsche Bank Securities and Credit Suisse are joint bookrunners for the debt refinancing.

Mega-deals talked

Two issuers are in the market with deals totaling $5 billion which are expected to price during the first two days of November.

Idearc, Inc., a new public company formed by the spin-off of Verizon Communications Inc.'s directories businesses, talked its $2.85 billion offering of 10-year senior notes (B2/B+) at 8% to 8¼%.

The single-tranche mammoth is expected to price on Wednesday via JP Morgan and Bear Stearns.

And Sabine Pass LNG LP, a wholly owned subsidiary of Houston-based Cheniere Energy Inc., put out price talk on its $2.15 billion offering of senior secured first-lien notes in two parts (expected Ba3/confirmed BB).

The company talked its seven-year notes at a yield in the 7% area and its 10-year notes at the 7 1/8% area.

The deal is expected to price late Wednesday or early Thursday via Credit Suisse.

Codere talks tap

Aside from the mega-deals, Spanish gaming firm Codere Finance SA, talked a €150 million add-on to its 8¼% senior notes due June 15, 2015 (B2/B) at a dollar price of 107.25 on Monday.

Credit Suisse, Barclays Capital and Morgan Stanley are joint bookrunners for the add on.

The original €335 million issue priced at par in June 2005. Subsequently the company priced a €165 million add on at 106.25 in April 2006.

The pending transaction will take the total issue size to €650 million.

NCO hits the road

Finally, news of one roadshow start surfaced.

NCO Group Inc. will begin a roadshow on Tuesday for its $365 million two-part notes offering.

The Horsham, Pa., provider of business outsourcing services is offering $165 million of seven-year senior floating-rate notes and $200 million of eight-year senior subordinated fixed-rate notes.

Morgan Stanley, JP Morgan and Banc of America Securities are joint bookrunners for the LBO financing.

New issues little changed

When the new Encore Medical 11¾% senior subordinated notes due 2014 were freed for secondary dealings, a trader said, they didn't move very much, going to 100.125 bid, 100.625 offered from their par issue price earlier in the session. Another trader saw them at 100.25 bid, 100.25 offered.

A trader saw the new Host Hotels & Resorts Inc. 6 7/8% notes due 2014, which had priced on Friday at 99.245 and had moved a bit above par in initial aftermarket action, hanging in around that level on Monday at 100.25 bid.

Hexion Specialty Chemicals Inc.'s new senior secured notes due 2014 - which had priced at par on Friday and then eased - staying at that lower level, at 99.75 bid, 100.25 offered.

Dura down after Chapter 11

Back among the established issues, Dura seemed to be the main topic of conversation among junk marketeers as the problem-plagued company finally ran up the white flag and sought bankruptcy protection, joining such sector peers as Dana, Delphi Corp., Tower Automotive Inc. and Collins & Aikman Corp. in Chapter 11.

The filing surprised nobody. It had been widely expected by analysts and other sector-watchers for some months and the bankruptcy buzz intensified when Dura failed to make the scheduled $17.25 million payment on its 8 5/8% notes that came due at in mid-October. It instead invoked the standard 30-day grace period.

With the company's overnight news release announcing the filing already on the screens when the day's trading got under way, the Dura bonds promptly fell several points in busy morning dealings, with its 8 5/8% senior notes due 2012, which had closed out trading at 33 bid on Friday, plunging to 28 bid, 29 offered, a trader said, before coming back and stabilizing at somewhat lower levels around 30 bid, 31 offered.

He saw Dura's 9% subordinated notes due 2009 drop as low as 5 bid from prior levels at 5.5 bid, 6.5 offered, but then come back to actually end a little higher at 6 bid, 7 offered.

"Dura was gyrating around this," another trader said, "down at first, and then it traded right back up a little bit, and then it headed down again. So they were sort of all over the place."

Yet another trader saw the 8 5/8s fall to as low as 27.5 bid, 28.5 offered, which he called a 5 point drop, before they came back to close around 30 bid, 31 offered, which he termed around a 3 point loss. The 9s, he said, finished "pretty much unchanged" around 6 bid, 7 offered.

In announcing its filing with the U.S. Bankruptcy Court in Wilmington, Del., Dura noted that its action only covered the company's U.S. and Canadian operations. Dura's European business, which accounts for about 51% of the company's revenues, is not covered by the filing.

Dura said that it had lined up $300 million in debtor-in-possession financing from Goldman Sachs, GE Capital and Barclays, which it expects to use to fund normal business operations and continue its operational restructuring program announced back in February.

Dana Credit up, corporate bonds lower

The other big mover seen coming out of the autos segment Monday was Dana. While most of the bonds were seen down 2 or 3 points, the company's Dana Credit 8 3/8% notes due 2007 were seen up 3 points or more, given wings by the company's announcement in a Securities and Exchange Commission filing that it was in talks with an ad hoc committee representing holders of some $399 million of Dana Credit notes, including the widely traded 8 3/8s. Those holders had declared the several series of Dana Credit bonds immediately due and payable when Dana filed for Chapter 11 protection in March. Under the terms of the forbearance agreement currently being negotiated, they would hold off on exercising their legal rights to demand immediate payment on the bonds, subject to approval of an intercompany agreement in Dana's Chapter 11 case (see related story elsewhere in this issue).

A trader saw the Dana Credit 8 3/8s push up to 101.75 bid, 102.75 offered from prior levels at 98 bid, 99 offered.

However, Dana Corp.'s own bonds were moving in the opposite direction, with its 6½% notes due 2008 falling to 73.5 bid, 74.5 offered from prior levels around 76 bid, 78 offered.

Tenet lower on warning

Outside of the auto arena, traders were seeing Tenet Healthcare Corp.'s bonds lower after the Dallas-based hospital operator warned that it will announce a third-quarter loss between $82 million and $92 million on Nov. 7, when its financial results have been finalized.

Tenet said its results would be "adversely impacted by higher than anticipated bad debt expense and continuing softness in commercial managed care volumes."

A trader saw the company's 9 7/8% notes due 2014 down a point at 98.25 bid, 99.25 offered.

Tenet's New York Stock Exchange-traded shares meantime lost 88 cents (10.60%) to end at $7.42. Volume of 9.7 million shares was nearly triple the norm.

Chiquita retreats on earnings fears

The trader also saw the bonds of Chiquita Brands International Inc. lower, citing investor angst ahead of quarterly earnings due out Thursday, which are expected to be weak, reflecting the problems that the Cincinnati-based produce company is having with European Union restrictions on banana prices, as well as the impact that the recent E. coli fresh spinach scare had on Chiquita's Fresh Express packaged salad business.

He saw Chiquita's 8 7/8% notes due 2015 down ½ point at 90.5 bid, 91.5 offered.

Tembec up on tariff payment

And the trader saw Tembec Inc.'s bonds better as the Montreal-based paper and lumber company received a US$242 million reimbursement under a softwood tariff agreement negotiated earlier this year between the United States and Canada. Under that pact, the U.S. repaid 80% of some US$3 billion in tariffs it collected from Tembec and a number of other Canadian forest products companies during the period that the two countries were in dispute.

The trader said that Tembec's 8 5/8% notes due 2009 got as good as 59.5 bid, a better than 2 point gain on the session, before they fell back from that peak to close at 58 bid, 59 offered, up a point on the day.

MagnaChip bounce continues

A trader saw MagnaChip Semiconductor Ltd. - whose distressed bonds were gyrating around last week after the Korean chipmaker reported earnings, continuing the bounce which was seen on Friday. "They still stayed on the upside."

The company's 8% notes due 2015 pushed up to around 60.5 bid, while its floating-rate notes due 2011 ended at 86 bid, 86.5 offered.

The 8s had initially plunged to 47 bid, 48 offered on Thursday after the poor numbers were released, a loss of about 4 or 5 points, but then moved back up later that session after the company's conference call, during which executives indicated that they had sufficient cash. That pushed the bonds back up to around 54.5 bid 55 offered, a gain of about 4 or 5 points on the session, and set the stage for the further upside movement on Friday, when the bonds moved up to around the 57-58 area.

The 2011 notes had meantime bounced back from the low 80s on Thursday to a close Friday around 85, setting the stage for Monday's move up to an 86ish context.

The high-tech firm had a net loss for the fiscal quarter ended Oct. 1 of $47.7 million, sharply wider than $13.2 million in the third quarter of 2005.

No Trustreet trading seen

The trader meantime saw "no trades" in Trustreet Properties Inc.'s 7½% notes due 2015, even with the news that GE Capital Solutions, a unit of General Electric Co., has agreed to buy the

restaurant-industry real estate investment trust for about $3 billion, including debt assumption.

The 71/2s are "a $300 million deal, definitely a decent enough size that it should be trading," the trader said, adding: "I didn't see a whole lot of it even before they got bought out."

At another desk, a trader said he'd seen a quote for the bonds at 105 bid, well up from the 99.5 bid level the bonds held when they'd last been traded, back around Oct. 19. But he agreed with the first trader that whatever the quotes might be "it didn't really trade today."

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