Alliant Techsystems deal prices; GM gains on Suzuki stake sale, auto sector better

By Paul Deckelman and Paul A. Harris

New York, March 6 - Alliant Techsystems Inc. sold $400 million of new 10-year bonds Monday, syndicate sources said. The Minneapolis-based defense contractor's offering was the only pricing of day. Elsewhere in the new-deal arena, the upcoming Spyglass Merger Corp. 10-year deal was heard to have been downsized and price talk emerged on Ball Corp's offering of 10-year bonds, which could price as early as Tuesday.

In the secondary market, General Motors Corp.'s bonds, and those of its General Motors Acceptance Corp. financing subsidiary were higher on the news that the giant carmaker agreed to sell most of its 20% stake in Japanese carmaker Suzuki - a deal that could be worth almost $2 billion to GM as it struggles to bounce back from a year in which it lost some $8.6 billion.

GM's good news, in turn, helped lift the bonds of the automotive parts sector, still reeling from last week's bankruptcy filing by Dana Corp.

But another name from that sector - battery maker Exide Technologies - was in retreat after it warned in a filing with the Security and Exchange Commission that it will likely be in violation of an earnings covenant in its senior credit loan agreement.

Outside of the autosphere, Felcor Lodging Trust Inc.'s bonds were seen firmer, in line with a rise in the Irving, Tex.-based lodging industry real estate investment trust's stock, apparently spurred by investor belief that recent consolidation within the sector is likely to continue.

Overall Monday's story was "Treasury volatility," high-yield market sources said.

One source had the yield on the 10-year Treasury moving seven basis points higher while the yield on the 30-year moved eight basis points higher.

Another source said that Treasury volatility coupled with a substantial sell-off in the stock market took the broad high-yield market down by as much as a quarter of a point.

Meanwhile the primary market saw a single issue price, as Alliant Techsystems Inc. completed its $400 million offering on top of price talk.

However no new roadshow starts were heard.

Alliant Techsystems oversubscribed

Monday's single issue came from Minneapolis-based high-tech defense contractor Alliant Techsystems.

The company priced a $400 million issue of 10-year senior subordinated notes (B2/B+) at par to yield 6¾%, on top of the price talk.

Banc of America Securities ran the books for the debt refinancing deal which the company will use to fund the tender for its existing $400 million of 8½% senior subordinated notes due 2011.

Hence the transaction brought about substantial interest savings for Alliant Techsystems.

An informed source told Prospect News that while Treasury volatility certainly did not help the transaction, with the new notes pricing at a 202 bps spread to Treasuries, the company still received the execution it was looking for in the end.

The source added that the order book was healthily oversubscribed with high quality accounts, and the bonds traded up.

Deal alterations

Also the Monday session produced news of some changes to offerings that have been in the market via investor roadshows.

Ball Corp. extended the maturity of its proposed $450 million issue of notes (assumed Ba2/confirmed BB) by two years to 12 years and talked the notes at a yield in the 6 5/8% area.

Lehman Brothers, Banc of America Securities, Deutsche Bank and JP Morgan are joint bookrunners for the acquisition financing.

Meanwhile Serena Software Inc. downsized its offering of 10-year notes to $200 million from $225 million, electing to raise the $25 million of proceeds in the bank loan market instead.

The San Mateo, Calif. software company talked the notes (Caa1/CCC+) at 10¼% to 10½%.

Merrill Lynch, Lehman Brothers and UBS Investment Bank are joint bookrunners.

Both Ball and Serena are expected to price on Tuesday.

Hurry up or wait?

Late Monday Prospect News asked one high-yield syndicate official whether volatility in the Treasury market is making itself felt in the high-yield primary.

The source replied that Treasury volatility is not only impacting Treasury-sensitive deals, but also impacting the tone of the market because investors as well as potential issuers are wondering where rates might be headed.

With regard to prospective issuers, Prospect News asked whether the current Treasury volatility might stay a prospective issuer's hand in the hope of riding out the chop, or propel that issuer into the market fearing a worse rate environment ahead?

"It's a combination of both," the source said.

"But I definitely think you are going to see a lot of issuers adopt the mindset that they had better do something quick before it's too late."

The source added that concerns over where rates are headed - added to the fact that the first quarter of 2006 and that the blackout period where frequent issuers have refreshed their quarterly financial numbers are both coming to an end - could make March a busy month in the primary market.

The official also professed the expectation that business on the forward calendar will pick up over the next two weeks.

Alliant Techsystems up in trading

When the new Alliant Techsystems 6¾% senior subordinated notes due 2016 were freed for secondary dealings, a trader saw the bonds get as good as 100.5 bid, 101 offered, up from their par issue price.

Another trader, who observed that the new deal "came on the tight side for a single-B" credit, saw it "trading a little better," in the 100.375-100.5 bid range. At another desk, however, the bonds were seen having moved up only slightly, to around 100.25 bid, 100.75 offered.

Dave & Buster's Inc.'s new 11¼% senior notes due 2014, which priced at par on Friday and then were seen to have moved as high as 101.5 bid, 102 offered when the bonds were freed later that session, were seen having pretty much hung onto their gains, at around 101.25 bid, 102.25 offered.

However, Bon-Ton Stores Inc.'s new 10¼% senior notes due 2014, which priced around mid-week last week at par, were seen having retreated slightly to 99 bid, 99.5 offered.

Longview rejects offer

Longview Fibre Co. - which is currently on roadshow with a $150 million offering of 10-year senior notes - was making some news on Monday, after the Longview, Wash.-based forest products company received - and rejected - a $1.3 billion buyout offer from a pair of private equity companies, Obsidian Finance Group, LLC and The Campbell Group LLC, who asked Longview to hold off on its planned bond offering and its concurrent planned common stock offering to consider their offer.

The company said it was committed to its already in-place strategy of conversion to a REIT, which will involve paying a special taxable distribution to shareholders as well as taking out its outstanding $215 million of 10% senior subordinated notes due 2009 via a tender offer. Traders said that that the existing notes - which one said "trade at a fat premium" around 105 bid, 105.5 offered, the approximate takeout level - were seen unmoved by the news and unchanged on the day.

Scotia Pacific up

Back among established issues without any new-deal implications, that trader characterized the market as having an overall tone of "trading sideways - I don't think [most bonds] were firm, I don't think they were soft. They were [mostly] unchanged, maybe with a bias towards slightly firmer."

The trader said that the idea that someone wanted to buy out forest products operator Longview Fibre might have been what was giving sector peer Scotia Pacific Co. LLC's 7.11% and 7.71% secured notes a boost to around 76.25 bid, 76.75 offered from prior levels at 75.5 bid, 76 offered.

"It doesn't trade that often," he said, "but that paper, definitely had a bid to it today."

GM gains on Suzuki sale

General Motors bonds were seen firmer on the news that GM will unload almost all of its 20.4% stake in Japanese car maker Suzuki. GM will sell all but 3% back to Suzuki for about $2 billion of proceeds.

The trader said that the Suzuki news may produce something of a domino effect for GM, which has been trying to sell a controlling stake in GMAC since October, in hopes of getting $10 billion or more into the company till, while linking GMAC up with a well-capitalized investment-grade financial company and thus raising its credit ratings and lowering its borrowing costs. Things haven't quite worked out that way so far, which has pressured GM's bonds, and GMAC's.

But the Suzuki news "is probably going to accelerate the GMAC sale talks," he said, "so the whole auto sector traded better," starting with GM itself, whose benchmark 8 3/8% notes due 2033 traded up to 71 from prior levels at 69.5 bid, 70.5, "so that paper did trade off its lows about half a point or so."

"GM didn't do much" on the news, another trader said, quoting its 8 3/8s at 71 bid, 72 offered, which he characterized as up about a point, while GMAC's 8% notes due 2031 were two points better at 91 bid, 92 offered.

He saw GM rival Ford Motor Co.'s flagship 7.45% notes due 2031 up half a point at 70.5 bid, 71.5 offered.

At another desk, a trader did see more movement in GM, with the 8 3/8s up two points to 71 bid, 72 offered. He saw the GMAC 8s go to 91 bid, 92 offered, up from 88.5 bid, 89.5 offered, while GMAC's 6¾% notes due 2014 were 1½ points better at 88 bid, 89 offered. So were its 6 7/8% notes due 2011, at 89.5 bid, 90.5 offered.

Auto sector higher

The trader saw other automotive names lifted as well, with bankrupt Delphi Corp.'s bonds two points ahead at 57 bid, 59 offered. He also saw bankrupt Dana Corp.'s bonds "improve a little bit," helped both by GM's news as well as bondholders "starting to figure out" what the Toledo, Ohio-based parts maker's bonds are worth in the wake of its Chapter 11 filing, announced Friday.

He saw Dana's 6½% notes due 2008 at 70 bid, 72 offered, its 6½% notes due 2009 and its two issues of 7% bonds, due 2028 and 2029, all at 69 bid, 71 offered, and its 5.85% notes due 2015 at 68 bid, 70 offered. All of those bonds were up about 1 to 1½ points, and were trading flat, or without their accrued interest.

Among the non-bankrupt auto parts maker names, Visteon Corp.'s 8¼% notes due 2010 were up a point at 78 bid, 79 offered. Dura Automotive Systems Inc.'s 8 5/8% notes due 2012 were half a point up at 78.5 bid, 79.5 offered.

Exide drops on covenant problem

But Exide Technologies' bonds and shares swooned after it warned in an 8-K filing Monday with the SEC that it will likely be in violation of an earnings covenant in its senior credit loan agreement and that it has begun talks with its lenders on amending or waiving that covenant - and it said ominously that if it can't get such a waiver or amendment on a timely basis, its business "would be significantly and adversely affected."

Traders saw its 10½% notes due 2013 dive to 74.5 bid, 75.5 offered from prior levels around 78 bid, 80 offered, while its Nasdaq traded-shares plummeted $1.18 (29.65%) to $2.80 on volume of 3.9 million, more than eight times the average daily handle.

The Alpharetta, Ga.-based maker of car batteries and other electrical energy storage systems said in the filing that it now expects its consolidated EBITDA for the fiscal fourth quarter ending March 31 to be between $105 million and $110 million - well down from its earlier projections of at least $123 million. Exide blamed the anticipated EBITDA shortfall on a drop in North American sales of vehicle batteries due to an unusually warm January, as well as decline in sales at its Industrial Energy Europe division in the wake of recently implemented price hikes.

Merger talk lifts FelCor

Apart from the auto names, sector consolidation buzz was seen as a possible driver in FelCor Lodging's stock rise and the modest firming in its bonds.

"Maybe they'll be the next one to be bought by Blackstone," a bond trader quipped, in noting that FelCor's 9% notes due 2011 were a point better at 111 bid, 112 offered.

He was referring to The Blackstone Group LLC's recent lodging industry shopping spree, which saw the New York-based private equity company buy Wyndham International Inc. last June for $1.44 billion, follow that up with the November acquisition of La Quinta Corp. for $2.28 billion, and then last month do two deals with MeriStar Hospitality Corp. - the first for 10 Florida properties, for $367 million, which was followed three weeks later by an announced deal for all of the rest of Bethesda, Md.-based MeriStar for $2.6 billion.

That consolidation speculation was probably the driver in the $1.56 (7.68%) rise in FelCor's New York Stock Exchange-traded shares to $21.86. Volume of 937,000 was almost triple the norm.

Levi up on IPO talk

A report in a San Francisco newspaper that Levi Strauss & Co. might be thinking about finally going public via an IPO stock sale was seen by a trader as having boosted the venerable Frisco-based blue jeans maker's 9¾% notes due 2015 by a point, to 107 bid, 108 offered.

Levi CEO Phil Marineau told the San Francisco Chronicle that "one of the certain ways that we could immediately pay down the debt, or a good portion of the debt, is to take part of the company, or all of the company, but most likely a part of the company, public. That's a choice that we have.

"We haven't made a decision to do that. It's just one of the choices that we have in order to bring some equity into the business, to pay down the debt, and to continue to make us more competitive in the marketplace. We haven't made that decision yet. We're looking at a number of choices relative to that."

Wynn edges up on sale

Wynn Resorts Ltd.'s shares jumped - but its bonds were only modestly better - after the company announced that it had sold a sub-concession - essentially, a gaming license - that it held in Macau to Australia-based Publishing and Broadcasting Ltd. for $900 million - well above the $200 million to $300 million that most Wall Street analysts had expected it to get.

A trader saw Wynn's 6 5/8% notes due 2014 up half a point to 98.5 bid, 99 offered, while its Nasdaq-traded shares boomed $7.83 (12.16%) to $72.24. Volume of 5.9 million shares was nearly six times the usual turnover.

Besides putting an unexpectedly big wad of cash into the Las Vegas-based gaming and lodging company's corporate coffers, allowing it to continue its development of the separate Wynn Macau gaming resort that it is now building and will operate under another gaming license it holds, the deal also adds to eponymous company founder and chairman Steve Wynn's reputation in the gambling industry as a shrewd visionary who's in good with Lady Luck. An added benefit of the deal, besides the cash, is that it effectively boxes Wynn rival Harrah's Entertainment Inc. out of the potentially lucrative gaming market in the former Portuguese colony, now under Chinese control, which over the past few years has started to build its own reputation -as "the Las Vegas of Asia."

While Wynn is pushing hard to complete construction of its Wynn Macau gaming resort there - it's scheduled to open in early September - Harrah's is for all intents and purposes left on the outside looking in. The sub-concession Wynn bought and has now re-sold to PBL -a media and gaming company controlled by the heirs of the late Australian gaming tycoon Kerry Packer - was the last such license available until 2009. Harrah's - the Las Vegas-based world's largest gaming company - would only be able to get a foot in the door in Macau if it could partner with an existing license holder, a development industry analysts don't see happening at this time.

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