Delphi jumps on financing plan; Citizens Communications upsizes drive-by

By Paul Deckelman, Paul A. Harris and Ronda Fears

New York, Dec. 18- Delphi Corp. bonds were zooming in the fast lane on Monday after a consortium of private equity investors agreed to put as much as $3.4 billion into the bankrupt Troy, Mich.-based auto parts maker. The company's 8¼% notes due 2033 were the big winners, leaping into the upper 120s - as high as 130 at one point - from prior levels around 105, traders said, fueled by the knowledge that holders of those bonds will be paid off fully in shares of the reorganized company.

Elsewhere, traders said there was not that much going on at the beginning of the penultimate trading week of the year, at least marketwise, even though some well known names had news out about them - Goodyear Tire & Rubber Co, Harrah's Entertainment Inc. and Delta Air Lines Inc., for instance. Bond price movements were a point or less in all of them.

TIM Hellas prices €1.4 billion

Meanwhile in the primary market, two issuers priced five tranches.

Greek telecommunications company TIM Hellas Communications priced €1.4 billion equivalent in four floating-rate tranches.

The company priced a €97.25 million face amount add-on to its three-month Euribor plus 350 bps senior secured floating-rate notes due Oct. 15, 2012 (B1/B) at 102.625. The issue generated €99.8 million of proceeds.

TIM Hellas also priced two tranches of nine-year subordinated floating-rate notes (Caa1/CCC+).

A €960 million tranche priced at par to yield three-month Euribor plus 600 basis points, on the tight end of the Euribor plus 600 to 625 basis points price talk.

Meanwhile $275 million tranche priced at three-month Libor plus 575 basis points, also at the tight end of the Libor plus 575 to 600 basis points price talk.

In addition, the company priced a €200 million of 9.5-year floating-rate PIK notes (CCC+) at par to yield three-month Euribor plus 800 basis points, on the tight end of the Euribor plus 800 to 825 basis points price talk.

Deutsche Bank Securities, JP Morgan, Lehman Brothers and Morgan Stanley were joint bookrunners for the debt refinancing and dividend funding deal.

Citizens massively upsized

Elsewhere Citizens Communications Co. priced an upsized $400 million issue of 20-year senior unsecured notes (Ba2/BB) at par to yield 7 7/8%. The drive-by deal was increased from $250 million and came on top of price talk.

Citigroup, Credit Suisse and JP Morgan were joint bookrunners for the acquisition financing deal from the Stamford, Conn., telephone, television and internet services provider.

An informed source told Prospect News that the deal had gone very well.

Pre-holiday calendar thins

With three full sessions and one abbreviated session remaining before Christmas, the forward calendar - lately seen to have carried $12 billion to $15 billion of deals in the market - dwindled down to a humble $350 million and £52 million after Monday's business was clear.

Some news surfaced, however, on the three deals that are left, all of which are expected to be priced by the Wednesday close.

Titan International Inc. talked its $200 million offering of five-year senior notes (B3) at 8% to 8¼%.

The deal, which is being led by Goldman Sachs, is expected to price on Tuesday.

Also expected to price on Tuesday is Metals USA Holdings Corp.'s $150 million offering of six-year senior unsecured floating-rate PIK notes (Caa1/CCC+), via Goldman Sachs and Credit Suisse.

An informed source told Prospect News that price talk is expected on Tuesday morning.

Finally, Global Crossing (UK) Finance plc is expected to price a £52 million add-on to its 11¾% senior secured notes due 2014 on Wednesday, according to a company source.

ABN Amro has the books.

The original £105 million issue priced at 98.575 to yield 12% on Dec. 23, 2004 in a transaction that also saw the company price $200 million 10¾% notes due 2014.

Citizens deal shows little strength

When the new Citizens Communications 7 7/8% notes due 2027 were freed for aftermarket dealings, a secondary trader saw them firm slightly to 100.25 bid, 100.5 offered, up from their par issue price earlier in the session. Another trader saw them at a slightly wider par bid, 100.75 offered price.

Traders said not see any secondary dealings in the new TIM Hellas bonds.

Among issues which had priced late Friday, UCI Holdco's new floating-rate notes due 2013, which had priced at 96.5, were seen a little bit better at 97 bid, 98 offered.

A trader saw Neenah Foundry Co.'s new 9½% senior secured notes due 2016 at 100.75 bid, 101.25 offered, up from Friday's par issue price.

And Dollarama Group Holdings LP's new floaters due 2012 traded at 99 bid, 99.5 offered, little changed from their issue price Friday at 99.

Delphi dominates

Back among the established issues, Delphi bonds soared, fueled by the news that an investor group led by Appaloosa Management LP and Cerberus Capital Management LP will pump up to $3.4 billion into the company, giving the investors a large stake when Delphi emerges from bankruptcy.

A trader saw Delphi's most widely traded issue, its 6.55% notes that were to have come due earlier this year, trading at 113 bid, 114 offered, up from levels around 110 bid, 111 offered on Friday, and saw its 7 1/8% notes due 2029 at 114 bid, 115 offered, up from 111 bid, 112 offered.

But the big mover of the day, he said, were the normally seldom-traded 8¼% notes due 2033, which he saw at a wide 125.5 bid, 130.5 offered, versus Friday levels at 106.5 bid, 108.5 offered, "so these moved up by 18 points," he exclaimed.

Another trader saw an even greater rise in the bonds, pegging them at 130 bid, up from 106.

"They're slated to receive 100% equity, which is what some people want," he said, "which is kind of crazy. They're subordinated to these other bonds - but they've had a heck of a run."

The company's other bonds, meantime, rose respectably on Monday - though nothing like the 81/4s. The 6.55s got as good as 115 before falling back to close at 113.5 bid, 114.5 offered, as did the 6½% notes due 2009. The 6½% notes due 2013 ended at 112 bid, 113 offered, while the 7 1/8s were 114.25 bid, 115.25 offered, all up about 3 points.

While Delphi's bonds sizzled on the news of the company's agreement with the investor group, its Pink Sheets-traded shares fizzled, losing 63 cents (19.09%) to close at $2.67. Volume of 49 million shares was about seven times the norm.

Besides Appaloosa Management and Cerberus, others in the investor group include Harbinger Capital Partners Master Fund I, as well as Merrill Lynch & Co. and UBS Securities LLC.

Those companies will invest a minimum of $1.4 billion and a maximum of $3.4 billion in the struggling company in exchange for common and preferred stock that will be issued in the first half of next year. They would get at least 30% of the company's stock, and should they invest the maximum $3.4 billion, they would end up owning 72% of the company.

Various debt-holders would get 28 million shares, or 21% of the restructured Delphi, while former corporate parent General Motors Corp. would get 5%, or seven million shares. Existing shareholders would get 3 million shares and could buy up to 57 million more at a discount, which could total up to 44% of the post-Chapter 11 company.

Separately from the investor consortium, Delphi announced that it had accepted a financing proposal from JPMorgan Chase Bank and a group of lenders to refinance its existing $2 billion debtor in possession credit line and about $2.5 billion in loans.

Delphi further said that its board named Rodney O'Neal, who currently is serving as president of Delphi, to also take over as chief executive, effective Jan. 1, when Robert S. "Steve" Miller relinquishes the post. Miller will, however, continue to serve as executive chairman until the company emerges from bankruptcy. O'Neal will also remain as president.

L-3 lower on lost contract

Apart from the Delphi situation, traders said, not much was going on. "Delphi was the bulk of the action," a trader said.

"Quiet, with light trading," was how another trader saw the situation, apart from Delphi, adding that things will only get slower from now through the end of the year. The market will see an abbreviated session Friday (2 p.m. ET close), ahead of a full market closure next Monday in observance of the Christmas Day legal holiday.

One of the traders saw L-3 Communications Holdings Co.'s 6 1/8% notes due 2014 at 97.75 bid, 98.75 offered, down a point on the session, on the news that the New York-based defense contractor lost out on renewal of a $4.65 billion, five-year contract to provide the Army with linguistics services. L-3 inherited that contract when it acquired Titan Corp. last year.

But that incumbency couldn't keep rival contractor DynCorp International Inc. from grabbing that lucrative contract right off L-3's plate.

Bear Stearns analyst Steve Binder said in a research note that loss of the contract could reduce L-3 sales by $500 million in 2007 and another $100 million in 2008. He cut his earnings per share forecast for 2007 by 15 cents, to $5.60 from $5.75, to reflect the loss of the business.

The contract had generated roughly $456.5 million in sales for L-3 during the first nine months this year and was expected to add between $610 and $615 million of total 2006 sales.

Harrah's off as bid decision nears

The trader also saw Harrah's bonds off, with the Las Vegas-based gaming giant's 6½% notes due 2016 at 88 bid, 89 offered, about a ½ point loss.

At another desk Harrah's 7.57% notes due 2017 were seen to have retreated about ¾ point to 82.5 bid, 83.5 offered, giving back all of the gains it had notched on Friday and then some.

A trader called it a classic case of "buy the rumor, sell the news," with the bonds having risen Friday on news reports indicating that a second would-be buyer, Wyomissing, Pa.-based Penn National Gaming, had indeed made a formal offer to acquire Harrah's. However, news reports on Monday said that a rival offer from Texas Pacific Group and Apollo Capital Management had the inside track, with a vote seen likely on Tuesday.

Goodyear little changed as talks resume

Goodyear's bonds were seen little changed as the Akron, Ohio-based tiremaking giant resumes stalled labor talks with the United Steel Workers Union, which has been striking the company since early October.

A trader pegged Goodyear's 7.857% notes due 2011 at 99.5 bid, 100.25 offered, which he called unchanged on the session.

Another trader, though, called them up ¼ point at 99.75 bid, 100.75 offered.

Goodyear's bonds had firmed about a point on Friday on the news that Goodyear and the union would resume the talks, which had been stalled since mid-November.

The union's 15,000 members struck Goodyear plants in the United States and Canada on Oct. 5, when their old contract with the world's third-largest tiremaker expired. The two sides have been unable to reach agreement since then, battling over the company's health care proposals for retirees, which the union says would shortchange them, and its plans to close a Tyler, Texas, tire factory - a step Goodyear says it must take to cut costs, reduce capacity and remain competitive with lower-cost overseas-based rivals.

Delta down after early gain fades

In the distressed-debt market, Delta Air Lines bonds initially moved up by about ½ point to a point, traders said - but the bankrupt Atlanta-based Number-Three airline carrier gave it all back and ended down a point on the day in "volatile" trading, as one put it. Delta's 8.30% notes due 2029 ended down a point at 66 bid, 67 offered.

Another trader saw that same up-and-down motion, but said that the bonds went out unchanged at 66-67.

The Wall Street Journal was reporting Monday that Delta was getting ready to present a reorganization plan that values the airline at about $12 billion to the bankruptcy court overseeing its overhaul.

The Journal said that Delta was acting to stop an $8 billion-plus takeover try by US Airways Inc. While management has contended all along it wants to emerge from bankruptcy as a stand alone company, some bondholders have been pushing for serious consideration of the US Air offer.

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