Spansion, VeraSun deals price; Movie Gallery, Fedders dive; Spectrum, Bally up

By Paul Deckelman and Paul A. Harris

New York, May 11 - Spansion Inc. and VeraSun Energy Corp. successfully priced $1 billion of new bonds between them on Friday, bringing to a close a busy week which also saw GMAC LLC double the size of its mega-deal offering to $2 billion, while sizable deals were also priced by MGM Mirage and Constellation Brands Inc.

The new Spansion bonds were seen having firmed solidly in aftermarket dealings, and VeraSun's new notes also managed to more than hold their own.

Elsewhere on the primaryside, roadshow details emerged on several upcoming offerings, including deals from Mueller Water Products Inc., Neff Corp. and Fontainebleau Las Vegas.

In the secondary arena, in addition to the trading in the two issues of new notes, GMAC's new bonds were seen by a trader as having "hung in" around their pricing levels - but the automotive finance company's outstanding debt was in retreat over the prospect of the increased liquidity.

Two distressed issues were seen racking up big retreats, as bonds of Fedders Corp. and Movie Gallery Inc. were on the slide, while those of Spectrum Brands Inc. and Bally Total Fitness Holding Co. were seen on the upside.

Overall a senior high yield capital markets official told Prospect News late Friday that the market passed the May 7 to May 11 week in excellent shape, and added that it had shown resilience in the face of Thursday's dramatic sell-off in equities.

He marked the broad market unchanged on Friday and up slightly for the week.

"It's hard to say that this will last," the source said, referring to a junk market that observers currently say is "red hot."

"But right now it feels pretty good."

A $1.5 billion Friday

Meanwhile the primary market saw three issuers price one dollar-denominated tranche apiece, generating a combined total of just under $1.5 billion of proceeds.

Spansion: a loan in bond clothing

Computer memory company Spansion priced a $550 million issue of six-year senior secured floating-rate notes (B1/B+) at par to yield three-month Libor plus 312.5 basis points, in the middle of the Libor plus 300 to 325 basis points price talk.

Banc of America Securities LLC was the left bookrunner for the debt refinancing and general corporate purposes deal. Deutsche Bank Securities was the joint bookrunner.

A source close to the transaction said that Spansion played to a very solid book featuring a crossover mix of banks, hedge funds and traditional high yield players.

The source said that Spansion's first-lien security made it something of a "loan in bond clothing," and hence very attractive to a wide cross-section of investors.

VeraSun tight to talk

Elsewhere VeraSun Energy priced a restructured $450 million issue of 9 3/8% 10-year senior notes (B3/B-) at 99.50 to yield 9.452%.

The yield was printed on the tight end of the 9½% area price talk.

The Brookings, S.D.-based ethanol producer withdrew a proposed seven-year tranche of notes.

Lehman Brothers, Morgan Stanley and UBS Investment Bank were joint bookrunners for the project financing.

Also pricing Friday was a $500 million issue of medium-term notes March 20, 2009 from Ford Credit de Mexico SA de CV. The deal has a three-month Libor plus 170 basis points coupon and priced at 99.565 for a discount margin of three-month Libor plus 195 basis points.

Goldman Sachs & Co. ran the books for the quick to market deal.

Week tops $6 billion issuance

Tallying Friday's business, the high-yield primary market saw slightly less than $6.37 billion of proceeds raised in a dozen dollar-denominated tranches during the week to May 11, making it the second-biggest week thus far in 2007 by dollar amount.

The biggest week was the March 12 to March 16 week which saw nearly $10 billion of issuance.

The week ending Friday was also the second week in a row top the $5 billion mark, with the April 30 to May 4 week having seen $5.88 billion of issuance in 15 tranches.

With Friday's business in the total, the week came to a close having seen $76.2 billion of proceeds raised in 189 dollar-denominated tranches year-to-date.

Hence, 2007 to Friday's close has seen nearly 56.5% more issuance than the $48.7 billion in 143 tranches that had priced by the May 11 close in the record-setting year of 2006.

New World Resources inside talk

Elsewhere Friday New World Resources BV priced a €300 million issue of eight-year senior notes (B3/B) at par to yield 7 3/8%, inside of the 7½% to 7¾% price talk.

Morgan Stanley, Barclays Capital and Citigroup were bookrunners for the debt refinancing and capital expenditures funding deal.

A source close to the deal said that while New World Resources was basically a Czech coal mining emerging markets play, there were high yield names in a significantly oversubscribed order book.

CMA CGM upsizes

French maritime shipping firm, CMA CGM, priced an upsized €500 million issue of 5½% five-year senior notes (/BB+/BBB-) at a 130 basis points spread to mid-swaps on Friday.

The spread on the crossover deal came at the tight end of the mid-swaps plus 130 to 145 basis points price talk.

Barclays Capital, BNP Paribas and JP Morgan were joint bookrunners for the acquisition financing.

The calendar builds

The forward calendar grew dramatically on Friday, although not quite as dramatically as some sources were anticipating as the session got underway.

Among the issuers that stepped into the light, UHS Merger Sub, Inc. (Universal Hospital Services, Inc.) will begin a roadshow on Monday for its $460 million two-part offering of eight-year second-lien senior secured notes.

The issuer, which will be merged with Universal Hospital Services, is offering a $230 million tranche of floating-rate notes and a $230 million tranche of fixed-rate PIK toggle notes.

Merrill Lynch & Co., Bear Stearns & Co. and Wachovia Securities are joint bookrunners for the merger funding deal.

Mueller Water Products will also start a brief roadshow on Monday for its $350 million offering of 10-year senior subordinated notes, which are expected to price on Wednesday.

Banc of America Securities and JP Morgan are leading the debt refinancing deal from the Atlanta-based manufacturer and marketer of infrastructure and flow control products.

Also Neff Corp. will start a roadshow on Monday for its $250 million offering of senior unsecured notes (Caa2/B-), another deal being led by Banc of America Securities, along with CIBC World Markets and UBS Investment Bank.

The Miami-based construction equipment rental company will use the proceeds to fund acquisition of the company by Lightyear Capital LLC from Odyssey Investment Partners.

Fontainebleau starts Tuesday

In yet another Banc of America Securities-led offering, Fontainebleau Las Vegas will begin a roadshow on Tuesday for its $675 million offering of eight-year second-mortgage notes.

Barclays Capital, Deutsche Bank Securities and Merrill Lynch & Co. are the joint bookrunners.

The destination resort company will used the proceeds to repay debt and fund the design, development, construction and opening of the Fontainebleau Las Vegas.

Awaiting Dynegy

At the outset, Friday, sell-side sources told Prospect News that Dynegy Holdings Inc. might officially launch its $1.1 billion minimum offering of senior unsecured notes, which it announced in a press notice released Thursday night.

However the Houston electricity company had not yet hit the switch as Prospect News was going to press on Friday evening.

The company will launch its $650 million of incremental bank debt on Monday, via JP Morgan and Citigroup.

An informed source said that it would be no surprise to see those two investment banks figuring prominently in the bond deal.

A big deal

When Prospect News asked one high yield syndicate official early Friday morning, whether Dynegy, at $1.1 billion minimum, would be the next "big deal" in the market, the source would give only a qualified "yes."

A $1 billion dollar sale is not such a big deal these days, the source said, adding that the average tranche size thus far in 2007 has been over $400 million, up from last year's average tranche size of over $362 million.

Recounting the benchmarks set in the fourth quarter of 2006, the multi-tranche, multi-billion dollar deals from Hercules Holding II/HCA Inc. ($5.70 billion) and Firestone Acquisition Corp. (Freescale Semiconductor Inc.) ($5.95 billion), you need to come to the primary market with an offering of $2 billion or more to genuinely be afforded the status of wielding a "big deal," the source asserted.

Spansion, VeraSun issues firm in aftermarket

When the new Spansion floating-rate notes due 2013 were freed for secondary dealings, a trader saw the new bonds get as good as 101 bid before coming slightly off that peak level to finish at 100.875 bid, 101.25 offered, up from their par issue price earlier in the session.

At another desk, a trader saw the bonds finishing at par bid, 101.25 offered.

The first trader also saw VeraSun's new 9 3/8% notes due 2017 having pushed up to 100.5 bid, 100.875 offered, up from their slightly discounted issue price of 99.5.

New GMACs steady, outstandings off

And that trader also saw GMAC's new 6 5/8% notes due 2012 quoted on a spread basis at 217 basis points over comparable Treasuries on the bid side and 214 bps on the offered side, in line with Thursday's spread at issue of 217 bps, - "not a huge difference, it was where they priced, but they held in pretty nicely, despite the name of the issuer and how big the issue was."

But while the new bonds were seen steady, the same could not be said for the company's outstanding debt, which was down for a second consecutive session, in likely response to a big new glut of GMAC bonds being dumped on the market just six months after the financing company - the former subsidiary of General Motors Corp. until the Detroit giant sold a controlling 51% stake in GMAC last year to an investment consortium - last accessed the credit markets.

GMAC's outstanding 8% notes due 2031, after having eased about ½ point on Thursday in initial response to the drive-by deal, were heard to have about tripled that loss to 1½ points on Friday, with the bonds going out just below 107, versus the nearly 109 levels the bonds held earlier in the week.

The GMAC bonds were among the day's most heavily traded issues.

Movie Gallery moves lower

Another very actively traded issue, market sources said, was Movie Gallery, whose bonds were seen lower after the Dothan, Ala.-based number-two U.S. video rental chain operator reported that it swung to a loss versus a year-earlier profit. A trader saw the company's 11% notes due 2012 fall to 82 bid, 83 offered from prior levels at 86 bid, 87 offered.

Another trader said - with some irony intended - that Movie Gallery "got us off to a good start," noting how the bonds, which had recently been trading in the upper 80s, opened the day's dealings closer to 82 bid, 83 offered, and then moved up a little from that low to 83 bid, 84 offered. However, after its conference call with company executives apparently failed to appease worried shareholders and bondholders, "it went on back down" to close at 82 bid, 83 offered, "back to where they started the week,' the second trader said.

Yet another trader pronounced the bonds 2 points lower at 83 bid, 84 offered.

Movie Gallery reported a net loss of $14.9 million (47 cents per share) - a sharp deterioration from its net income of $40.3 ($1.27 per share) a year earlier.

Operating income in the quarter was $33.6 million, versus $67.5 million for the same period last year. The results were hurt by expenses connected with a loan refinancing and the costs connected with its start-up of an online movie service to compete with more successful rivals Blockbuster Inc. and Netflix Inc.

Total revenues were $647.7 million, a decrease of 6.7% from $694.4 million in the first quarter of 2006, with the company's Hollywood Video unit leading the way downward.

Fedders falters on numbers

Probably the biggest downside mover, a trader said, was Fedders, as he quoted the Liberty Corner, N.J.-based air conditioner manufacturer's 9 7/8% notes due 2014 as having tumbled to 41 bid, 43 offered from prior levels at 47 bid, 49 offered.

A second trader who saw the bonds at that same level said they were down 7 points on the day, and ascribed the fall to "disappointing" numbers.

Fedders posted a net loss of $18.9 million for the first quarter - nearly double the year-earlier red ink of $9.9 million. Sales nosedived nearly 70% to $30.1 million, versus $99.7 million a year earlier.

Equity investors lost their cool as much as the bondholders did, as Fedders' Pink Sheets-traded penny stock shares were seen down 11 cents (15.71%) to 59 cents. Volume of 249,000 was about 2½ times the normal handle.

Friendly's melts away

Also seen lower on negative numbers was Friendly Ice Cream Corp. Its 8 3/8% notes due 2012 were seen down a point at 98 bid.

Another trader quoted the Wilbraham, Mass.-based ice cream manufacturer and restaurant operator's bonds at 97 bid, 98 offered, which he called down a point on the day.

Yet another saw the bonds at 97.75 bid, 98.5 offered, "maybe off a half."

The company's loss for the fiscal first quarter ended April 1 totaled about $6 million (73 cents per share) - around triple its year-earlier deficit of $1.8 million (23 cents per share). The year-ago results included 33 cents per share from discontinued operations.

Revenue fell to $122.6 million off 3% from $125.7 million a year ago.

Another source noted that an early loss of more than a point had been whittled down to about 3/8 to ½ point at 98.75 by day's end, after the company's conference call. On that call, its chief executive officer, George Condos said the company would try to new cold drinks and a new service program at its restaurants to try to enhance the guest experience.

Spectrum Brands moves up

On the upside, a trader said, Spectrum Brands' 7 3/8% notes due 2015 jumped 2 points to 82.5 bid, 83.5 offered, on "good reports," after the Atlanta-based maker of Rayovac Batteries reported quarterly numbers that included what company chairman and CEO David Jones called "solid revenue growth generated this quarter from all of our major product lines, particularly the significant improvement in global battery sales."

Even though the company suffered a fiscal second quarter operating loss of $209.9 million versus income of $18.1 million in the same quarter of fiscal 2006, its shares were "up big," the trader said, as Bear Stearns upped its rating to outperform despite that wider-than-expected loss. The investment bank cited what it termed a striking improvement in the fundamentals for the consumer products company.

Bally gets stronger

And a trader saw Bally Total Fitness' 9 7/8% subordinated notes due 2007 three points better on the day at 85 bid, 86 offered, while its 10½% senior notes due 2012 gained a point to 96 bid, 97 offered.

The Chicago-based fitness club operator announced Thursday that its noteholders had agreed to default waivers that will run through July 13, giving the company time to try to get them to agree to restructure its debt. It will make a forbearance payment to the senior noteholders, but got the sub holders to agree to forbear without payment of a fee.

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