Yonkers Racing, Basic Energy slate deals; secondary mostly quiet, but Lear up on plan details

By Paul Deckelman

New York, July 6 - It was back to work Monday after a long holiday weekend, but Junkbondland seemed to still be on at least a partial hiatus, with relatively modest volume and not much price movement seen in most issues.

An exception was Lear Corp., whose bonds were seen points better after the Southfield, Mich.-based automotive components supplier outlined the details of its planned bankruptcy restructuring.

But most other names were relatively sedate, including General Motors Corp., even though a bankruptcy judge delivered a major ruling in favor of the company's restructuring plan and against some of its bondholders.

No new deals priced either, although two more joined the forward calendar - for Yonkers Racing Corp. and Basic Energy Services Inc., with syndicate sources projecting that both will likely price towards the end of this week.

One Communications Corp.'s senior secured deal, which had originally been expected to price last week, remained a primary market no-show on Monday.

Market indicators mostly easier

Looking at statistical market measures, the CDX Series 12 High Yield index - which had lost 1¼ points on during Thursday's lightly traded final session of the week before the Independence Day holiday break - was off by another ¼ point on Monday, dipping to 83 bid, 83½ offered.

The KDP High Yield Daily Index, which had edged upward by 4 basis points on Thursday, inched another 1 bp higher on Monday to end at 62.94, while its yield was unchanged at 10.46%.

In the broader market, advancing issues - which had led decliners on Thursday for a seventh consecutive session - fell behind them on Monday, lagging by about a five-to-four margin.

Overall market activity, measured by dollar-volume totals, understandably zoomed by 83% from Thursday's extremely shrunken levels.

Despite that rise in volume - although the activity levels were small by normal standards, only seeming greatly magnified when matched against the anemic levels seen Thursday - a trader said that "we had kind of a quiet day. He said that the Trace totals for bond-price activity and volume "were quiet as well. It doesn't look as though anything moved up."

"There wasn't much to report," another trader said, while a third characterized Monday as "a very quiet day - call it "holiday-like."

He saw relatively thin activity in the big market bellwether issues, like Community Health Systems Inc.'s 8 7/8% notes due 2015. The Franklin Tenn.-based hospital operator's bonds fell to 98 bid, down ¼ point from the last prior round-lot levels on Thursday. Just $4 million of the normally busily traded bonds changed hands, "not much for one of the barometer issues."

He saw Greenwood Village, Colo.-based financial transaction processor First Data Corp.'s 9 7/8% notes due 2015 "get walloped" down to 70¼ , down 2 points from where they were on Thursday on volume of $8 million. "That isn't a huge amount of bonds, typically - but on a day like today, it seems active."

He saw another commonly watched market barometer issue, Aramark Corp.'s 8½% notes due 2015, unchanged from Thursday's levels at 96. Some $7 million of the Philadelphia-based food service and uniform provider's bonds changed hands.

Sallie Mae seen better

The most actively traded issue, the trader said, was SLM Corp.'s 5% notes due 2015, which rose to 77 bid from 75 back on June 29 - the last time those bonds had traded in round-lot size. Some $25 million of the bonds changed hands, even though there seemed to be no fresh news out about the Reston, Va.-based education lender that might explain the activity.

Sallie Mae's 4% notes due 2019 were also busily traded, firming to 99 bid from 98 3/8 last Wednesday, with $11 million of turnover.

Unisys remains active

The trader said that the Sallie Mae 5s were "by far" the most active that he had seen, since the next most active credit, Unisys Corp.'s 6 7/8% notes due 2010, had only traded $16 million. Those notes eased to 99¼ bid from 99¾ on Thursday.

There was no fresh news out about the Blue Bell, Pa.-based information technology company - whose bonds had surged strongly higher last week on the news that it had terminated its previous unattractive and unpopular offer to exchange new debt for its existing bonds, and had announced a new offer with better terms, with the 6 7/8s soaring all the way up to around a 98-99 range, some 10 or 11 points above their pre-news levels, while its 8% notes due 2012 jumped more than 20 points into the lower 80s.

Lear leads the way

A trader said Lear Corp. bonds "moved up 2 points versus their levels Wednesday," the last previous significantly active trading in the credit.

Another trader agreed that Lear "seems like it's moved" into the high 30s, getting up to around 39-40 during the session, and finally ending around 40. He said that the credit was "a big, active issue," ending up a solid 1 to 2 points" higher on the session, because there was "a lot of news on Lear today," as the company outlined its reorganization plans.

The trader said that the Lear bonds were up "at least 5 to 6 points" from the levels they had held last week in the low to mid 30s.

Another trader, looking solely at round-lot dealings, said the Lear 5¾% notes due 2014 had jumped to 40 from 32 on July 1, the last previous time a round-lot trade was seen. Volume was $12 million. He saw the Lear 8½% notes due 2013 at 40, up from 36 last Thursday, with $89 million traded.

Lear's bonds leaped after the company - which had announced on July 1 its intention of restructuring though a bankruptcy proceeding - released details of its plan.

Under that plan, the automotive interior components company would restructure approximately $2.3 billion of debt outstanding under its amended and restated credit and guarantee agreement, and approximately $1.3 billion of debt outstanding under its 8½% and 5¾% notes and its 8¾% senior notes due 2016, and zero-coupon convertible senior notes due 2022.

Lear has received commitments for a $500 million debtor-in-possession one-year term loan, which can be extended to 15 months, that is being led by JPMorgan and Citigroup. Proceeds will be used for working capital and other general corporate needs.

The DIP financing will convert into exit financing term loan with a three-year term upon the company's emergence from Chapter 11.

The company is seeking support for the proposed plan of reorganization from additional lenders and bondholders, and if the support is obtained, a bankruptcy filing would take place shortly after.

GM gyrations go nowhere

Also in the increasingly crowded automotive bankruptcy parking lot, a trader said General Motors' benchmark 8 3/8% bonds due 2033 "was the most active GM - but it wasn't that active." He saw the bonds continuing to trade around 13 bid.

Another trader said that "for whatever reason, I can't say I saw a lot of it," even though GM had big news out, with a federal judge approving the fast-track sale of the best of the company's assets to a "New GM" entity to bring it quickly out of bankruptcy over the objection of, among others, dissident bondholders.

He said that the 12½ to 13 1/8 context the bonds traded in "looks pretty unchanged to me."

However, at another desk, a trader quoted the benchmark's at 12¾ bid, 13¾ offered and said that was up ¾ point on the day.

While the official bondholders' committee has endorsed the company's bankruptcy plan, which was worked out with heavy input from the federal government, slated to become the new GM's majority stockholder and main creditor, a group calling itself Unofficial Committee of Family & Dissident GM Bondholders had objected to the plan, which it said ran roughshod over the rights that creditors like bondholders usually exercise in a bankruptcy reorganization. Those dissenting bondholders had argued that GM should restructure itself under a more traditional Chapter 11 reorganization plan, in which creditors would be able to vote, but judge Robert Gerber of the U.S. Bankruptcy Court for the Southern District of New York swatted away their arguments, and similar contentions from other objectors including terminated GM dealers and groups of consumer and asbestos claimants that argued they will now be unable to sue GM for their injuries, contending that time was of the essence in keeping GM from falling apart completely and undergoing liquidation.

New Wind bonds hold gains

Among newly or recently priced issues, traders saw Wind Acquisition Finance SA's big new dual-currency issue continued to do well.

One saw the dollar-denominated tranche continuing to hover at 101 bid, 101½ offered.

The company - a unit of Milan, Italy based Wind Telecomunicazioni SpA - priced $2 billion of those dollar-denominated 11¾% notes due 2017 last Wednesday at 97.492 to yield 12¼%, with the new bonds almost immediately shooting up above the par level and staying there.

Wind also priced a mirror tranche of €1.25 billion of euro-denominated bonds at 96.721 to yield 12½%, which traded up to 99 bid, par offered, and stayed there.

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Toys bonds still struggling

On the other hand, Toys 'R' Us Inc.'s new $950 million of 10¾% notes due 2017 were seen offered at 97 with no bid. The Wayne, N.J.-based specialty retailer of toys and juvenile products priced those bonds last Wednesday at 97.399 to yield 11¼%, but the bonds were seen to have fallen below that level when they were freed for secondary dealings.

Off to the races with Yonkers

While those recent issues continue to trade around, as did Denver-based energy company Bill Barrett Corp.'s new 9 7/8% notes due 2016, which were holding on to the near-par levels to which they had risen after pricing last Tuesday at 95.172 to yield 9 7/8%, primaryside players were anticipating a resumption of activity, now that the holiday break is history.

They saw two prospective new deals join the forward calendar, the first from Yonkers Racing Corp., the operator of the famed Yonkers Raceway harness horse racing track and its affiliated Empire City slot machine "racino" in Yonkers, N.Y., located just north of New York City in suburban Westchester County.

Syndicate sources said it plans to sell $225 million of (B1/B+) seven-year senior secured notes via bookrunners Credit Suisse, Investment Banking Division, and J.P. Morgan Chase & Co.

Timing of the deal was not immediately clear, although one source said he thought it might come to market later this week.

Nothing that Yonkers is "a first-time issuer," with no outstanding bonds out, he suggested that the deal "has probably been pre-marketed" to likely buyers before it emerged. "They probably have a book of lead orders," he said.

The new notes will be offered as Rule 144A for life, and will be non-callable for the first four years, although the company will have the option to redeem up to 10% of the notes at 103% of face value in each of those first four years.

The company plans to use the proceeds of the bond offering to repay existing debt and to terminate an interest-rate swap arrangement, a syndicate source said.

Back to Basics

The other new deal to slate comes from Midland, Tex.-based oilfield services company Basic Energy Services, which announced plans for a $225 million private offering of senior notes due 2017. Syndicate sources heard that the company had begun a roadshow Monday for the deal, with an investor call with prospective buyers scheduled for Tuesday and pricing expected late this week.

The sources said that the Rule 144A and Regulation S deal would be brought to market by Goldman Sachs & Co. as bookrunner.

Basic Energy Services said that it plans to use a portion of the anticipated deal proceeds to pay down $180 million under the tranche A and tranche B portions of its revolving credit facility, with the remainder slated for general corporate purposes.

It separately announced fiscal second-quarter guidance, "which wasn't pretty," a trader said; "they expect sales to be down 23% to 25% in the quarter from the first quarter." As part of that announcement, the company cautioned that it expects to not be in compliance with some of its credit facility covenants in the future quarters.

An energy-oriented buyside source did not think that such an ominous announcement would have much impact on the company's attempts to sell its new deal to prospective buyers - if anything, he suggested, the company might be trying to "scare" its current bondholders into buying this deal - the proceeds of which will take out the credit facility by holding out such a bearish possibility as the alternative.

He said that Basic is being hurt by the fact that industrywide "we still haven't seen the real bottom in well servicing."

That having been said, he believes that Basic's management "ought to be able to get some sort of covenant waiver" from its credit facility lenders, and if it manages to sell the bond deal and pay down that facility, "it certainly will buy them some time."

The company's current bonds, a $225 million offering of 7 1/8% senior notes due 2016 priced at par in April 2006, currently trade around the 80 bid level, for an approximate 11.70% yield to maturity, another market source said, projecting that the upcoming issue is likely to come at a yield of around 12½%, "if not more."

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