Shaw, Tekni-Plex upsize offerings, Sonic, Chesapeake price drive-bys; auto sector rallies behind Ford

By Paul Deckelman and Paul A. Harris

New York, Nov. 12- Shaw Communications Inc. and Tekni-Plex Inc. were heard by high yield syndicate sources to have upsized their scheduled junk bond offerings on Wednesday, while Chesapeake Energy Corp. and Sonic Automotive Inc. priced quickly-shopped "drive-by" offerings - the latter an add-on to its existing 8 5/8% senior subordinated notes due 2013.

In the secondary market, a generally better tone was seen, especially after the bonds of investment-grade automotive bellwether Ford Motor Co. shrugged off a downgrade by Standard & Poor's to just one notch above junk status and firmed smartly, which in turn got the junk automotive names in a convoy behind Ford.

"This market continues to appear healthy," said one sell-side official on Wednesday, referring to the four high yield deals priced during the mid-week session -two of them upsized.

"I think we still have some momentum here, and you can look for that to continue right through the end of next week."

Somerville, N.J.-based packaging products manufacturer Tekni-Plex Inc. upsized the only deal that priced after having been marketed via a roadshow. The company sold $275 million - increased from $200 million - of 10-year second priority senior secured notes (B2/B-) at par to yield 8¾%.

Lehman Brothers and Citigroup ran the books on the deal, which priced right at the 8¾% area talk.

Also on Wednesday Chesapeake Energy Corp. sold $200 million of 6 7/8% senior notes due Jan. 15, 2016 (Ba3/BB-) at 98.977 to yield 7%.

Price talk on the quick-to-market deal from the Oklahoma City independent natural gas producer was 6 7/8%-7%.

Banc of America Securities, Deutsche Bank Securities and Lehman Brothers were bookrunners.

And Sonic Automotive, Inc. priced a $75 million add-on to its 8 5/8% senior subordinated notes due Aug. 15, 2013 (B2/expected B+) at 105 for a 7¾% yield to worst.

Price talk was 105.25 area.

Banc of America Securities, JP Morgan and Merrill Lynch were bookrunners.

The issuer, a Charlotte, N.C.-based auto retailer, sold the original $200 million at 98.3628 to yield 8 7/8% on Aug. 7, so Sonic drove off Wednesday with a substantially better interest rate.

Meanwhile in Canada, terms were heard Wednesday on Shaw Communications Inc.'s upsized C$350 million of 10-year senior notes (Ba2/BB+), increased from C$250 million. The Calgary, Alta.-based communications company's deal, which was led by RBC Capital Markets and TD Securities.

One new deal that had been anticipated since late October came squarely into view during the session. The roadshow is scheduled to start Friday for General Nutrition Cos. Inc.'s offering of $190 million seven-year senior subordinated notes (B3/B-). The deal is expected to price during the week of Nov. 24.

Lehman Brothers and JP Morgan are joint bookrunners on the offering from the Pittsburgh-based producer and seller of nutritional supplements.

Meanwhile Norwegian petroleum company DNO ASA postponed its offer of $175 million of seven-year senior notes indefinitely, citing Moody's assignment of a Caa2 rating on the deal. The company indicated that the rating would create difficulty in pricing the deal on acceptable terms. Standard & Poor's had assigned its B- rating to the notes.

Credit Suisse First Boston was the underwriter on the offer.

Finally, an emerging markets source told Prospect News that activity on higher-yielding corporate credits in that asset class has been sparse.

However, the source specified, pending issues from the Philippines are likely going to have to fight their way up from beneath a load of negative headlines.

The official was referring to reports of up to 10,000 protesters hitting the streets in Manila, demanding the ouster of Philippine President Gloria Arroyo and condemning the recent defeat of a move to oust that country's chief justice.

Investors reliably demonstrate an aversion to news of political upheaval in the emerging markets.

"No way they are going to be able to get a deal done in this environment," said the official.

In the secondary market, "things felt pretty good," a trader said, noting that the tech-heavy Nasdaq index - home to the stock of many junk issuers - had rallied from recent weakness to end up 42.36 points at 1,973.11. The Dow Jones Industrial Average was also up by 111.04 to 9, 848.83, while the S&P 500 likewise firmed to 1,058.53, up 11.96.

Much of the attention of the corporate bond-market world - that is, whatever was not focused on the new-deal arena - was centered on Ford, with S&P finally passing its judgment on the bonds of the Number-2 automaker (and Number-1 corporate issuer, with $180 billion of total debt) - something the market had been waiting for since S&P placed Ford's ratings under scrutiny a month ago.

To nobody's surprise, S&P dropped Ford's long-term rating a notch to the last stop before junkbond land, BBB-, warning that "Ford's profitability and cash flow remain poor, and Standard & Poor's believes that only limited improvement will be achievable over the next few years."

But the ratings agency also said the carmaker's outlook was stable, declaring that "over the next two years, even if expected improvement in earnings and cash flow should fail to materialize, and even if the company were to experience minor losses, the ratings would not necessarily be jeopardized as long as Ford maintains a large liquidity position and Ford Credit maintains satisfactory funding flexibility."

News that the ratings drop will likely go no further than BBB- in the foreseeable future, allowing the carmaker to keep its coveted investment-grade status, immediately caused Ford's bonds to tighten by about 40 basis points, its 7% notes due 2013 improving to 264 basis points off comparable Treasuries, while Ford's bonds due 2031 were quoted around 300 bps over, a sharp improvement from recent levels.. Ford shares jumped 75 cents (6.09%) to $13.06., on New York Stock Exchange volume of nearly 36 million shares, about four times the norm.

A junk trader said that "it was kinda funny" that the bonds had improved so sharply, considering the downgrade, while acknowledging that the not-so-unfavorable outlook decision no doubt swung much more weight with debt investors. He saw the junk automotive sector "a little stronger" in response to Ford's good news.

Among the automotive junkers seen steady-to-higher in the wake of the Ford developments was Dana Corp., whose 9% notes due 2011 were up about a point-and-a-quarter at 111.75. At another desk, Dana's 10 1/8% notes were unchanged at 111.75.

The trader there saw Tenneco Automotive's 10¼% notes having moved up to 111.5 bid from prior offered levels around 111, while its 11 5/8% notes were unchanged at 103 bid.

Collins & Aikman Products Co.'s 11½% notes due 2006 were seen a point better at 74 bid, while its 10¾% notes due 2011 were up half a point at 84 bid, 86 offered.

Outside of the automotive sphere, a trader saw Delta Airlines bonds weaker after the Atlanta-based air carrier warned that its fourth-quarter loss would be at least 50% larger than previously forecast, because it will take a $140 million non-cash charge related to a large jump in pilot retirements, which will boost the company's pension obligations. Delta said that it would post a fourth-quarter loss in a range of $365 million to $415 million, after having previously forecast a loss of $225 million to $275 million.

The trader quoted Delta's 8.30% bonds due 2029 at 64.5 bid, 66 offered, down from prior levels at 66, and pegged its 9% notes due 2016 at 70 bid, 73 offered, off from 72.5 bid, 74 offered previously.

Another trader, however, saw the airline's bonds, if anything, firmer. "The bids held up," he said. "I saw buyers. I don't know why, but I did."

Delta's bad news had little impact on the bonds of other air carriers, with a trader seeing "not much movement" in Northwest Airlines' 9 7/8% notes due 2007, at 89 bid, 91 offered, and AMR Corp.'s 9% notes due 2012, unchanged at 82.75 bid, 84.25 offered.

Back on the ground, the trader said that Winn-Dixie Stores bonds "were better - though I don't know why." He saw its 8 7/8% notes due 2008, which had recently traded in the mid-90s, as having firmed to 99.5 bid, up half a point from recent levels, even though analysts had cautioned that the supermarket chain, mostly centered in the Southeast, could come under pressure as retailing giant Wal-Mart continues to add supermarket sections to its megastores.

The trader also saw EchoStar Communications Corp.'s bonds weaker after the Littleton, Colo.-based satellite TV operator on Tuesday reported that during the third quarter it added 285,000 new Dish Network subscribers - less than the 300,000 that Wall Street analysts had been looking for and far less than the 326,000 new customers DISH competitor DirecTV, claimed to have added.

It also cautioned investors that delays in deliveries of high definition television products would mean likely weak sales during the all-important holiday consumer-shopping season in the fourth quarter.

Pre-guidance, he said, EchoStar's 5¾% notes due 2008 had been at 99.375 bid, 99.75 offered, but had eased Wednesday to 98.5 bid, 99.5 offered. Its 6 3/8% notes due 2011 had fallen to 98.75 bid from 99.375 previously.

And the trader saw Tenet Healthcare Corp. bonds weaken in response to the big loss which the Santa Barbara, Calif.-based hospital operator had reported on Tuesday, its 5 3/8% notes due 2006 dipping to 93.5 bid from 95 previously and its 7 3/8% notes due 2013 ending at 94.5 bid, 95 offered, down a point on the session.

Another trader, calling the day's action "a mixed bag," noted some brisk upside movement in the distressed bonds of Finova Corp., after the Scottsdale, Ariz.-based financial services concern said in its latest 10-Q filing that it had bought back $100 million of senior notes during the quarter at about 49 cents on the dollar, bringing to $298 million face amount the bonds it had repurchased over the past year. Even though Finova cautioned that it could give no assurances of future bond buybacks, investors "got all excited," he said, lifting the bonds as high as 52 bid, 53 offered from prior levels around 50 bid, 51 offered, before they eased off those peaks to end at 51.25 bid, 52.25 offered.

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