GM, GMAC up on report auction near; Massey, Clarke, Ventas deals price

By Paul Deckelman and Paul A. Harris

New York, Dec. 9 - General Motors Corp. bonds and those of the giant carmaker's financial arm, General Motors Acceptance Corp. were seen up several points across the board after The Wall Street Journal reported that GM's plan to sell a majority stake in GMAC has garnered "strong or robust" interest from potential buyers.

On the downside, Toys 'R' Us notes were lower after the specialty retailer posted disappointing third-quarter numbers.

Overall senior high-yield syndicate official marked the broad market slightly higher on Friday.

In the primary sphere, Massey Energy Co. was heard to have successfully priced an upsized offering of eight-year notes. Also pricing were Clarke American Corp.'s eight-year deal and a smallish add-on offering from Ventas Inc. - which already priced a deal earlier in the week.

Joining the forward Calendar was Mirant Corp., which will take a large eight-year note issue on the road beginning Monday. Meantime, price talk emerged on Omnicare's planned two-part subordinated offering.

Massey Energy oversubscribed

The day's biggest deal came from Massey Energy Co., which priced an upsized $760 million issue of 6 7/8% eight-year senior notes (B1/BB-) at 99.243 to yield 7%, on the tight end of the 7% to 7¼% price talk. The sale generated $754.25 million of proceeds.

UBS Investment Bank ran the books for the debt refinancing and general corporate purposes deal from the Richmond, Va.-based coal producer.

An informed source said that the order book was approximately two times oversubscribed.

In addition, Ventas Realty, LP and Ventas Capital Corp. priced an add-on to the notes it had issued just last Tuesday.

The company priced a $75 million add-on to its 6½% senior notes due June 1, 2016 (Ba2/BB+) at 99.50, resulting in a yield of 6.567%.

Banc of America Securities and UBS Investment Bank ran the books for the debt refinancing deal from the Louisville, Ky.-based healthcare real estate investment trust.

The original $125 million also priced at 99.50.

$2.4 billion week

Friday's business brought the week of Dec. 5 to a close having seen $2.4 billion of issuance price in 12 dollar-denominated tranches, well over the previous week's volume of just over $860 million four tranches.

Friday's totals left 2005 year-to-date issuance at $94.6 billion in 370 dollar denominated tranches, as 2005 new issue volume continues to trail far behind that of the previous year: by the Dec. 9, 2004 close the market had seen $133.8 billion in 537 tranches.

The $100 billion mark

A tally of the Dec. 12 week's pending business shows that the market anticipates seeing $8.175 billion price in 21 tranches from 17 prospective issuers.

Given that the Dec. 5 week closed with $94.6 billion of year-to-date issuance, it is conceivable that 2005 could top the $100 billion mark.

Mirant's $850 million exit financing

Only one roadshow start was heard during the Friday session.

Mirant North America, LLC, will start a roadshow on Monday for its $850 million offering of eight-year senior notes (B1/B), which is expected to price before the end of the week.

JP Morgan, Deutsche Bank Securities and Goldman Sachs & Co. are joint bookrunners for the Atlanta-based energy producer's deal.

Proceeds will be used to make distributions as part of plan of reorganization to fund the company's exit from bankruptcy.

The rest of the big ones

Mirant's deal, while sizable at $850 million, should be eclipsed by a pair of mammoths poised as business expected to be concluded by the Friday close.

Biggest is Hertz Corp.'s $2.80 billion two-part bond offering via Deutsche Bank Securities, Lehman Brothers, JP Morgan, Goldman Sachs and Merrill Lynch.

The bonds are expected to be sold in both dollar and euro tranches.

The biggest LBO transaction since last summer's $3 billion transaction from SunGard Data Systems, the car rental company, which is being acquired from Ford Motor Co., will attempt to price $2.2 billion equivalent of eight-year senior notes (expected B1/confirmed B/confirmed BB-) and $600 million of 10-year senior subordinated notes (expected B3/confirmed B/confirmed B+).

A buy-side source told Prospect News earlier in the week that the dollar-denominated senior tranche is expected to come in the 9% range, while the dollar-denominated subordinated notes are expected to come in the 11% range.

Hertz is expected to be mid-week business.

Next in line in terms of size is Paxson Communications Corp.'s $1.130 billion.

The offering is comprised of $700 million of seven-year floating-rate first-priority senior secured notes (CCC+) and $430 million of eight-year floating-rate second-priority senior secured notes (CCC-).

Citigroup, Bear Stearns & Co., CIBC World Markets, Goldman Sachs & Co. and UBS Investment Bank are joint bookrunners for the massive debt refinancing which is also expected to be mid-week business.

A market source told Prospect News that the fact that both Paxson tranches are comprised of Rule 144A for life notes seems to be turning into something of a sticking point among investors.

Also topping the half-billion threshold among deals on the week's massive calendar is Omnicare Inc.'s $750 million two-part offering of senior subordinated notes (Ba3/BB+).

On Friday the Covington, Ky., provider of pharmaceutical care for the elderly talked its eight-year notes at a yield in the 6¾% area, and its 10-year notes at the 7% area.

Pricing is expected early in the week via Lehman Brothers, JP Morgan and SunTrust Robinson Humphrey.

Shortly after Friday's close Prospect News asked a senior high-yield syndicate official to calculate the prospects of all, or at least most, of the business on the Dec. 12 week's massive calendar clearing.

The official said pointed out that AMG Data Services reported Thursday that the high yield mutual funds had seen a $361 million inflow for the week that ended Wednesday, the second consecutive net inflow trailing a streak of 11 consecutive outflows.

Considering that inflow in conjunction with the healthy demand seen in Friday's upsized $760 million Massey Energy transaction, which again was twice oversubscribed, the official was optimistic that the business on the massive calendar would clear.

Massey firm in trading

When the new Massey Energy 6 7/8% senior notes due 2013 were freed for secondary dealings, a trader saw the bonds move up a little, to bid levels around par to 100.125, up from the 99.243 issue price earlier in the session.

"When they started this deal out, they were talking [a yield of] 6 5/8% or 6 7/8%, accounts said they didn't care there, and that pushed the talk to 7¼%," he said. "They priced it [to yield] 7% and it traded up about half a point or ¾ of a point."

He said that "there was a little trading around par to 100.25, then it kinda died," and fell back to the par to 100.125.

He also saw the Clarke 11¾% senior notes due 2013 having opened up at 100.25 bid, 100.75 offered, up from their par issue price earlier in the session, with some trades between 100.25 and 100.5, and added that "there's still some residual interest in it."

He also noted that Clarke "priced pretty cheap for a B2 credit. I didn't get a chance to look at the financials, so I'm not sure what was going on there, why it had to come at 11¾% [coupon] for a B2/B- credit."

Another trader, who saw the new Clarke bonds at 100.25 bid, 100.5 offered, agreed that "something is up with them" for the bonds to come with so fat a coupon.

He saw the new Massey bonds at 99.25 bid, 99.75 offered, not much moved from issue.

Among other issues priced earlier in the week, he saw Ventas' 6½% notes due 2016, which had priced at 99.5 on Tuesday, trading at par bid, 100.5 offered. However, he did not see the 6½% 2006 add-on that priced Friday trading around.

He also saw Galaxy Entertainment Finance Co. Ltd.'s 9 7/8% notes due 2012 and floating-rate notes due 2013 at 101.75 bid, 102.5 offered - off slightly from the peak level above 102 that each tranche hit after having priced at par on Thursday, but still well up from issue.

And he saw the new Denbury Resources Inc. 7½% notes due 2015 at 101 bid, up from Wednesday's issue price at par.

GM, GMAC gain

Back among the established issues, a trader said that the market "had a better tone to it" on Friday.

One of the big winners was GM, which, along with GMAC, "took off" as trading opened, another trader said, pushed higher by the Wall Street Journal report indicating that GM should be able to accomplish its goal of selling a 51% stake in its currently wholly-owned financing subsidiary. GM is undertaking the transaction in order to help GMAC lower its borrowing costs, since the unit's now-junk ratings would be lifted to be in line with the presumably investment-grade ratings of its prospective new majority owner. The deal would also help GM's cash flows - currently dented by its sagging North American car and truck sales - by bringing in as much as $10 billion to $15 billion, according to most estimates.

The story - which quoted a GM spokesperson as having said that there has been "strong or robust interest" from potential would-be buyers - "seemed to point that there are multiple parties interested in buying the 51% of GMAC," and that pushed GM's benchmark 8 3/8% notes due 2033 as high as 74 bid, 75 offered, up from Thursday's closing levels around 70 bid, 71 offered.

GMAC's flagship issue, its 8% notes due 2031, did even better initially, jumping to 100.5 bid, 101.5 offered from Thursday's close at 94 bid, 95 offered, he said.

However, "as time progressed and people digested what was actually in the article, the bonds fell back," he said, "and gave back most of the gains," with the GM issue closing the day at 72 bid, 73 offered, a two-point gain on the day rather than the early four-point bulge, while the GMAC 8s came off their highs to end at 98 bid, 99 offered.

Another market source saw the bonds as high as 102 before they backpedaled to the 98 area - still up about four points on the day.

Those GMAC bonds were as high as 107 in late October after GM unveiled plans to sell control of the unit to a strategic partner - a presumably deep-pocketed, stable financial industry buyer - but had fallen into the low 90s by earlier this week after two companies mentioned as potential buyers explicitly disavowed any interest in GMAC - Bank of America and Wells Fargo & Co.

On Friday, word circulated in the markets that yet a third company which has been mentioned as possibly being interested in taking control of GMAC - HSBC Holdings, the world's third-largest bank - also is not interested in GMAC, which could have helped to knock the latter's bonds, and those of its parent, off from their highs. The Reuters news report quoted an unidentified source as having said HSBC is not interested, and said the London-based bank did not wish to comment.

Other financial companies which reportedly are still interested in GMAC include GE Consumer Finance - a unit of General Electric Co. - and Citigroup. Both have declined comment. Another name being bandied about is Kohlberg Kravis Roberts & Co., which led a private equity consortium that bought a 60% stake in GMAC's commercial mortgage operations over the summer. Reports said however, that the KKR-led group might be more interested in buying control of GMAC's ResCap residential mortgage business rather than taking a dominant stake in GMAC itself.

The deadline for initial bids for control of GMAC is set to expire on Monday.

Another trader saw the GM 8 3/8s ending the day at 73.5 bid, 74.25 offered - off their highs, but still up 3¾ points on the day. He saw the GMAC 8s finish up 4¾ points on the session at 99 bid, par offered.

Auto sector better

The good news about the recently badly battered GM gave some strength to the overall automotive sector traders said, with one quoting GM arch-rival Ford Motor Co.'s bonds "up, but not quite as much as GM's," with Ford's benchmark 7.45% notes due 2031 a point better at 72.5 bid, 73.5 offered.

Another trader saw those Ford bonds 1½ points higher on the day at 73 bid, 74 offered, and saw the 7% bonds due 2013 of Ford's equivalent to GMAC, Ford Motor Credit Corp., also up 1½ points, at 89 bid, 90 offered.

"Some of the auto parts players were up" after GM opened better, a trader said, with Lear Corp.'s 8.11% notes due 2009 at 93 bid, 94 offered and ArvinMeritor Inc.'s 8¾% notes due 2012 at 95 bid, 96 offered, each up a point. The trader saw Hayes Lemmerz International Inc.'s 10½% notes due 2010 having pushed up to 82 bid from prior levels in the upper 70s, helped by the GM news and by release of its quarterly numbers.

"Yesterday [Thursday] they started trading up in front of the numbers," he said, as the bonds went from the mid 70s to the high 70s. On Friday, the momentum continued, and they pushed up to 82. "So they kind of moved up. It looks like they had good numbers. Over the last two days, they're up around five points."

Despite a wider net loss for the third quarter, the Northville, Mich.-based maker of vehicular wheels reported 11% higher sales, improved operating income, positive free cash flow and increased liquidity.

Toys 'R' Us down

The numbers were not so favorable, however, for Toys 'R' Us, a trader said, quoting the Wayne, N.J. specialty retailer's 7 78% notes due 2013 at 78.5 bid, 79.5 offered, down from 81 bid, 82 offered previously.

"It was not good," he said. "They had a poor quarter, and the bonds were down two points."

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