Primus up, Fedders down on earnings; AFC, CanWest Media join calendar

By Paul Deckelman and Paul A. Harris

New York, Nov. 2 - Primus Telecommunications Group Inc. bonds were seen solidly higher in relatively quiet Election Day dealings Tuesday, spurred on by solid third-quarter results for the McLean, Va.-based telecommunications company. Also on the earnings front, Fedders Corp. bonds fell on poor third-quarter results for the air conditioner maker.

As forecast, Election Day 2004 found the high yield primary market sitting dead in the water, with no new issues pricing.

However details did emerge on deals set to begin marketing as early as Wednesday.

A winner, please

Meanwhile one sell-side source told Prospect News that as far as high yield is concerned, market players would eventually learn to deal with a President Bush or a President Kerry. The important thing, said the source, is that "we wake up Wednesday morning and find out who is going to be the next president.

"You hear talk that the lawyers are working around the clock and that this election will ultimately be disputed.

"That uncertainty would be very bad for all of the capital markets," the sell-sider added, "not just the stock market.

"It is more important that we clearly have a president, and soon, than whether it is Kerry or Bush."

In a special Election Day issue of Leverage World, the weekly publication of high yield strategy, junk bond guru Martin Fridson took note of recent financial activity suggesting there has been extensive speculation in the capital markets that indeed the presidential election will be contested.

Back in mid-October Fridson advised readers of his weekly strategy organ how a disputed presidential election might be capitalized upon.

Following that story Fridson noted a "surge of interest in out-of-the-money put options on the S&P 500.

"This is exactly the sort of vehicle that would be used to bet on the downward pressure on stocks that a disputed election would likely create," Fridson added. "In the week of October 25-29, daily volume on the March 2005 put, with a strike price of 925, ranged from 20 to 6,500 contracts. On November 1, volume surged to 28,500 contracts.

"In addition, speculative interest in Treasury bonds has increased, consistent with Leverage World's thesis that governments would benefit from a flight to quality. The Wall Street Journal reported on November 2 that 'a report Friday from the CFTC showed that noncommercial traders, usually deemed to be hedge funds, had taken their largest position ever in the 10-year Treasury note.'"

Affinia, AFC on the road

Although no deals priced Tuesday several issuers came to the fore with timing and other details on deals in the pipeline.

Affinia Group, Inc. is expected to run a Nov. 3-11 roadshow for an offering of $300 million of 10-year non-call-five senior subordinated notes (B).

Credit Suisse First Boston, Deutsche Bank Securities, Goldman Sachs & Co. and JP Morgan will run the books acquisition deal.

Meanwhile AFC Enterprises, the Atlanta-based franchisor of Church's Chicken, among other brands, will begin a roadshow during the week of Nov. 15 for $155 million of seven-year non-call-four senior secured notes via SunTrust Robinson Humphrey.

The Atlanta-based company will use the proceeds to back the buyout of its Church's Chicken brand by Crescent Capital Investments, Inc.

And CanWest Media, Inc. is selling $115 million of 8% senior subordinated notes due Sept. 15, 2012 (B-), according to a market source.

Citigroup will run the books for the Rule 144A/Regulation S offering which is expected to price on Nov. 8.

The new notes are being offered concurrently with the previously announced exchange offer for Hollinger Participation Trust's 12 1/8% senior notes due 2010.

The issuer, a subsidiary of media company CanWest Global Communications Corp., will use the proceeds to repay seller notes.

And a roadshow started Monday for Ultrapetrol (Bahamas) Ltd.'s $150 million of 10-year senior secured first preferred ship mortgage notes (B3), which is expected during the week of Nov. 8 via Credit Suisse First Boston.

Secondary quiet

"It was a pretty quiet day" in the secondary market, a trader said. "There were a lot of people looking for paper, following the equity markets up and down."

He said that people "were scrambling around. They don't want to take on a lot of risk going into the [election] results [Tuesday] night."

Against that backdrop, he said, there was "not much of anything happening, just people chasing offerings, and a lot of noise."

Primus up on earnings

One name heard making some of that noise was Primus. Its Primus Telecommunications Group. Its 12¾% notes due 2009 were quoted unchanged at 83.5 bid, a market source said - while its affiliated Primus Telecommunications Holding Inc. 8% notes due 2014 were quoted up as much as seven points, at 79.5, on favorable earnings data.

At another desk, the 8% notes were seen up more than five points on the session at 80, while the 123/4s were up four points at 86.5.

Primus' Nasdaq-traded shares meanwhile zoomed 48 cents (25.67%) to close at $2.35 on volume of over 15 million shares - around eight times the usual turnover.

Primus reported net income of $16.1 million (16 cents a share), from $5.8 million (six cents a share) last year. Excluding gains of $12.6 million in the latest period, the company reported earnings of $3.6 million (four cents a share).

Revenue rose 2% to $334.3 million from $328.3 million.

The company attributed the gain to favorable foreign currency translations and a gain from the early extinguishment of debt.

On the downside, Primus said its operating results for the quarter reflected the continuing negative impact of increased competition from pricing and product bundling, which affects core services in virtually all of its markets, as well as the expected increase in expenditures to support its competitive response.

Fedders lower on loss

Another name out with earnings was Fedders, whose 9 7/8% notes due 2014 "hit the skids on earnings," a trader said, quoting the bonds as having fallen to 74 bid, 77 offered post-earnings from 78.5 bid, 79.5 offered before the numbers came out.

At another desk, however, the Fedders notes were seen down perhaps half a point at 77, although a market source said that quote may have been rendered earlier in the session.

Liberty Corner N.J.-based Fedders had a net loss for the quarter of $9.7 million, far wider than the net loss of $3.7 million in the prior-year quarter. Net loss applicable to common stockholders was $10.7 million (35 cents per share) compared to a net loss applicable to common stockholders of $4 million in the prior-year quarter, or 13 cents per share.

"The decline in sales was the result of adverse weather conditions in key North America markets that depressed demand for room air conditioners," the company lamented in announcing its results.

On an operating basis, the third-quarter loss was $10.4 million, a sharp deterioration from $800,000 in the prior-year period. Selling, general and administrative expenses increased during the quarter to $18 million from $16.3 million in the prior-year period, due to higher selling expenses as a result of increased sales activity globally and higher warehousing costs to support higher inventory levels, and severance costs.

Tenet steady on results

Tenet Healthcare Corp. reported a third-quarter a net loss of $70 million (15 cents per share), smaller than the year-earlier red ink of $308 million (66 cents per share).

While net operating revenues for the quarter were $2.44 billion - a decrease of $80 million, or 3.2%, from $2.52 billion in the third quarter of 2003 - much of that was attributable to the Santa Barbara, Calif.-based hospital company's continued closure and sale of unwanted non-core hospital assets, under a previously announced divestment plan.

The company touted its $1.3 billion cash position at the end of the quarter, and its undrawn credit line. On the downside, Tenet continued to be beset by rising bad-debt expenses from uninsured patients not paying their bills.

The company's bonds, however, were little affected, with Tenet's 5% notes due 2007 seen unchanged at 99.75, its 5 3/8% notes due 2006 down half a point at par, and its 7 3/8% notes due 2013 up half a point at 95.5. Its recently issued 8 7/8% notes due 2014 were seen half a point better at 105.5.

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