US Unwired gains on Sprint buyout offer; Iesy euro/dollar deal prices

By Paul Deckelman and Paul A. Harris

New York, July 11 - Bonds of US Unwired Inc. were seen having firmed smartly on Monday after telecommunications giant Sprint Corp. announced that it would acquire the Lake Charles, La.-based Sprint affiliate in a $1.3 billion deal that will also put an end to US Unwired's potentially messy lawsuit against Sprint, which could have threatened the latter's planned merger with Nextel Communications Inc.

Elsewhere, Northwest Airlines Corp. continued gaining altitude, as oil prices moved in the opposite direction for a third straight session, falling below $59 as feared supply disruptions due to Hurricane Dennis did not materialize.

In the primary market, Iesy Repository GmbH was heard by new-deal sources to have successfully priced a two-part, dual currency offering of 10-year notes. Meanwhile price talk emerged on CCM Merger Inc./Motor City Casino's planned eight-year note offering, which is expected to price toward the latter part of the week.

On the back of a solid session in the equity markets, sources saw strength in the high-yield universe on Monday.

One sell-side source marked the broad market up one-quarter to three-eighths of a point.

"We expect to start seeing some build up on the calendar," remarked the source, an official on a high-yield syndicate desk.

"With the strength we're seeing in the secondary, I think it's just a matter of time before a real calendar starts to materialize."

Meanwhile a buy-side source who spoke on background, Monday, was less than enthusiastic about products currently displayed along the aisles of the junk new issue market.

"People are tearing around trying to find some yield," the source said, adding that, although the forward calendar is starting to build, the present calendar does not contain something for everyone.

Iesy brings only deal

A two-tranche €360 million equivalent offering of 10-year senior notes (Caa1/CCC+) from German cable services provider Iesy Repository GmbH was the only business to be completed during the opening session of the July 11 week.

Iesy priced $151 million of notes at par to yield 10 3/8%, on top of upwardly revised price talk, and €235 million at par to yield 10 1/8%, on top of inwardly revised price talk.

Both tranches had been talked at the 10¼% area late last week.

Citigroup, Deutsche Bank Securities and JP Morgan were joint bookrunners for the debt refinancing deal.

The €360 million equivalent that priced on Monday had been downsized from the €525 million equivalent two-part offering that the company postponed on April 28, 2005 due to unfavorable market conditions.

Sources remarked that Monday's deal, which priced in London, had been expected by some observers to price late last week, and was conceivably delayed by the terrorist attacks which took place last Thursday on that city's public transportation system.

Stats ChipPAC back with $150 million drive-by

A name that sources say could generate interest among high-yield accounts as well as emerging markets ones appeared on Monday with a quick-to-market deal.

Semiconductor assembly and testing services company Stats ChipPAC Ltd., which has headquarters in Singapore and in Fremont, Calif., talked its $150 million offering of five-year senior secured notes (Ba2/BB) at the 7¾% area.

Credit Suisse First Boston and Deutsche Bank Securities are the bookrunners for the debt refinancing and general corporate purposes deal.

Last November the company priced a $215 million issue of senior unsecured notes due 2011 (Ba2/BB) at par to yield 6¾%, at the tight end of the price talk.

MotorCity Casino talked 8%-8¼%

Also set to price this week is the $200 million offering of eight-year senior unsecured notes (B3/B-) from CCM Merger, Inc. (MotorCity Casino).

The notes were talked Monday at 8% to 8¼%, with terms expected on Thursday morning. Deutsche Bank Securities and Merrill Lynch & Co. are bookrunners.

Six-handles for Mylan?

Elsewhere on the forward calendar, terms are also expected to surface during the present week on Mylan Laboratories Inc.'s $500 million two part senior unsecured notes deal (Ba1/BB+).

The Canonsburg, Pa., pharmaceutical company is in the market with a five-year bullet and a 10-year non-call-five note via Merrill Lynch & Co.

The roadshow is scheduled to wrap up Thursday, with pricing expected shortly thereafter.

A buy-side source commented on Monday that the credit is a strong double-B.

And the source added that, although official price talk has yet to be heard, the five-year note is expected to come with a yield in the low 6% range, while the 10-year is expected to come in the mid 6% range.

US Unwired jumps on Sprint purchase

Back in the secondary sphere, word that Sprint plans to acquire US Unwired pushed the bonds of the second largest Sprint affiliate up and likewise gave a boost to some of the other companies that resell major-company telephone services in less-than-major markets.

A trader saw US Unwired's 10% notes due 2012 jump to 115.25 bid, 116.25 offered from Friday's levels at 111.5 bid, 112.5 offered.

The acquisition deal, which will pay US Unwired's shareholders $6.25 per share, also includes Sprint's assumption of $266 million of the affiliate's debt.

Even more important, from the viewpoint of Overland Park, Kan.-based Sprint, the deal also lays the groundwork for disposing of US Unwired's lawsuit trying to stop its merger with Reston, Va.-based wireless communications provider Nextel, which is to be voted upon by the shareholders of Sprint and Nextel at separate meetings in several days.

US Wireless, which sells Sprint-branded service to 500,000 subscribers in nine southern states, has been battling with Sprint for quite some time over what the affiliate claims to be unfair business practices. The two sides have been in court in recent weeks - and US Unwired filed a motion asking the judge to block the proposed Sprint merger with Nextel. US Unwired claims that that were the merger to go through, the combined Sprint/Nextel entity would be violating US Unwired's contractual protection against Sprint directly competing with it in its territories, since Nextel affiliate Nextel Partners Inc. - which performs the same function for Nextel as US Unwired and other affiliates do for Sprint, that is, selling its branded services in small- and medium-sized markets - would be selling Nextel's phone service in some of US Unwired's turf.

As part of the acquisition agreement, Sprint and US Unwired will ask the U.S. District Court in Lake Charles, La., where the latter's suit is being heard, to stay all pending litigation between the two companies, including U.S. Unwired's request for an injunction on the Sprint-Nextel merger. The litigation would be resolved once the deal is closed, which Sprint said should take place in the third quarter, pending regulatory and shareholder approval.

Moody's Investors Service indicated that it may raise US Unwired's ratings, now at the B3 level, citing its expected acquisition by Sprint, which is investment-grade rated, though not by much, at Baa3.

Other rural telecoms gain

The trader said the US Unwired news helped to give a boost to a number of other smaller, largely rural and small-town telephone-service providers, including Rural Cellular Corp.'s 9¾% notes due 2010, which moved up to 94.5 bid, 95.5 offered from Friday's levels at 93 bid, 94 offered; Triton PCS Holdings Inc.'s 8½% notes due 2013, up two points, at 92 bid, 93 offered; and Dobson Communications Corp.'s 10 7/8% notes due 2010, which rose to 101.5 bid, 102.5 offered, up from par bid, 101 offered.

At another desk, a market source saw the US Unwired notes having gotten as good as 116.5 bid, up from 111.

Northwest gains continue

Elsewhere, a trader saw Northwest Airlines bonds continuing the rise seen on Friday, when the Eagan, Minn.-based Number-Four U.S.-based air carrier's bonds snapped back after having suffered losses of several points across the board on Thursday's London terrorist attacks.

Northwest "was up a couple" of points, he said, quoting its 8 7/8% notes due 2006 at 62 bid, 64 offered, up from 60 bid, 62 offered on Friday, while its 10% notes due 2009 were a point better at 43 bid, 45 offered.

A market source saw the airline's 7 7/8% notes due 2008 two points better at 42 bid, 43 offered.

The catalyst, said a trader, was oil prices, which last week spiked up to closing levels almost at $62 per barrel of light, sweet August-delivery crude, but which started coming down late last week on profit-taking off recent gains. On Monday, crude prices continued to fall, settling at $58.92 on the New York Mercantile Exchange, down 71 cents on the day. Besides profit-taking, the fact that Hurricane Dennis, which blasted the Florida Panhandle and the nearby Gulf Coast over the weekend, did not damage any of the numerous refineries situated near the Gulf, as some market participants had feared, also brought oil prices down, which in turn boosted shares and bonds of Northwest and other airlines.

Heading into earnings time for the most recent quarter, some analysts were predicting that even some airline majors such as Continental Airlines Corp. and, perhaps, American Airlines parent AMR Corp. might show a profit this just-past quarter, on increased passenger traffic. However, Northwest and rival Delta Airlines Corp. are still expected to post losses.

Levi up ahead of earnings

Also looking ahead for numbers were investors in Levi Strauss & Co., which is expected to report quarterly earnings Tuesday. A trader saw the San Francisco-based blue jeans maker's 9¾% notes due 2015 and its 12¼% notes due 2012 each up a point, at par bid, 101 offered and 110 bid, 111 offered, respectively. Another source quoted the 93/4s up a point at 100.75 bid.

In general, junk bonds were higher, in tandem with a gain in equities spurred by the oil price retreat and bullish hopes on earnings - the Dow Jones Industrial Average rose 70.58, to 10,519.72.

Steel rises

Steel issues were among the winners, with AK Steel Holding Corp.'s 7 7/8% notes due 2009 two points better at 92 bid, 93 offered, while the Middletown, Ohio-based specialty steelmaker's 7¾% notes due 2012 were likewise up a deuce at 86 bid, 87 offered. US Steel Corp.'s 9¾% notes due 2010 were a point better at 108.5 bid, 109.5 offered.

Amkor up, Pogo down

Amkor Technology Inc.'s 10½% notes due 2009 gained two points to 90.5 bid, 91.5 offered, while its 9¼% notes due 2008 were half a point ahead at 97.5 bid, 98.5 offered, a trader said. A market source at another shop pegged the West Chester, Pa.-based semiconductor manufacturing services company's 7¾% notes due 2013 at around 88 bid, up a half.

Pogo Producing Co.'s notes "showed a little bit of weakness," a trader said, following the news that the Houston-based independent oil and gas exploration and production company will acquire Unocal Corp.'s Canadian oil and gas subsidiary, Northrock Resources Ltd., for $1.8 billion (see related story elsewhere in this issue).

Pogo's 6 5/8% notes due 2015 eased half a point to 103 bid, 104 offered, while its 8¼% notes due 2011 were a quarter-point lower at 105.5 bid, 106.5 offered.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.