Huntsman bonds up on IPO news; calendar build up continues

By Paul Deckelman and Paul A. Harris

New York, Sept. 13- The bonds of Huntsman International LLC and its affiliated companies were being quoted solidly higher Monday on the news that the Salt Lake City, Utah-based chemical company will go public sometime during the fourth quarter and will use the proceeds from its anticipated initial public offering to pay down debt.

On the new-deal front, nothing was heard to have priced Monday - but the forward calendar continues to gain impressive heft, with market sources hearing of upcoming roadshows for several issuers, such as Graham Packaging Holdings Co. LP, Coleman Cable Inc., US LEC Corp., while price talk emerged on several other bond issues expected to price by Wednesday, including Fisher Communications Inc., Grohe AG and Ashford Hospitality's preferred offering.

That activity was in keeping with predictions from numerous market sources.

Thus when the dust settled on Monday's session the dollar-denominated calendar showed $2.975 billion of deals in the market, having more than doubled from $1.440 billion at Friday's close.

Low defaults ease junk investor worries

One sell-side source, who took a minute to say "I told you so" to Prospect News regarding Monday's buildup on the calendar, said that good "credit news" has lately caused investors to become emboldened.

"The Standard & Poor's default rate fell to 1.69% in August," the official said.

"Right now there is nothing for investors in high yield to be afraid of from a principal protection point of view. And for the next 12-15 months there does not appear to be anything to worry about."

When asked if news that US Airways Group has filed for bankruptcy protection for the second time in two years would not spook junk investors just a little, the sell-sider responded that the event is very "sector specific.

"Someday you might see the index throw out airline debt in the same manner that telecom debt was thrown out," the source added.

Four new deals in the market

Four prospective issuers showed up on Monday with six tranches of bonds that are, or soon will be, on the road.

Graham Packaging Holdings Co. LP will hold a Sept. 20-28 roadshow for a $725 million offering of high-yield notes in two tranches.

The company plans to sell $350 million of eight-year non-call-four senior notes and $375 million of 10-year non-call-five senior subordinated notes via Citigroup, Deutsche Bank Securities and Goldman Sachs & Co.

Proceeds will be used to repay debt and to finance the York, Pa.-based company's $1.2 billion acquisition of Owens-Illinois' blow-molded plastic container business.

Also announcing two tranches on Monday was Vancouver, B.C., forest products company Ainsworth Lumber Co. Ltd.

A two-day roadshow is scheduled to get underway Thursday for the company's $450 million deal that will be comprised of eight-year non-call-four fixed rate senior notes and six-year non-call-two floating rate senior notes. Tranche sizes remain to be determined.

Pricing of the deal, via Deutsche Bank Securities and Goldman Sachs & Co., is expected to take place on Friday.

Meanwhile the roadshow starts Wednesday for US LEC's $150 million of five-year second priority senior secured floating-rate notes, which are expected to price Thursday, Sept. 23, via Deutsche Bank Securities

The Charlotte, N.C. telecommunications carrier plans to use the proceeds to repay debt and fund working capital.

Finally, the roadshow started Monday for Coleman Cable Inc.'s $110 million of eight-year senior notes (B-).

The Wachovia Securities-led deal is expected to price on Wednesday Sept. 22.

The Waukegan, Ill.-based designer, developer and manufacturer of electrical wire and cable products will use the proceeds to refinance debt and fund a shareholder distribution.

Present week takes shape

Meanwhile, although no issues priced on Monday, the Sept. 13 week's primary market business took on some detail during the session as price talk was heard on a pair of deals, both of which are expected to price on Wednesday.

Price talk of 8¾%-9% emerged on Fisher Communications Inc.'s $150 million of 10-year senior notes (B2/B-), via Wachovia Securities.

And price talk is 8¾% area on Grohe Holding GmbH's €335 million of 10-year senior notes (B3/B-), via Credit Suisse First Boston, Citigroup and Deutsche Bank Securities.

Huntsman gains

Back in the secondary arena, "Huntsman was doing better," a trader observed, quoting its Huntsman LLC 11½% notes due 2012 at 108 bid, 109 offered, and Huntsman Advanced Materials LLC's floating-rate notes due 2008 at 106.75 bid, both up 1½ points.

At another desk, Huntsman LLC's 11 5/8% notes due 2010 were seen having jumped to 116.375 bid from prior levels around 115, while its 9 7/8% notes due 2009 were up a more conservative half a point at 109.5. Huntsman International LLC's 10 1/8% notes due 2009, however, were seen unchanged at 104.75 bid.

Privately held Huntsman, which is controlled by billionaire petrochemical entrepreneur and philanthropist Jon M. Huntsman, announced that the companies would sell stock via an IPO in the fourth quarter. The company did not say how large the IPO would be, but did say that substantially all of the proceeds from the proposed offering will be used to repay debt.

According to a recent filing with the Securities and Exchange Commission, Huntsman had net debt of about $5.8 billion.

The company statement said that existing shareholders are also expected to participate in the proposed offering. Huntsman said that it expects to file a registration statement with the SEC relating to the proposed offering some time during the fourth quarter.

International Steel up on earnings

Elsewhere, International Steel Group Inc. raised its estimates for likely third-quarter earnings, citing healthy sales and stronger steel prices. The Richland, Ohio-based integrated steeler, which financier Wilbur Ross built over the past several years from assets of other major steelmakers like Bethlehem Steel Corp. and LTV Corp., bought though the bankruptcy courts, now expects to earn between $2 and $2.10 a share, well up from analyst's expectations of $1.70. The company hopes to also improve its credit standing to investment grade (see related article, elsewhere in this issue).

International Steel's 6½% notes due 2013 were seen having moved up to 99 bid, up from 97 previously.

A market source also saw some firmness in the bonds of International Steel rival United States Steel Corp., with the Pittsburgh-based steel giant's 10¾% notes due 2008 up half a point at 117.75, while its 9¾% notes due 2010 were a quarter point better at 113.5.

At another desk, the U.S. Steel 103/4s were seen as high as 119 bid, up half a point, while Portland, Ore.-based Oregon Steel Mills Inc.'s 10% notes due 2009 were also half a point better at 108.5.

Calpine continues gains

Calpine Corp. bonds continued their recent firming trend, pushed up, according to market denizens, by several influences, including increased demand for power in the San Jose, Calif.-based power generating company's home turf out West, positive investor reaction to several recent asset sales by the company, and some short covering in the name.

A trader quoted Calpine's 8½% notes due 2011 as having firmed to 67.25 bid from prior levels at 65, while its 8 5/8% notes due 201 improved to 67.75 bid, also from 65.

Another market source saw its 8¾% notes due 2007 up more than two points on the session at 79.5 bid.

Lucent better on Moody's upgrade

A trader saw Murray Hill, N.J.-based telecommunications equipment maker Lucent Technologies Inc.'s bonds up solidly in the wake of Friday's late announcement by Moody's Investors Service upping Lucent's ratings, including the senior implied rating, which was elevated two notches to B2 from Caa1. The outlook is positive.

Moody's cited Lucent's adequate funds, stabilizing revenue and its better profitability and cash flow.

The trader saw Lucent's 6.45% bonds due 2029 at 84 bid, 84.5 offered, up from around the 80-81 level previously, while its 7¼% notes due 2006 pushed up to 106.5 bid, 107 offered from around 105.25 on Friday.

And he saw Lucent's Canadian rival, Nortel Networks Corp. - whose bonds generally move in tandem with Lucent's - likewise better on the Lucent news, with Nortel's 6 1/8% notes due 2006 about half a point better, at 102.5.

Alaska Communications was "also firmer," he said, its 9 7/8% senior notes at par bid, 101 offered, and its 9 3/8% junior notes at 97.75 bid, both up about 1½ points.

Levis down

On the downside, a market source quoted Levi Strauss & Co.'s bonds down about a quarter to half a point across the board, with the San Francisco-based blue jeans maker's 12¾% notes due 2012 at 105 bid, its 11 5/8% notes due 2008 at 103.75, and its 7% notes due 2006 at 99.

Levi's bonds had pushed upward on Friday in the wake of a piece in The Wall Street Journal, which reported that clothing makers Perry Ellis International Inc. and Haggar Corp. have entered the bidding for Dockers, pushing offers for the casual khaki clothing line to between $750 million and $900 million. The paper cited unidentified sources "familiar with the matter."

The Journal said that each has either lined up or is in the process of lining up deep-pocketed equity partners - Oak Hill Capital Partners in Perry Ellis's case, while Haggar was reported to be in advanced talks with a number of private-equity firms to prepare a joint bid.

However, the paper also said that the Haas family, which controls the closely held Levi, wants to see bids above $900 million, and could still take Dockers off the table.

Debt-burdened Levi first announced in May that it would explore the possible sale of Dockers, with proceeds expected to be used to eliminate debt. Analysts and news reports have indicated that the unit could fetch anywhere between $500 million and $1 billion. Among the companies previously mentioned as potential buyers have been Jones Apparel, VF Corp. and Kellwood Corp.

Overall, a trader, noting that the corporate new issuance calendar "is getting bigger by the minute," said that this "will make it a tough trade this week. Probably it keeps the market bid early this week, as the deals price and will make it heavy later in the week when the supply hangover is felt."

He quipped "that's pretty much the way I feel every week as well!"

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