Plains All American, Loews add to calendar; Lucent slips more in quiet session

By Paul A. Harris and Peter Heap

New York, Sept. 16 - Plains All American Pipeline LP's announcement of a $150 million drive-by offering of notes amounted to most of the activity in the high-yield market Monday as the weekend effectively stretched into three days with the Yom Kippur holiday.

Secondary levels were essentially unchanged across the board, traders said. What little news there was in the session either had no impact or emerged too late to move bond prices.

Lucent Technologies Inc. was the most significant mover as the company's debt slipped a little further in a continuing reaction to its Friday warning that its earnings will be worse than expected and that it will make more job cuts.

However the primary calendar continued to build, with Plains All American Pipeline expecting to price its new notes by Wednesday and Loews Cineplex Theatres, Inc. appearing on the horizon with a new junk bond deal in conjunction with its upcoming initial public offering of common stock.

Houston-based Plains All American Pipeline started its roadshow Monday for the $150 million of 10-year senior notes (Ba3/BB) it will issue jointly with PAA Finance Corp. The deal will price via UBS Warburg on Wednesday, according to a syndicate source.

Also on Monday Loews Cineplex Theaters amended its $300 million IPO registration with the Securities and Exchange Commission, announcing its intention to also bring a Rule 144A senior subordinated notes offering and enter into a new senior credit facility.

The IPO, via Goldman Sachs, Salomon Smith Barney, Credit Suisse First Boston and Merrill Lynch, was originally filed Aug. 6, 2002.

No amount or maturity was mentioned with regard to the notes. The credit facility will be comprised of a seven-year term loan and a five-year revolver via Credit Suisse First Boston and Merrill Lynch.

Nor was any timing was heard on the New York cinema company's financing.

"It's all going to be contingent upon when people think they can get good access to the equity markets," one informed source told Prospect News.

In addition to the Plains All American Pipeline deal, the week of Sept. 16 figures to see the pricing of Chukchansi Economic Development Authority $135 million of unrated seven-year senior notes, via Dresdner Kleinwort Wasserstein and Banc of America Securities.

The notes - proceeds from which will fund design, development and construction of a casino in Coarsegold, Calif., near Yosemite National Park - are expected to price late in the week.

Meanwhile sources told Prospect News that the market anticipates new deals will continue to be announced as the sell-side sizes up the cash positions of investors.

"I think the calendar will build because people feel that the accounts have a lot of cash to put to work," one sell-side source commented Monday, adding that most of the activity figures to involve deals that have financial sponsors.

Indeed there are offerings presently in the market that answer this description. These include, from the eurobond market Brake Bros. plc's £175 million equivalent via Credit Suisse First Boston and JP Morgan to fund the acquisition of the company by Clayton, Dubilier & Rice, Inc.; Legrand, SA's €600 million equivalent via Credit Suisse First Boston and Lehman Brothers to fund the LBO of the company by Kohlberg Kravis Roberts & Co. LP and Wendel Investissement from Schneider Electric SA; and last but certainly not least Jefferson Smurfit Group plc's €900 million equivalent via Deutsche Bank Securities Inc. and Merrill Lynch & Co. to fund the acquisition of the company by Madison Dearborn Partners.

The Jefferson Smurfit deal was heard to have started the European leg of its roadshow, as of Monday.

From the U.S. side, Brand Services, Inc.'s $165 million offering via Credit Suisse First Boston and JP Morgan to fund the acquisition of the company by JPMorgan Partners from DLJ Merchant Banking is expected to price in September. And up to $1 billion from Qwestdex, via Banc of America Securities, Deutsche Bank Securities, JP Morgan, Lehman Brothers and Wachovia Securities, sponsored by Carlyle Group and Welch, Carson, Anderson & Stowe, is expected to come in mid-October.

Among recently issued names, Swift & Co.'s new 10 1/8% notes due 2009 slipped back a little in secondary trading but still held firmly above their issue price.

One trader saw them at 94¼ bid, 95¼ offered at Monday's close, although he cautioned not to read too much into the figures since volume was so light.

That level would, however, be slightly weaker than the 95-96 area they were seen at late Friday but still solidly above the 93.48 they priced at on Friday.

"They are trading above the discount issue price. They've been there since pricing," said one sell-side source.

"I think people think this is a good company and negative news was a driver for some of its pricing. So in the secondary market people are trying to scoop it up."

Among less recent issues, Lucent was seen down a point or two, according to one market source.

Its benchmark 71/4s due 2006 were seen at 61½ bid by a trader, down from 62 bid, 64 offered at Friday's close.

Lucent's bonds were hit hard on Friday - the 7¼% notes, for example, fell three points - after the Murray Hill, N.J. telecommunications equipment maker warned it would post a 45 cents per share loss for its fiscal fourth quarter, nearly three times what Wall Street had been anticipating. With demand still weak, the company also said it will make further job cuts.

However generally the high-yield market was quiet and unchanged.

Asked what happened during the session, one trader ticked off a long list of sectors as unchanged.

Another described the day as "very very quiet."

With the Jewish Yom Kippur falling on a Monday, "a lot of people just took a long weekend," regardless of their religious affiliation, the trader said.

Illustrating the quiet was Fleming Cos., Inc., a big loser on Friday.

One trader said he saw no trades in the name during Monday's session, adding that it was offered with no bids throughout the day.

Fleming's 10 1/8% notes were seen going out Monday evening at 80 at another desk, in line with Friday's close and down six points since early Friday.

The company's debt lost ground Friday on talk of a major seller of the name, with traders seeing the securities being unloaded during the day.

During Friday's session the Dallas-based grocery wholesale distributor and retail supermarket operator said William Marquard, its executive vice-president for business development and chief knowledge officer, would leave the company in about three months, citing "personal" reason for his impending departure. It also said Thomas Zatina, its senior vice president of Northern operations, had already left the company, although the company declined to elaborate on the reasons for the latter executive's departure.

Fleming's debt has been roiled by allegations from disgruntled investors that the company misled them for much of the year by giving overly optimistic assessments of the performance of its retail supermarket division while knowing that the unit was struggling. Those investors have filed class-action lawsuits, which Fleming said it intends to "vigorously" defend.

Fleming has also been hurt by a recent Wall Street Journal article which claimed relations with many of its over 2,000 vendors were strained over discounts for supposedly broken or missing merchandise which the company unilaterally claimed, allegedly refusing to pay the full amount it owed the vendors, who supply Fleming stores and its wholesale operation with a wide variety of goods. Fleming disputed the Journal's contention that the problem was widespread or serious, saying it affected at the most a mere handful of vendor accounts.

Fleming's stock rose 5 cents during Monday's session to $5.75.

Meanwhile news in the energy sector had no impact on bond prices.

Williams Cos. Inc. announced the sale of its 6,000 mile Central natural gas pipeline to Southern Star Central Corp. for $380 million in cash and assumption of $175 million in debt.

The move is part of Williams' continuing effort to build up its balance sheet.

But traders said the news had no impact on the company's bonds.

The debt due 2031 and 2032 was seen in the 65 to 67 range, the 2004s at 82 bid and the 2006s at 73 bid, one trader said.

Also ignored was a downgrade by Moody's Investors Service of NRG Energy Inc.

Among the actions, the rating agency cut the company's senior unsecured debt to Ca from Caa1, warning there is an "increasing probability" NRG will default on its obligations.

Again, the company's debt showed no response to the news.

Even more negative news emerged late in the day, well after trading had wound down.

Standard & Poor's cut NRG's corporate credit rating and some of its securities to D, saying NRG had notified the bond trustee it would not make the interest payments due Monday on its $350 million 8.25% senior unsecured notes due Sept. 15, 2010 as well as NRG Energy passthrough trust 2001-1's $250 million 8.7% convertible securities due March 15, 2005 and NRG South Central Generating LLC's $500 million 8.962% senior secured bonds series A due March 15, 2016 and NRG South Central Generating LLC's $300 million 9.479% senior secured bonds series B due Sept. 15, 2024.

S&P also cut NRG's other debt to CC from CCC, saying the downgrade reflects the "uncertainty" that it will be able to restructure its debt outside the bankruptcy courts.

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