Crescent, Standard Pacific, Alltrista price deals; restructure plan boosts Flag

By Paul Deckelman and Paul A. Harris

New York, April 10 - Real estate investment trust Crescent Real Estate Equities LP/Crescent Finance Co. sold $375 million of seven-year senior notes Wednesday, while homebuilder Standard Pacific Corp. was heard by syndicate sources to have brought a quickly shopped $150 million bond offering to market. And late in the session Alltrista Inc. made it three with a $150 million sale.

In the secondary arena, meantime, the bonds of Flag Telecom Holdings Ltd. jumped half a dozen points on news that its board had approved a restructuring plan under which all of its creditors will be paid - albeit at a sizable discount to par. Xerox Corp. bonds shrugged off news that the Securities and Exchange Commission has widened its probe of alleged accounting irregularities at the giant office machines company.

In the primary, the $1 billion of five- and 10-year notes set to price Thursday from Starwood Hotels & Resorts Worldwide is drawing attention even though it carries a split rating of Ba1 from Moody's Investors Service and BBB- from Standard & Poor's. Sources on both the buy- and sell-sides of the high-yield market expressed interest in the deal in recent communications with Prospect News.

"I put in for Starwood, the longer maturity," stated Bob Franklin, portfolio manager of the Neuberger Berman High Yield Fund.

"There aren't a lot of deals coming that are particularly palatable, in my opinion, so when in doubt I go for credit quality," Franklin added.

A sell-side source who spoke Wednesday with Prospect News, fresh from the roadshow of a deal currently in the high-yield primary market, commented that the interest in Starwood among high-yield accounts is an expression of the money that recently has been reported flowing into the asset class.

"The accounts I talked to today told me there's plenty of cash out there.

"Mutual fund flows don't tell you the whole story," this sell-side official continued. "It sounds like the insurance companies and potentially the CDOs are all flush with cash. Those are pretty decent-sized pieces of the market as well. The mutual funds are still the critical mass, 50% of the market, or more.

"But especially when you get into high double-B land you get some people dipping down, technically, to expand that market a bit."

This official added that Starwood as well as the Western Oil Sands ($425 million) might be especially attractive to insurance funds owing to their structure.

"Those deals are structured to be attractive to the insurance company-side of the market," the official said. "When a deal's a bullet (as Starwood and Western are) it's much more attractive to them because they basically like to line up their liabilities against these assets. So when the assets are prematurely called it doesn't help them manage their interest rate-risk.

"That's why they are particularly sensitive to whether the thing is callable."

Starwood's five-year maturity notes have price talk of 7 3/8%-7½%, and the 10-year notes are talked at 7 7/8%-8%.

Terms emerged Wednesday on the drive-by deal from Irvine, Calif. homebuilder Standard Pacific Corp. Its $150 million of 10-year senior subordinated notes (Ba3/B+) priced at 99.20 to yield 9 3/8%. Price talk on the deal was 9¼%-9½%. Credit Suisse First Boston, Salomon Smith Barney and Banc of America Securities were joint bookrunners.

Fort Worth REIT Crescent Real Estate Equities LP/Crescent Finance Co. priced $375 million of seven-year senior notes (Ba3/B+) on Wednesday, at par to yield 9¼%, at "the wide end of (9%-9¼%) talk," according to a syndicate source. JP Morgan and Deutsche Bank Securities Inc. were joint bookrunners on the Crescent deal.

And late in the session Alltrista Inc. priced its offering of $150 million senior subordinated notes due May 1, 2012 (B3/B-) at 98.436 to yield 10%. Price talk on the issue had been 9 5/8% to 9 7/8%. The offering was brought to market by bookrunners Banc of America Securities and CIBC World Markets.

Everywhere one turned Wednesday, the news seemed to concern homebuilding and real estate. Price talk of 8 3/8%-8 5/8% was heard on Beazer Homes USA, Inc.'s $350 million of 10-year senior notes (Ba2/BB) set to price Thursday afternoon via sole bookrunner UBS Warburg.

Meanwhile, Champion Homebuilders Co.'s $150 million of five-year senior notes (B2/B) was talked in the 11½% area. That deal, via bookrunner Credit Suisse First Boston, is expected to price Friday.

Outside that sector, Atlanta, Ga.-based apparel company Russell Corp. had its offering of $200 million eight-year senior notes (B1/BB) talked at 9¼%-9½%, with a Thursday afternoon pricing anticipated. JP Morgan is the bookrunner.

It should be noted that no new offerings appeared Wednesday in the high yield primary.

The market anticipated hearing terms Wednesday on Block Communications, Inc.'s upsized offering of $175 million seven-year senior subordinated notes (B2/B-) via Banc of America Securities. Price talk is at 9¼%-9½%. However late in Wednesday's session terms on that deal had not emerged.

Late in the day, Panavision Inc. said it had abandoned its offering of $200 million seven-year senior secured second lien notes (Caa2/CCC+). The company blamed "continuing unfavorable market conditions." It had already been downsized from $250 million, at which point Panavision announced it had terminated its tender offer for its outstanding 9 5/8% senior subordinated discount notes due 2006.

When the new Crescent bonds went into secondary trading, they firmed slightly, to about 100.25 bid/100.75 offered, from their par issue price. "It was a reasonably good deal," a trader opined. "It was a reasonably good deal, with a pretty fat (9¼%) coupon.

The trader saw Standard Pacific's new notes as having firmed smartly to 100.75 bid/101.25 offered, after having priced at a discounted 99.20 earlier in the session.

The Irvine, Calif.-based homebuilder's new bonds may have been eagerly snapped up because "that paper (Standard Pacific's) has been hard to come by in the secondary market. Their [past] deals have been very small, and never did trade much in the first place. They've never been as liquid as some of the other homebuilders," he said.

Among those other homebuilders is D.R. Horton Inc., which sold $250 million of new 8½% senior notes due 2012 last Thursday. They priced at 99.171, and were heard Wednesday "still hanging in" at 99.75 bid/100.5. The trader said that the homebuilding sector as a whole has been pretty much unchanged over the last couple of days.

Telecommunications, on the other hand, continues to be the sector in the spotlight, with Flag Telecom Holdings a major mover in Wednesday's action. The Hamilton, Bermuda-based communications company's notes were seen up five to six points, with its 8¼% bonds due 2008 firming to 28 bid. A market source cited the news that Flag - which provides voice and data traffic service for other telecom carriers - has proposed a plan which would give its creditors a mixture of cash, new debt and new equity in return for their existing debt.

Flag hopes to offer the holders of the $430 million of 8¼% notes $170 million of new notes; it would offer the holders of its $300 million of dollar-denominated 11 5/8% senior notes due 2010 and €300 million of euro-denominated 11 5/8s a package of $150 million in cash, $40 million in new notes and equity; and it hopes to persuade lenders on Flag Atlantic's credit facility to accept $70 million in cash and new shares in exchange for its $257 million in debt to the lender. Flag said in its statement that none of the creditors have so far agreed to the debt proposal; the stakes of its equity holders, meantime, "will be substantially diluted," although by how much won't be known until talks with the creditors are completed.

Among other communications names, Microcell Telecommunications Inc.'s 14% notes were down five points on the session, to 55 bid/58 offered, although no fresh news was immediately seen on the Canadian wireless operator.

Global Crossing Holding Ltd's bonds remained mired at recent levels of between two and three cents on the dollar, even as new details surfaced about possible buyers for some or all of the troubled Bermuda-based undersea fiber optic network operator, currently in Chapter 11. The New York Times reported that a clerical error in an e-mail sent out by the company's law firm to interested parties mistakenly included the names of all of the other interested parties - in violation of the confidentiality agreements all of them had signed. Among the companies named as possible interested parties are such telecom industry heavyweights as Verizon Communications, Deutsche Telekom, France Telecom and Telefonos de Mexico, the Times said - as well as high yield telecom bellwether Level 3 Communications Inc. The Wall Street Journal had reported Monday that Level 3 might be interested in buying some or all of its fallen rival's network, and believes it has the financial resources to swing such a deal.

Another troubled telecommer - Canadian-based Teleglobe - were seen by at least one desk as having rebounded Wednesday after taking a pounding Tuesday on fears that company parent BCE Inc. might consider walking away from the money-losing long-haul and data-services unit, or restructuring its sizable debt load. That possibility - along with a recent downgrade of its nominally investment-grade bonds to junk status by Moody's Investors Service and a threatened downgrade by Standard & Poor's - have knocked those bonds for a sharp loop, driving them down to the twenties and below.

A trader said that on Wednesday, however, Teleglobe's 7.20% notes due 2009 and its 7.70% notes due 2029 "were bouncing," moving up from Tuesday's closing levels around 17 bid/20 offered to as high as 21 bid/24 during the session. Late in the session, he pegged the bonds at 20 bid, but allowed that "they may north of that."

The trader also saw some upside for another troubled Canadian-based telecommunications-related company, equipment maker Nortel Networks Corp., whose bonds ended Tuesday around 72 bid, after it announced that first-quarter revenues would come in a bit below analysts expectations, and also announced the complete drawdown of its $1.75 billion bank facility, although Nortel stressed that it did not really need the money right now but was only drawing it out in order not to lose that flexibility, since the facility was about to expire and would not have been renewed by its lending group. Even so, Standard & Poor's still knocked its bond rating down to junk, following by days a similar move by Moody's.

Still, he noted that Nortel's 6½% notes due 2006, after having opened around 72 "ticked up all day," to end up a trey at 75 bid.

Part of the rise may be due to a sense of relief by the market at the other shoe having now dropped in the form of the ratings downgrade to junk and the bank loan drawdown. Also, the trader said, people "seem to be getting used to the old 'draw-down-the-revolver trick'," not getting as wigged out as they once might have, and pacified by the prospect of nearly $2 billion extra sitting in the corporate treasury. "They were comfortable enough with it in this case that the bid moved up three points by the end of the day."

Outside of the telecom sector, the trader saw "nothing, no movement at all" in Xerox Corp. debt, despite scary-sounding news stories about the SEC having widened its investigation of the Stamford, Conn.-based copier king's accounting practices, telling two former executives and the firm's auditor, KPMG, that it may file civil charges against them.

The new development comes on the heels of the company's recent announcement that it had agreed to a $10 million civil penalty and would restate results going back to 1997.

But the trader asserted that far from representing fresh new trouble for Xerox, "this would seem to clear the way for the SEC to go after former executives," such as ex-CEO Paul Allaire and ex-CFO Barry Romeril, rather than the company itself and its current management, and as such, is "not really material." He quoted Xerox's 5½% notes due 2003 unchanged at 94 bid/95 offered.

At another desk, a market source said: "I didn't see Xerox do anything, whether because this was already anticipated or what." He quoted Xerox's 9¾% notes due 209 at 97 bid/97.5 offered "exactly where they were (Tuesday)."

Xerox, a trader said, "opened down a touch on the news, but like everything else [in a generally solid market Wednesday], it seems to have caught a bid, closing unchanged to up slightly."

The trader also saw strength in the healthcare names, declaring that "a lot of healthcare paper was on the move, up a half point to a point." He asserted that the move appeared to be "more technical than fundamental," and that there seemed to be "a large buyer in the market," capitalizing on healthcare's status as a defensive play.

Whatever the reason, he said, "for once, a sector is moving up by itself, instead of being just driven by [individual stories about] individual names."

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