Stone Energy trades up on acquisition; Nordic Telephone talks €2 billion; oil-sensitive names holding in

By Paul A. Harris

St. Louis, April 24 - As the final week of April 2006 got underway in the junk bond market, a source from a hedge fund marked it slightly lower and spotted the CDX 100 closing at 101.75 bid, 102 offered, off one-sixteenth.

No issues were priced during the primary market session, although news surfaced on deals in the market, including Nordic Telephone Co. Holdings ApS's massive €2.031 billion multi-tranche offering.

Meanwhile in a quiet session in the secondary market, the existing bonds of Stone Energy Corp. rose on news that the company has agreed to be acquired by Plains Exploration and Production Co.

A trader said on Monday that high-yield credits which should be showing sensitivity - perhaps even considerable sensitivity - to crude oil prices in the vicinity of $75 per barrel have been showing impressive resilience to the rising prices of oil and other commodities.

Some chemical and packaging names, the trader added, are trading at or near the high ends of their 2006 trading ranges.

Graphic Packaging Corp. and Graham Packaging Holdings Co. paper, for example, is well bid, the trader said.

The source spotted Graham Packaging's 8½% senior notes due 2012 trading at 102 bid, 103 offered late Monday afternoon, and said that the level represents the paper's high since the beginning of the year.

This source also noted that the subordinated notes of Tekni-Plex Inc. have also "rallied dramatically from the beginning of the year."

The trader saw the Tekni-Plex paper closing out Monday at 69.25 bid, 69.75 offered, and added that it is up about 24 points since the beginning of the year, even in the face of rising oil prices.

The trader admitted that it stands to reason that packaging and chemical names should be suffering in the face of rising raw materials costs, particularly the increasing price of crude oil.

The fact that the above-mentioned names are not hurting could indicate that some of the raw material inputs have been hedged appropriately for 2006, the trader said.

"You would expect them to move in the opposite direction from oil, but they are not," the trader asserted.

Little change in autos

Earlier in the day a market source said that the bonds of Ford Motor Co. were slightly weaker trailing last Friday's news that Ford lost $1.19 billion in the first quarter of 2006.

"Everything's quiet," the source said just after mid-morning.

"The government market is a little stronger and Ford is off just a little.

The source specified that Ford stock was at that point off $0.36 or 5% on the day, trading at $7 per share. He suggested investors may be thinking that Ford could be a little more vulnerable than its competitors to rising gas prices.

Ford's 7.45% bonds due 2031 were at 72.50 bid, 73 offered, perhaps down a half, the source said.

Meanwhile General Motors Corp.'s benchmark 8 3/8% notes due in 2033 were off 0.625 at 73 bid, 73.50 offered.

And General Motors Acceptance Corp.'s 8% notes were at 94 bid, 94.50, offered, unchanged.

Stone rises on acquisition news

Meanwhile in the energy production sector, Stone Energy's bonds traded up on news that it has signed a definitive agreement to be acquired by Plains Exploration in a stock-for-stock transaction, pending stockholder approval.

The combined company will have an estimated proved reserve base of approximately 500 million barrels of oil equivalent, 80% of which are oil, according to a press release.

After the news circulated Monday morning, a trader saw Stone Energy's 6¾% notes due 2014 at 101 bid, up from 94.50 on Friday.

"Plains Exploration is a double-B company, the trader commented.

"I think they will take this paper out somehow."

Another source saw the 6¾% paper at 101 bid, 101.50 offered, while the Stone Energy 8¼% subordinated notes due 2011 were also higher at 104 bid.

Rotech trades

Elsewhere a trader said that the existing paper of Rotech Healthcare Inc. traded in abundance on Monday.

The company's debt has suffered since it disclosed that if proposed Medicare reimbursements for compounded budesonide at a new rate are upheld the company's annual revenues for 2006 could fall by approximately $30 million.

The trader said that the bonds traded to a low of 84.50 on the bid side, Monday, but then started grinding their way back to close the day at 88 bid, 89 offered, only slightly off from last Friday's close of 88.75 bid, 90 offered.

The trader speculated that the notable volume in the paper could be attributable to the paper changing hands from traditional high-yield accounts to hedge funds.

Remington eases as metals gain

Also showing some sensitivity to increasing raw materials prices on Monday was the existing debt of Remington Arms Co., Inc.

The gunmaker, which supplies Wal-Mart and other large stores, saw its bonds trade at 82 bid, 82.50 offered on Monday, according to the trader who added that the paper was at 83.50 bid last week and 85 bid two weeks ago.

The weakness has to do with the raw materials cost increases, particularly lead and copper, the trader asserted, adding that the company has small margins to begin with.

"They've just been steadily treading water," said the trader. "They're down a little each week."

Movie Gallery trades higher

The existing paper of Dothan, Ala.-based Movie Gallery, Inc. traded higher on Monday as a trader said that the bonds are likely stronger on last week's news that the company has entered into a management agreement with Hilco Real Estate, LLC. Under the agreement Movie Gallery and Hilco will initiate a program to restructure leases at more than 1,100 existing Movie Gallery and Hollywood Video stores.

On Monday Movie Gallery's 11% bonds due May 1, 2012 (Caa3/CCC-) were seen late in the session at 51.50 bid, 52.25 offered, up from the 49.50 bid, 50.50 offered context in which they traded late last week.

The trader commented that the lease restructuring is material news because there is the possibility that the company can decrease leverage if the restructuring results in an anticipated decrease in its interest expense.

Shortly thereafter another source spotted the Movie Gallery 11% paper at 52 bid.

New XM paper holds in

During Monday's quiet session sources noted little change among recent issues.

However several spots were heard on the recently priced notes of XM Satellite Radio, Inc.

Last week the Washington, D.C. company priced an upsized $800 million two-part senior notes (Caa2/CCC) transaction: a $600 million issue of eight-year fixed-rate notes at par to yield 9¾%, and a $200 million issue of seven-year floating-rate notes at par to yield three-month Libor plus 450 basis points. The deal was increased from a planned $600 million.

Early Monday a source spotted the 9¾% notes due 2014 trading at 100.75 bid, 101.25 offered, while the floating-rate paper was at 101.125 bid, 101.625 offered.

Meanwhile a buy-side source said that demand for the paper was okay, but added that there were some covenants that allow the company to add on debt for every dollar that the stock goes up.

"I think that people are comfortable with it," the source said.

Nordic Telephone talks €2.031 billion

As the final week of April got underway in the primary market no issues were priced. However news circulated on issues that are in the market.

Nordic Telephone Co. has given price talk on its €2.031 billion equivalent three-part offering of senior notes (B2/B/B+).

The Copenhagen, Denmark-based communications solutions provider is talking its dollar-denominated 10-year fixed-rate notes at 9% to 9¼% and its euro-denominated 10-year fixed-rate notes at 8¼%-8½%.

Meanwhile the company is talking its euro-denominated 10-year floating-rate notes at Euribor plus 575 to 600 basis points.

Tranche sizes remain to be determined. Pricing is expected on Wednesday.

Deutsche Bank Securities, JP Morgan, Barclays Capital, Credit Suisse and The Royal Bank of Scotland are the bookrunners.

Also from Germany, formwork and scaffolding technologies company Peri GmbH plans to price a €75 million add-on to its 5 5/8% senior fixed-rate notes due Dec. 15, 2011 (BB+) in the early-to-middle part of this week via Deutsche Bank Securities.

The original €150 million priced at par in December 2004 as part of an overall €250 million two-part transaction that also included a €100 million tranche of senior floating-rate notes due Dec. 15, 2009. The floaters priced at par to yield six-month Euribor plus 175 basis points.

NPC downsizes, talks notes

Elsewhere Pizza Hut restaurants franchisee NPC International Inc. downsized its offering of eight-year senior subordinated notes to $175 million from $200 million and shifted $25 million to its bank loan.

The Lenexa, Kan.-based company talked the notes (Caa1/B-) at a yield in the 9½% area and set pricing late Tuesday afternoon.

Merrill Lynch & Co. and JP Morgan are joint bookrunners.

Also expected to price Tuesday is the P.H. Glatfelter Co. $200 million offering of 10-year senior unsecured notes (Ba1/BB+).

On Monday a source from a hedge fund told Prospect News that the deal, led by Credit Suisse, is a blowout. The source recounted that late last week the notes were talked at 7¼% to 7½% but added that, given demand, talk could tighten to 7% to 7¼%.

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