Playtex bonds fall after earnings warning; new Qwests struggle; 6 deals join calendar

By Paul Deckelman and Paul A. Harris

New York, Feb. 2 - Bonds of Playtex Products Inc. were quoted down five or six points on the session Monday, after the consumer products company warned that its 2003 and 2004 earnings would come in below analysts' expectations. Also, the recently issued bonds of Qwest Communications International Inc. were seen having little attraction to investors, with the three tranches all trading below their respective Friday issue prices.

The lackluster showing by the new Qwest paper seemed to underscore a generally more sluggish tone in the primary market late last week, even though it had racked up impressive numbers in January in terms of new deals priced and total dollar volume amounts.

Nonetheless, prospective junk bond issuers rolled out half a dozen new deals during Monday's session, substantially building out the forward calendar - and very late in the day Time Warner Telecom Inc. announced an additional $800 million offering.

And although no straight-out high yield issues priced Monday, one source insisted that the junk market remains hot.

"People are trying to get in before the window closes," the sell-sider said with respect to the Monday's six-deal buildup.

"And I think this junk rally has some way to run, still," added the source.

"We are seeing evidence that people are continuing to invest money in high yield mutual funds. And the managers of those funds will have to put that money to work.

"The question then becomes, if they're not going to put it into high yield, where will they put it?"

Half a dozen deals roll out

The six new issuers that showed up Monday included:

--Alaskan telecommunications company General Communications, Inc., which will start its roadshow Tuesday for $200 million of 10-year senior notes (existing ratings B2/B+). The Deutsche Bank Securities-led offering is expected to price on Thursday afternoon.

--The roadshow starts Tuesday on two tranches from North Atlantic Trading Co. Inc.

The New York City-based manufacturer and marketer of loose leaf chewing tobacco is offering $185 million of senior notes due 2012 (B2) and $75 million proceeds of senior discount notes due 2014 (Caa1). Citigroup will be the bookrunner.

--Woodcraft Industries, Inc. will start the roadshow early in the week of Feb. 2 for $130 million of eight-year senior subordinated notes due 2012 (B3/CCC+), expected to price mid-to-late in the week of Feb. 9.

Credit Suisse First Boston will run the books for the deal from the Saint Cloud, Minn.-based manufacturer of kitchen and bath cabinet and other wood components.

--The roadshow got underway Monday for Dunlop Standard Aerospace Holdings plc's $125 million add-on to its 11 7/8% senior notes due May 15, 2009 (B3/CCC+).

The Credit Suisse First Boston deal is expected to price on Wednesday.

The Coventry, U.K. company aircraft parts and services company priced the original $225 million issue on May 7, 1999.

--Forest City Enterprises, Inc. plans to sell $100 million of notes in a retail offering expected to price this week.

The company plans to sell four million of $25 par senior notes due 2034 (Ba3/BB-). Price talk is 7%-7¼%.

Morgan Stanley Dean Witter will run the books for the offering from the Cleveland-based real estate development and management company.

--The roadshow begins Tuesday in London for JSG Holdings €250 million equivalent of 10-year senior PIK notes due 2014 in dollar and euro tranches (B).

The Deutsche Bank Securities deal is expected to price late this week. The prospective issuer is a newly created Jefferson Smurfit Group holding company.

Qwest trades weaker

When the new Qwest Communications bonds were heard to have broken, they pushed downward.

"All of them traded softer than issue," a trader said, quoting the Qwest 7¼% senior notes due 2011 as having opened at 99 bid, 99.375 offered, and then trading down to 98.5 bid, 99 offered, down from 99.3205 at issue on Friday. He saw the Denver-based telecommunications operator's new 7½% notes due 2014 opening 98 bid, 98.5 offered, but then retreating to 97.25 bid, 97.75 offered, down from 98.275 at issue on Friday.

The company's floating-rate notes due 2009 "did the best of the three," he said, actually improving to 99.75 bid, 99.875 offered from its opening at 99.25 bid, 100.5 offered.

Another trader opined that all of the new Qwest issues "did pretty lousy," with the 7¼% notes at 98 bid, 98.25 offered, the 71/2s at 97 bid, 97.25 offered, and the floaters at 99.25 bid, 99.75 offered.

Among Qwest's existing bonds, its 13½% notes due 2010 were seen down more than two points on the day at 118.25 bid.

General Communication's GCI Inc. 9¾% notes due 2007 were seen a point better at 103.5 bid; the Anchorage, Alaska-based telecom company is tendering for those notes and anticipates funding the buyback with its planned issue of new bonds (see Tenders and Redemptions elsewhere in this issue).

Playtex loses on earnings

Apart from new-deal-related movements, Playtex's bonds were the big loser on the session, its 9 3/8% notes quoted as having fallen to 98 bid from 104. At another desk, a trader saw the bonds dip as low as 97 bid, 99 offered, which he pegged as "down five points from Friday, when they had already dropped a point, so that's six points in two sessions."

The Westport, Conn.-based maker of such well-known consumer brands as Playtex Tampons, Woolite rug cleaner and Binaca breath sprays said it would take $4 million in charges for restructuring in 2004, including costs for an unspecified number of job cuts.

Playtex further said that with fourth-quarter sales off 8% from the previous year's levels, it would have a 2003 profit of 37 cents per share, excluding charges - less than analysts' estimates of 39 cents per share.

And in 2004, the company projects net income of between 30 and 33 cents per share, which would include 16 cents of charges for refinancing an existing credit facility and issuing $450 million in senior secured notes, as well as the restructuring charge; Wall Street had been estimating earnings of around 51 cents per share for the company.

Playtex stock nosedived $1.41 (17.22%) to $6.48 on the New York Stock Exchange on volume of three million shares, more than 15 times the norm.

A&P drops

Elsewhere, a trader said that Great Atlantic & Pacific Tea Company Inc. bonds "were softer by a couple of points, quoting the Montvale, N.J.-based operator of the A&P supermarket chain's 9 1/8% notes as having fallen to 87 bid, 89 offered from 91 bid, 93 offered last week, and its 7 ¾% notes due 2007 at 89 bid, 97 offered, down from 92 bid, 94 offered.

He noted that the supermarket sector in general was softer following the big slide Friday in the bonds of Winn-Dixie Stores Inc. after that company's unexpected quarterly loss, and said that the supermarkets in general had been "overvalued; let one or two operators like Winn-Dixie have bad numbers and investors look at all the others and decide that they're trading too high as well."

Emerging markets off last week's lows

The hemorrhaging seen in the emerging markets bonds through the latter half of the Jan. 26 week seemed to be stanched somewhat on Monday, according to a trader.

The hardest hit paper late last week - the Brazilian sovereign - stabilized somewhat, the source added.

"Apparently during the last hour on Friday the locals were selling Brazil aggressively. Brazil was probably the only part of the index that widened out significantly on Friday, with a follow-through earlier on today.

"Brazil widened out by 30 basis points. I'm sure most of that is the long end, just getting hammered.

"It definitely traded off of its lows, though. It's much improved today, relative to where it was on Friday. Friday, late in the day, it was just a sell-off. At the lowest point Brazil was 95.375, and it closed out at 97. It still closed softer by a quarter of a point. But that's pretty impressive, overall."

Venezuela hangs in

Relative to the pummeling taken by some of the Latin American paper, the trader said, Venezuela held its ground impressively on Monday.

"Venezuela got bounced around early this morning because that's when the heavy Brazilian pressure occurred," the source said.

"But between 10:45 and 11:00 a.m. you saw the bid start to come into the Venezuela assets - especially the dollar assets as opposed to the euro assets. In fact they closed on a positive note today. The Venezuela notes due 2027 closed up a quarter of a point, which is pretty impressive.

"The Brazilian Cs closed down. Columbia closed a little lower. Mexico closed lower. And the Russia 30-year closed lower.

"I think we may see a bounce overnight. But I am not very certain about how significant it will be. And if there is any kind of a bounce I think sellers will see that as an opportunistic situation and sell some positions."

New deals may have to ride out chop

The trader said that information heard over the past week about prospective new deals has likely undergone review.

"I think a lot of the news you heard in the past about issues slated to come out this week have been pushed back because of market volatility," commented the source.

"It would not surprise me to hear that there is new issuance planned for the coming month. There was a heavy calendar of new issues. But I think the bulk of that came in January: about $16 billion of new issues was done in January, with maybe a small amount to be completed in February.

"But under the circumstances I think you just have to wait until the market settles down.

"There are still a lot of nervous investors who are long Columbia, long Brazil, long Russia, long Venezuela. These are high-beta credits and they have seen a high level of volatility since last Wednesday."

Pakistan heard

The trader reported hearing of one offering Monday, a sovereign of unspecified size and tenor from the Islamic Republic of Pakistan, via Deutsche Bank Securities.

"No one knows the yield talk on that," said the trader. "They're going to probably have to have a two-week roadshow.

"There is no talk on the size, the yield or the risk premium.

"And no one is certain how to size up the risk on that country. Last month the president was an assassination target twice in the space of three weeks. That's a difficult one."

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