Four deals price in brisk session; Nextel rises on Moody's upgrade review

By Paul A. Harris

St. Louis, May 26 - Wednesday's session unfolded at a comparatively brisk pace in the junk bond market.

Four deals, two of them drive-bys, priced for $790 million and €100 million of issuance in the primary market.

Meanwhile in the secondary recent issues from Leiner Health Group, Concentra, and UGS were seen trading up, and the existing bonds of Nextel took spark from the kind words on its credit ratings from Moody's.

However traders said that overall the session came and went in a fairly lackluster fashion.

After a recent dearth of drive-by deals Wednesday saw a pair of quick-to-market transactions completed

Aztar Corp. price an upsized, quick-to-market $300 million issue of 10-year senior subordinated notes (Ba3/B+) at par to yield 7 7/8% - spot on the 7 7/8% area price talk.

Banc of America Securities, Citigroup and Deutsche Bank Securities ran the books for the debt refinancing deal from the Phoenix-headquartered casino operator.

When Aztar's new 7 7/8% notes were released for trading they were spotted at 100.50 bid, 100.75 offered.

Navistar International Corp. priced $250 million of 7½% senior notes (Ba3/BB-) in a quick-to-market transaction at 99.324 to yield 7 5/8%.

The JP Morgan and Credit Suisse First Boston led deal came in the middle of the 7½%-7¾% price talk.

The Warrensville, Ill. truck, bus and diesel engine-maker will use the proceeds to refinance debt.

Kentwood, Mich. auto components and assemblies manufacturer Autocam Corp. sold $140 million of 10 7/8% 10-year senior subordinated notes at par to yield 11¼%, wide of the 10 7/8%-11 1/8% price talk.

Goldman Sachs & Co. and Citigroup ran the books on the acquisition financing that had been marketed via a roadshow.

And finally Samsonite Corp. priced a slightly downsized €100 million of six-year floating-rate notes (B1/B+) at par to yield three-month Euribor plus 437.5 basis points. The offering was reduced from €105 million.

The Deutsche Bank Securities and Merrill Lynch & Co. led refinancing deal came right on top of the price talk.

On Tuesday Samsonite priced a slightly upsized issue of $205 million of seven-year senior subordinated notes (B3/B-) which came at par to yield 8 7/8%, spot on the 8 7/8% area price talk.

Merrill Lynch & Co. and Deutsche Bank Securities ran the books.

Nextel advances on Moody's review

The bond of Nextel Communications Inc. moved higher on news that Moody's Investors Service is considering raising the company's ratings.

The Moody's action, which affects approximately $10 billion of debt, was prompted by the wireless company's increased market share as it attracts the industry's most desirable subscribers, the rating agency said.

Moody's also noted Nextel's strengthened balance sheet, which it attained by refinancing debt at lower interest costs and longer maturities.

One trader spotted Nextel 7 3/8% notes due 2015 advancing to 100.625 bid, 101 offered on the news, improved from 100 bid, 100.50 offered on Tuesday, "up about five-eighths.

"That's become high quality," said the trader, "so that's a real pop."

Goodyear rides out S&P cut

Elsewhere, the trader noted, the paper of Goodyear Tire & Rubber Co. held in impressively Wednesday considering that Standard & Poor's on Tuesday cut Goodyear's corporate credit rating by one notch to B+ from BB-.

"Goodyear shook off the downgrade and is hanging in there," the trader said, reporting the Goodyear 6 3/8% notes due 2008 are 89.50 bid, 90.50 offered, unchanged on the session.

Another trader told Prospect News that the longer Goodyear paper appeared to advance, while the shorter maturities remained unchanged.

This source had the 6 5/8% due 2006 at 98.50 bid, 100 offered, unchanged.

Goodyear's 8½% notes due 2007 were also unchanged at 97.50 bid, 99 offered.

However, this trader saw the 6 3/8% notes due 2008 at 89 bid, 91 offered, up from 88 bid, 90 offered on Tuesday. And the 7.857% notes went to 86 bid, 87 offered from 85 bid, 86 offered on Tuesday. Finally the 7% due 2028 advanced Wednesday to 75 bid, 77 offered from 74.50 bid, 76.50 offered.

Also basically unchanged on Wednesday were the existing issues of Collins & Aikman, said the trader.

The 10¾% notes were at 99.25 bid, 100.25 offered, "up perhaps a quarter of a point" from the 99 bid, 100.50 offered Tuesday close.

Meanwhile Collins & Aikman's 11½% notes were at 96.50 bid, 98.

"Both of them were basically unchanged," said the source.

However another trader reported that Collins & Aikman "felt good today."

This source had the 10¾% notes due 2011 at 99.75 bid on Wednesday, up from 97.25 bid, 98.25 offered on Tuesday.

This trader also reported having seen strength in the Time Warner Telecom's 10¼% notes due 2011, which were at 90.25 bid, 91.25 offered at the end of the session, more than two points higher than Tuesday's close of 88 bid, 89 offered.

Tenneco gains

This source also said that existing paper of Tenneco Automotive Inc. firmed, following the auto parts maker's abandonment of a proposed secondary public stock offering, which would have amounted to approximately $150 million, and a simultaneous tender offer for the notes.

"Tenneco jumped up after they withdrew," said the trader, spotting the 11 5/8% notes at 107.75 bid, 108.75 offered, up from 106.50 bid, 107.50 offered, where they had been trading early in the week.

Calpine rises on sale

Also advancing during the secondary session were issues of Calpine Corp. which reported in a Wednesday press release that it has sold the power contract related to its 118-megawatt Parlin and 58-megawatt Newark Power Plants in New Jersey, by which it raised $101 million in cash.

The Calpine 8½% notes due 2008 finished the day at 59.625 bid, 60 offered, just over a point better than Tuesday's close of 58.50 bid, 59.50 offered, the trader said.

Generally better tone

"A lot of stuff has been hanging in there and doing better," the source commented.

"People got over the shock of the over-$40 per barrel crude oil price. After the 'doomsday' scenarios that you've seen spun out about that I think people are now beginning to take that in stride.

"The economy is growing enough that it will offset the increases in oil, at least for the time being.

"Long term, who knows?

"But that seems to be what is driving stocks and holding the wheels on the junk bond market."

Another source said that the fortunes of the high-yield market going forward hinge on the apparent liquidity of the asset class.

"A lot depends on the funds flow numbers on Thursday," said the official. "Some people are anticipating outflows of around $200 million. Other people are expecting inflows.

"Things are going to remain quiet until people get the feeling that money is flowing into the product versus out of it.

"A lot of the deals that are getting done are the ones that are rolling out of an existing issue on a tender versus an actual new deal. Those seem to be doing okay."

Busy Thursday talked up

Primary market sources told Prospect News that Thursday was shaping up to be a moderately busy session, as issuers were no doubt seeing advantages to completing deals prior to the three-day Memorial Day recess, which could herald the start of a summer slow-down in the capital markets.

Price talk of 8½% area emerged Wednesday on Finlay Fine Jewelry Corp.'s planned offering of $200 million of eight-year senior notes (B1/B+), which is expected to price Thursday afternoon via Credit Suisse First Boston and JP Morgan.

The price talk is 8¼% area on Herbst Gaming, Inc.'s upcoming $150 million of eight-year senior subordinated notes (confirmed B3/expected B-), also expected to price on Thursday, via Lehman Brothers.

Finally, Maax Corp. issued price talk of 9 ¾%-10% on its $150 million of eight-year senior subordinated notes (B3/B-), which are also expected to price on Thursday.

Goldman Sachs & Co. has the books.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.