Inmarsat, Atlantic Broadband deals price; IMC Global up on Cargill news

By Paul Deckelman and Paul A. Harris

New York, Jan. 27 - Inmarsat Group Ltd. and Atlantic Broadband Finance LLC were heard by high yield syndicate sources to have priced scheduled new-deal offerings Tuesday, along with SGL Carbon Finance SA, which brought a euro-denominated deal to market.

Meanwhile a number of other likely deals were heard to have made their way onto the forward calendar.

In the secondary market, bonds of IMC Global Inc. "were up big," as one trader put it, on news that the Lake Forest, Ill.-based maker of agricultural chemicals will merge with Cargill Inc.'s fertilizer subsidiary, Cargill Crop Nutrition, to form a better-capitalized, publicly traded new fertilizer concern, as yet unnamed.

Tuesday's primary market session saw three deals price, with a dollar-total well in excess of three-quarters of a billion.

London-based satellite company Inmarsat Finance plc brought the day's biggest deal, selling $375 million of eight-year senior notes due (B2/B) at par to yield 7 5/8%.

The acquisition financing, led by Credit Suisse First Boston, Barclays Capital and Royal Bank of Scotland, came inside of the 7¾%-8% price talk.

Also pricing an acquisition financing deal Tuesday was Quincy, Mass. cable operator Atlantic Broadband Finance, LLC.

The company sold $150 million of 10-year senior subordinated notes (Caa1/CCC+) at par to yield 9 3/8%.

The Merrill Lynch & Co.-led deal came at the tight end of the 9 3/8%-9 5/8% price talk.

And Tuesday in London, SGL Carbon Luxembourg SA sold €270 million of eight-year senior notes (Caa1/CCC+) at par to yield 8½%.

Credit Suisse First Boston and Deutsche Bank Securities were bookrunners for the deal from the Wiesbaden, Germany-based producer of carbon and graphite products, which came spot on the 8½% area price talk.

Terms were expected on one other deal Tuesday, according to market source.

Dex Media, Inc. was expected to price a $250 million proceeds add-on to its senior discount notes due 2013 (Caa1 expected/B). Price talk is 7¾%-8%.

JP Morgan is the bookrunner.

Proceeds will be used to fund a dividend to sponsors Welsh Carson and Carlyle.

No terms were available as Prospect News went to press Tuesday night.

A fistful of new deals

Five more companies were heard to be in the market with junk bond deals during the session. Two of those deals are expected to be completed by Wednesday's close.

Freeport-McMoRan Copper & Gold plans to sell $350 million of 10-year senior notes (B2/expected B-) on Wednesday via JP Morgan.

The New Orleans-based copper and gold producer will use to proceeds to refinance debt.

And Keystone Automotive Holdings, Inc. is planning to raise $75 million of proceeds with an offering of seven-year senior discount notes, also to be sold on Wednesday, via Banc of America Securities.

The Exeter, Pa.-based marketer and distributor of aftermarket automotive parts and accessories will use the proceeds to fund a dividend payment to equity holders.

Also on Tuesday, Buffets Holdings, Inc. announced plans to offer $100 million of senior discount notes.

Credit Suisse First Boston will be the bookrunner on the Rule 144A offering, according to market sources. No timing or structural details were heard on the deal from the Eagan, Minn.-based restaurant operator and franchiser.

Solo Cup Co. was heard to be in the market with up to $325 million of high yield bonds in an acquisition financing. Prospect News learned that the company will also obtain $800 million credit facility led by Bank of America. No timing or structural details were heard.

And late Tuesday American Achievement Corp. was heard to be coming with junk bonds via Goldman Sachs & Co., Deutsche Bank Securities.

The Austin, Tex. manufacturer and seller of high school and college class rings and yearbooks will use the proceeds to help fund the acquisition sponsored by Fenway Partners from Castle Harlan Inc.

Inmarsat soars in trading

When the new Inmarsat 7 5/8% senior notes due 2012 were freed for secondary dealings, they shot to as high as 104.25 bid from their par issue price earlier in the session, and were heard going home having held on to most of that initial gain, at 104 bid, 104.5 offered, "not a bad rise at all," a trader said, with no little understatement.

Another trader, who saw the Inmarsat bonds at 104, also noted that the new Atlantic Broadband 9 3/8% senior subordinated notes due 2014 were also strong right out of the gate, firming handsomely to 103.25 bid, from a par issue price.

He noted the odd paradox that investors "couldn't get enough" of the two new deals - while "the rest of the market felt like crap all day."

He ascribed it to a general malaise in the junk market in the wake of junk's recently robust run-up.

"Everything was down today. People got profits [to take] and they're just kicking it out indiscriminately."

Tenet down

Among issues which he saw lower were Calpine Corp. and also Tenet Healthcare Corp., which was reported by The Wall Street Journal to be possibly getting ready to sell as many as 20 0r 30 of its roughly 100 hospitals - a development which would signal that the Santa Barbara, Calif.-based hospital operator's "return to normalcy" remains far away, according to an analyst quoted in the story.

"Tenet was down pretty good," he said. "The stock was off 85 cents, and [the story said] they're going to sell some hospitals. I can't really see where it affects the credit one way or another - but they were down a point, a point-and-a-half," with Tenet's 7 3/8% notes due 2013 closing at 100.25 bid, 101.25 offered, down from their opening at 101.75 bid, 103.75 offered, and well down from Monday's finish at 102.75 bid, 103.75 offered.

Another trader said that Calpine "got mowed," declining for a second consecutive session. "It was down another two or three points," he said, pegging the San Jose, Calif.-based independent power producer's 8½% notes due 2008 at 83.25 bid, 84 offered, down from 85.5 bid, 86.5 at the open.

"There was no real news out on them," the trader said, although he noted that "they popped five points the other day. In a situation like that, something's got to give, investors gotta take some of their profits."

IMC jumps on merger

One name which definitely was not going down was IMC Global, whose bonds were being quoted up as much as 10 points on the session from recent levels in the wake of the Cargill news. Several weeks ago, the company's bonds had firmed after an online agricultural chemicals industry newsletter reported that IMC might hook up with the much larger Cargill - and now that prediction has proven to be prescient.

IMC's 10 7/8% notes due 2008 were being quoted up five points on the session, at 125 bid, while a market source pegged its 11¼% notes due 2011 as having firmed to 122 bid from 119. He saw the company's 7 5/8% notes due 2005 up three points, at 108, while its 6 7/8% notes due 2007 were up more than two points at 108.5.

A trader said that would-be buyers of the 11¼% notes were bidding 122 "and looking" [for offerings], while another trader heard offerings on some issues as high as the 130s.

A trader quoted IMC paper in general "up pretty big," and said that it s 10 7/8% notes due 2013 had moved up to 126 bid, 128 offered on the Cargill news from 119 bid, 121 offered previously.

Under the terms of the deal as announced, IMC Global shareholders will own 33.5% of the new company and Cargill shareholders will have the rest; Cargill agreed not to increase its holdings in the new company for the first four years after the transaction closes nor to reduce its stake for the first three years.

IMC has about $2 billion of outstanding debt; the prospect of being taken over by the much larger and financially stronger Cargill caused both Standard & Poor's and Moody's Investors Service to contemplate an upgrade in IMC's current ratings (B1/B+), although S&P indicated that Cargill's single-A area ratings would likely be cut.

Elsewhere, market buzz that Dex Media plans a $250 million add-on to its existing notes was the likely catalyst behind a two-point fall in existing Dex bonds. The Dex Media East LLC 12 1/8% notes due 2012 dipped 2½ points to 121.5; Dex West's 9 7/8% notes due 2013 were quoted at 115 bid, down two points, and Dex Media Inc.'s 8% notes due 2013 were likewise down a deuce at 105 bid.

Xerox firm on earnings

Back on the upside, Xerox Corp. paper was slightly better, after the Stamford, Conn.-based copier and office machines giant announced fourth-quarter net earnings of $222 million (22 cents a share), well up from $19 million (one cent per share) in the year-earlier period. Excluding a special litigation-related gain, earnings were 19 cents a share in the latest quarter - beating Wall Street expectations of 15 cents.

""Xerox is operating on full throttle with winning results" Xerox's chairman and chief executive, Anne Mulcahy, said in a statement.

"Our 2003 performance, capped by a successful fourth quarter, is proof positive that the Xerox value proposition is clicking with customers and that our strengthened operations are delivering sustainable results."

Investors must have thought so as well; Xerox shares jumped $1.20 (8.60%) to $15.15 in New York Stock Exchange dealings of 27 million shares, some five times the norm.

On the bond side of the ledger, Xerox's 7 5/8% notes due 2013 were half a point better at 108.5, although its 9 ¾% notes due 2009 were unchanged at 118.5 bid.

A trader said the company's 8% bonds due 2027 "popped a point" to 102.5 bid.

Also on the earnings front, a trader said that Flextronics International Ltd. "Had very strong earnings," released after the close, of $21.4 million (four cents a share) - a sharp turnaround from the Singapore-based electronics manufacturer's year-ago net loss of $6.5 million (one cent a share). Excluding restructuring charges and other items, Flextronics did even better, with earnings of $93.9 million (17 cents a share) - up from $66.2 million (13 cents a share) a year earlier, and up from analysts' expectations of 14 cents a share.

The trader saw Flextronics' 6½% notes due 2013, which had languished as low as 104 bid, 105 offered during the session, pushing up to a close of 105.5 bid, 106.5 offered, half a point better on the day.

IUSA pulls $175 million deal

In emerging markets corporates action Tuesday, Industrias Unidas SA de CV (IUSA) postponed indefinitely its offering of $175 million of eight-year senior unsecured notes (Caa1/B+).

Talk on the Deutsche Bank Securities-led deal had been for a yield of 11½%-11¾%.

However a trader who spoke with Prospect News on Tuesday said that those levels were heard to have generated very little interest among investors.

"The leverage was too high and it was a small deal, overall," said the trader.

"In the end I think people felt when they looked at the prospectus that they weren't getting paid for the risk they would have been taking.

"I think something about 12½% would have been the appropriate reward for the risk an investor takes with that credit."

This emerging markets source said that it is difficult not to see the postponement of IUSA in a positive light, simply because it demonstrates a willingness on the part of investors to draw the line - even in a cash-laden, paper-starved market.

"It shows that although portfolio managers want yield, they were only willing to chase so far."

The trader told Prospect News that the softness that was reported to have been felt Monday in the high-yield market also registered an impact in emerging markets.

"Monday, for the first time in quite a while, we saw a disconnect," said the trader. "The world bond markets came off because of this very strong speculation that was going around of lower interest rates.

"I'm sure that impacted some of the swap markets and the cash market.

"It was the first time in a long time that I saw an overall bond market sell off that impacted high yield and emerging markets.

"You had a lot of assets that were down," added the source, "but you didn't have any real aggressive sellers."

Emerging markets returns strongly

However, the trader continued, Monday's sell off was followed by a strong trading session Tuesday.

"The markets came back big today," the trader said. "They're off their highs, but nevertheless they all finished on the positive side."

The source reported that Venezuela's sovereign due 2027 finished flat, Tuesday, while the "Russian '30s were up an eighth of a point.

"The Philippines, even after the downgrade, was up half a point," the source continued.

"Mexico was up about 0.75, the Ecuador 12% bonds were up 0.75."

The Brazil Cs were up 0.25 at 101.5, "which is like an all-time high.

"I think anytime investors see a nice pullback, like we saw Monday, they pull the trigger and buy assets," the source added.

With regard to secondary activity on emerging markets corporate names, the trader had Braskem 2008 paper 109.25 bid, 110.25, and Braskem's 2014 maturity at 103.5 bid during morning trading.

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