Westlake Chemical prices downsized deal; Rural Cellular offering ahead

By Paul Deckelman and Paul A. Harris

New York, July 21 - Westlake Chemical Corp. came to market Monday with a somewhat downsized offering of eight-year notes, although that paper was heard to have firmed respectably when it was freed for secondary activity. There was a rash of forward calendar activity, with the most notable feature being Rural Cellular Corp., which was heard planning to quickly shop a $325 million offering of seven-year notes and price it some time Tuesday.

Apart from the activity in the new Westlake notes, secondary activity was muted, with many players hugging the sidelines as they watched the carnage in the Treasury market, which was sharply lower. AK Steel Corp. notes, which had slid on Friday in response to poor earnings, were heard to have stabilized by the end of Monday's dealings.

In total half a dozen new deals totaling $1.22 billion sprang into action during the opening session of the July 21 week, while only one deal was completed.

The sole transaction that priced Monday was a slightly downsized offering from Houston petrochemical concern Westlake Chemical, which sold $380 million - decreased from $400 million - of eight-year senior notes (Ba3/B+) at par to yield 8¾%.

Credit Suisse First Boston, Bank of America Securities, Deutsche Bank Securities and JP Morgan ran the books on the deal, which priced at the tight end of the 8¾%-9% price talk.

Of the half dozen deals that came out of the chute on Monday, the biggest was a quick-to-market offering from Rural Cellular Corp.: $325 million of seven-year non-call-four senior notes (CCC) via Lehman Brothers and Morgan Stanley.

Early in the session some observers told Prospect News that terms might emerge on the Rural Cellular deal before Monday's close. However none were heard and late in the session an informed source pegged Rural Cellular as Tuesday's business. However no price talk was available.

Next in terms of amount among the deals that doffed their hats Monday was a $250 million eight-year non-call-four senior notes offering (B3) from behavioral health company FHC Health Systems, Inc., which plans to be on the road seeking positive reinforcement from the accounts beginning Tuesday, and wrapping up July 30. Citigroup and Goldman Sachs & Co. are joint bookrunners.

Only slightly smaller, in terms of amount, is the offering from EaglePicher Inc. The Phoenix, Ariz.-based manufacturer will start roadshowing $220 million of 10-year non-call-five senior notes (B3 expected/ B-) on Tuesday via UBS Investment Bank, with pricing expected on July 31.

At an even $200 million, Euramax International, Inc.'s offering was fourth largest of the deals that were lit up on Monday. The Norcross, Ga.-based company, which produces aluminum, steel, vinyl and fiberglass products for original equipment manufacturers, distributors, contractors and home centers in North America and Western Europe, began its roadshow for an offering of eight-year non-call-four senior subordinated notes (B2/B). The Euramax deal, via UBS Investment Bank and Banc of America Securities, is expected to price on July 30 or 31.

The fifth largest of Monday's half dozen new deals was introduced by New Orleans-based independent oil and natural gas exploration and production company Energy Partners, Ltd., which started the roadshow for $150 million of seven-year non-call-four senior notes (B2/B+). Credit Suisse First Boston is the bookrunner on the deal, which is expected to price mid-to-late in the week of July 28.

And Monday's smallest deal was a $75 million add-on from Vancouver, B.C.-based chemical company Acetex Corp., which intends to add on to its 10 7/8% senior notes due Aug. 1 2009 (expected ratings B2/B+). That deal, which is also being led by bookrunner UBS Investment Bank, is expected to price late in the present week.

As the above-mentioned deals set out on the road, or prepared to do so, two others drew close to completion during Monday's session.

Price talk of 6¾%-6 7/8% emerged Monday on Wabtec Corp.'s offering of $150 million of senior notes due 2013 (Ba2/BB). The Wilmerding, Pa.-based provider of technology-based products and services for the rail industry expects to price its 10-year bullets Wednesday morning, via bookrunner JP Morgan.

Talk also emerged Monday on Focus Wickes plc's £225 million in sterling and euros of eight-year non-call-four notes mezzanine notes (B3/B+), which the company intends to sell at a discount. Price talk is 10%-10¼% for the coupon and 12%-12¼% for the yield.

ING and Royal Bank of Scotland are joint bookrunners on the London-based retail home improvement store operator's offering.

When the new Westlake 8¾% senior notes due 2011 were freed for secondary market trading, they moved up to levels around 101.125 bid, 101.525 offered.

Also showing some strength among recently issued bonds - IMC Global Inc.'s 10 7/8% senior notes due 2013, which priced Friday at 97.782 and were quoted Monday at 99 bid, 100 offered.

Jacuzzi Brands Inc.'s 9 5.8% senior secured notes due 2010, which priced at par on June 30, continued to bubble around the 104.25 bid, 105.25 offered area, while Rockwood Specialties Group Inc.'s 105/8% senior notes due 2011, which priced at par on July 9, were at 103 bid, 105 offered, along with Wackenhut Corrections Corp., whose 8¼% senior notes due 2013 priced at par on July 1. Merisant Co.'s 9½% senior subordinated notes due 2013, which priced at par on June 27, remain in the 103 bid, 104 offered neighborhood. TransDigm Inc.'s 8 3/8% senior subordinated notes due 2011, which priced at par on July 15, hovered around 102.5 bid, 103.5 offered.

Back among the established issues, things were "pretty darn slow today, even with the big inflow," a trader said, referring to the $1.22 billion inflow into high-yield mutual funds reported last week by AMG Data Services, whose weekly statistics of money coming into and out of the junk funds are regarded by many observers as a reliable barometer of overall high yield market liquidity trends.

"There was not a lot of news - just some profit-taking. It seems like everyone was just watching stocks, Treasuries (both lower) and earnings."

The latter, he said, "have for the most part been OK - but not really good enough to be a sustainable rally."

The trader saw some profit-taking among issues which have run up, such as Level 3 Communications Inc.'s 9 1/8% senior notes due 2008, which were as good as 90.5 bid around the middle of last week. The Broomfield, Colo.-based telecommunications operator's notes eased to 88.5 bid, 90.5 offered by Friday and eased further on Monday to 88 bid, 89 offered.

Airline issues, he said, which had recently run up as the major air carriers reported better second-quarter earnings (or at least, in the case of some, smaller losses) versus a year ago - aided by a large dollop of federal aid - "either plateaued or gave back a point across the board."

Continental Airlines Inc.'s 8% notes due 2005 were quoted at another desk, for instance, as having dipped a point, to 91 bid, while United Airlines' deeply distressed 9¾% bonds due 2021 were off three-eighths of a point, quoted at under nine cents on the dollar.

Friday's big loser, AK Steel - which had fallen sharply after the Middletown, Ohio-based producer of stainless steel and other specialty steels reported a much larger-than-expected second-quarter loss of $78.2 million (72 cents per share), versus its year-earlier profit of $16.2 million (15 cents a share) - had pretty much stabilized, and in places were quoted higher.

Its 7 7/8% notes due 2009 - which on Friday had nosedived as low as 71 bid from Thursday's 81.5 bid, 82.5 offered as people began digesting the results, only to come back up to 75 bid, 77 offered at the close, were being quoted Monday as high as 77 bid,79 offered.

AK's 7¾% notes due 2012, which had also dropped sharply in Friday's initial dealings before recouping about half of that loss to end at 74 bid, 76 offered, was seen around that same level Monday. "There was nothing further with them," a market observer noted. At another desk, however, they were pegged a point off at 73.

Some sector weakness was left over from Friday, with Oregon Steel Mills Inc.'s 10% notes due 2009, which had dropped two points on Friday in sympathy with AK, were down another point Monday, closing at 84 bid. But United States Steel LLC's 10¾% notes due 2008, which had also lost two points Friday, dragged down by investor skittishness about AK, were heard a point better at 103.5 bid.

A trader, noting that Treasury issues "got slaughtered," said that interest-rate sensitive sectors, such as anything having anything to do with real estate (homebuilders, REITs, etc.) "got hammered, not on any news but just on being interest-rate sensitive. All that stuff got weaker."

For instance, he said, homebuilder Standard Pacific Corp.'s 6 7/8% notes went from bid levels around 102-102.25 at the opening to a closing level on 100.75 bid, 100.25 offered.

Of course, there are exceptions to every trend. The trader said that Ametek Inc. - a Pennsylvania electronics manufacturer whose paper, he said, trades off the Treasury curve, reported second-quarter earnings late in the session of $21.8 million (65 cents per share), which it said was a quarterly record. With the earnings "hot off the press," the company's bonds went from about 106 bid to levels above 107, he said. The record earnings, he said, enabled it to firm despite the weaker Treasuries.

On the other hand, he saw Mark IV Industries' 7½% notes due 2007 dip to 82.5 bid, 84.5 offered, in response to Moody's Investors' Service's downgrade of the auto parts maker's bonds to Caa1 from B3 late Friday.

The trader said Acetex Corp., whose 10 7/8% notes had recently firmed to above 103, the level at which investors figured the Vancouver-based chemical company might call them, moved back down to around 101 after the company made an announcement - but not the expected redemption notice; instead, Acetex said it would offer $75 million of new 10 7/8% senior notes due 2009 as an add-on deal. "After they changed their minds and decided not to buy them [the existing bonds], the bids just disappeared," he said.

Traders reported no activity that they could see in the bonds of Millennium Chemicals Inc., after the underperforming Red Bank, N.J.-based chemicals maker announced that it was canceling its dividend - considered among the highest of commodity chemicals maker but seen by analysts as a drag on company finances - would cut its workforce, consolidate its headquarters structure and replace chairman and CEO William Landuyt with two other company executives. It also lowered its earnings guidance, citing lower sales.

EchoStar DBS bonds were firmer after the satellite broadcaster announced that it would sell $300 million of convertible debt to telecom giant SBC Corp. and unveiled plans to offer a co-branded TV service to SBC customers in 13 states including Texas and California.

EchoStar's 9 3/8% notes due 2009 firmed to 107 bid, 107.5 offered from 106 bid, 107 last week. Its 10 3/8% notes due 2007 likewise rose a point to 111 bid, 111.75 offered.

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