Collins & Aikman, Charter, Adelphia better; Von Hoffman prices add-on

By Paul Deckelman and Paul A. Harris

New York, Oct. 7- Collins & Aikman Products Co.'s recently badly battered bonds were heard to have firmed a bit off their recent lows Tuesday, helped, no doubt by renewed strength in their bank debt and by Standard & Poor's declaration late Monday that recent media speculation that the auto components supplier might be in danger of losing its $1.2 billion of supply contracts with Daimler-Chrysler would have no impact for now on its ratings. Other junk names seen a little better included Charter Communications Holdings LLC and Adelphia Communications Corp.

In the primary market, the pace picked up on Tuesday, as terms were heard on Von Hoffman Corp.'s $60 million add-on and four would-be issuers began their marches to the junk market.

St. Louis educational and commercial printer Von Hoffman priced a $60 million add-on to its 10¼% senior notes due March 15, 2009 (B2/B) at 104.75, and walked away with an 8.916% yield to worst.

Von Hoffman, which is in the process of acquiring Lehigh Press, priced its original $215 million offering at par, on the Ides of March, 2002. Hence the company came away with a better interest rate with Tuesday's add-on.

Timing and other details emerged Tuesday on a name that is new to the speculative-grade credit sphere. Boise Cascade Corp., downgraded to junk because it will be swinging a more debt-laden ax with its acquisition of Cleveland-based OfficeMax Corp., will begin roadshowing a two-part $500 million offering of senior unsecured notes (Ba2/BB) on Thursday.

The Idaho-based office and paper products firm intends to sell a seven-year bullet tranche, as well as a tranche of 10-year non-call-five notes.

Goldman Sachs & Co. will be keeping the logs on the Boise Cascade deal which is expected to price on Oct. 16.

Representatives from Mountain Gods Resort & Casino, along with their investment bankers from Citigroup, will descend among the junk investors starting Wednesday with an offering of $185 million of seven-year senior notes.

The South Central N.M.-based resort and casino company, owned by the Mescalero Apache tribe, will set up an interest reserve account for the first three interest payments, and will use the rest of the proceeds to fund the remaining construction and equipment costs of the casino and repay debt.

The roadshow is expected to conclude on Oct. 16.

Although Paramount Resources Ltd. announced its public offering of $150 million of seven-year non-call-four senior notes (B2/B) last week, the Calgary, Alta. natural gas company will reportedly pull away from the pump next Tuesday via UBS Investment Bank. The deal is expected to price during the week of Oct. 20.

And National Nephrology Associates, Inc. plans to commence a roadshow on Wednesday for an offering of $150 million of eight-year senior subordinated notes. The Banc of America Securities-led deal - proceeds from which will go to repay the Nashville-based dialysis services company's bank debt and fund the payment of the first phase of its acquisition of the Saint Barnabas assets - is set to conclude its roadshow on Oct. 16.

Responding to Tuesday's news of a building forward calendar one sell-side official told Prospect News: "It's clear that there still remains a lot of cash in the market. I think the issuance that has been announced over the past few days, plus what we hear is in the pipeline, is coming up to meet strong demand.

"The inflows/outflows have been either side of zero for the past three weeks, on a relative basis," this sell-sider added. "But in our conversations with the buy-side it sounds as though cash levels continue to warrant primary issuance."

In addition to the deals just setting out on the road, a Wednesday discharge date was heard on Universal Hospital Services' $250 million of eight-year non-call-four senior notes (B3/B-).

Price talk is 10 1/8%-10 3/8% on the deal that is being administered by Goldman Sachs and Credit Suisse First Boston.

And from the emerging markets front price talk of 8 5/8% area was heard Tuesday on Mobile TeleSystems' offering of up to $500 million of seven-year senior unsecured notes (Ba3/B+).

The Russian mobile telephone giant's deal, led by ING Bank and Credit Suisse First Boston, is expected to price on Wednesday.

A buy-side source who has been following the deal told Prospect News that the MTS offering has been "going gangbusters," with the book rumored to be building toward the $700 million level.

Also heard to be faring well is the offering of $250 million of 10-year senior unsecured notes (B2/B-) from Mexican glass maker Vitro SA de CV. Price talk of 11½%-12% was heard Tuesday. The deal, via Citigroup and Credit Suisse First Boston, is expected to price on Friday.

In the secondary market Tuesday, "there was a whole lot of noise," a trader said, "but nothing really happened."

Another trader agreed that there was "not tons of activity," although he saw some things moving around.

One of the names which seemed to be on the upside was Collins & Aikman, whose bonds had been skidding downward since the middle of last week, when the Detroit Free Press reported that Number-3 U.S. automaker Chrysler would likely review most or nearly all of the $1.2 billion in supply contracts it has with Collins & Aikman, a Troy, Mich.-based supplier of interior components and other auto parts. The story quoted one unidentified Chrysler exec as blasting Collins & Aikman in no uncertain terms, calling it Chrysler's "worst supplier" by virtually any measure.

While the prospect that its largest supplier - accounting for almost one-third of its total business - might put its contracts up for rebidding by competitors sent Collins & Aikman's 10¾% senior notes due 2011 down about 10 points from previous levels in the upper 80s and caused an even more pronounced slide of between 15 and 20 points in its more volatile 11½% subordinated notes due 2006, which fell to around 60 bid, the previous free-fall seemed to have stabilized by Monday, with most market participants queried by Prospect News reporting at the worst, only a two-point erosion from the previous week's levels.

On Tuesday, things actually seemed to be turning around for the embattled credit, which was quoted either unchanged or even up modestly.

A trader quoted the 111/2s at a tight 62 bid, 62.25 offered, while the 103/4s were at 79.5 bid, 80 offered, both about a point to a point-and-a-half better.

Among the positive factors helping to buoy the bonds seemed to be a feeling that the big slide seen at the tail end of last week may have been overdone.

The Free Press story, for instance, only quoted unidentified Chrysler executives, who declined to attach their names to the harsh criticism of Collins & Aikman. And it should be noted that Chrysler reviewing contracts with a possible eye of rebidding them somewhere down the road is not exactly tantamount to canceling the contracts or pulling them from Collins & Aikman. Industry watchers suggest that Chrysler, whatever its dissatisfaction level Collins & Aikman may be, will likely tread lightly, for fear of doing anything that might throw a wrench into the works of its planned rollouts of a number of new models.

Indeed, S&P, acknowledged concern that "any material loss of business would impair Collins & Aikman's credit quality at a time when its operating performance is weak and its financial flexibility is limited" - the ratings agency said a loss of about 5% of Collins & Aikman's $4 billion yearly sales, or $200 million, might be cause for concern.

But it also said that "the resourcing of all of the Chrysler business is unlikely because it would involve significant disruptions to several vehicle platforms, at a time when Chrysler is struggling financially. In addition, DaimlerChrysler may be unable to find suitable suppliers with available capacity that are able and willing to take on the business, some of which carries low margins."

There were also some indications from the bank debt world that Collins & Aikman may not be the potential basket case many people were viewing it as last week. Its bank debt jumped up to around 99 from 97.5, a fairly significant move in a market far less volatile than the junk bond market is. There was talk of a private call with current or potential lenders, which apparently went well, given the movement in secondary trading of Collins & Aikman's loan obligations.

Before the ominous scenario outlined by the Free Press hit the tape last week, Collins & Aikman bonds had been on a strong rise - spurred by market scuttlebutt that the company was supposedly close to lining up new financing.

Elsewhere, a trader said that Charter "felt a little better," quoting the St. Louis-based cable operator's benchmark 8 5/8% notes due 2009 as having pushed up to 79.25 bid, 80 offered from 78 bid, 79 offered previously. Another upsider he saw was Level 3 Communications Inc., its 11% notes due 2008 up a point at 92.5 bid, 93.5 offered.

And he saw AK Steel Corp. bonds also up, continuing to ride the momentum seen on Friday when the Middletown, Ohio-based steelmaker announced that it had renewed talks with the United Steel Workers of America, whose relations with AK's recently resigned previous management had been strained, at best.

The trader saw AK's 7 7/8% notes due 2009 at 69.5 bid, 70.5 offered, while its 7¾% notes due 2012 were a point or so firmer at 67.5 bid, 68 offered.

On the downside, he saw Trump Atlantic City Funding's 11¼% mortgage bonds due 2006 "a little weaker," possibly just on the continued angst which investors in incumbent Atlantic City gaming names are feeling in the wake of the opening this past summer of the glitzy new Borgata resort by Boyd Gaming Corp. and MGM Mirage. He quoted the A.C.s as declining to 75.25 bid, 76.25 offered from opening levels at 77.25 bid.

Overall, though, the trader saw "a lot of things up a quarter point, a half point - but how high can you go?"

He said the new deal calendar "is filling up, but with no real compelling value," in the absence of the kinds of excitement-generating mega-deals such as those seen a few weeks ago. The secondary, he said "continues to grind north - but there are not a lot of interesting ideas out there."

A market source saw a solid rise in the bonds of bankrupt cable operator Adelphia, whose 10¼% notes due 2011 firmed to 78.5 bid from Monday's 75. Its 9 7/8% notes due 2007 were up three points at 77.

A trader meanwhile characterized them as "a lot better," although there was no fresh news immediately seen on the company."

"A lot of the junkier names, like the lower-quality paper, were moving," he said. On the one hand, he said, "you had the lesser credits doing better because the stock market had a good bid to it, while on the other hand, the government market was getting smacked around pretty good and dragging down the interest-sensitive stuff. "

He opined that given the fact that this market week is bracketed like books in a set of bookends between Monday' s Yom Kippur holiday - which saw the market open but at a substantially reduced activity levels - and Friday's 2 p.m. ET early close ahead of Monday's Columbus Day holiday, "it's going to be kinda spotty."

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