Enron's almost-junk bonds up on Dynergy talks news; Triton PCS upsizes new 10-year deal

By Paul Deckelman and Paul A. Harris

New York, Nov. 7 - News that the embattled Enron Corp. might be in talks with rival Dynergy Inc. on a much-needed cash infusion - or possibly even a merger - gave a boost to the beleaguered Houston-based energy marketer's bonds Wednesday, traders said. In the primary market, Triton PCS Inc. sold an upsized issue of 10-year senior subordinated notes in the Rule 144A private placement market.

And not only was Triton's issue increased to $400 million from $300 million but it priced at a yield of 8¾%, at the tight end of price talk of 8 ¾% to 8 7/8%.

"The book was considerably oversubscribed," one sell-side source told Prospect News as the terms became available late in the session.

While Enron remains nominally investment-grade rated following a recent twin downgrade (Baa2/BBB), junk players had recently begun following its descent, figuring it to become the latest in a long line of fallen angels.

"It looks like they may be on our desk at any moment," a high yield secondary trader had told Prospect News on Tuesday.

That migration into junk-bond land may still happen - or maybe not, if news reports are to be believed.

The New York Times reported Wednesday morning that Enron's efforts to quietly line up a big-name backer whose presence would reassure jittery smaller investors "seems to have backfired," with such well-known players as billionaire market guru Warren Buffett and buyout giants Kohlberg Kravis Roberts, Blackstone Group and Clayton, Dubilier & Rice apparently having having taken a pass on putting money into Enron at a time when the company is beset by falling natural gas prices and is under investigation by the Securities and Exchange Commission.

"Everyone was staying away (Wednesday morning) when the stock was down two points," or about 25%, on the bearish Times story, a bond trader specializing in crossover and fallen angel credits said.

But then, news hit the tape that Enron was reported by CNBC and The Wall Street Journal to be in talks with Dynergy - like Enron, also a Houston-based energy marketer - for a cash infusion of up to $2 billion. The news reports indicated the two companies could unveil some kind of transaction as early as Thursday. There were also reports that energy major Chevron Texaco, which has a 27% stake in Dynergy, might become involved. Dynergy refused to comment on the reports and Enron representatives reportedly could not be reached for comment Wednesday afternoon.

On that news, particularly with the Chevron angle, the trader said, "every offering just dried up, and I haven't seen any real bonds since then."

He last saw Enron's 9 1/8% and 9 7/8% notes due 2003 quoted offered at 80, while its 6¾% notes due 2009 were being offered in the 67-72 area when the offerings were pulled.

Another trader said that he had seen the Enron 9 1/8% notes due 2003 quoted at 65 bid/68 offered pre-news, and then, "when the news came out that they were in talks with Dynergy, all of a sudden - BOOM! - up 10 points" to around the 76 bid level.

He saw the company's 6½% notes due 2002 going from pre-news levels in the 60s to post-news bid levels in the 80-81 area.

On another front, the trader saw Conseco Inc.'s bonds "on fire" Wednesday, aided by the news, announced Monday by the company, that chairman and CEO Gary Wendt had decided to put his money where his mouth was and back up his optimistic assurances to investors about the company's turnaround progress by personally buying a million shares of its common stock. The troubled Carmel, Ind.-based insurer also said that another 10 members of its senior management team had likewise collectively bought several hundred thousand shares.

Conseco shares, which bottomed at a ten-year low of $2.51 last week after the company reported a $411 million net loss for the third quarter and cut its earnings forecasts, have been rebounding ever since then, closing Wednesday at $3.78, up 22 cents on the day.

"Ever since Gary made the announcement that he bought the shares," the company's bonds have turned around, the trader said. He saw its 9% notes due 2006, which had been in the 40-42 bid area last Thursday, and stayed around 40 bid Friday, when Wendt made his stock purchases, climbing to 47 bid by the end of Tuesday and then finishing Wednesday around 50 bid/53 offered. Meantime, Conseco's 8½% notes due 2002 had moved up to 77 bid by day's end, "up pretty big."

It looks like "Gary hasn't lost his touch," the trader opined. He noted that after the former GE Capital executive took the helm of the struggling Conseco last year, there was a honeymoon period for the first year in which it seemed he could do no wrong, and the company's stock and bonds came back strongly from the depths to which they had fallen under the previous management.

"He got their new 10¾% issue done. Then people got all bugged out about the economy and (Conseco) started taking their writedowns, and the bonds fell apart. Most guys now, if they say they are buying some stock back, people figure they're just doing it to look good, that the CEO is buying some shares back. You don't normally see bonds go up like that just on the fact that (the CEO) is buying stock back, but maybe the market still feels (Wendt) has a lot of credibility and sees it as a vote of confidence."

Elsewhere, American Tower Corp. bonds, which had finished sharply lower Tuesday on news that the Boston-based communications antenna tower company had posted a wider-than-expected third-quarter loss and saw more of the same ahead for the fourth quarter, rebounded partly from their Tuesday lows. Its 9 3/8% notes due 2009 - which had fallen all the way down to around 72 bid Tuesday from prior levels around 80 - gained back three of those points, closing the day at 75 bid.

But Global Crossing Holdings Ltd.'s bonds, down around five points Tuesday to the 12.5 bid level on news that the long-haul telecom carrier's merger deal with 59%-owned affiliate Asia Global Crossing Ltd. was off, making a restructuring of the parent now appear more likely in the eyes of market watchers, continued to languish at those lower levels in Wednesday's dealings.

In the primary, early Wednesday Woolworths Group plc priced £100 million of five-year senior notes in London via Barclays Capital, yielding 8 ¾%, at the tight end of talk of 8¾% to 9%.

"It was around two times oversubscribed," a syndicate source said, adding that "it sold a little bit into the States, a lot of UK accounts, and some in Europe as well. There were some investment grade-players, as well."

Also Wednesday, ISP Chemco Inc. priced a $100 million add-on to its 10¼% notes due July 1, 2011, via UBS Warburg. The new add-on brings to $405 million the aggregate of a deal that began in June, 2001 with an initial offering of $205 million, and increased by $100 million with an add-on the following month.

The ISP Chemco was definitely a drive-by deal, according to one informed source, who commented that the green flag came down on the deal shortly after noon, Eastern Time.

Also in the drive-by category, Resolution Performance Products LLC announced a $75 million add-on to its 13½% notes due Nov. 15, 2010.

This deal, via sole bookrunner Morgan Stanley, is set to price Thursday following a Wednesday conference call.

Noting that both the ISP Chemco and the Resolution deals were chemical sector issuance, one investment banker told Prospect News: "Chemicals have been hot.

"These are financings of opportunity," the banker added. "The market has been relatively robust in the past couple of weeks, and these guys take advantage of that to tack a little bit onto their existing issues."

This banker also speculated that there could by more drive-by deals headed to the primary in the weeks running up to Thanksgiving.

"This is something that all of us on my side of the business love to do," he commented of the two add-ons. "You don't have to do a roadshow, so your costs are down.

"You bring the sales guys in and say 'We got one - let's get it done.'

"It's probably a good time to do things like this."

Although some primary market watchers expected the Land O'Lakes $300 million offering to price Wednesday - price talk of 8 ¾%-9% came out Tuesday - the deal had not priced by late in the session, and sources told Prospect News that it would price Thursday.

Also on Thursday price talk is expected to emerge on ResCare $150 million seven-year notes via UBS Warburg.

End

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