Sabine soars on 'strategic' review; junk up as shares jump on monoline ratings; Massey firms

By Paul Deckelman and Paul A. Harris

New York, Feb. 25 - Sabine Pass LNG LP's bonds were seen having moved solidly upward on Monday on news that parent Cheniere Energy Inc. is exploring strategic options, which could include the sale of the Sabine Pass assets.

Also in the energy arena, Massey Energy Inc.'s bonds were firmer, helped by the outlook for coal prices.

MBIA Inc.'s junk bond-like surplus notes moved up by several points after Standard & Poor's affirmed the monoline bond insurer's ratings, and those of sector peer Ambac Financial Group Inc. Some Ambac debt that has been trading like junk lately was also seen up.

On the downside, Clear Channel Communications Inc.'s bonds were seen lower as the previously announced sale of the broadcasting giant's TV operations continues to encounter problems.

The leveraged markets took a header from stocks, as well as from positive ratings news from the monoline front, as the final week of February got underway.

A senior syndicate official who tracks both leveraged loans and junk bonds said that the bank loan market has firmed over the past couple of days.

"I don't want to overplay it, but it has a firmer tone," the source specified, adding that junk rallied on Monday as well.

Cash bonds were well bid, as investors put to work some of the cash they have accumulated over the past couple of months, the official explained.

"The derivatives indexes continue to bounce also," the source said, adding that the CDX High Yield 9 index ended the Monday session up 2 points from Friday's lows.

Rallying stock prices helped, the syndicate official said, recounting that the major U.S. indexes all ended the day more than 1% higher, with the Dow Jones Industrial Average up more than 1½%.

Also helping, the source added, was Standard & Poor's affirmation of its triple-A ratings on MBIA and Ambac.

Market indicators point northward

A trader said that the widely-followed CDX index of junk market performance was up 1 point on the session at 89 7/8 bid, 90 1/8 offered. Meanwhile, the KDP High Yield Daily Index rose by 0.20 to 74.17 while its yield narrowed by 5 basis points to 9.60%.

In the broader market, advancing issues led decliners by a better-than five-to-four margin. Overall activity, reflected in dollar volumes, rose by around 6% from Friday's levels, which were impacted to a degree by a snowstorm in the Northeastern United States.

Sabine bonds cook on strategic review

A trader said that "the big winner today" was the Sabine Pass 7½% notes due 2016. He saw the bonds jump 6 points to 97 bid, 99 offered, fueled by the news that the company's ultimate corporate parent, Houston-based Cheniere Energy, is "evaluating strategic options to enhance shareholder value, including options to optimize the value" of the Sabine Pass liquefied natural gas receiving terminal in coastal Louisiana, which is scheduled to come on line this year as the largest LNG receiving terminal in North America by regasification capacity.

"We do not believe that our current market valuation is reflective of the true value of this unique asset, and we are therefore exploring options to enhance value for our shareholders," Cheniere's chairman and chief executive officer, Charif Souki, said in a statement.

The company has hired Credit Suisse to assist in exploring the strategic options for Sabine Pass, which could include sale of some or all of its assets, the trader pointed out.

Massey gains on coal outlook

The trader also saw Massey Energy's 6 7/8% notes due 2013 gaining a point to 97 bid, 98 offered, cited market chatter that "positive sentiments towards coal, as well as rising oil costs" - which increase the attractiveness of coal as an alternative fuel - have pushed those bonds up.

"No pun intended," he said, "but the run-ups in both oil and coal have fueled the rise in the Masseys."

Other energy names seen firming on Monday included Chesapeake Energy Corp., whose 6¼% notes due 2018 were up nearly a point at 96.5 bid, and Range Resources Corp.'s 7½% notes due 2017, up nearly a point to around the 103 level. But Knight Inc.'s long-term 7.45% bonds lost a point to 90.5.

Techs seen strong

A trader saw Freescale Semiconductor Inc.'s bonds up about 2 points across the board on overall tech-sector strength, with the San Antonio-based computer chip maker's 10 1/8% notes due 2016 at 73 bid, 74 offered.

At another desk, Freescale's 9 1/8% notes due 2014 gained 2 points to about the 77.5 level.

Another market source also saw the company's 8 7/8% notes due 2014 up more than a point at the 83.5 bid level, while Amkor Technology Inc.'s 7¾% notes due 2013 gained half a point to 91.5

MBIA, Ambac 'junk' trades up on S&P news

A trader said that "the whole market did a lot better" on the news that Standard & Poor's had affirmed the current ratings of troubled bond insurers Ambac and MBIA, rather than downgrading them. That pushed MBIA's 14% surplus notes due 2033 up by about 3 points to 96 bid, 97 offered.

Another trader saw those bonds firm to 95 bid, 96 offered from prior levels around 94 bid, 96 offered. "It wasn't a huge move, but it was a little better - call it more stable."

Those bonds, which priced in mid-January at par, have been on a wild roller-coaster ride in the intervening month and a half, falling as low as 70 bid - and being traded off junk bond desks at a number of companies despite their nominally investment-grade rating - and then bouncing off those lows to come back to their present levels in the mid-90s on investor hopes for some kind of a bailout deal from the banks for the bond insurers, as well as good news of the sort that S&P delivered Monday.

The ratings agency, in sparing MBIA from a downgrade, at least for now, indicated its confidence that MBIA could raise the capital it needs to sustain its top-drawer rating, noting the company's sale of some $2.6 billion of debt and equity in the first two months of 2008.

The trader also saw better levels in Ambac's 6.15% bonds due 2037 - another nominally investment-grade instrument that has been reduced to trading like junk, and badly distressed junk at that, by the company's problems. The bonds, which had recently been trading at 45.5 bid, had moved out to a wide 50.5 bid, 56 offered.

And Radian Group Inc.'s 7¾% notes due 2011 were seen at 85 bid, 86 offered, "not so bad" in price terms, the trader said - "except that's a 13.50% to 13.15% yield - so that's not so great."

Clear Channel off as deal struggles

The "big loser on the day," as a trader described it, was Clear Channel's 5½% notes due 2014, which ended off 3 points at 66 bid, 68 offered. He said that "an asset sale that was supposed to be a positive for them, looks like it's falling apart."

Published reports late Monday indicated that the radio broadcasting giant was supposedly ready to drop the price for its television group by $100 million in an effort to preserve a deal with a private equity firm, Providence Equity Partners, whose bankers have expressed reservations at the transaction.

Also in the communications arena, XM Satellite Radio's 9¾% notes due 2014 were seen up a point at 91 bid, 92 offered. LIN Television's 6½% notes due 2013 were up ½ point around the 92 level.

Telecom operator Citizens Communications Co.'s 9¼% notes due 2011 were seen up more than 2 points at the 105 mark.

Abitibi bonds seen mostly lower

A trader saw AbitibiBowater Inc.'s bonds continue to fall, with the 6.95% notes coming due on April 1 at 91 bid, 93 offered, down from 93.5 bid, 94.5 offered, and its 5¼% notes coming due in June at 89 bid, 91 offered, down from 92 bid, 93 offered. Its 8.85% bonds due 2030 were ½ point lower at 52.5 bid, 54.5 offered.

The trader also saw sector peer Tembec Inc.'s 8 5/8% notes due 2009 2 points lower at 29 bid, 31 offered.

However, another market source saw Tembec's 8½% notes due 2011 up a point at 33.

Another trader saw the AbitibiBowater 6.95s at 91 bid, 92 offered and the 51/4s at 88.75 bid, 89 offered, both "slightly weaker" from Friday's levels and noted what Fitch Rating had to say about credit when it recently downgraded it - that the company's "ability to refinance its obligations under current credit conditions could be difficult."

At another desk, the company's 7½% bonds due 2028 were down a point to the 49 area, while its 6½% notes due 2013 were off ½ point around 66.

However, another trader saw the old Bowater bonds better by about 2 points across the board, with its 7.95% notes due 2011 at 72 bid, 73 offered; the old Abitibi part of the debt, he said, was unchanged on the day.

All quiet in the primary

The Monday session produced no primary market news, as sources advised Prospect News that all eyes are now on a four-B rated deal from Norcross, Ga.-based packaging and paperboard company Rock-Tenn Co.

Rock-Tenn started a roadshow on Friday for its downsized $200 million offering of eight-year senior notes (Ba3/BB-). Marketing is expected to wrap up on Friday.

Banc of America Securities, Wachovia Securities and SunTrust Robinson Humphrey are joint bookrunners for the corporation-to-corporation acquisition deal in which Rock-Tenn will acquire Southern Container, a Hauppauge, N.Y., privately held containerboard manufacturing and corrugated packaging business, for $851 million in cash.

The bond portion of the financing was downsized from $400 million, with $200 million of proceeds shifted to the company's term loan A, which was upsized to $550 million from $350 million.

The overall size of the credit facility was upsized to $1.2 billion from $1.0 billion.

A good test

Sell-side sources assert that the Rock-Tenn deal will be a good test as to whether a new issue can clear a high yield primary market that has been in virtual suspension since the start of the year.

One syndicate official, not in the deal, counted off its merits.

"It's a small deal that has double-B ratings," the official said.

"It's a corporate-to-corporate acquisition - i.e. no sponsor - and it's in a space that people are very familiar with.

"It's moderately leveraged at approximately 4.3 times to 4.4 times.

"In the heyday it would have fallen off the shelves."

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