Allied Waste, Premcor, Massey Energy price new deals; Tesoro, Mediacom up on earnings

By Paul Deckelman and Paul A. Harris

New York, Nov. 5 - Allied Waste Industries Inc. priced an upsized $350 million offering of new 10-year notes Wednesday, high yield syndicate sources said, while Premcor Refining Group Inc. brought a two-part $385 million deal to market. Also appearing was a $360 million offering from Massey Energy Co.

In secondary dealings, favorable earnings data fueled a rise in the bonds of Premcor competitor Tesoro Petroleum Corp. and in Mediacom LLC. But the numbers were not so favorable for Oregon Steel Mills Inc., and its bond prices showed it.

A roaring primary market saw another $1.095 billion of business go down in four tranches during the mid-week session.

One of them, a quickly shopped offer from Allied Waste North America, Inc., upsized by $100 million.

The Scottsdale, Ariz. waste services company priced $350 million - up from $250 million - of seven-year senior notes (Ba3/BB-) at par to yield 6½%, bringing the Citigroup and JP Morgan-led deal home right at the 6½% area price talk.

Another of the four Wednesday tranches, this one from Richmond, Va. coal company Massey Energy Co., priced at the tight end of talk.

The largest tranche of the day at $360 million, the company's seven-year guaranteed senior notes (Ba3/BB) came at par to yield 6 5/8%. UBS Investment bank did the bookrunning on the deal that had been talked at 6 5/8%-6 7/8%.

Wednesday's remaining two tranches came in a drive-by from Old Greenwich, Conn. refiner The Premcor Refining Group Inc., which priced $385 million altogether.

Premcor priced $210 million of 7.25-year senior notes (Ba3/BB-) at par to yield 6¾%, at the wide end of the 6½%-6¾% price talk. The company also priced $175 million of 8.25-year senior subordinated notes (B2/B) at par to yield 7¾%, spot on the 7¾% area talk.

Credit Suisse First Boston, Morgan Stanley and Deutsche Bank Securities were bookrunners on the Premcor deal.

Timing was heard Wednesday on five offerings, new or recently added to the new deal pipeline.

The roadshow starts Thursday for General Cable Corp.'s offering of $275 million of seven-year senior notes via Merrill Lynch & Co. and UBS Investment Bank.

The bond deal from the Highland Heights, Ky. cable-maker is part of a refinancing plan that also includes a $240 million senior secured asset based revolving credit facility, an offering of $75 million of redeemable convertible preferred stock, and an offering of $50 million shares of common stock.

A quick-to-market deal from Atlanta-based single family homebuilder Beazer Homes USA, $200 million of 10-year senior notes (existing ratings Ba2/BB), is expected to price Thursday afternoon via UBS Investment Bank.

The roadshow is set to begin Friday for gaming firm Golden Nugget's $140 million of eight-year senior second lien notes due 2011, which are expected to price early in the week of Nov. 17.

Lehman Brothers is the bookrunner on the deal which is intended to fund Poster Financial Group's acquisition of Golden Nugget properties.

From Europe, Norwegian oil company DNO ASA expects to price $175 million of seven-year senior notes (Caa2/B-) on Nov. 12 via Credit Suisse First Boston.

And Tabletop Holdings, Inc., parent of Chicago sweetener company Merisant Co., expects to complete a quick-to-market $75 million proceeds sale of 11-year senior subordinated discount notes deal (Caa1/B-) on Thursday. Price talk is 12¼%-12½% on the transaction which is being led by Credit Suisse First Boston and Jefferies & Co.

In addition to the Tabletop Holdings deal, price talk emerged on five other offerings that are expected to be priced during the remainder of the Nov. 3 week.

Price talk is 6 7/8%-7 1/8% on Triad Hospitals, Inc.'s $450 million of 10-year senior subordinated notes (B3/B), expected to price Thursday via Merrill Lynch & Co. and Banc of America Securities.

Talk is 7¼%-7½% on MSW Energy Holdings II's $225 million of seven-year notes (Ba2/BB-), expected to price late Thursday or early Friday, via Credit Suisse First Boston.

Talk of 9¾%-10% emerged Wednesday on Dollar Financial Group, Inc.'s $200 million of eight-year senior notes (B3/B), expected to price Friday. Credit Suisse First Boston and Citigroup are the bookrunners.

The talk is 10¼%-10½% on Stratus Technologies Inc.'s $170 million of five-year senior notes (B3 confirmed/B expected), which are expected to price on Thursday via Goldman Sachs and JP Morgan.

Finally, price talk of 9%-9¼% was heard on Quality Distribution, LLC's $125 million of seven-year senior subordinated notes (B3/B-) also expected to price Thursday, via Credit Suisse First Boston and Deutsche Bank Securities.

During Wednesday's session Prospect News quizzed American Century High Yield Fund vice president and portfolio manager Mike Difley on a topic said to be of significant interest in the investment banks - namely, the cash position of the buy-side.

"I've seen a slow inflow of cash," said Difley. "But given that the investment banks are bringing these drive-by deals, which are getting snapped up very quickly, it tells you there still is plenty of cash out there."

Difley said that the quick-to-market deals that have peppered the high yield market during the present week could continue right up until it's time to chase down the turkey.

"Certainly it could continue to happen, particularly with well-known names in the market," he said.

"From what I hear, anecdotally, the calendar is going to continue to build. I think they are going to try to push quite a few of these deals before Thanksgiving. And based on investor demand I think you are going to continue to see some deals between Thanksgiving and Christmas."

However, Difley commented, the hot market conditions that are presently waving the green flag to lower-tier credits cannot be expected to last indefinitely.

"I think it's going to be a much more discriminating market in 2004, whereas this year basically everything went up," he said.

"Just by virtue of what bonds have done in the high yield market year-to-date, there is less in the way of opportunities.

"Particularly in the new issue front, if there continues to be this excess of cash creating a supply-demand imbalance you're going to see more and more of the marginal deals coming out. And that's where investors really need to do their work."

Nevertheless, said the American Century High Yield Fund portfolio manager, high yield is likely to continue to attract investment dollars.

"Where are you going to put your money?" he asked, rhetorically. "You can get 1% in the money market or you've got the high yield market which is yielding somewhere in the low-to-mid 8% range, according to Merrill's index.

"Obviously investors have come back to stocks," Difley added. "With the big GDP number in the third quarter people are seeing that this economy is recovering.

"As long as the economy continues to expand at a moderate pace - I think in the fourth quarter people are looking for something like 4% GDP - and we don't get a big downturn in stocks, I don't see what's going to punish the high yield market."

When the new Premcor 7¾% senior subordinated notes due 2012 were freed for secondary dealings, they firmed smartly to 101.75 bid, 102.25 offered, from their par issue price earlier in the session, a trader said. And while he did not actually see any quotes on the new Premcor 6¾% senior notes due 2011, he theorized that with the 73/4s where they were, the new 63/4s had to have risen to "at least 1011/2."

He also saw the new Massey Energy 6 5/8% senior notes due 2010 at 101 bid, 101.5 offered, up from their par issue price. But Allied Waste's 6½% senior secured notes due 2010 seemed to be down in the dumps, relatively speaking, getting no better than 100.25 bid, 100.5 offered.

At another desk, a trader saw the new CCO Holdings LLC - i.e. Charter Communications Inc. - 8¾% senior notes due 2013, which had priced late Monday at par after a whirlwind marketing push by the St. Louis-based cabler's underwriters - as trading in a 100.125-100.375 bid context. Other traders said they hadn't seen the new Charters trading around, although one said he saw Charter's existing bonds trading weaker. Its benchmark 8 5/8% notes due 2009 were quoted a point easier, at 78 bid, 79 offered, while its 10¼% notes were also a point down, around par bid, 101 offered. At another desk, however, Charter's 8¼% notes due 2007 were quoted having risen more than two points to the 90.5 level.

Tesoro Petroleum's 9 5/8% notes due 2012 were quoted up nearly three points on the session at 106.75 bid, after the San Antonio, Texas-based energy refiner and marketer reported third-quarter net income of $70.6 million ($1.09 per share) - a sharp turnaround from its loss last year of $15.8 million (24 cents a share). The company credited the turnaround to sharply higher refining margins and strong summertime demand for gasoline.

Excluding one-time charges in the most recent period, per-share profits totaled $1.19 - well above the 76 cents average consensus of Wall Street analysts.

Tesoro's 9 5/8% notes due 2008 firmed to 106.25 bid, 107 offered from around 103.5 and its 8% notes due 2008 were at 105 bid, a level that a trader said "might actually be a little low."

Industry peer Premcor's notes were meanwhile also seen firmer - especially the three series of notes which the Old Greenwich, Conn.-based energy refiner and marketer plans to redeem with the proceeds of its new bond deal, the 8 3/8% senior notes due 2007, 8 5/8% senior notes due 2008 and 8 7/8% senior subordinated notes due 2007 (see Tenders and Redemptions elsewhere in this issue for full details). The 8 3/8% notes pushed up half a point to 101.75 bid, the 8 5/8s were a tad better at 104.25 and the 8 7/8s rose to 103 from 102.625.

Mediacom LLC's bonds were up after parent Mediacom Communications Corp. reported that it had swung into the black in the third quarter, earning $1.9 million (2 cents per share) versus $39.9 million of red ink (33 cents a share) in the year-ago quarter. The Middletown, N.Y.-based cable systems operator attributed the turnaround to an increase in subscribers for its high-speed data services.

A trader said that Mediacom's 9½% notes due 2013, which had finished on Tuesday at 95.5 bid, 96.5 offered, got as good as 98.5 bid, 99 during the session before falling back to close at 97.5 bid, 98.5 offered, "off their highs but still up two points on the day," a trader said. "The numbers were well received."

AmeriSource Bergen Corp. reported fourth-quarter earnings of $119.5 million ($1.04 a share), well up from $95 million (86 cents a share) in the year-earlier period. For the full fiscal year ended Sept. 30, the Valley Forge, Pa.-based drug wholesaler did even better, as net income surged 28% to $441.2 million ($3.89 a share), up from $344.9 million ($3.16 a share) a year ago. AmeriSource Bergen's 8 18% notes due 2008 were more than a point improved at 109.25 bid.

On the downside, Calpine Corp. posted favorable numbers, with net income jumping to $237.8 million (51 cents a share) from $151.1 million (34 cents), in the year-ago quarter. However, analysts noted that much of the rise was due to a one-time gain of 23 cents per share from the repurchase of debt and preferred securities. And the San Jose, Calif.-based independent power producer cut its forecast for full-year core operating earnings to a range of 18 cents to 22 cents per share, down from a range of 25 cents to 35 cents per share; it cited the difference between relatively low electricity prices versus its own rising costs for the natural gas in lowering guidance.

A trader said that Calpine's debt was "unchanged off the bat - but then it weakened after people reviewed the numbers." He saw the company's 8½% notes due 2011, which had ended Tuesday at 71.5 bid, 72.5 offered, falling to a low of 69.5 bid as players digested the earnings data and the lowered guidance. The notes ended at 70 bid, 71 offered, off around a point-and-a half on the day.

And Oregon Steel's 10% notes due 2009 were seen down three point on the session to around the 79 bid level, after the Portland, Ore.-based steelmaker reported that it had lost $20.9 million (79 cents a share) in the third quarter - a sharp slide from its profit of $4 million (15 cents a share), a year earlier. It also reported lower revenues, blaming the decline on lower selling prices for plate, coil and welded pipe products and reduced shipments of welded pipe at the Company's Oregon Steel Division.

Oregon also said it was in violation of one of its revolving credit facility covenants, although it added that it was in talks with its lenders on getting a waiver and expected to have such a waiver and new covenants in place before it files its 10-Q report with the SEC.

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