Lyondell prices upsized $510 million; junk rallies from Asian-sparked sell-off; Calpine bonds lower

By Paul A. Harris

St. Louis, May 30 - U.S. capital markets faced trouble from China as the Wednesday session got underway.

In an attempt to take some of the steam out of its raging bull stock market the Chinese government increased a trading tax, raising it to 0.3% from 0.1%.

The strategy appeared to work, at least through the Asian session, with Chinese equities nose-diving and the Shanghai composite index dropping 6.5%, according to one source.

"It's a quiet market," a junk trader commented on Wednesday morning.

"People are taking a step back on the China news."

However as Wednesday wore on in New York, both stocks and junk bonds beat their respective ways back.

By the close, sources were marking junk unchanged on the day.

At the end of the session, a hedge fund manager, who said the secondary market had been very quiet throughout the Wednesday session, spotted the high yield-tracking CDX 100 index at par 7/16 bid, par 9/16 offered, and added that it was the third day in a row that the index had closed at that level.

Lyondell brings a half billion

Lyondell Chemical Co. priced an upsized $510 million issue of 10-year senior unsecured notes (/B+/BB-) at par to yield 6 7/8% in a quick-to-market Wednesday transaction.

The yield was printed on top of the price talk while the deal was increased from a planned size of $500 million.

Citigroup, Banc of America Securities LLC, Deutsche Bank Securities and JPMorgan were joint bookrunners for the debt refinancing deal from the Houston-based chemical company.

Shortly after the bonds broke for trading, one source saw them at par 1/8 bid, par 3/8 offered.

Later a trader said Lyondell's 6 7/8% notes due 2017 were at 100.25 bid "out of the gate," and stayed there.

Later still a source close to the deal spotted the paper at par 3/8 bid, par ½ offered.

Puget Sound sells hybrid

Meanwhile Puget Sound Energy, Inc. priced a $250 million issue of 60-year series A enhanced junior subordinated notes (expected ratings Ba1/BB) at a 210 basis points spread to Treasuries, on top of the price talk.

The notes, which were sold at par, will bear interest at 6.974% until June 1, 2017, after which the coupon will float at a 253 basis points spread to three-month Libor.

Lehman Brothers, JP Morgan and Morgan Stanley were joint bookrunners for the debt refinancing deal from the Bellevue, Wash., energy retailer.

MetroPCS to tap 91/4s

Dallas-based MetroPCS Communications, Inc. is expected to price a $300 million add-on to its 9¼% senior notes due 2014 on Thursday, selling the bonds via Bear Stearns.

Proceeds will be used for general corporate purposes, which could include financing the company's participation in and acquisition of additional spectrum in the upcoming Federal Communications Commission's 700 MHz auction.

The original $1 billion issue was sold in November 2006.

The deal was announced early Wednesday morning, and some market sources had been expecting it to price before the close.

However no terms had been heard as Prospect News went to press.

Nor had any price talk been circulated, according to a sell-side source.

Calpine rumor mill

Although traders and other sources generally marked the secondary market as quiet on Wednesday, they allowed that Calpine securities were on the move.

Calpine converts were up but the bonds lower on a rumor that as part of its plan for exiting bankruptcy Calpine will retire its unsecured paper at par plus accrued interest.

In this scenario, the source explained, only holders of the convertibles would receive some equity.

One source had Calpine's 7¾% convertible notes due 2015 at 138.50 bid, 140.50 offered on Wednesday, improved from 136 bid, 137 offered on Tuesday, up 2 or 3 points on the day.

However Calpine's 8½% notes due 2011 were at 127.50 bid, 128.50 offered, down from 128.50 bid, 129.50 offered on Tuesday.

Calpine send a draft of its reorganization plan to the creditors and said it is willing to negotiate disputed claims

This source also noted that Calpine's stock was up $0.28 on the day.

Ford paper lower

News that a sale by Ford Motor Co. of its Volvo unit in by no means imminent sent its securities lower Wednesday morning.

A trader, mentioning that Ford stock was "down a dime," spotted Ford's bonds due 2031 at 81 3/8 bid, 81 7/8 offered, down from 83 on Tuesday.

The source added that Ford's five-year CDS was at 500 bps bid, 505 bps offered, on Wednesday morning, unchanged to perhaps down a little.

Prices on recent issues were in scarce supply on Wednesday. However one source spotted the Fontainebleau Las Vegas Holdings, LLC/Fontainebleau Las Vegas Capital Corp. 10¼% second mortgage notes due 2015 at 103 bid, versus 102.75 bid, 103.25 offered on Tuesday.

The company priced a $675 million issue of Caa1/CCC+ paper at par last week.

Finlay, Mrs. Fields dip

Meanwhile a trader, noting that the market pretty had been stable on Wednesday, without a huge amount of activity but busier than Tuesday, saw weakness in the existing issues of Finlay Enterprises, Inc. and Mrs. Fields Cookies.

Mrs. Fields' 11½% notes were at 86.75 bid, 91 offered on Wednesday, down and wider from the close of 89.50 bid, 90 offered on Tuesday, the source said, remarking upon the wide bid-offer gap.

Meanwhile the Finlay 8 3/8% notes due 2012 were also lower at 89.75 bid, 90 offered, the trader said, remarking that earnings weren't awful, but adding that people had been hoping that they would be better.

Finally, a sell-side source said that the existing issues of Berry Plastics traded off on news that the company was about to launch a $500 million seven-year senior unsecured holdco PIK toggle term loan (CCC+) in order to fund a dividend.

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