Pilgrim's Pride, Stallion Oilfield Services deals price; Young Broadcasting up on Paxon/ION sympathy

By Paul Deckelman, Paul A. Harris and Stefanie N. Rotondo

New York, Jan. 19 - Pilgrim's Pride Corp. and Stallion Oilfield Services Ltd. were heard to have successfully priced bond offerings on Friday, bringing to a close a holiday-shortened week whose major event on the primaryside was the pricing of Aramark Corp.'s downsized - though still gigantic - two part mega-deal at mid-week.

While the Aramark bonds continued to trade Friday at the lofty levels to which they had moved when they broke into secondary, as did the new bonds of Tube City IMS Corp. and Open Solutions Corp., the new Pilgrim's Pride and Stallion issues were unable to do likewise, and both were seen trading not much changed from their issue levels.

In the secondary market, a trader saw good appreciation in the bonds of Young Broadcasting Inc., attributing their rise to sector sympathy generated by the news that Ion Media Networks Inc. - the company formerly known as Paxson Communications - had received a proposal to restructure its preferred and common stock, which would result in a tender offer for West Palm Beach, Fla.-based television broadcaster's outstanding common stock.

On the downside, technology names continued to struggle, with declines seen in both Amkor Technology Inc. and Freescale Semiconductor Inc. as the once high-flying high-tech industry continued to absorb body blows - the latest being Motorola Inc.'s announcement of big pending job cuts, as well as IBM Corp.'s equity retreat.

In the distressed-debt precincts, there was some activity in the bonds of Delta Air Lines Inc., spurred by the news that the bankrupt Atlanta-based Number-Three U.S. airline carrier's parent said it would soon submit US Airways Group Inc.'s revised takeover bid for Delta to its board for review.

A high yield syndicate official, speaking just after the close, said that the broad market was firm on Friday.

Meanwhile in the roaring hot primary market, three issuers raised slightly more than $1.1 billion by placing four dollar-denominated tranches of notes.

Pilgrim's Pride massively upsized

In Friday's largest transaction, Pilgrim's Pride Corp. priced a massively upsized $650 million two-part deal.

The Pittsburg, Tex., poultry producer priced an upsized $400 million issue of senior notes due May 1, 2015 (B1/B) at par to yield 7 5/8%, on top of price talk. The senior notes tranche was upsized from $250 million.

Pilgrim's Pride also priced an upsized $250 million tranche of senior subordinated notes due May 1, 2017 (B2/B) at par to yield 8 3/8%, also on top of price talk. The senior subordinated notes tranche was upsized from $200 million.

Lehman Brothers and Credit Suisse were joint bookrunners for the merger financing deal.

The overall two-part transaction was upsized to $650 million from $450 million.

On Thursday a source close to the transaction said that it was significantly oversubscribed.

Stallion prices $300 million

Also Friday, Houston-based Stallion Oilfield Services priced a $300 million issue of eight-year senior unsecured notes (B3/B-) at par to yield 9¾%, at the wide end of the 9½% to 9¾% price talk.

UBS Investment Bank led the deal. Credit Suisse and Lehman Brothers were joint bookrunners.

Proceeds will be used to repay bank debt and for general corporate purposes including acquisitions and capital expenditures.

In addition to the two U.S. issuers who completed deals on Friday, Brazilian beef exporter Industria e Comercio de Carnes Minerva Ltda., issuing via subsidiary Minerva Overseas Ltd., priced a $150 million issue of 9½% 10-year notes (/B/B+) at 97.646 to yield 9 7/8%.

The yield came 12.5 basis points inside of the 10% to 10¼% price talk.

Credit Suisse was the bookrunner for the Rule 144A and Regulation S transaction.

A $4 billion week

Tallying Friday's issuance, the Jan. 15 to Jan. 19 week came to a close having seen slightly more than $4 billion of issuance.

That also represents the total amount of issuance for all of 2007 to the Jan. 19 close, as the previous week had seen no deals pricing whatsoever.

Comparing 2007 year-to-date issuance with that of the record breaking year of 2006, perhaps not surprisingly 2007 trails 2006 in terms of dollar amount.

At the Jan. 19, 2006 close, the primary market had seen more than $6.55 billion.

However in terms of deal volume it's a dead heat.

In both 2006 and 2007 14 dollar-denominated tranches had been priced by the Jan. 19 close.

The week ahead

Heading into the Jan. 22 to Jan. 26 week, the market expects to see $2.375 billion of bonds price in nine tranches.

The breakdown is as follows:

• Allis-Chalmers Energy Inc. is expected to price $225 million of 10-year senior notes early in the week via RBC Capital Markets;

• Baldor Electric Co. has been marketing a $550 million offering of 10-year senior notes (B3/B) via BNP Paribas and Lehman Brothers;

• Snoqualmie Entertainment Authority expects to price a $320 million two-part offering of senior notes (B3/B) - a $120 million tranche of seven-year floating-rate notes and a $200 million tranche of eight-year fixed-rate notes. Bear Stearns has the books;

• MasTec, Inc. has been roadshowing $150 million of 10-year senior notes (B1/B+) via Morgan Stanley;

• Alion Science & Technology Corp. is marketing a $200 million offering of eight-year senior notes (CCC+) via Credit Suisse; and

• Sbarro, Inc. expects to price $150 million of eight-year senior notes (Caa1/CCC) via Credit Suisse and Banc of America Securities.

In addition to these offerings from U.S.-based companies, Mexican glassmaker Vitro SAB de CV plans to price $750 million of bank debt and/or senior unsecured notes, including $250 million minimum of notes due 2012 and $250 million minimum of notes due 2017. Morgan Stanley, Credit Suisse and Lehman Brothers are in the lead.

And turning to Eastern Europe, Polish steel producer Zlomrex SA is marketing €170 million of seven-year senior secured notes, also via Rule 144A and Regulation S.

On Friday the company talked the Caa1/B rated deal at 8½% to 8¾%.

Pricing is expected early in the week.

Deutsche Bank Securities is the bookrunner.

New deals not much changed

When the new Pilgrim's Pride two-part deal was freed for secondary dealings, a trader saw the senior bonds at 100.125 bid, 100.875 offered, and the subordinated paper at 100.25 bid, 101.25 offered.

At another desk, a trader was quoting both issues in a par to 100.5 context, but said he hadn't seen any actual trades in it. Both tranches had priced at par earlier in the session.

He meantime saw Stallion Oilfield Services' 9¾% notes due 2015 in a narrow par to 100.25 range. Another trader saw them straddling their par issue price, at 99.875 bid, 100.125 offered.

The anemic aftermarket performance of Friday's two new issues stood in marked contrast to the enthusiastic reception the secondary market gave to the week's previous new deals, with Aramark's 8½% notes and floating-rate notes, both due 2015, Tube City's 9¾% notes due 2015, and Open Solutions' eight-year 93/4s all heard to have pushed solidly higher from their respective par issue prices when they broke and all finally settling in up somewhere around 2 points, a trader said.

ION offer gives Young a boost

Back among the established issues, Young Broadcasting's 8¾% notes due 2014 were seen up 1½ points to 91 bid, 92 offered, attributing the rise in the New York-based television station group owner's bonds to "sympathy" on Thursday's announcement about the offer to buy out ION Media Networks - news which could spark more sector-consolidation transactions, so the theory goes.

At another desk, a market source pegged Young's 10% notes due 2011 up ½ point at 98.75.

The first trader meantime saw no activity in ION's own floating-rate bonds - issued back when the company was still called Paxson - noting that "you never see them around."

Under the terms of the a proposal that ION received Thursday from NBC Universal Inc. and Citadel LP, a tender offer for Ion's class A shares would commence upon the earlier of either May 6 or regulatory approval of the transfer to a Citadel affiliate of NBC Universal's call right on the voting securities held by affiliates of Lowell Paxson, the company's founder. The call rights were granted under a complicated deal which Paxson had entered into several years ago which gave NBC's parent, General Electric Co., an option to buy the smaller company.

Further delay in Adelphia

In activity Friday among other media names, a trader saw Adelphia Communications Corp.'s 9 7/8% notes due 2007 up ½ point at 102.

However, another trader pegged the bonds of the bankrupt Greenwood Village, Colo.-based company - formerly the operator of the fifth-biggest cable-TV network in the United States - as unchanged, its 10¼% notes due 2011 around 104 bid and its 10¼% notes that were to have matured last year at around par.

Those bonds had recently firmed smartly to those levels in anticipation of Adelphia's emergence from Chapter 11, after nearly five years in the bankruptcy court dock, with bondholders to get the shares of Time Warner Cable given to Adelphia when it sold its assets last year to Time Warner Cable and the latter's partner and sometimes rival, Comcast Corp.

However, the emergence has been delayed as several creditor groups continue to squabble over the division of the proceeds from that $17 billion sale, even though the U.S. Bankruptcy Court for the Southern District of New York, which oversaw the Adelphia reorganization, confirmed the Adelphia plan earlier this month.

Late Friday, well after the close, Adelphia announced that a stay of that confirmation order sought by the disgruntled creditors was being again temporarily extended, further pushing back the scheduled emergence. The record date for the distribution of sale proceeds to noteholder claimants and equity claimants, which had previously been set for this past Wednesday, will be changed to a date to be determined, and then announced in a subsequent notice to be filed with the court.

Delta board to get bid

Elsewhere among the distressed names, Delta Air Lines was seen having regained recently lost points amid the news that the company will soon formally review the increased takeover bid from U.S. Airways.

The company's 8.30% notes due 2029 edged up just over 2 points, a trader said, closing the day at 70.25.

However, another trader called the notes essentially unchanged on the day.

News reports said that Delta will soon take the revamped bid from U.S. Airways to its board for consideration. However, it should be noted that such an announcement does not imply that Delta- which had repeatedly and publicly opposed the US Airways bid to buy it - has softened its position. Management said in the announcement that it was legally obligated to fulfill its fiduciary duties to the company's shareholders, and to consider the bid.

Tempe, Ariz.-based US Airways - created in late 2005 out of the merger of US Airways, then itself in the throes of a bankruptcy case, with the smaller but more financially sound low-cost carrier AmericaWest Airlines - announced on Nov. 15 that it was offering to buy Delta for $4 billion in cash and somewhat more than $4 billion in stock. On January 10, it upped its acquisition offer by 20% to $10.2 billion total.

The announcement that the board will consider the US Air bid came on the heels of an amended disclosure statement Delta filed with the bankruptcy court. According to court papers, the company is seeking to eliminate a new equity investment rights offering for general unsecured creditors. The amended plan allows for the recovery of 62% to 78% in new common stock, as opposed to the original plan, which called for 63% to 80%.

Delta further announced that it would increase some of its domestic fares by $5, a move in line with other domestic carriers. The system-wide increase comes as oil prices, well below their summer highs, saw a little bounce in the market Friday. After dropping to intra-day levels on the New York Mercantile Exchange just below $50 a barrel on Thursday, crude oil prices jumped $1.51 to $51.99 Friday.

But the potentially higher jet fuel prices did little to dampen investor enthusiasm for Northwest Airlines Corp., whose 7 7/8% notes due 2008 were quoted up a point at 105. No firm positive news was seen out on the bankrupt Eagan, Minn.-based Number-Five domestic airline's parent.

Amkor, Freescale easing, but Unisys up

Back among the non-distressed names, bonds of semiconductor manufacturers and other companies that service them continued to struggle as investors warily regarded the sector's troubles.

A market source saw Amkor's 7¾% notes due 2013 down a point at 94 bid, while Freescale's 10 1/8% notes due 2016 were down ¾ point at par, both continuing a retreat seen on Thursday.

However, a trader at another desk called MagnaChip International Ltd.'s 8% notes due 2014 a point better at 65.25 bid, 66.25 offered, although he saw "no news" out on the company. He attributed the rise to "retail buying," i.e. by non-institutional investors.

And he saw Unisys Corp.'s 8% notes due 2012 up ½ point on the day and a full point on the week at 99.75 bid, 100.75 offered, surmising that the bonds of the Blue Bell, Pa.-based information technology solutions company's "in front of their numbers up next week." Furthermore, he said, the bonds were moving "perhaps in sympathy with IBM."

Big Blue late Thursday reported very respectable numbers - an 11% gain in net profit to $3.54 billion, or $2.31 per share, on revenue of $26.3 billion, beating year-ago levels. However, IBM shareholders were not satisfied, and its stock fell $3.28, or 3.3%, to close at $96.17 on the New York Stock Exchange. Analysts speculated that investors were disappointed that a fair portion of the gains came from such factors as currency fluctuations and tax rate changes, rather than from the company selling or servicing more computers.

IBM's mixed bag was typical of a tech sector that has struggled lately, with chip industry bellwether Intel Corp. having recently issued disappointingly conservative profitability guidance.

And on Friday, another big name, Motorola, posted a 48% drop in fourth-quarter earnings versus a year-ago and said that it would eliminate as many as 3,500 jobs over two years as a money-saving measure.

Hooters, Movie Gallery could move on Monday

A trader said that after the market closed the news came out that a suitor had made a bid to acquire 155 East Tropicana LLC - better known in the market as "Hooters," the name of its popular restaurant chain. He said that he had heard that its 8¾% notes due 2012, which had been at 85.5 bid, 86.5 offered during the session, were being quoted after-hours at a sharply higher 95.5 bid, 96.5 offered, but emphasized that he had seen "no trades - and it's very late."

It was thought that the late developments might have an impact on the company's bonds on Monday.

And distressed-market watchers were speculating that there could be Monday activity in Movie Gallery Inc.'s 11% notes due 2012, after the Dothan, Ala.-based video rental chain operator Friday filed its delayed third-quarter report, showing a wider quarterly loss, and warned of credit facility covenant default danger, saying it would need alternative financing soon.

Movie Gallery's filing and warning were not altogether news, as one trader remarked, but he said the company's acknowledgement that it is in danger of defaulting on credit facility covenants could put some pressure on the bonds, once short-covering subsides.

As it was on Friday, he said he saw nothing in the bonds, and the stock also closed the session unchanged. But, he said it has been noted previously that there is a fairly substantial short position in the bonds.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.