Western Wireless plans $600 million deal, others slate; Dana bonds firm on takeover news

By Paul Deckelman and Paul A. Harris

New York, July 8 - Western Wireless Corp. announced plans to raise $600 million by selling new seven- and 10-year notes in a quickly shopped deal that is expected to price on Friday, while several other issuers were heard Tuesday to be hitting the road with offerings of their own.

In secondary dealings, news that ArvinMeritor Inc. is mounting an unsolicited hostile takeover effort against larger auto parts rival Dana Corp. pushed the latter company's bonds up in moderately active trading.

In the primary, Tuesday's session - the second post-Fourth of July session - saw no deals price.

However the forward calendar continued to build, with four prospective issuers imparting intentions to tap junk-bond investors who are still thought to be loaded down with the cash that has reportedly come into the high yield asset class through the first half of 2003.

Bellevue, Wash.-based Western Wireless announced an offering of $600 million in tranches of seven-year non-call-four and 10-year non-call-five senior unsecured notes (expected ratings Caa2/CCC) on Tuesday. The deal, via Goldman Sachs, JP Morgan and Wachovia Securities, will launch on a brief roadshow Wednesday, and is expected to price on Friday.

Meanwhile the roadshow began Tuesday for Houston-based Westlake Chemical Corp.'s offering of $400 million of eight-year senior notes (Ba3/B+), which is expected to price late in the week of July 14. Credit Suisse First Boston, Banc of America Securities, Deutsche Bank Securities and JP Morgan will run the books on the refinancing deal.

The roadshow begins Wednesday for Columbus McKinnon Corp.'s offering of $100 million seven-year non-call-four senior secured notes (B3/B-). The Amherst, N.Y.-based manufacturer of hoists expects to price its deal during the week of July 14 via bookrunner Credit Suisse First Boston.

One market source told Prospect News on Tuesday that Columbus McKinnon, which is also a refinancing deal, could price early next week owing to the fact that the issuer is well known to high yield investors.

Also on Tuesday, MSX International, Inc., a Southfield, Mich.-headquartered provider of technical business services, began its roadshow for $100 million of five-year non-call-two senior secured notes (B2/B). The refinancing deal is expected to price early in the week of July 21 via Jefferies & Co.

Finally on Tuesday price talk emerged on the massive Calpine Corp. deal: $1.2 billion of senior secured second priority notes in three tranches which are expected to price on Thursday.

Price talk is 8¼%-8½% on the seven-year non-call-four fixed-rate notes. The 10-year non-call-five fixed-rate notes are talked 25 basis points behind the seven-year tranche. And the four-year non-call-two floating-rate notes are talked at Libor plus 575 basis points.

Goldman Sachs is the bookrunner on the San Jose, Calif.-based independent power producer's deal.

Meanwhile on Tuesday Louise Rieke, portfolio manager of the Waddell & Reed Advisors High Income Fund, told Prospect News that one portion of the high yield market might be expected to hitch a ride on the presently rallying equities market while another portion could just as easily fall somewhat behind.

"Historically high yield tends to parallel equities," said Rieke. "However I think that right now it's going to be a little different than has been the case historically because of the absolute low yields. The sector of the market that trades tight to Treasuries - these deals that have come with six- and seven-handle coupons - will be more sensitive.

"But when you get out into the bigger coupons, that sector still has some way to go. You still have a lot of total return left in that part of the market. The triple-C and single-B sectors of the market can still perform, I think, versus where Treasuries are going to go.

"We will track equities from that standpoint because the credit quality should be getting better for the companies. And of course the lower-tier credits represent a big sector of our market."

Prospect News inquired of Rieke whether two consecutive weeks of outflows from high-yield mutual funds - $144.3 million for the week ending July 2, which followed a $177.2 million outflow the previous week - taken in conjunction with continued strength in equities might signal a turning of the tides in a junk market that has rallied conspicuously through the first half of 2003.

"Historically you get money in during the first half of the year," said the Waddell & Reed portfolio manager, "so these outflows may be a seasonal phenomenon.

"Of course it might also be true that the tide is beginning to turn," she added. "Right now we have seen equity markets picking up. And you have to factor in the tax implications of the dividend exclusion. People may be becoming attracted to income from equity funds that pay dividends."

In the secondary arena, a trader saw the new Jacuzzi Brands Inc. 9 5/8% senior secured notes due 2010 continuing to firm up, quoting the new bonds of the West Palm Beach, Fla.-based maker of whirlpool tubs and other plumbing products as high as 103.25 bid, up from Monday's 102 bid, 103 offered, and well up from the par level at which they had priced on June 30.

Back among the established issues, the $2.2 billion Dana acquisition deal proposed by ArvinMeritor was the subject of some discussion and a fair amount of bond activity.

A trader said that Dana's 10 1/8% notes due 2010 had initially firmed to about 110 bid from its late-Monday levels in the 108-108.5 ballpark. But by day's end, he said, it had come off the highs, and was being offered around the same 110 level at which it had been bid for earlier. "Net-net on the day, it ended up maybe half a point to a full point," he said.

The trader observed that the proposed takeover was "something like the first we've seen in this sector [in a long while] and it's nice to see some consolidation. It may be a harbinger of things to come, as the economy starts to get better."

Even so, he said, investors proved a little more cautious about the Dana bonds by the end of the day, possibly because split-rated ArvinMeritor (Baa3/BB+) "is not that much of a credit-quality improvement" from Dana's Ba3/BB level - especially with both Standard & Poor's and Moody's Investors Service eyeing it for a possible downgrade should the costly deal go through. "People took it up, but then it came back in."

Another trader agreed that "this pickup in merger activity is definitely a further sign that people feel the economy has turned," and quoted Dana's 9% notes due 2011 as having improved to 108.5 bid, 110 offered from Monday's 107.5 bid, 108.5 offered. He saw the company's 10 1/8% notes due 2011 at 111 bid, 112.5 offered, up half a point on the bid side; its 7% bonds due 2029 up half a point at 87 bid, 88.5 offered, and its 6½% notes due 2009 slightly easier at 96.5 bid, 98 offered.

Meantime, he said, would-be acquirer ArvinMeritor's paper was "under pressure," with its 6.80% notes due 2009 falling to 99 bid, 101 offered from 104 bid, 105.5 offered on Monday, and its 7 1/87% notes due 2009 dropping to 99.5 bid, 101 offered from 105 bid, 106.5 offered. ArvinMeritor's 8¾% notes due 2012 likewise tumbled to 107.5 bid, 109 offered from 111.5 bid, 112.5 offered.

Troy, Mich.-based ArvinMeritor launched its $15 per share offer to Dana stockholders after it failed to get its larger Toledo, Ohio-based rival to discuss a possible buyout.

Elsewhere, HealthSouth bonds were quoted at lower levels from Monday, one trader saying that the notes "came in about three or four points across the board" after having "shot up" on Monday. But they were seen higher at another desk which thought people were still responding positively to the company's assessment of its finances.

The first trader quoted the company's senior notes in the 85.5 bid, 86.5 offered area and pegged its convertible bonds at 81 bid, 83 offered.

"I don't know if it was profit-taking or just people digging into the investor call held on Monday," he said, adding that "there wasn't a lot of substance on that call. Management just made projections, but didn't discuss how it was going to handle all of the investigations and lawsuits they have to deal with. And they still have to deal with two issues of maturing convertibles that they don't have the money for. They talk about getting new money - but the only place they could get that would be equity and where are they going to get someone to invest $500 million without being able to show audited financial statements?"

HealthSouth, a Birmingham, Ala.-based operator of diagnostic imaging and outpatient surgery and rehabilitative services centers told equity and bond investors at its meeting in New York on Monday and those listening in on a webcast that that it was expecting net revenue of $4.1 billion and free cash flow of $328 million over the next 12 months, as well as EBITDA of $650 million.

But the company still faces daunting challenges, including a civil probe by the Securities and Exchange Commission and a criminal investigation by the Justice Department of accounting fraud allegations, not to mention multiple lawsuits filed by disgruntled investors.

The trader declared that he saw no way out for the company but a Chapter 11 filing - a notion that management has steadfastly resisted, possibly, the trader said, because the current interim management is heavily invested in the company's stock, which would likely become worthless in the event of a reorganization, "along with its convertibles," he added. "If they filed now, they might be able to reorganize and they could get plenty of DIP (debtor in possession) financing - but management's equity stake would be wiped out. So right now, it seems like they're doing what they can to protect their own interests."

But another trader saw HealthSouth's bonds rising another 3 points Tuesday, making a 6 point jump in two days. He quoted the 6 7/8% notes due 2005 at 90 bid, 91 offered, while the 8½% notes due 2008 rose to 88 bid, 89 offered.

"That's a huge jump," he added. "Especially during this quiet period, with earnings coming up."

A trader saw Calpine Corp. bonds "going crazy" as the California-based power producer prepares for its upcoming $1.8 billion bond and loan financing. He quoted its 8½% notes due 2011 up more than two points on the session, at 82.5 bid.83 offered, while its 8¼% notes due 2005 firmed a point to 95 bid, 96 offered.

Also up, he said was Levi Strauss & Co.'s 11 5/8% notes, which moved up to 91 bid from prior levels at 88.5 bid, 89.5 offered.

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