Church & Dwight, DRS, Goodman, Landry's price; Levi up on tender offer for notes

By Paul Deckelman and Paul A. Harris

New York, Dec. 15 - The high-yield primary market kept up its furious pace of new-deal activity Wednesday, trying to clear the decks and get everyone's financing in before things roll up for the year. Issuers seen successfully bringing deals to market during the session included DRS Technologies Inc., which priced an upsized add-on offering to its existing notes, Goodman Global Holdings Inc., Church & Dwight Co. Inc., Veneco Inc. Standyne Holdings Inc., and Landry's Restaurants Inc., which downsized its 10-year offering by $50 million.

In the secondary market, Levi Strauss & Co.'s 7% notes due 2006 were seen up solidly on news that the San Francisco-based apparel company will tender for the notes and pay for them using the proceeds of a planned new issue.

Nextel Communications Inc. bonds were seen higher, as the Reston, Va.-based wireless operator officially announced its planned merger with Sprint Corp.

The primary market saw an even $1.75 billion of bonds price Wednesday in seven tranches, as sources told Prospect News that the lights of the 2004 year-end holiday season are coming into sight.

Volume beats 2003

But that issuance was enough to take the year-to-date volume past the total for all of 2003, according to data compiled by Prospect News.

Through Wednesday's close, $138.505 billion of junk bonds in 559 deals have been issued in the U.S. market, beating the $138.483 billion total in 506 deals for last year as a whole. The figures cover dollar-denominated transactions sold in the United States and include junk-rated emerging markets corporates.

From comparable industry data, that would appear to make 2004 the second busiest year ever for high-yield bonds after 1998, although Prospect News' data does not run back earlier than 2001.

Of Wednesday's seven tranches two were upsized, one was downsized, four came at the tight end of price talk and three came at the wide end.

Of the four tight-pricing tranches, Goodman Global Holdings Inc. priced two, leading the mid-week session with $650 million of issuance.

"Everybody is trying to get their deals in, but I think it's going to start wrapping up," one investment banker suggested well after the mid-week session had concluded.

"On a practical level I don't think people are going to try to do too much after next Tuesday," the sell-sider added. "I don't think anybody is going to be announcing anything next week.

"But from people I have talked to, plus what we have going on, I think it's going to be a pretty busy January."

Goodman $650 million at tight end of talk

The session's biggest issuer was Houston heating and air conditioning company Goodman Global Holdings Inc. which sold $650 million of bonds in a two-tranche acquisition financing.

The company sold $250 million of senior floating-rate notes due June 15, 2012 (B3/B-) at par to yield six-month Libor plus 300 basis points, tight to the Libor plus 300-325 basis points talk.

In addition Goodman Global sold $400 million of eight-year senior subordinated notes (Caa1/B-) at par to yield 7 7/8%, again tight to the 8% area price talk.

UBS Investment Bank, JP Morgan and Credit Suisse First Boston were in charge of the thermostat.

Landry's shifts $50 million to revolver

The only deal to be downsized during the session came from steak and seafood restaurateur Landry's Restaurants Inc., also a Houston-based company.

Landry's priced a reduced $400 million of 10-year senior notes (B2/B) at par to yield 7½%, at the wide end of the 7¼% to 7½% talk. The deal was cut from $450 million.

The $50 million by which the deal was downsized was shifted to the company's revolver.

Wachovia Securities, Banc of America Securities and Deutsche Bank Securities ran the books debt refinancing/general corporate purposes issue.

Church & Dwight upsized

As had been anticipated by various market sources in the run-up to Wednesday's session, Church & Dwight Co. Inc. generated healthy demand for its eight-year senior subordinated notes (Ba3/B+).

The deal was upsized to $250 million from $175 million and priced at par with a 6% yield, at the tight end of the 6% to 6¼% price talk.

One source told Prospect News that the offering had generated significant interest among "crossover" accounts.

JP Morgan and Citigroup ran the books for the debt refinancing deal from the Princeton, N.J., manufacturer of personal care, household and specialty products.

DRS Technologies drives by

One of two quick-to-market deals that appeared Wednesday came from Parsippany, N.J. defense electronics supplier DRS Technologies, Inc., which priced an upsized $200 million add-on to its 6 7/8% senior subordinated notes due Nov. 1, 2013 (B2/B).

The add-on priced at 105.0, resulting in a 5.971% yield to maturity, bringing it tight to the 104.5 to 105 price talk.

Bear Stearns & Co. ran the books for the debt refinancing and acquisition funding deal, which was increased from $150 million.

The original $350 million issue priced at par on Oct. 16, 2003, bringing the current new issue size to $550 million.

Veneco, Stanadyne complete deals

In the rest of Wednesday's action, Venoco, Inc. priced $150 million of 8¾% seven-year senior notes (Caa1/CCC+) at 99.362 to yield 8 7/8%, on the wide end of the 8¾% area price talk.

Lehman Brothers and Harris Nesbitt ran the books for the debt refinancing, dividend funding and acquisition-related deal from the Carpinteria, Calif.-based independent energy company.

And Stanadyne Holdings Inc. sold $100 million of senior discount notes due Feb. 15, 2015 (B-) at 58.145 to yield 12%, at the wide end of the 11¾% to 12% price talk.

The sale generated $58.145 million of proceeds.

Goldman Sachs & Co. ran the books for the Windsor, Conn.-based automotive technology company's issue, proceeds from which will be used to fund a distribution to stockholders.

Levi drive-by

The other company to appear with quick-to-market business Wednesday was San Francisco pants-maker Levi Strauss & Co.

At 10 a.m. ET Thursday morning, the apparel company will attempt to persuade the accounts, via an investor telephone call, to slip into its offering of $375 million of 10-year non-call-five senior notes.

Citigroup has the tape measure.

The company plans to use the proceeds to refinance $375 million of the company's $450 million 7% notes due Nov. 1, 2006.

Asian issuers in U.S. junkland

Sources also said Wednesday that there is considerable interest among U.S. junk players in a pair of offerings expected to price Thursday.

Magnachip Semiconductor issued price talk on its $750 million three-part bond offering on Wednesday.

The South Korea-based chip-maker plans to sell $500 million of notes to be split between a seven-year non-call-one floating-rate bond, price talk Libor plus 325 to 350 basis points, and seven-year non-call-four fixed-rate second priority senior secured bond, price talk 6 7/8% to 7 1/8%.

In addition Magnachip plans to sell $250 million of 10-year non-call-five senior subordinated fixed-rate notes, price talk 8% to 8¼%.

UBS Investment Bank, Citigroup, Goldman Sachs & Co. and JP Morgan will run the books.

Meanwhile price guidance of 8% to 8¼% was heard on Asia Aluminum Holdings Ltd.'s $425 million of seven-year senior unsecured notes (Ba3/BB), expected to price Thursday morning New York time via Morgan Stanley.

The Hong Kong-based processed aluminum producer will use the proceeds to repay the company's existing $75 million syndicated loan and for capital expenditures, with part of the proceeds to be kept in an escrow account in the event that a minority shareholder exercises a put option.

New deals higher in trading

When the new Church & Dwight 6% notes due 2012 were freed for secondary dealings, they were seen having improved to 100.625 bid from their par issue price earlier in the session. But the best aftermarket performance seemed to come from Venoco's 8¾% notes due 2011, which firmed to 101 bid, 101.75 offered from their 99.362 issue price earlier on.

The DRS Technology 6 7/8% add-on notes due 2013 inched up to 105.25 bid, 105.75 offered from their 105 issue price. But Goodman Global's floating rate notes got as good as 101.25 bid, 102 offered from a par issue price, while its 7 7/8% fixed-rate notes ended at 100.375 bid, 10075 offered, also up from par.

Levi Strauss 7s up

Back among the established issues, a trader saw Levi Strauss's 7% notes firm to 105.25 bid, 106 offered from Tuesday's levels about 103 bid, 104 offered on the news that Levi will sell $375 million of new bonds and use the proceeds to tender for a like amount of 7% notes.

"Everybody else is accessing the market these days," he quipped, "so why not them?"

The appreciation was, understandably, much less pronounced in the company's other two outstanding issues, which are not involved in the tender offer; Levi's 11 5/8% notes due 2008 ended at 105.25 bid, 106.25 offered, while its 12¼% notes due 2012 closed at 112.5 bid, 113.5 offered, both up ¼ point.

At another desk, a trader saw the 7s get as good as 105.625 bid, 106 offered, before backing off that peak level to end at 105.375 bid, 105.875 offered.

Noting the way yields have come in of late in issues like Levi and other below-investment grade names, trading now well above par, the first trader opined that "I'm kind of getting to believe there is no junk bond market any more. It's more like 'investment-grade lite.'"

Nextel higher still

Nextel is another name that has appreciated smartly to levels above par, particularly over the last few days, after news began circulating late last week that Nextel and Sprint were in merger talks, and that advance picked up steam as it became more apparent that there would be a merger transaction coming out of all of the speculation.

The trader saw Nextel's 5.95% notes due 2014 as having pushed up to 106 bid, 106.25 offered on Wednesday following the official announcement of the merger (see related story elsewhere in this issue), up from 105.25 bid, 105.75 offered, and well up from levels around 104.5 bid, 105.5 offered on Dec. 10, when the bonds had a major advance on the second day the merger talk was in the market.

He noted that the bonds had actually gotten up to 106 on Monday, and then moved back down on Tuesday, when news stories circulated saying that Sprint and Nextel competitor Verizon Wireless' corporate parent, Verizon Communications, might toss a monkey wrench into the gears by coming in with its own bid to buy Sprint in order to create the nation's biggest wireless operator, while freezing Nextel out. However, that market scuttlebutt proved to be groundless, as Vodafone Group plc, Verizon Wireless' co-owner said it had had no talks with Verizon Communications on such a step and other reports quoted sources close to Verizon as saying it would not pull the trigger on a bid for Sprint.

At another desk, a market source saw all of the Nextel bonds "up a little," with the 5.95s up 1/8 on the day at 105.75 bid, the company's 6 7/8% notes due 2013 half a point better at 110.5 and its 7 3/8% notes due 2015 half a point better at 112.

Nextel Partners - which might be bought out by one-third owner Nextel following the completion of the merger - was up about ¼ point on the session, its 8 1/8% notes due 2011 ending at 112.25 bid and its 11% notes due 2010 firming to 112.75.

MCI 10-years gain

Also in the telecom sphere, MCI Inc.'s 10-year notes were seen up ¾ point at 109, after the Ashburn, Va.-based long-distance carrier reset the coupons on its three series of outstanding notes upwards by 1%, following Moody's Investors Service assigning a B2 rating to the notes, and Standard & Poor's having recently given them a B+.

The new coupon on the 10-years is 8.735%. However, the shorter MCI bonds were quoted lower, with the newly re-set 6.908% notes due 2007 off 1¾ points at 102.25 bid, and its 7.688% notes due 2009 off 3/8 point at 104.125.

Hollywood Entertainment down

Also on the downside, Hollywood Entertainment Corp.'s 9 5/8% notes due 2011 lost nearly two points on the session to 107 bid, after billionaire investor Carl Icahn said in a filing with the Securities and Exchange Commission that he supports a $700 million bid for Hollywood made by rival movie rental chain Blockbuster Inc. Icahn said in his filing that following recent stock purchases he is the largest shareholder in both companies and feels that the Blockbuster offer makes more financial sense than two other offers for Portland, Ore.-based Hollywood - one from smaller movie-rental chain Movie Gallery Inc. and a bid by senior Hollywood management to take the company private with backing from Leonard Green & Partners.

The Hollywood bonds had soared as high as 114 some weeks back on the news that the Green deal, thought to have died over the summer, was revived, although in smaller form. But they fell back to the 107-108 area when Blockbuster made its counter-offer.

Calpine higher

Back on the upside, Calpine Corp. bonds were up several points, although no one could cite any actual fresh news about the San Jose, Calif.-based power generator.

A trader saw its 8½% notes due 2008 at 78 bid, 79 offered, up from prior levels at 76.5 bid, 77.5 offered, and said the bonds may have actually moved a little higher after he saw that quote. The 81/2s due 2011 moved up to 73 bid, 74 offered from 71.5 bid, 72.5 offered.

A market source at another shop saw Calpine's 8.4% notes due 2012 up more than two points, ending at 93 bid.

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