Millennium Chemical retreats on paint-case verdict; Dana rebounds

By Paul Deckelman and Paul A. Harris

New York, Feb. 27- Millennium Chemicals Inc.'s bonds were seen down several points Monday in apparent response to last week's jury verdict in Rhode Island ruling the company and two other former makers of lead paint are liable for a product that was said to have poisoned children there for years.

On the upside, troubled Toledo, Ohio-based automotive components maker Dana Corp.'s bonds were seen higher on the news that Dana was continuing talks with its lenders and had gotten a covenant waiver in connection with its accounts receivable securitization facility.

Another troubled auto parts manufacturer, Tower Automotive Inc., was higher after reaching agreement with its unions on shutting down a Wisconsin factory as part of the Rochester Hills, Mich.-based company's efforts to trim overhead and reduce capacity.

In the primary market, players didn't see too much going on. Price talk emerged on Quebecor World Inc.'s upcoming issue of 10-year notes, which is expected to price on Wednesday, while market scuttlebutt has it that funding for MidOcean Partners' planned acquisition of water theme park operator Palace Entertainment Inc. is expected to include high-yield debt.

Overall, one sell-side official marked the broad high-yield market firmer on Monday.

"Everything our guys look at seems to be walking up," the source said.

With one session left in February 2006, this official asserted that the lack of new issue supply appears to be making itself felt in the prices of existing bonds.

The source added that this supply-demand effect could reasonably have been expected to emerge weeks ago, after the new issue spigot all but closed trailing January 2006's massive $16 billion of issuance. After all, with only one session remaining in February the new issue trickle totals a mere $5.7 billion.

Nevertheless, the source said, the unmistakable impact of the tight February new issue supply is a phenomenon that seems to have considerably lagged, not making itself felt in secondary prices quite recently.

Millennium down 2

Back in the secondary realm, a trader said that Millennium Chemicals' 9¼% notes due 2008 fell to 102.5 bid, 103.5 offered, down two points on the day, and well down from levels around 107.5 bid, 108.5 offered that they had held last week, before the lead paint case verdict.

He noted that even though Millennium is a unit of Lyondell Chemical Co., "Lyondell does not guarantee the debt, so they've been pressured."

The jury found that Hunt Valley, Md.-based Millennium's immediate corporate parent, Millennium Holdings LLC, and two other paint manufacturing companies, Sherwin Williams and NL Industries Inc., were liable for damages stemming from the effect of decades of lead-paint use. Lead was formerly used as a key element in making paint pigment - until it was discovered in the 1970s that it could cause severe health problems for young children who ingested it by eating paint chips.

Rhode Island was the first state to sue the paint industry over lead contamination, and the guilty verdict is expected to spur other, similar lawsuits elsewhere.

The Rhode Island suit did not seek a specific dollar amount - but did ask the jury to force the former manufacturers of lead pigment or paint to deal with the mess.

Still to be decided is whether the defendant companies might also have to pay punitive damages in addition to footing the bill for cleanup costs.

Cablevision gains on results

Elsewhere, Cablevision Systems Corp.'s bonds were seen up after the Bethpage, N.Y.-based cable operator and sports team operator's strong 2005 fourth quarter and full year earnings, spurred on by signing up new subscribers for its cable TV, internet access and telephone service, as well as the return of professional hockey this year to the company's Madison Square Garden following the labor problems that wiped out the whole 2004-2005 National Hockey League season.

Cablevision generated robust cash flow numbers, which company officials said on their conference call helped to improve its various measures of debt and , including net debt and its various debt-to-cash flow ratios, relative to the previous quarter's and to a year ago (see related story elsewhere in this issue).

A trader saw its 8 1/8% notes due 2009 at 103 bid, 103.5 offered, up ¾ point on the session, while its 7 5/8% notes due 2018 were half a point better at 97 bid, 98 offered.

However, another trader said that the company's bonds had done "nothing much," even while acknowledging the company had "a decent quarter," which saw it swing back into the black after the previous year's red ink. He saw the 8½% notes due 2009 up perhaps half a point at 102.75 bid, 103.75 offered.

Graphic Packaging rises

Another upsider, he said, was Graphic Packaging International Corp., on "no news," but because it's "one of the higher-yielding paper credits." He pegged the Marietta, Ga.-based paperboard maker's 9½% notes due 2013 up a point at 95 bid, 96 offered.

"They had been lagging the recent improvement in the forest products area, so finally they caught hold with the buyers," he said.

At another shop, a market source was quoting the company's 8½% notes due 2011 half a point better at 101.25.

SunCom up

The prospect that SunCom Wireless Holdings Inc.'s bondholders might be able to speak with a unified voice in discussions on the financial situation facing the Berwyn, Pa.-based wireless provider - the former Triton PCS - by the formation of an ad-hoc bondholder committee, helped push its 8½% notes due 2013 up a point at 98.5 bid, 97.5 offered.

Dana rebounds

But the day's big gainers came out of the distressed automotive area, with Dana leading the way in response to the company's announcement that it is working with its lenders on new financing and expects to have everything wrapped up within the next two weeks.

Market buzz that the company's efforts to line up new secured credit facilities were in trouble helped beat Dana's bonds down badly last week and caused a sharp widening of the cost of protecting its debt against a possible default in the credit default swaps market.

But on Monday the news was good, with Dana also announcing that it had gotten a waiver of the minimum credit rating requirement for its program securitizing payments due on its accounts receivables.

A trader saw Dana's 5.85% notes due 2015 up 1½ points at 61 bid, 62 offered, while its 7% notes due 2029 were at 62 bid, 63 offered, also up 11/2. He saw the shorter maturity debt gain even more, with its 6½% notes due 2008 two point better on the day at 65 bid, 66 offered and its 6½% notes due 2009 at 64.5 bid, 65.25 offered, well up from 62 bid, 63 offered.

Another trader saw Dana as "very volatile" and said that the day-over-day gains only tell half the story; for the 6½% '09 bonds, he said, Friday's closing level at 60.5 bid, 61.5 offered quickly gave way to Monday's opening levels at 65 bid, 66 offered, helped by Dana's announcement. The bonds pushed as high as 66.5 bid by midday, though after that, they came off that peak level to end at 63.5 bid, 64.5 offered, "net-net up three points, and up 5 to 6 points intraday."

Dana's New York Stock Exchange-traded shares - which lost most of their remaining value in volatile downside trading last week - were seen on the comeback trail Monday, jumping 27 cents (17.88%) to $1.78 on volume of 51.8 million, or more than 10 times the average daily turnover.

Tower gains on union deal

"The other volatile name" in that sector was Tower, whose 12% notes due 2013 pushed as high as 68.5 bid, before coming off that peak to finish at 66 bid, 67 offered - still up more than two points from the previous level at 63.5 bid, 64.5 offered.

However, another trader said he had seen the Tower bonds trading in that 66 bid, 68 context Friday and pronounced them unchanged at that level Monday. "The news didn't do them much good."

He was referring to the announcement that the bankrupt Novi, Mich.-based vehicular frames maker had reached agreement with the unions representing its workers at the company's plant in Milwaukee resolving issues arising from the planned closure next month of that plant. The agreement must still be approved by the bankruptcy court and the union members.

Tower also said that its board of directors had authorized management to begin negotiating with the union about the planned closing of its Greenville, Mich. plant.

Quebecor talks notes 8¾% area

Meanwhile in the primary, three deals that have been winding the investor roadshow trail are poised to price before the Friday close.

News emerged Monday on one of those.

Quebecor World Inc. is talking its $300 million offering of 10-year senior notes (Ba3/BB-) at 8¾% area, with pricing expected Wednesday morning.

Citigroup has the books for the debt refinancing and general corporate purposes deal from the Montreal-based commercial printer.

Rounding out the week's calendar at Monday's close were Bon-Ton Stores Inc., with a $525 million offering of eight-year senior notes (B2/B-) via Banc of America Securities and Citigroup, and Dave & Busters Inc.'s $175 million of eight-year senior unsecured notes (B3/CCC+) via JP Morgan.

Palace deal to include junk bonds

Further out along the new issue time-line, the financing for MidOcean Partners' acquisition of Palace Entertainment from an investor group led by Windward Capital is expected to generate new high-yield debt, according to an informed source.

JP Morgan will have the books, the source added.

The financing will also include a new revolver from General Electric Capital Corp.

Palace Entertainment owns and manages a portfolio of 32 family-oriented parks in eight states. Its brands include Boomers!, Malibu Grand Prix, Mountasia, Raging Waters, SpeedZone, Splish Splash, Silver Springs, Big Kahuna's and Wet 'N Wild.

The transaction is expected to close sometime in the second quarter of 2005, subject to financing and other customary closing conditions.

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