Pride, Range Resources deals price; Qwest firms on report of settlement talks

By Paul Deckelman and Paul A. Harris

New York, June 22 - Energy seemed to be where it was at in the high-yield primary market Tuesday, as oil service operator Pride International Inc. sold a solidly upsized issue of 10-year notes, while E&P player Range Resources Corp. was heard to have priced an add-on to its existing 7 3/8% senior subordinated notes due 2013.

In secondary market dealings, Qwest Communications International Inc. bonds firmed after The Wall Street Journal reported that the Denver-based telecommunications company was in talks with federal regulators aimed at settling its legal problems with the government once and for all.

And HealthSouth Corp. notes were half a point better after the Birmingham, Ala.-based provider of outpatient medical services announced that it had gotten its noteholders to agree to waive a default, allowing the company to proceed with its restructuring efforts without having to worry about the creditors accelerating its debt and possibly forcing it into a bankruptcy filing.

A "receptive" buy-side made possible the upsizing of a pair of junk bond deals - one apiece on either side of the Atlantic - during Tuesday's primary session, accounting for two out of the session's three new offerings.

Meanwhile the forward calendar continued to build, and the investment banks continued to set the stage for the late part of the last full week of June 2004.

Pride ups deal to $500 million

Houston-based drilling contractor Pride International, Inc. priced an upsized $500 million issue of 10-year senior notes (Ba2/BB-) at 99.474 on Tuesday to yield 7.45%, just inside of the 7½% area price talk.

Citigroup, Banc of America Securities and Deutsche Bank Securities ran the books for the debt refinancing deal.

An informed source said that the deal, which had upsized from $400 million during its roadshow, did very well.

TUI four times oversubscribed

Meanwhile Hanover, Germany-based tourism group TUI AG also upsized its issue to €400 million from €250 million, pricing the five year floating-rate senior notes at par in London on Tuesday morning.

The new TUI floaters came at three-month Euribor plus 210 basis points, inside of the three-month Euribor plus 215-230 basis points price talk.

Royal Bank of Scotland and WestLB ran the books on the debt refinancing deal.

An informed source told Prospect news that the TUI deal represented the first-ever senior floating-rate note done for a non-investment grade company in Europe.

"Previous floating-rate notes/second lien notes have been subordinated 'fillers' between high yield and senior bank tranches, or high yield substitutes," the source noted in a Tuesday morning email message.

"This one is fully senior with the company's bank debt and has effectively opened the senior floating-rate note market for non-investment grade issuers."

The source went on to say that the TUI deal was "marketed sans roadshow, with a single investor conference call last Friday afternoon. Price talk was released Monday morning and books closed over-subscribed 4 times by Monday lunchtime in London."

Thirty percent of the book was comprised of domestic German names, with the remainder coming from continental Europe, the source added, noting that the action took place principally among non-investment grade buyers, but with good investment-grade buying interest, the latter "searching for yield."

The source went on to characterize TUI as a BB equivalent credit (the notes contain a 75 basis points coupon step-up in the event the company has not gotten a rating within 18 months).

"It is a strong de-leveraging story," said the source, "and it demonstrates investor appetite for floating rate exposure at a time of fears over interest rate rises."

Range $100 million add-on

Also pricing Tuesday was Range Resources Corp.'s $100 million add-on to its 7 3/8% senior subordinated notes due July 15, 2013 (B3/B).

The add-on priced at 98.125 resulting in a 7.667% yield.

Price talk on the JP Morgan and UBS Investment Bank-led deal was 97.75-98.50.

The Fort Worth oil and gas company intends to use the proceeds to partially fund the acquisition of the 50% of Great Lakes Energy Partners, LLC that Range does not currently own or, if the acquisition fails to close, for general corporate purposes.

The original $100 million issue priced at 98.272 on July 16, 2003, to yield 7 5/8%. Hence, with the pending sea change in U.S. interest rates looming, Range Resources got a rate on its new notes slightly over 40 basis points higher than the one it printed on the notes it sold almost one year ago.

Kabel Deutschland talks €700 million

Prospective issuers began setting the stage for the latter reaches of the June 21 week during Tuesday's session.

Kabel Deutschland GmbH, the largest cable network operator in Europe, issued price talk of the 10¾% area on the dollar tranche and the 11% area on the euro tranche of its €700 million equivalent offering of 10-year senior notes (B3/B/B+).

Tranche sizes remain to be determined on the acquisition financing deal that is expected to price on Thursday via Deutsche Bank Securities and Morgan Stanley.

Meanwhile price talk is 10%-10¼% on Medical Device Manufacturing, Inc.'s $190 million offering of eight-year senior subordinated notes (Caa1/B-), expected to price Wednesday afternoon, via Credit Suisse First Boston.

Price talk is 9¾%-10% on Ames True Temper's offering of $150 million of eight-year senior subordinated notes (Caa1), expected on Wednesday afternoon, via Banc of America Securities

And price talk of 10 ¾%-10 7/8% emerged Tuesday on Wornick Co.'s $125 million of seven-year senior secured notes (B2/B+), expected to price late Thursday or Friday, via Jefferies & Co.

Allied Security, TPSA, Rompetrol plan junk

Timing news emerged Tuesday on three new deals.

Allied Security, Inc. started a roadshow Tuesday for $175 million of seven-year senior subordinated notes, via Bear Stearns & Co. The roadshow finishes on June 30.

The King of Prussia, Pa.-based private security company will use the proceeds in an acquisition financing.

Meanwhile TPSA Eurofinance SA, a financing subsidiary of Telekomunikacja Polska SA, was heard to presently be on the road with a €300 million minimum offering of seven-year bonds. Roadshow stops are scheduled for Paris on Wednesday and Frankfurt on Thursday.

BNP Paribas and Deutsche Bank have the books.

Finally Rompetrol Group Netherlands NV will start a six-day roadshow Wednesday in Athens for €250 million of senior notes that are expected to come with a three- to seven-year maturity (/B-/B-).

JP Morgan will run the books on the deal from the vertically integrated Romanian private oil company, based in Bucharest.

Pride up in trading

When the new Pride International 7 3/8% senior notes due 2014 were freed for secondary trading, they were heard to have firmed to 100.75 bid, 101 offered from their 99.474 issue price earlier in the session.

Likewise, the new Range Resources 7 3/8% add-on notes due 2013, which had priced earlier in the day at 98.125, were seen having moved up by the end of trading to 99.25 bid, 99.75 offered.

Qwest stronger

Back among the existing issues, Qwest bonds "were all up a couple of points across the board," a trader said, although he saw them having come off their intra-day highs to end up a point to a point-and-a-half on the session.

He quoted the Qwest Capital Funding Inc. holding company 7¼% notes due 2011 at 89 bid, 90 offered, its 7.90% notes due 2010 at 93.5 bid, 94 offered, its 7¾% notes due 2006 at 100.5 bid, 101 offered, and the company's 6 7/8% bonds due 2028 at 78 bid, 78.5 offered.

The trader also saw the Qwest Services Corp. operating company 13% notes due 2007 at 115 bid, 115.5 offered, its 13½% notes due 2010 at 118 bid, 118.5 offered, and its 14% notes due 2014 at 122 bid, 122.5 offered, all up about a point.

A market source saw the Qwest Capital Funding 7% notes due 2009 half a point up at 91.25 bid, and its 7 5/8% bonds due 2021 nearly three points better at 82.5 bid.

He also saw Qwest Communications Corp.'s 7¼% notes due 2007 a point better at 93.5 bid, as were the 6 3/8% notes due 2008, which moved up to 90.5 bid from 89.5. Qwest Communications' 7.20% bonds due 2026 firmed to 87 bid from 85.25, while its 6 7/8% bonds due 2028 rose to 77 bid from 75.25.

Qwest was reported by The Wall Street Journal to be in talks with the Securities and Exchange Commission and other regulators, aiming to reach an overall settlement of various suits and investigations the company has been involved in with Washington over the past several years.

No specific price tag was put on the potential settlement, but the Journal said that Qwest could wind up paying hundreds of millions of dollars. Qwest declined to comment on the specifics of the news report, other than to say that it was continuing previously announced discussions with the SEC regarding accounting issues.

The Journal report followed by a day news that two former executives of the Colorado-based company, which provides local telephone service in 14 Western states, had agreed to settle SEC suits alleging that they had helped cover up a 2001 revenue shortfall at Qwest. Former senior vice president Augustine Cruciotti agreed to pay $150,000, while former regional vice president Steven Haggerty will cough up $30,000. Terms of the settlement call for neither man to admit any wrongdoing in the matter.

Separately, Fitch ratings service on Tuesday raised Qwest's outlook to stable from negative on its CCC+ rating, citing the company's solid cash flow and reduced debt load. Last week, Standard & Poor's jumped its ratings three notches, to BB- from B- previously.

Lucent gains on Sprint plans

Also in the telecom sphere, Lucent Technologies Inc. bonds were seen up about a point, apparently reacting to news that long-distance and wireless giant Sprint Corp. would be upgrading its network to the tune of $1 billion, with investors believing that Murray Hill, N.J.-based telecom equipment maker Lucent will benefit - either directly, from Sprint procurement contracts, or by selling gear to Sprint's rivals when they undertake similar expansion.

Sprint says it will install evolution data optimized, or EV-DO, gear to increase wireless internet access speeds to broadband levels, or about six times faster than standard home dial-up rates.

A trader saw Lucent's 6.45% bonds due 2029 about a point better at 77.25 bid, 78.25 offered, although he saw no change in the company's benchmark 7¼% notes due 2006, steady at 102 bid, 102.5 offered.

A source at another desk likewise saw the 71/4s unmoved at 102.5 but saw Lucent's 6½% bonds due 2028 half a point better at around 76.875.

Lucent's New York Stock Exchange-traded shares were up 19 cents Tuesday (5.40%) to $3.71.

Nortel also gains

Brampton, Ont.-based telecom equipment maker Nortel Networks Corp. - a Lucent rival whose bonds frequently move more or less in tandem with those of its New Jersey competitor - was also up Tuesday, apparently on the Sprint news.

A trader saw its 6 1/8% notes due 2006 a point better at 100.5 bid, 101 offered. Its 7 7/8% bonds due 2026 improved to 94.5 bid, 96.5 offered.

"Everything was going up," another trader said, quoting Nortel's 6 7/8% bonds due 2026 at 88 bid and looking for offers.

HealthSouth unch to firmer

HealthSouth was seen mostly unchanged to half a point firmer, after the company announced that it had gotten a majority of the holders of the final two series of notes from which it was seeking noteholder consents and waivers, to go along with its request for a default waiver (see "Tenders and Redemptions" elsewhere in this issue for complete details), ending a struggle that's been going on since mid-March. The company now has consents from a majority of the holders of each of its seven issues of public debt, totaling some $2.6 billion - but it had to pay more than it had originally counted on in order to get balky bondholders to go along with its plans.

A source quoted HealthSouth's 8 3/8% notes due 2011 as having firmed about half a point to 96.75, although he saw other issues, such as its 6 7/8% notes due 2005 and 8½% notes due 2008 unchanged at par and 98.5, respectively.

At another desk, the company's 8½% notes due 2008 were seen to have firmed to 97.75 bid, 98.75 offered, while its 7 5/8% notes due 2012 were at 93.5 bid, 95.5 offered and its 7 3/8% notes due 2009 were at 99.5 bid, 100.5 offered.

Another trader said that the HealthSouth paper "wasn't trading a lot."

On the downside, the same trader saw Troy, Mich.-based automotive components maker Arvin-Meritor Inc.'s 8¾% notes due 2012 "trading off," to 107.5 bid, 108 offered. He said that previously, the bonds had been "well bid for" at levels above 108 bid.

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