C&A, Qwest, three others price; Hanger bounces off lows; funds see $91 million outflow

By Paul Deckelman and Paul A. Harris

New York, Aug. 12 - Collins & Aikman Products Co. was heard by high yield syndicate sources Thursday to have successfully priced an upsized offering of eight-year notes, although the Troy, Mich.-based automotive components maker, desperate to do the deal and use the proceeds to eliminate some current bonds, was forced to pay a truly high yield to get the deal done. Primaryside players meantime saw Qwest Corp. bring an upsized seven-year offering to market, with the proceeds of that offering also slated for bond buybacks. Also seen pricing new deals were THL Buildco Inc./Nortek Inc. and Newfield Exploration Co., the latter deal upsized.

In the secondary arena, Hanger Orthopedic Group's bonds were seen in the mid-80s, up from the lows they hit during a wild plunge Wednesday, but still well below where they were before the company announced plans to delay its second-quarter results for a week.

Existing Collins & Aikman bonds firmed on the prospect that the new bond deal would get done (it did) and the proceeds would go to taking out Collins & Aikman's soon-maturing subordinated notes.

Great Atlantic & Pacific Tea Co. Inc.'s bonds were in retreat, after Moody's Investors Service downgraded the debt ratings of the parent company of the venerable A&P supermarket chain.

And after trading wound down for the day, market sources familiar with the weekly mutual fund-flow numbers compiled by AMG Data Services of Arcata, Calif., told Prospect News that $91.3 million more had left the junk funds in the week ended Wednesday than had come into them. It was the third consecutive week in which a net outflow was reported, coming on the heels of the relatively benign $29 million outflow seen in the previous week, ended Aug. 4, and the more meaningful negative $358 million spurt for the previous week, ended July 28.

All told, the funds have hemorrhaged some $478.3 million over the past three weeks, at least partly offsetting the $977.42 million net inflow which was seen over the four weeks before that, according to a Prospect News analysis of the fund-flow figures, which are considered a key barometer of overall junk market liquidity trends.

For the year to date, though, things have been pretty much all negative since around February (when big outflows more than wiped out the inflows seen in the first four weeks of the year) with a cumulative net outflow for the year so far of about $4.899 billion, according to the Prospect News analysis. Outflows have now been seen in 19 weeks out of the 32 since the start of the year, with inflows in only the remaining 13.

Still on track for strong Q4

One investment banker reached well after the Thursday session came to a close told Prospect News that the outflow is "pretty insignificant.

"The statistics basically remained the same for the past several months," the sell-sider added. "We've had more weeks of outflows than inflows, with total outflows this year somewhere between $8.6 and $8.8 billion.

"But the accounts still have cash. Things aren't as good as they could be. It's not like it was late last year when money was just rolling in. But it's also not terrible."

The high yield team to which this banker belongs is looking for total new issue volume for 2004 to be slightly higher than 2003 - in other words, another record.

"If we reach $155 billion this year we'll be on target," the sell-sider said. "We don't expect to see $175 billion.

"We're looking for a strong fourth quarter.

"Even if money continues to trickle out for the rest of the year I still think we will have healthy new issuance."

Prospect News' total for 2004 through Thursday's close is $93.2 billion, a little ahead of the $89.6 billion at the same point last year. For all of 2003 the total was $138.5 billion.

Nortek prices day's biggest

Activity in the phenomenally busy high yield-primary reached what one source characterized as a fever pitch - "considering this is late summer" - as a fistful of deals totaling around $2 billion proceeds rolled out of the investment banks.

Leading the day was Providence, R.I., building products manufacturer Nortek Inc.

THL Buildco Inc., the issuer which will be merged into Nortek, sold $625 million of 10-year senior subordinated notes (B3/B-) at par on Thursday to yield 8½%.

The UBS Investment Bank-led acquisition financing came at the tight end of the 8½%-8¾% price talk.

Qwest upsizes drive-by

In quick-to-market action Qwest Corp. priced an upsized $575 million of 7 7/8% seven-year senior notes (Ba3/BB-) at 98.66 to yield 8 1/8%, in the middle of the 8%-8¼% price talk. It was increased from $500 million.

Goldman Sachs & Co. had the books for the deal from the Denver, Colo.-based provider of voice, video and data services.

An informed source told Prospect News that the deal was well oversubscribed.

"It was a quick offering, announced Wednesday with an investor call Wednesday night and price talk coming out late Wednesday," the source said, adding that the deal was very well received.

Collins & Aikman prices at cheaper talk

Troy, Mich.-based automotive interior manufacturer Collins & Aikman Products Co. sold $415 million of 12 7/8% eight-year senior subordinated notes (B3/B-) at 96.416 on Thursday to yield 13 5/8% - a deal that generated $400.1 million of proceeds.

The deal came at revised price talk of 12 7/8% coupon pricing at a discount to yield 13 5/8%, which had been upped from the previous 12¾% coupon and 13% yield.

Deutsche Bank Securities, Credit Suisse First Boston and JP Morgan were the underwriters.

One market source commented that the transaction found the company "with its feet held over the fire," adding that the deal went forward only after Collins & Aikman transformed the notes into bullets. Recall that earlier in the week the company added a year of call protection, changing what had been an eight-year non-call-four into an eight-year non-call-five.

Proceeds from the sale, the source added, will be used to redeem all $400 million of the company's 11½% senior subordinated notes due 2006.

"This will provide CKC a window until the end of 2011 before any public bonds mature," commented the source. "The existing bank facility runs to December 2005 but one could expect some extension to this arrangement."

Also on Thursday Prospect News learned that Collins & Aikman is expected to increase pricing on its $400 million seven-year term loan B because of where its bond priced.

Currently the term loan B is priced with an interest rate of Libor plus 325 basis points.

Newfield upsizes by $25 million

Well after Thursday's close terms rolled out on an upsized $325 million deal from Newfield Exploration Co.

The Houston-based independent crude oil and natural gas exploration and production company its 10-year senior subordinated notes (expected ratings Ba3/BB-) at par 6 5/8%, at the tight end of the 6 5/8%-6 7/8% price talk.

Morgan Stanley ran the books for the acquisition financing.

Finally, in another UBS Investment Bank-led deal, Norcraft Holdings LP in conjunction with Norcraft Capital Corp. sold $118 million of zero-coupon eight-year senior discount notes (Caa1/B-) at 68.079505 on Thursday to yield 9 ¾%.

The note sale generated $80.333 million of proceeds, with the bonds coming at the tight end of the 9¾%-10% price talk.

Blockbuster talks $300 million

Price talk of 8 ¾%-9% emerged Thursday on Blockbuster Inc.'s $300 million of eight-year senior subordinated notes (B1/B+/B+), expected to price on Friday via JP Morgan, Credit Suisse First Boston and Citigroup.

Prospect News learned from a buy-side source in the leveraged loan market that Blockbuster started considering flexing up its $550 million seven-year term loan B to Libor plus 250 basis points from Libor plus 200 basis points and adding soft call protection of 101 once "wider than expected" price talk on the bond deal surfaced Thursday.

Nortek, Qwest edge up in trading

When the new Nortek 8½% notes due 2014 were freed for secondary dealings, they were heard to have firmed slightly to 100.5 bid, 100.75 offered, from their par issue price earlier in the session.

A trader saw Qwest's new 7 7/8% notes due 2011 push up only slightly from their 98.675 issue price, to 98.75 bid, 99.25 offered, although the bonds were later quoted at 99.125 bid, 99.375 offered, leading a trader to call it "a moderately better break."

Collins & Aikman new, old bonds gain

And he saw the new Collins & Aikman 12 7/8% notes due 2012 trade all the way up to par bid from their 96.41 issue price, before coming down off the high to end at 98 bid, 99 offered, "a good break, but strange pricing," he opined. Another trader saw the Collins & Aikman bonds going out at 99.25 bid, 99.5 offered.

Meantime, Collins & Aikman's outstanding 11½% notes due 2006 were seen to have pushed to as high as 100.l5 bid, from 98.5 bid, 99.5 offered on Wednesday. The company is using the proceeds of the new bond deal to take out the 11½% notes.

Collins & Aikman's 10¾% notes due 2011, which usually trade at a premium to the 111/2s, didn't do too shabbily either, pushing up in Thursday's dealings to about the 102.25 bid area from prior levels around par.

Hanger rebounds a little

Back among the established bonds that don't have any new-deal connections, Hanger Orthopedic's 10 3/8% notes due 2009 - which had been seen swooning to as low as 82 bid, 84 offered Wednesday from prior levels at par on the news that the Bethesda, Md.-based operator of prosthetic patient-care centers would delay its scheduled release of second-quarter numbers to this coming Monday Aug. 16 from this past Monday were seen rebounding slightly from their oversold condition.

Traders quoted the bonds at bid levels around 86-87 - up from the lows they hit Wednesday but still down more than a dozen points from the levels they held before the negative news came out.

There was meanwhile no word from the company whether it would make the $10.3 million coupon interest payment due Monday on the bonds. Some analysts have speculated that the company might not, since by their calculations, such a payment would consume almost all of the company's cash on hand. Company officials did not return several phone calls that Prospect News made Thursday seeking a clarification.

Toys 'R' Us down again

Elsewhere, Toys 'R' Us bonds - which fell about three points across the board on Wednesday after the Wayne, N.J.-based toy retailing giant said it consider getting out of the toy-store business in order to focus on its more profitable Babies 'R' Us baby merchandise operation, were seen down at least another point Thursday.

The company's 7 5/8% notes due 2011 were seen ending at 99.25 bid, down about a point-and-a-half on the session.

A trader at another shop quoted its 7 3/8% notes due 2013 at 99.25 bid, 99.75 offered, down a point on the day. "They were off 20 basis points at the open," he said, "and they stayed down there all day."

Another trader saw Toys 'R' Us' 8¾% notes due 2021 off about a point or so at 97.5 bid, 99.5 offered.

A&P off on Moody's cut

Also among retailers, he said, A&P's bonds were "getting beat up," after Moody's downgraded the Montvale, N.J.-based supermarket operator's bonds a notch to Caa1. He saw A&P's 7¾% notes due 2007 fall to 92 bids, 93 offered from recent levels around 94.25 bid, 95.25 offered, and its 9 1/8% notes due 2011 dip to 84 bid, 86 offered from 87.5 bid, 88.25 offered recently.

Another downsider was Level 3 Communications Inc., although the trader said he saw no news to explain why the Broomfield, Colo.-based telecom company's bonds were getting whacked around.

"Just general malaise, I guess," he offered.

He saw Level 3's 9 1/8% notes due 2008 at 71.5 bid, 72.5 offered, down two points, and its 11% notes due 2008 at 77 bid, 79 offered, also two points lower.

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