NTL, Consolidated Communications price; AK Steel up on contract news; Telewest gains

By Paul Deckelman and Paul A. Harris

New York, April 2 - NTL Cable plc on Friday became the latest in a string of recent large deals to come to market, as the New York-based provider of cable service in the UK brought a three-tranche multi-currency deal worth the equivalent of £811 million to market - or just under $1.5 billion. NTL joins such other large deals seen over the past few weeks as Cablevision Systems Corp.'s $2 billion offering earlier in the week, WMG Acquisition Corp.'s $650 million equivalent two- part offering, Ispat Inland ULC's $800 million two-parter, and Calpine Generating Co. LLC's massive $2.4 billion placement of bonds and loans earlier in March. Besides NTL's offering, smaller deals pricing Friday included Consolidated Communications and Port Townsend Paper.

By the session's close one sell-side official had tallied $7.06 billion of issuance for the week, "between Cinemark, on Monday, and Port Townsend, of Friday."

In the secondary market, AK Steel Corp.'s bonds firmed smartly in busy dealings after the Middletown, Ohio-based steelmaker announced a new contract for one of its plans, setting the stage for possibly bringing its future labor costs down. And UK cable operator Telewest Communications plc's bonds were better, apparently given a lift by the success of the NTL deal.

A big calendar

Despite all the deals pricing Friday, the new issue pipeline continued to build, most notably with International Steel Group, Inc. announcing a roadshow start for an offering of $600 million and with Edison Mission Energy subsidiary Midwest Generation, LLC announcing its intention to bring $1 billion in an offering that one sell-sider expects to hit the market on Monday.

"I count about $6.5 billion on the road and another $2-3 billion announced," said an investment banker late Friday.

"That's a huge calendar.

"Last year's average run rate was about $2.75 billion per week priced. And any calendar over $5 billion is large. So if we're looking at $6.5 billion announced and in marketing. That's big."

NTL sells £811 million in $, €, £

NTL Cable priced £811 million of senior notes (B3/B-) in four tranches on Friday.

The New York City-based cable TV company sold $425 million and €225 million of 10-year fixed rate notes at par to yield 8¾%, spot on the 8¾% area price talk, which had been revised down from 9%-9¼%.

The company also sold £375 million of 10-year fixed rate notes at par to yield 9¾%. Price talk had the sterling-denominated notes at 75-100 basis points behind the dollar tranche.

In addition the company sold $100 million of 8.5-year floating-rate notes at par to yield Libor plus 500 basis points. That was in line with talk of Libor plus 500 basis points.

Deutsche Bank Securities and Goldman Sachs & Co. had the physical books on the debt refinancing deal and Credit Suisse First Boston and Morgan Stanley were joint bookrunners.

Consolidated, Port Townsend price restructured deals

Consolidated Communications priced a downsized restructured offering of $200 million eight-year senior notes (B3/B-) at par to yield 9¾%, at the wide end of the 9½%-9¾% price talk.

Credit Suisse First Boston and Citigroup ran the books for the acquisition financing deal from the rural local exchange carrier which is headquartered in Mattoon, Ill.

The notes had been marketed with a 10-year non-call-five structure. However they were priced with an eight-year tenor, with call protection decreased to four years.

The issue size was decreased from $240 million, with $40 million being transferred to the company's credit facility.

Also on Friday Port Townsend Paper Corp. priced a $125 million issue of units comprised of 11% seven-year senior secured notes (B3/B) and warrants for 5% of the company.

The notes priced at 95.348 to yield 12%, spot on price talk which had put the coupon at 11%, pricing at a discount to yield 12%.

JP Morgan and UBS Investment Bank were the underwriters for the deal from the pulp and paper company which is based in Port Townsend, Wash.

The notes will be secured by a first priority lien on the consolidated company's property, plant and equipment and a second lien on current assets, according to a market source who added that the notes also contain an excess cash flow sweep covenant.

In the wake of the terms on Consolidated Communications and Port Townsend Paper, Prospect News asked one sell-side official if the primary market might be moving through some chop, possibly caused by the massive pipeline and news of three consecutive outflows from the high yield mutual funds.

"The big news today was of course that Treasury number moving, after the economic numbers were released," the source replied. "Our most important benchmark, the 10-year Treasury, closed Thursday at 3.88%. And the last time I saw it [Friday] it was 4.14%.

"That's a 26 bp move in the 10-year, with people selling off Treasuries. That put a little bit of pressure on new issue yields but probably not significant pressure."

Calendar continues to build

International Steel Group, Inc. will begin a three-day roadshow on Monday for an offering of $600 million of 10-year senior notes (Ba3/BB), with pricing expected on Thursday.

Goldman Sachs & Co., UBS Investment Bank, Citigroup and JP Morgan will be joint bookrunners for the debt refinancing and acquisition financing deal from the Richfield, Ohio integrated steel company.

In addition Atlantic Express Transportation Corp. was heard to be on the road with $115 million of four-year senior secured notes in fixed- and floating-rate tranches (B3/B), which it expects to price on April 16.

Jefferies & Co. is the bookrunner for the Staten Island, N.Y.-based school bus service operator's debt refinancing deal.

Midwest Generation unveils $1 billion

Midwest Generation, LLC is coming to the high-yield market with $1 billion of second priority senior secured notes via Credit Suisse First Boston, Citigroup, Lehman Brothers and JP Morgan.

The Rosemead, Calif.-based subsidiary of Edison Mission Energy also plans to obtain a $700 million credit facility as part of its massive debt refinancing.

And Bellevue, Wash.-based aerospace supplier Primus International Inc. was heard to be planning to sell $65 million of senior secured second-lien notes due 2009 (B+) via Jefferies & Co.

Finally on Friday, price talk of 6 3/8%-6 5/8% emerged on a $400 million offering of five-year senior unsecured certificates of beneficial ownership from The Williams Cos., Inc./Credit Linked Certificate Trust.

The Citigroup-led deal is expected to price on Monday.

NTL up in trading

When the new NTL 8¾% senior notes due 2014 were freed for secondary activity, the bonds were quoted as having firmed to 101.75 bid, 102.5 offered.

A trader saw the new Consolidated Communications 9¾% senior notes due 2012 as having moved up to 101.5 bid, 102.5 offered from their par issue price earlier in the session.

A trader saw Telewest's 11% notes due 2007 having moved up to 66 bid from prior levels around 64.5 in response to the success of the NTL deal; he cited market speculation that NTL, now armed with fresh cash from the bond sale and from a £2.4 billion bank credit facility might decide to go shopping - with rival cabler Telewest said to be on its shopping list.

Telewest's 9 5/8% notes due 2006 have also been pushed up into the mid 60s in recent days on that same speculation.

AK Steel shoots higher

Elsewhere, a trader said that AK Steel's bonds were "on fire," after the company announced that it had reached a three-year labor contract covering 460 workers at its plant in Coshocton, Ohio.

He quoted AK's 7¾% notes as having firmed to 90.5 bid, 91.5 offered, while its 7 7/8% notes firmed to 93.5 bid, 94.5 offered.

Another trader declared that the steel issues, led by AK were "definitely stronger," although he had the 7 7/8% notes at 92.5 bid and the 7¾% notes at 91.5 bid, both up a point and a half.

He likewise quoted Oregon Steel Mills Inc.'s 10% notes due 2009 at 101.5 bid, a point better on the session, and said that United States Steel LLC notes were "also strong," although he had no levels.

At another desk, the U.S. Steel 10¾% notes due 2008 were quoted at 118 bid, up two points on the session, while Oregon's 10% notes were seen 1¼ points better at 101.25.

While AK Steel's Coshocton plant only employs a fraction of the company's roughly 8,000 employees, the agreement with the United Auto Workers union - AK's first since its workers certified the UAW as their bargaining agent in 2002 - provides for a defined contribution pension plan and cost-sharing provisions for active and retiree health-care costs for its Coshocton employees.

The switch to the defined contribution form of pension plan is significant; under such a plan, management puts in a certain contribution to an employee-owned account, such as a 401(k), but then the responsibility for growing that amount to a decent-sized pension rests with the investment decisions made by the employee, usually through his or her choice of mutual fund vehicles.

Under the old-style defined benefit plan, the employee was guaranteed a particular sum on a periodic basis, and it was up to the company to come up with the money and fund the pension plan come what may' a number of large U.S. steelmakers, faced with spiraling pension obligation costs and dwindling revenues, were forced into bankruptcy in recent years, including such once-familiar names as Bethlehem Steel Corp., National Steel and LTV Corp.

The fight over efforts by industry to switch out of defined benefit plans and into defined contribution setups has been a controversial feature of labor-management relations for the past several years, with labor unions insisting that the risks of the plans are being unfairly shifted to the employees, while companies have insisted that such changes were necessary for them to stay in business, particularly in industries such as steel, where domestic producers like AK and others have had to contend with competing lower cost imports from abroad.

Besides its announcement of the Coshocton contract, AK also announced on Friday that it plans to raise transactional prices for carbon steel products by $150 per ton, beginning May 1 with the price hike applying mostly to steel sold in the spot market. AK also said that its raw materials carbon steel surcharge will be $97 per ton.

Higher steel prices, amid booming demand for steel as the U.S. economy recovers and China's economy continues to grow, have been a key catalyst behind the rebound this year in the shares and bonds of such surviving U.S. steelmakers as AK, U.S. Steel and investment grade steeler Nucor.

High yield rises on payrolls

The depth of the economic recovery in the U.S. was driven home Friday with the release of March's job creation numbers; non-farm payrolls jumped by 308,000 jobs, well up from analysts' expectations. It was the biggest rise in the key economic statistic in four years, and apparently signals that the economic recovery is finally taking hold.

The number caused Treasuries to tumble - portending possible higher inflation - but caused stocks to soar, and high yield mostly followed the example of the latter, a trader said, with junk bonds "pretty much up on the day. Spreads [against Treasuries] did come in dramatically." He opined that while the size of the number was certainly a surprise to the financial markets, "I was sort of expecting it - it was only a matter of time" before pent up demand for new labor would show an impact in the recovering economy.

While most high yield names did firm at least half a point to a point in response to the jobs number and the stock market's gains, the major exception was in what are considered interest-rate sensitive sectors, particularly those which depend on overall interest rates remaining low, such as housing and real estate.

"Homebuilders, real estate and lodging got hammered on interest rate concerns," a trader declared, and sure enough, homebuilders were weaker across the board, with Beazer Homes' 8 3/8% notes due 2012 down three-quarters of a point to 111; D.R. Horton Inc.'s 5 7/8% notes due 2013 losing a point to 103; and Horton's 7½% notes due 2007 down a point at 111.5.

Lodging is another area, traders sad, that is adversely affected by any indication rates may rise; on Friday, Host Marriott Corp.'s 9½% notes due 2007 ended at 111.5 bid, down half a point. Starwood Hotels and Resorts' 7 3/8% notes due 2015 were down more than a point at 106.5 bid.

Charter up again

Charter Communications Inc. predicted a rise in both subscribers and revenues in the fiscal first quarter of this year, projecting that revenue is likely to rise 3% in the first quarter of 2004, up from $1.8 billion last year. The St. Louis-based cable operator also expects to gain between 60,000 and 65,000 digital subscribers in the quarter versus a loss of 32,000 last year. And it said that it expects to soon close on the sale of a New York cable systems property to Atlantic Broadband, a transaction that was delayed because of regulatory concerns.

Charter's bonds - already given a boost during the week by news that the company will soon do a $1.5 billion bond deal and use new-deal proceeds to pay off some operating subsidiary debt - were up on Friday as well, with its 8 5/8% notes due 2009 firming half a point to 83 bid, 84 offered.

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