Stanadyne 10-year deal prices; Primus rebounds, J.C. Penney firms on asset sale news

By Paul Deckelman and Paul A. Harris

New York, Aug. 2 - Stanadyne Corp. was heard by high-yield syndicate sources to have successfully brought a $160 million issue of 10-year notes to market Monday, the only pricing off a large calendar seen by the time trading rolled up for the day.

In the secondary market, Primus Telecommunications Group, Inc. bonds - which were soundly beaten down on Friday after the McLean, Va.-based telecom operator reported a second-quarter loss - a sharp deterioration from its year-ago profit - were on the rebound, up anywhere from two to four points on the session as players stepped in to reverse Friday's oversold condition. Also on the upside, though not quite as dramatically, was J.C. Penney & Co., whose bonds were up around half a point across the board after the Plano, Tex.-based retailer announced plans for some $2.3 billion of debt buybacks as part of a massive capital "repositioning" that will also include an even bigger share buyback and the elimination of lease debt from its recently sold Eckerd drugstore unit.

Although junk players saw only one issue price during the opening session of August 2004, a new issue calendar that sources have characterized as already being remarkably full for late summer, continued to grow.

However companies attempting to sell high-yield bonds are presently seen to be making concessions, both monetary and structural, sources added

Stanadyne sells $160 million

The day's only completed deal came from Windsor, Conn.-based engine components and fuel systems company Stanadyne Corp., which sold $160 million of 10-year senior subordinated notes (Caa1/B) at par late Monday to yield 10%.

Goldman Sachs & Co. ran the books for the acquisition financing deal, which came wide of the 9¾% area price talk.

Crompton, United Refining restructure

Price talk emerged Monday on four deals, all of which are expected to be completed before Wednesday's close.

Crompton Corp issued price talk Monday on a restructured $600 million bond deal (B1/B) that is expected to price Tuesday in two tranches, according to a syndicate source.

Talk is 9 7/8%-10 1/8% on an eight-year non-call-four tranche of fixed rate notes.

Meanwhile price talk is six-month Libor plus 575 basis points on a tranche of six-year non-call-three floating rate notes.

Tranche sizes remain to be determined.

Pricing is expected on Tuesday, via Deutsche Bank Securities, Banc of America Securities, Citigroup and Credit Suisse First Boston.

An anticipated tranche of fixed rate 10-year non-call-five notes was dropped from the deal.

In addition, the eight-year non-call-four tranche replaced an anticipated seven-year fixed-rate tranche.

Also dropping a 10-non-call-five tranche on Monday was United Refining Co.

The Warren, Pa. refiner changed its $200 million note offering to an eight-year non-call-four structure from a 10-year non-call-five. It also issued 10%-10¼% price talk on the deal, which is expected to price on Tuesday, via Citigroup, Goldman Sachs & Co. and PNC.

One sell-side official mentioned that of 14 deals now in the market, eight had eight-year non-call four tranches.

"They're becoming pretty popular," the source said, adding that an issuer targeting a specific interest rate now may need to be somewhat more flexible with the tenor, as the possibility of a rising rate environment could be expected to increase investors' appetites for shorter-maturing paper.

Those issuers who still intend to bringer longer-term notes can expect to have to pay somewhat more, the source added.

In addition to Crompton and United Refining, price talk emerged Wednesday on U.S. Oncology's two-part $575 million bond deal.

Price talk is 9% area on the planned $200 million of eight-year non-call-four senior notes (B2/B-). Meanwhile talk is 10¼% area on the $375 million of 10-year non-call-five senior subordinated notes (B3/B-).

Both tranches are expected to price on Wednesday, via Citigroup, JP Morgan and Wachovia Securities.

And price talk of 9%-9¼% was heard on Innophos Inc.'s upcoming $190 million of 10-year senior subordinated notes (B3/B-), expected to price on Tuesday afternoon via Bear Stearns & Co. and UBS Investment Bank.

Calendar continues to grow

Details were heard Monday on three new offerings which will be marketed via roadshows.

Rainbow Media Enterprises will start a roadshow Tuesday for $800 million of fixed-rate high-yield bonds in two tranches, with pricing expected during the week of Aug. 9.

The company, a subsidiary of Cablevision, plans to sell $250 million of eight-year non-call-four senior notes as well as $550 million of 10-year non-call five senior subordinated notes.

Banc of America Securities, Bear Stearns & Co., Credit Suisse First Boston and JP Morgan are the bookrunners for the deal, proceeds from which will go to repay debt and fund a distribution to the parent company.

A roadshow also starts Tuesday for a $250 million offering of 10-year senior notes from Century Aluminum Co., a deal that is also expected to price next week.

Credit Suisse First Boston, Banc of America Securities, Goldman Sachs and JP Morgan will run the books for the acquisition and debt refinancing deal from the Monterey, Calif.-based primary aluminum producer.

And Secunda International Ltd. will start a roadshow Tuesday for $125 million of eight-year senior floating-rate notes (B2/B), which are expected early in the week of Aug. 16.

RBC Capital Markets will run the books for the debt refinancing deal.

The company is a Halifax, Nova Scotia-based provider of supply and support services to the offshore oil and gas industry.

New deal terms soften

One sell-side source, hours before the Stanadyne terms revealed that the deal had come 25 basis points wide of talk, told Prospect News that, "in terms of pricing things have softened a little" in the primary market.

"But new issuers are continuing to hit the market," the official pointed out.

"I would say that regardless of recent news of outflows from the high-yield mutual funds, the liquidity of this asset class is not drying up."

Stanadyne rises in trading

When the new Stanadyne 10% senior subordinated notes due 2014 were freed for secondary dealings, a trader saw the bonds push up to 101 bid, 101.5 offered, well above their earlier par issue price.

Primus partly rebounds

Back among existing issues, Primus bonds were heading in quite a different direction than they were on Friday, when they slid badly on the company's announcement after the close the previous session that in the second-quarter ended June 30, it lost $15 million (17 cents a share) versus its year-ago profit of $20 million (21 cents a share). That shocked the socks off Wall Street, where the analysts had been looking for about 10 cents a share of earnings, and caused its stock to drop half of its value and the bonds to likewise swoon.

On Friday its 8% notes due 2014 were seen to have tumbled as low as 68 during the session before going home at 72, still down 10 points on the day and its 12¾% notes due 2009 lost 24 points to close around 84.

On Monday, though, it was a different story, with the 8% notes moving up to 76 bid from 72 and the 123/4s at least two points better at 86.

Another trader also saw the 8s around 75, "up three or four points on the day," and while he didn't specifically see the 123/4s he thought they were "probably better as well, following the other ones [up]."

However, he did not share whatever bullish sentiment caused the Primus notes to bounce Monday.

"The deal on these guys is they have a lot of the same problems that AT&T has in their long-distance business - everybody's trying to be a loss-leader in that [to drum up business for a company's other services]. That's a problem."

Today, he said, Primus "still covers interest three times. Tomorrow? I don't know. They're free cash-flow positive today. I don't know about tomorrow. That's what everybody's trying to figure out right now."

But another trader took a more sanguine view, that the numbers weren't all that bad. Actually, he said they were "pretty decent," and so the bonds "are back in the pink" - at least relative to Friday.

Another market source saw the 8s up about 2½ points on the day at 75 bid.

AT&T firms

And speaking of AT&T, as one of the traders was, another trader, who traffics in crossover issues, said the Basking Ridge, N.J. -based long-distance giant's bonds - which widened out notably last week after Moody's Investors Service cut Telephone's ratings to junk - were firmer on Monday, the investor panic apparently short-lived.

He saw the company's 8.05% notes due 2011 and 7.30% bonds at a bid level equivalent to 340 basis points off Treasuries and offered at 335 bps over, a tightening of five beeps from there they finished Friday. Last week after Moody's announcement cutting the once-indestructible telecom giant's ratings two notches to Ba1, he said the bonds had widened out to as much as 360 bps over on the bid side. "They widened out - but then came back to 20 bps off their wides," he said.

Reynolds rises on earnings

Elsewhere, he saw the bonds of the former R.J. Reynolds Tobacco Holdngs Inc. - now part of a recently formed tobacco supercompany, Reynolds American Inc. - were up anywhere from three-quarters of a point to a point, after the Winston Salem, N.C.-based cigarette producer reported second-quarter earnings of $151 million ($1.77 per share), more than double $70 million (83 cents a share), a year earlier. Reynolds blew right through analysts' projections of earnings around $1.24 a share.

With those kind of smokin' numbers, he said, the bonds were up smartly, its 7¼% notes due 2012 a point better at 98.75 bid, 99.25 offered.

J.C. Penney better

J.C. Penney's bonds were seen up anywhere from a quarter point to three-quarters of a point, following the company's announcement of its debt and share buyback plans, which promise to cut its net leverage down to the mid-30% range from previous levels above 50% (see related story elsewhere in this issue).

Penney's 7 3/8% notes due 2008 were quoted at 108.75 bid, up from 108 previously; its 6½% notes due 2007 were a quarter point better at 107.5. Several issues were seen up half a point, including its 8% notes due 2010 at 112.75; its 9% notes due 2012 ending at 121; and its 6 7/8% notes due 2015 at 104.75.

Penney paper was "significantly better, particularly in the short end," a trader opined. He saw its 8% notes due 2010 half a point better at 111.5 bid, 112.5 offered.

A trader quoted Collins & Aikman Products Corp. bonds little changed, with the Troy, Mich.-based auto components maker's senior paper seen at 101 bid, 101.75 offered, and its subordinated notes at 98.25 bid, 99 offered. The company posted a second-quarter earnings loss, but said that it had strong EBITDA gains during the second quarter, and projected that it might soon return to positive cash flow (see related story elsewhere in this issue).

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