Rhodia, LBC, ONO price deals; Collins & Aikman falls as company scrubs offering; lower on rate fears

By Paul Deckelman and Paul A. Harris

New York, May 7 - Europe was where it was at for the high-yield primary market Friday, as French chemical maker Rhodia was heard by syndicate sources to have successfully brought an upsized dollar- and euro-denominated two-part deal to market, while two other European issuers - chemical storage company LBC Luxembourg and Spanish cable operator ONO Finance - also priced new issues, both downsized. But perhaps of more import, Collins & Aikman Products Co. - which had just announced plans for a $500 million offering of seven- and 10-year notes on Wednesday - abruptly reversed course on Friday and said it was postponing the deal.

The Troy, Mich.-based automotive components maker's existing bonds were meantime sharply lower in response to news of the postponed deal.

But traders said most other secondary issues were also on the downside Friday, as robust April job-creation numbers fed already strong fears that interest rates will soon be headed back up after having touched historic lows earlier this year. Among the few issues seen as solidly higher was Sea Container Ltd.'s several bond issues, even as the Hamilton, Bermuda-based maritime and lodging company announced plans to call one of them for redemption.

A busy but choppy Friday in the junk bond market saw six tranches price, totaling $822.5 million and €606.4 million.

Half of the day's deals, representing all but one of the euro tranches, came downsized, however. The exception to the rule was Rhodia, which upsized to €725 million equivalent, most of it coming in dollars.

And while on the subject of Rhodia, the French specialty chemical manufacturer's €181 million piece was the only one of the day's tranches not to price either at the wide end of price talk or wider - in some cases considerably wider.

And if that were not sufficient to set a sour tone for the Friday session, two companies postponed deals that had either started or were about to start roadshows. And another delayed its offering.

Quite late in the final session of the May 3 week one sell-side official was not mincing words.

The official made reference to the continuing reports of cash leaking from high-yield mutual funds - Thursday the market heard that another $200.6 million had drained out for the week ending May 5 - an equity market which during the last session of a negative week fell gave up another 1.21% as measured by the Dow Jones Industrial Average and the 10-year Treasury which saw its yield rise almost 17 basis points on the day.

"The storm is coming," said the source.

"A lot happened today - it could be the worst day of the year so far.

"Alan Greenspan is going to pull the trigger," the official added, making reference to the expectation that the Federal Reserve will soon hike short term interest rates.

"There's no question about that," added the source. "He pretty much has to.

"The party could be over."

Rhodia prices only upsized deal

Rhodia priced an upsized two-tranche offering of approximately €725 million of six-year senior notes (B3/CCC+) in dollar and euro tranches during the session.

The company sold $647.5 million of 10¼% notes at 96.742, to yield 11%. That brought the yield at the wide end of the revised price talk: 10¾%-11%, increased from 10¼%-10½%.

The company also sold €181 million of 10½% notes at 96.765, to yield 11¼%. The euro piece came on top of its price talk, 25 basis points behind dollar tranche, and was the only issue of the day to do so.

Credit Suisse First Boston, BNP Paribas and Goldman Sachs & Co. ran the books on the debt refinancing deal that had been upsized from €625 million equivalent.

From there the story of Friday's primary session takes on a less pleasant tone.

ONO Finance priced a downsized €280 million of senior notes (Caa2/CCC-/B-).

The Spanish cable, telephone and internet company priced a downsized €180 million of 10-year senior fixed-rate notes at par to yield 10½%. The issue, which had been downsized from €250 million, came at the wide end of the 10¼%-10½% price talk.

The company also sold €100 million of 10-year senior floating-rate notes at par to yield three-month Euribor plus 850 basis points, again at the wide end of the three-month Euribor plus 825-850 basis points talk.

Banc of America Securities and BNP Paribas had the books on the debt refinancing deal.

However, the story with regard to price talk becomes more dramatic, still.

Primedia Inc. priced a downsized $175 million of six-year senior floating-rate notes (B3/B) at par to pay three-month Libor plus 537.5 basis points, 87.5 basis points wide of the three-month Libor plus 450 basis points talk.

Banc of America Securities, Citigroup and JP Morgan were bookrunners on the debt refinancing deal from the New York City-based targeted media company.

And finally, LBC Luxembourg Holdings SCA, a chemical storage company operating in Europe and the United States, priced a downsized issue of €133 million 11% 10-year senior subordinated notes (Caa1/CCC+) at 94.259 to yield 12%.

That yield was 200 basis points outside of the wide end of the 9¾%-10% price talk.

Deutsche Bank Securities and Lehman Brothers led the sale, which generated €125.4 million of proceeds.

Two walk away, another delays

Elsewhere Friday, two prospective issuers postponed deals that were heard to be in, or nearly in the market.

Malaysia's NCL Corp., a wholly owned subsidiary of Star Cruises Ltd., postponed its $350 million 10-year senior notes offering (B2/B+) on Friday, citing market conditions.

JP Morgan had the bookrunning mandate on the deal.

And Collins & Aikman Products Co. postponed its $500 million two-tranche bond offering on the day its roadshow was set to start.

In a Friday press release the Troy, Mich. automotive trim manufacturer commented that it has postponed the deal "in light of material adverse changes in prevailing U.S. Treasury and high-yield market conditions."

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

Finally, American Equity Investment Life Holding Co. delayed its $150 million offering of 10- and 12-year senior notes (BB+) pending a rating form Fitch.

Merrill Lynch & Co., Raymond James, Advest and Wachovia Securities are the underwriters of the deal from the West Des Moines, Iowa-based underwriter of annuity and insurance products.

Stena set to ship out

One roadshow start was heard during the session.

Swedish shipping company Stena AB will run a May 10-14 roadshow for its offering of $250 million of 20-year senior notes (Ba3/BB-), via underwriters JP Morgan, UBS Investment Bank and Citigroup.

Elsewhere, a $200 million bond offering from Finlay Enterprises, Inc. is likely to close by the end of May, according to a spokesman for the company.

Credit Suisse First Boston is expected to emerge as bookrunner for the debt refinancing deal from the wholly owned subsidiary of New York City-based retailer Finlay Fine Jewelry Corp.

Finally on Friday price talk of 10¾%-11% emerged on Lazy Days' R.V. Center Inc.'s upcoming $155 million of eight-year senior notes (B3/B-). Books close on Monday with pricing expected shortly thereafter, via Deutsche Bank Securities.

"Who's buying these bonds?!"

One sell side official who keeps an eye on both the junk bond and emerging markets told Prospect News on Friday that, all things considered, high yield has been running along in the face of considerably adverse winds.

"It's amazing when you look at the numbers, this year as opposed to last year," the source said.

"Last year you had something like $19 billion of inflows. This year you're $2 billion-and-something in outflows.

"But at the same time, issuance in high yield is still so high. Where is it going? Who is buying it?

"I think high yield has really been impressive in terms of how well the new issue market has held up. I guess that it has been to the detriment of the secondary market, because it's my understanding that no one is spending much time looking in the secondary, because you can buy whatever you want in the primary."

Rhodia steady in trading

When the new Rhodia dollar-denominated 10¼% senior notes due 2010 were freed for secondary dealings, they were heard to have traded around 96.75 bid, 97.5 offered, little changed on the bid side from their issue price earlier in the session at 96.742.

Collins & Aikman "hammered"

Back among the established issues, Collins & Aikman "got hammered," a trader said, quoting the company's 11½% subordinated notes due 2006 "down significantly," at 95.5 bid, 96.5 offered, versus prior levels at 99 bid, 99.75 offered.

Another trader agreed that the 111/2s were now in a 95 bid context and saw the company's 10¾% senior notes due 2011 at 98 bid, 99 offered. The company's bonds were "getting bounced around and were lower than they were before they announced the deal," on Wednesday.

At another desk, the 11½% notes were seen having fallen 4½ points to the 95 level, while the 10¾% notes were seen off 2½ points at par.

The 11½% notes were especially hard hit on the decision to put off the new deal until whenever because the company had planned to use the proceeds of the now-postponed offering to redeem all $400 million of those bonds, as well as to reduce borrowings under the company's senior credit facility.

Collins & Aikman had said at the time that it was also in the process of negotiating to amend and restate its senior credit facility in hopes of replacing it on more favorable terms, including lengthening the maturities on its term loans - but said on Friday that in line with the postponed bond offering, it will now correspondingly postpone its efforts to amend and restate the senior credit facilities.

Collins & Aikman's New York Stock Exchange-traded shares meantime lost 42 cents (7.54%) Friday to end at $5.15. Volume of 548,000 shares was around 2½ times the usual activity level.

AK Steel keeps heading down

Elsewhere, a trader said that another issue that investors were "continuing to lean on" and push lower was AK Steel Corp., despite a lack of fresh negative news about the Middletown, Ohio-based steelmaker.

He saw AK's 7¾% notes due 2012 finish at 83.5 bid, 84.5 offered, while its 7 7/8% notes due 2009 were at 85.5 bid, 86.5 offered, both down about three-quarters of a point to a point on the session.

"I'm not sure what that's about," he acknowledged, noting that it wasn't necessarily about weakness in the overall steel sector, since he saw Oregon Steel Mills Inc.'s 10% first mortgage notes due 2009 firm to 102.75 bid from prior levels at 102. At another desk, United States Steel LLC's 10¾% notes due 2008 were seen up about half a point to 115.5.

Another trader who saw the AK bonds around those same lower levels concurred that it was tough to say why the bonds eroded, other than "just more of the cruddy market."

Jobs data hurts junk

He said that "a lot of stuff got kicked around" in the wake of the Labor Department's job-creation numbers, which showed a gain of 288,000 jobs during the month, well above the roughly 165,000 that Wall Street had been expecting. Not only was April stronger than expected - March's job-creation stats, already considered the strongest in four years, were revised upward to show 337,000 new jobs during the month, versus the originally reported 308,000.

The stronger jobs data imply that the Fed is more likely to pull the trigger on a rate hike of at least 25 basis points sooner rather than later - maybe as soon as June - and caused both stocks and 10-year Treasury to tank, frightening many junk players as well.

"The market in general was off a point to two points across the board," the trader said, commenting that "it's so funny - a month ago, people said stocks weren't doing well and junk was stable - just treading water - because people were wondering whether the economy is really rebounding, and now it's rebounding too quickly - so stocks are going down and junk is getting killed."

Another trader opined that "obviously, anything interest-rate sensitive got clocked. The homebuilders were down about a half point to three-quarters, in general, and the 6-handle coupon paper got hammered, to a certain extent."

For instance, he said, Flextronics' 6½% notes were trading at 98 bid, 98.5 offered, down from par bid levels Thursday.

"Decent names just got racked," he exclaimed," such as Offshore Logistics' 6 1/8% notes due 2013, which traded down to 94 bid from prior levels above 95.

Sea Containers rises

However, there were issues on the upside - one that he saw was Sea Containers, which announced plans to call its 12½% senior subordinated debentures scheduled to be coming due later this year (see Tenders and Redemptions elsewhere in this issue for full details).

He didn't see those particular bonds moving - they had already moved up to just over par, around the scheduled takeout price of $1,002.08 per $1,000 principal amount, in anticipation of such a call - but he did see the company's other paper up on anticipation the company will have good news to report when it holds a conference call with investors this coming week.

"We'll see what happens, but it looks like the company is over the hump," he said.

He quoted the bonds up around half a point against the backdrop of a mostly down market otherwise and pegged its 10½% notes due 2009 as having moved to 99.75 bid, par offered, up about half a point on the day and up even more solidly from its recent issue price at 97 and change. He saw Sea Containers' 7 7/8% notes due 2009 trading up at 98.5 bid and the 10¾% notes trading up at 104.75, helped out by a short squeeze on the issue.

Level 3 up

Another issue that was doing well while most others around it were not, a trader said, was Level 3 Communications Inc., "the one bond that was moving up when everything else was getting beat up."

He saw the Broomfield, Colo.-based telecommunications company's 11% notes due 2008 at 76 bid, up from 74.5 bid, 75.5 offered, and its 9 1/8% notes due 2008 at 73.5 bid, a point better on the day. Also higher, he said, was Time Warner Telecom's 9 3/8% notes due 2008, up half a point on the session at 89.5 bid, 90.5 offered.

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