AMD down on sales warning; Univision dives on credit-line drawdown; new-deal bonds move up

By Paul Deckelman and Paul A. Harris

New York, April 8 - Advanced Micro Devices Inc.'s bonds fell Tuesday, along with its equity, after the Sunnyvale, Calif.-based semiconductor maker warned that its first-quarter sales would come in below previous expectations, forcing the company to chop its 16,000-person workforce by around 10%.

Univision Communications Inc.'s bonds took an early dive on the news that the Spanish-language broadcaster had drawn down most of its bank credit line.

On the upside, Levi Strauss & Co.'s bonds were seen better after the San Francisco-based apparel company reported solidly higher net income for the fiscal first quarter.

Six Flags Inc.'s bonds were also firmer, helped by the news that the New York-based theme park operator will partner with Kraft Foods in a marketing and sponsorship alliance.

Meanwhile, new bonds priced on Monday by Videotron Ltd., Nielsen Co. and PolyOne Corp. were all seen having traded up from their respective issue prices, which in each case was below par.

Having processed so large a chunk of new paper in the previous session, the primary itself sat back on Tuesday to catch its collective breath. While no new deals priced, syndicate sources heard that MarkWest Energy Partners was getting ready to hit the road Wednesday and Thursday to market a new issue of 10-year notes.

Market indicators end mixed

A trader saw the widely followed CDX index of junk bond performance down 3/8 point Tuesday at 94 5/8 bid, 94 7/8 offered. The KDP High Yield Daily Index meanwhile fell by 0.12 to end at 74.55, while its yield widened by 4 basis points to 9.53%.

In the broader market, advancing issues led decliners by a five-to-four margin. Overall activity, reflected in dollar volumes, fell nearly 16% from Monday's levels.

In general, a trader said, "the market has lost some of the volatility that it's had over the last couple of months, when you had things two to three points up and down all over the place. It seems like it's starting to firm up a little bit" - although he then added "maybe that's just this week, who knows?"

"There is no question," another trader said, "that the high yield market is a little easier here, with stocks and Treasuries getting hit."

Stocks fell Tuesday after aluminum industry leader Alcoa Inc. reported disappointing earnings and AMD warned about its sales decline; coupled with the bearish tone in the just-released minutes of the Federal Reserve's March 18 meeting, that was enough to push equities lower, with the bellwether Dow Jones Industrial Average down 35.99, or 0.29%, to 12,576.44 and broader market indexes also lower. Treasuries were meantime mixed; although 2-year notes firmed by 7 bps on the day, longer paper, like the 10-year notes and the 30-year bonds, weakened 2 to 3 bps.

New issues holding their own

However, he said, "the recent new issues have held up really well."

He noted that the $375 million issue of new 7¾% notes due 2016 that Steel Dynamics Inc. priced on March 27 was trading at 101.25 bid, 101.75 offered, well up from its par issue price.

"That's impressive, holding in there in this environment, because things are definitely a little bit easier. People realize that the worst may not be behind us, but yet there are a few selected issues that are definitely holding in there."

Among the bonds which successfully came to market on Monday, the trader saw Videotron's 9 1/8% notes due 2018, which priced at 98.432, get as good as 102 bid, 102.5 offered early on, before coming down from that peak level to 100.75 bid, 101.25 offered.

He also saw the new PolyOne 8 7/8% add-on notes due 2012, which priced on Monday at 99.75, get as good as 100.75 bid, 101.75 offered. Nielsen's new 10% add-on notes due 2014, which came to market on Monday at 99.5, improved somewhat to 100.5 bid, 101.5 offered.

Noting that all three of the new deals had priced at a discount to par - Videotron in particular - and then had moved up past the par level, he opined that "the current state of the market caused these credits to price wider than their credit quality - causing over-subscribed interest for core holdings for accounts."

AMD dives on poor sales prognosis

Back among the established issues, Advanced Micro Devices' 6% notes due 2015 were seen having fallen more than 2 points in busy dealings that included a number of large-block trades in response to the company's bearish sales projections. A market source pegged those bonds at around 63.75, down from Monday's levels around 66.

Its 5¾% notes due 2012, while less-actively traded, were also seen down more than 2 points to about the 71.5 level.

A trader saw the 6s trading between 63.75 and 64.5, in contrast to Monday's levels at 66 bid, 66.5 offered, while the 53/4s came down to the 71 region from 73 bid, 73.5 offered on Monday.

"Everyone was disappointed," he said of the bearish sales outlook. "They were not expecting this."

Another market source pegged the company's 7¾% notes due 2012 down 4 points at 81 bid.

That slide followed the company's revelations, just as the financial markets were closing on Monday, that it anticipates reporting on April 17 that first-quarter sales for the period ended March 29 came in at about $1.5 billion - up 22% from a year earlier but down 15% sequentially from the 2007 fourth-quarter sales level. That $1.5 billion figure is also well below both AMD's own previous projections of quarterly sales reduced "in line with seasonality," or only about a 7% sequential drop, as well as the expectations of most analysts, which on average were in the $1.6 billion to $1.65 billion range.

AMD - the second-largest computer-chip maker after Intel Corp. - blamed the anticipated revenue shortfall on "lower than expected sales across all business segments." In response to its less-than-robust sales figures, the company announced plans to reduce its worldwide workforce of some 16,000 people by about 10% by the end of the third quarter. It expects to record a restructuring charge of as-yet undetermined size in the current second quarter.

Analysts said that AMD's sales fell due to a combination of factors including an overall slump in the computer-chip industry as well as industry leader Intel's aggressive recent efforts to recover some of the market share that it lost to its smaller rival several years ago.

Intel's New York Stock Exchange-traded shares retreated by as much as 6% from Monday's close to $5.95, before improving a little from that low to end at $6.03, down 31 cents or 4.89%, on volume of 61.7 million shares, more than twice the usual turnover.

AMD's decline also pushed some high-yield, high-tech peers lower as well. Freescale Semiconductor Inc.'s 8 7/8% notes due 2014 were seen down a point at 81.5 bid. Amkor Technology Inc.'s 7¾% notes due 2013 were being quoted down a point at 93.5 bid, although at another desk, the bonds were seen closing at 93, down 1½ points. However, Seagate Technology HDD Holdings managed to buck the generally negative trend in the sector, its 6.80% notes due 2016 ending slightly firmer at 96 bid, in active dealings.

Univision slides on credit drawdown

Also on the downside, Univision Communications' 7.85% notes due 2011 were called "extremely active" by a trader who saw those bonds open at 83 bid, well down from Monday's closing level at 88, and then stay down all day, although by the end of the session, they had managed to regain some lost ground, clawing their way back up to 86 bid, down 2 points going home.

Those bonds took a nosedive after the company revealed that it had drawn down $700 million of its $750 million credit line, with plans to use $250 million of the money to pay off bank debt maturing in 2009 and the rest for general corporate purposes. The action was seen in the financial markets as a worrisome signal that the company could not - or didn't think that it could - get the funds for that debt paydown elsewhere.

Univision recently agreed to sell its music division for $153 million - only about half of the $300 million it had been hoping to get for the unit.

Levi better on better earnings

On the upside, a trader saw Levi Strauss' 9¾% notes due 2015 at 102 bid, 104 offered, which he called a 2 point gain, although at another desk, the bonds were actually quoted a point higher than that, at 103 - but were still considered down ½ point.

The first trader noted that the venerable blue jeans maker issued "pretty good' quarterly numbers that would justify strength in the bonds. Levi said that for the fiscal first quarter ended Feb. 24, net revenues were up 4% to $1.083 billion, although Levi did acknowledge that this was primarily due to foreign exchange fluctuations; on a constant-currency basis, sales were flat from a year earlier.

However, the same could not be said for the company's net income, which rose by 12% year-over year to $97 million.

Levi said in announcing its results that while overseas sales of its iconic brand were pretty strong, domestic sales remain sluggish.

Six Flags helped by Kraft deal

The trader also noted strength in Six Flags bonds on the news that the theme park operator will partner with Kraft Foods.

Its 9 5/8% notes due 2014 were seen up 2 points to 58 bid, "looking", he said, while its 9¾% notes due 2013 were also 2 points better at 59 bid, also looking for offers.

The company said its multi-brand partnership with Kraft will highlight selected brands including Nabisco 100 Calorie Packs, CornNuts and Lunchables Lunch Combinations. For instance, there will be an on-pack promotion with Lunchables that will feature a free children's ticket offer for the theme parks, while 100 Calorie Packs Oreo Thin Crisps will be a Six Flags KidsMeal featured dessert item at the parks' concession stands.

The alliance "will also provide Nabisco 100 Calorie Packs, CornNuts and Lunchables content and advertising integration across the Six Flags Media Networks, as well as product sampling and event sponsorships," Six Flags said.

It's the latest cross-promotional tie-up between Six Flags and other companies, notably including Coca-Cola Co. - Coke is the official soft drink at all of the company's nearly two dozen theme, water and animal parks - Sara Lee Corp.'s Ballpark Franks brand, and Time Warner, which licenses the use of its Warner Brothers cartoon characters and DC Comics superhero characters for the parks' promotional efforts.

Freeport higher

Elsewhere, Freeport McMoRan Copper & Gold Inc.'s 8 3/8% notes due 2017 were 2 points better at 109 bid, 110 offered; a trader cited Fitch Ratings upgrading the precious metals company's issuer rating and its bonds to investment-grade status at BBB-, from BB+ previously.

Rexnord Corp.'s 11¾% notes due 2016 were being quoted up as much as 6 points in a 91-92 context, in active trading, although there was no fresh news seen out on the Milwaukee-based maker of industrial equipment that might explain that gain.

Brief roadshow for MarkWest

Trailing Monday's burst of drive-by issuance, which saw three issuers combine to raise $746.6 million of proceeds, a familiar high yield name from the energy sector stepped forward with a deal it will market on Wednesday and Thursday, and expects to price before Thursday's close.

MarkWest Energy Partners, LP plans to sell $250 million of 10-year senior notes (B2/B) via JP Morgan, RBC Capital Markets and Wachovia Securities.

The Denver-based natural gas gathering and transmission company will use the proceeds to fund capital expenditures and repay debt.

Solid executions

A sell-side source told Prospect News that all three of Monday's deals, add-ons from Nielsen Finance LLC and PolyOne Corp., and a new issue from Videotron Ltd., were solid executions.

This official looks for more of that type of primary market activity - either drive-bys, such as the trio mentioned above, or deals that will be marketed for just a couple of days, such as MarkWest.

"People will take advantage of these pockets of liquidity," the official remarked.

However this banker believes that there needs to be a sustained period of strength in the market before there is a re-emergence of deals which require two-week roadshows.

"Pricing is still all over the board," the banker said.

"The indexes seem to be up or down a point or two each day."

Presently there is only one deal in the market that is running a full roadshow.

Calgary, Alta.-based waste management company, CCS Inc., will begin a roadshow on Wednesday for it $312 million offering of senior unsecured notes due Nov. 15, 2015.

The roadshow is scheduled to conclude on April 23, and the notes are expected to price thereafter.

Goldman Sachs & Co. and Deutsche Bank Securities are joint bookrunners for the deal to refinance the $612 million bridge loan related to the LBO of the company.

The overhang

The buy-side source told Prospect News that two of the underwriters are building a book for the Alltel Communications, Inc. cash-pay notes, which are part of the LBO backlog.

This source said that an unspecified amount is for sale to yield in the range of 13½%.

At least one of the underwriters is holding out for a substantially better price, the buy-sider said.

Prospect News asked the source whether the holdout underwriter might be correct.

"I think that given the rally and a lot of the stuff that has happened behind the scenes on getting the credit crisis under control you could make that case," the buy-sider said.

"Triple Cs have rallied big time over the past two to three weeks.

"West Corp is up big.

"A lot of the big LBO names that have had very decent results were taken down by the Street."

Asked if there is any news on the First Data Corp. risk, the source said if Alltel can get done First Data will be right behind it.

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