Slate keeps fattening, but no pricings; Oregon Steel off on delayed conference call

By Paul Deckelman and Paul A. Harris

New York, July 28 - New deals continued to clamber aboard an already-crowded forward calendar Monday, but none of the almost two dozen deals expected to price this week broke the logjam by actually pricing.

In the secondary market, Oregon Steel Mills Inc. notes were reported to have fallen several points after the Portland-based steeler rescheduled Friday's planned conference call. Also on the downside were WorldCom Inc. bonds and those of its MCI long distance unit, as the troubled telecommer's rivals alleged that it had unfairly schemed to avoid network access charges to local telephone companies - accusations which could throw a wrench into WorldCom's plans to emerge from bankruptcy protection this fall.

Back in the secondary market, Oregon Steel's 10% notes due 2009 "were down pretty sharply after they postponed their conference call," said a trader who saw the bonds having fallen from opening levels at 84 bid, 86 offered to 80.5 bid, 82 offered. He explained that "people got nervous" about what might be up with the company, which recently reported a wider-than-expected second-quarter loss versus a year-ago profit.

Another trader quoted the bonds has having traded as low as a "really wide" 79.5 bid, 82.5 offered earlier in the session before having improved to 80.5 bid, 83.5 offered, which he also said was "just too wide."

At a third desk, the 10% notes were pegged at 81 bid, down four points on the session. Oregon shares were seen down 10 cents (3.51%) to $2.75, although its New York Stock Exchange-traded volume was an anemic 33,000 shares, less than one-quarter of the usual turnover.

Oregon did not make any formal announcement of the delay in the second-quarter earnings conference call, although the company's investor relations department did confirm for Prospect News that the conference had been pushed back to Aug. 14 at 8 a.m. PT (11 a.m. ET) - the time shown on the company's website - from this coming Friday.

The company offered no further information as to the reason for the change or the actual timing of the decision beyond that bare-bones confirmation, nor did a promised follow-up call from a higher-ranking official ever materialize.

The first trader said that the Oregon slide also had some impact on its sector peers, such as AK Steel Corp., whose bonds had recently been firming as the name recovered from the slide it took after a disappointing earnings report on July 18. Indeed, on Friday, the Middletown, Ohio-based maker of stainless steel and other specialty steel products had announced that it has entered into a $400 million, five-year senior secured revolving credit facility with a syndicate of lenders. That good news boosted AK's 7 5/8% notes due 2009 to 78.5 bid, 79.5 offered, and its 7¾% notes due 2012 to 75.5 bid, 76.5 offered.

But on Monday, AK "got hit a little" in sympathy with Oregon's downturn, the trader said, quoting the 7 5/8s as having gone back down to about 77 bid, 78 offered, while the 73/4s softened to 73 bid,74 offered.

United States Steel LLC's 9¾% senior notes due 2010 eased to 97.5 bid, 98.5 offered from 98 bid, 99 offered at the opening, he said, while its 10¾% notes, which closed Friday at 102 bid, 103 offered, went home at 100.5 bid, 102 offered Monday.

Elsewhere, a trader said, "there was lots of attention paid to WorldCom, and the bonds were down a couple of points."

He quoted the bankrupt Clinton, Miss.-based telecom company's 8¼% notes at 27.5 bid, 28 offered, down at least two to three points, while the notes of its MCI long distance unit were also "off a couple," at 74.5 bid, 75.5 offered.

"That was the main focus here," he reported - even as he noted that not everybody necessarily thinks that allegations lodged against WorldCom by long-distance rival AT&T amount to all that much. He said for instance, that at least one research report he had seen had opined that disputes over access charges are fairly commonplace in the telephone industry, and would not necessarily be "material" in delaying WorldCom's plan to come out of bankruptcy in the fall and change its name to MCI in order to distance itself from the more than $11 billion accounting scandal that led to the company's fall.

Over the weekend, The New York Times disclosed and WorldCom confirmed that federal prosecutors had subpoenaed documents in an effort to discover whether MCI, the nation's Number-Two long-distance carrier behind AT&T, had "laundered" calls through smaller phone companies to avoid paying access fees or even shift them onto rival long-distance carriers such as AT&T, Verizon Communications Corp. and SBC Communications. Allegations have also surfaced that the long-distance giant may have re-directed domestic calls through Canada as part of the scheme.

WorldCom - which changed management in an effort to make a clean break with the former regime which caused its slide into bankruptcy - confirmed that it had gotten the Justice Department subpoena and said it would fully cooperate with the probe - while also trying in its statement to downplay the importance of the whole matter, noting, the Times said, that "access charges between local and long-distance carriers have existed for decades and are routine in the industry."

In a statement late Monday, Michael D. Capellas, WorldCom's chairman and chief executive officer, said it would cooperate fully with the U.S. Attorneys Office's investigation and carry out its own internal analysis.

"As I have said all along, we will do the right thing," Capellas added. "We have a zero-tolerance policy and if any wrongdoing is discovered you can be certain that we will take appropriate action swiftly."

But those damage-control efforts could face problems, with the U.S. Bankruptcy Court for the Southern District of New York considering its planned emergence from Chapter 11. On Monday, AT&T filed a motion with the court alleging that MCI had in fact diverted calls to Canada as recently as that morning - and that some of the calls shunted northward were calls placed by the State Department and other government agencies. While the rival phone giant claimed that WorldCom was thus potentially playing games with national security to save money, WorldCom dismissed the claims as a nuisance effort by its competitors to impede its recovery from bankruptcy.

At any rate, another trader said, WorldCom bonds "got crushed" Monday, with its own corporate debt falling across the board to 27.25 bid, 27.75 offered from around 30.5 bid, 31 offered, and MCI's paper careening as low as 74.5 bid Monday from 78.75 bid, 79.75 offered on Friday, before trading back up slightly from those lows to 75 bid, 76 offered.

Apart from those two disasters du jour, traders said not much else was happening. A trader noted that Xerox Corp. bonds were "essentially unchanged" after the Stamford, Conn.-based copier and office machines giant reported that in the second quarter net income of $86 million (nine cents a share) off slightly from year-earlier net of $87 million (11 cents a share).

Xerox's 7 1/8% notes due 2010 hung in at 97.25 bid, 98.25 offered, while its 7.20% notes due 2016 were likewise unchanged at 93 bid, 95 offered.

Also unchanged were the bonds of Amkor Technologies, ahead of the scheduled release of earnings after the market's close on Monday. Its 9¼% notes due 2008 were seen around the same 107 bid, 108 offered levels at which they had ended last week.

The trader did see a little ease in Calpine Corp.'s 8½% notes due 2011, off nearly a point from their opening levels to 75.5 bid, 76.5 offered, while Charter Communications Holdings LLC's 8 5/8% notes due 2009 were a point down at 76.5 bid, 77.5 offered.

"Across the board, everything was anywhere from half a point to two points easier on no news. Everything just feels weaker."

Although the week of July 28 got underway with a slew of deals positioned on the forward calendar and expected to price early in the week, no terms whatsoever had been heard by the end of Monday's session, according to primary market sources.

However in spite of the modest outflow from high-yield mutual funds reported last week and despite the continued sell-off in the Treasuries market, sending the yield on the 10-year note out to 4.29% late Monday, five new offerings totaling $1.875 billion came into play during the session, including Dynegy Holdings Inc.'s massive $1.325 billion in two tranches - a deal expected to price by the end of the week.

"The market is in decent shape," one sell-side source told Prospect News late in Monday's session. "It just might not be quite as good as we have seen over the past two months."

Word of sizable new issuance from Dynegy had been buzzing around the market for more than a week and on Monday the Houston energy giant switched on the lights to show investors a two-part offering of $1.325 billion of 10-year non-call-five and 12-year non-call-five second priority senior secured notes. Dynegy had previously said on July 15 it was planning $1.2 billion of notes.

The Credit Suisse First Boston-led deal is expected to price on Friday.

Sources in the convertibles market advised Prospect News on Monday to expect price talk and a conference call Tuesday morning on the Dynegy convertible deal, adding that the $300 million convert is now seen at $175 million, with the straight bonds getting upped.

Elsewhere Monday Hercules, Calif.-based Bio-Rad Laboratories, Inc. removed the petri dish-lid from an offering of $200 million of 10-year senior subordinated notes (BB-). Goldman Sachs is bookrunner on the deal which is expected to price during the week of August 4.

Ardent Health Services, LLC of Nashville announced a Wednesday roadshow start for $150 million of 10-year non-call-five senior subordinated notes, expected to priced mid-to-late during the week of August 4. Banc of America Securities and UBS Investment Bank are joint bookrunners.

Lexington, Ky.-based mattress-maker Tempur Pedic Inc. also bounced into the market Monday with $150 million of seven-year senior subordinated notes (B3/B-). The company expects to spring into action with a roadshow scheduled to begin Tuesday and will likely put the deal to bed late in the week of August 4. Lehman Brothers and UBS Investment Bank are joint bookrunners.

And the market heard Monday that Anchor Glass Container expects to price a $50 million add-on to its 11% senior secured notes due Feb. 15, 2013 on Tuesday, via Deutsche Bank Securities and Credit Suisse First Boston.

The Tampa, Fla. glass container company sold the original $300 million on Jan. 31, 2003.

One deal transformed into an add-on during Monday's session. Corrections Corp. of America, which had previously been heard to be in the market with a $275 million 10-year non-call-five senior notes deal, announced that it intends to sell a $250 million add-on to its 7½% senior notes due May 1, 2011 on Tuesday. Price talk is 102.375-102.875 on the deal, which is being led by Lehman Brothers.

Price talk was also heard Monday on Energy Partners, Ltd.'s upcoming $150 million of seven-year non-call-four senior notes (B2/B+). The deal, which is expected to price on Tuesday via Credit Suisse First Boston, was talked at 8¼% area.

Price talk of 6½%-6¾% emerged Monday on Morris Publishing Group LLC's sale of $200 million 10-year non-call-five senior subordinated notes (Ba3/B+), which is also expected to price on Tuesday, via JP Morgan.

Also on Monday Seabulk International, Inc., now on the road with $150 million of 10-year senior notes (B2/B), issued price talk of 9% area. The Credit Suisse First Boston-led deal is expected to price Tuesday.

And price talk of 7¼%-7½% was heard Monday on Select Medical Corp.'s $175 million of 10-year non-call-five senior subordinated notes (B2/B), expected to price on Tuesday via JP Morgan and Merrill Lynch.

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