US Steel, L-3, Dole, others price deals; secondary focuses on new paper

By Paul Deckelman and Paul A. Harris

New York, May 14 - United States Steel Corp., Medex Inc., and Dole Food Inc. were among a slew of companies coming in with new deal pricings during Wednesday's session, which looked to challenge last Thursday for the title of "busiest day of the year."

Secondary activity, not surprisingly, was largely dried up - with most of the focus there also on the new deals, as one by one they were freed for secondary dealings and broke into the market.

The cash-fed fires of the high yield primary market continued to blaze impressively on Wednesday as six new junk bond deals priced, four of them upsized by $100 million apiece and another bumped up by $50 million.

Meanwhile the forward calendar continued to take on new passengers, the most conspicuous by far being El Paso Production Holding Co. which is headed for the road Thursday with $1.2 billion of new 10-year paper.

Meanwhile panting sell-side sources who assisted Prospect News in unclogging Wednesday's impressive primary market news jam had barely enough time to impart commentary. However all hands agreed that at present the market is hot.

The most recent data analyzed by Prospect News would certainly bear out that contention. Heading into the Ides of May, month-to-date issuance so far is $9.26 billion, making May (and remember the month still has half its distance to run) the second busiest month this year already, behind February's $10.1 billion. And it has already passed the total for every single month of 2002 which did not manage to go higher than $8.40 billion in April 2002.

Of the six junk bond deals that priced on Wednesday five were upsized. Four issuers increased their offerings to bond-hungry investors by $100 million each.

United States Steel Corp. upsized its seven-year senior notes deal (B1/BB-) to $450 million from $350 million. The registered offering, with proceeds going to fund the acquisition of National Steel's integrated assets, priced at par to yield 9¾%, at the wide end of the 9½%-9¾% price talk. JP Morgan and Goldman Sachs & Co. were joint bookrunners.

Although L-3 Communications caught some market observers by surprise when news of its 10-year Rule 144A deal surfaced early Wednesday morning, before the session closed it had upsized the offering to $400 million from $300 million. The new 6 1/8% senior secured notes priced at 99.544 to yield 6.1875%, inside the 6¼% area price talk. Lehman Brothers and Morgan Stanley were underwriters.

Cleveland real estate firm Forest City Enterprises also upsized its deal, Wednesday, to $300 million from $200 million, and also extended the maturity of its new senior notes to June 1, 2015 - they had originally been announced as 10 years. The Ba3/BB- notes priced Wednesday at par to yield 7 5/8%, in the middle of the 7½%-7¾% price talk, via Goldman Sachs.

Investors went the whole hog and then some for a new offering of 10-year paper from pork producer Smithfield Foods, Inc. The Virginia company upsized its deal to $350 million from $250 million, and priced the notes at par to yield 7¾%. JP Morgan ran the books.

Also upsized was the Medex, Inc.'s $200 million - increased from $150 million - of new 10-year senior subordinated notes (B3/B-), which priced at par to yield 8 7/8%, at the inside of the 9% area price talk. Lehman Brothers and Wachovia Securities were joint bookrunners.

In fact the only high yield deal that did not upsize, Wednesday, was Dole Food Co., Inc.'s quick-to-market $400 million of seven-year senior notes (B2/BB-). The Westlake Village, Calif. food producer priced its new bonds at par, Wednesday, to yield 7¼%, at the wide end of the 7%-7¼% price talk. Deutsche Bank Securities and Banc of America Securities were joint bookrunners.

Also pricing Wednesday was a split-rated offering from Semco Energy, Inc., which brought $300 million (Ba2/BBB-) in two tranches of senior notes via Credit Suisse First Boston. The company priced $150 million of 10-year paper at par to yield 7¾%, and $150 million of five-year notes also at par to yield 7 1/8%.

Wednesday's headline grabber was El Paso Production Holding Co., which will begin roadshowing $1.2 billion of 10-year senior notes on Thursday, with pricing expected to take place on May 20. Credit Suisse First Boston and Citigroup are joint bookrunners on the deal which the company is bringing in order to repay $1.2 billion of intercompany obligation to El Paso, incurred in connection with the retirement of the Trinity River financing.

In addition to El Paso, Hard Rock Hotel Inc. showed up Monday with a new offering of $140 million of 10-year second lien notes (B) that will be marketed with investor conference calls, and is expected to price early in the week of May 19. Banc of America Securities is the bookrunner on the Las Vegas gaming and lodging firm's deal.

The market also learned Wednesday that the roadshow starts Thursday for Huntsman LLC's $250 million of seven-year senior notes (B3/B), with pricing is expected on May 21. Deutsche Bank Securities and Credit Suisse First Boston are joint bookrunners.

Another roadshow kicks off Thursday for Pliant Corp.'s $250 million of six-year non-call-three senior secured notes, which are expected to price on May 22. via JP Morgan and Deutsche Bank Securities.

Meanwhile the roadshow started Wednesday for Transmontaigne, Inc.'s sale of $200 million of seven-year senior subordinated notes. The company, which has offices in Denver and Atlanta, and which provides integrated terminaling, transportation, storage, supply, distribution, marketing and supply management to refiners, wholesalers, distributors, marketers and end users of petroleum products, expects to price its Rule 144A deal on May 28 via UBS Warburg.

And there will be no roadshow for Lyondell Chemical Co.'s new $325 million of senior 10-year secured notes due in 2013 (Ba3/BB), a quick to market deal from Citigroup, Banc of America Securities and JP Morgan that surfaced on Wednesday and figures to price Thursday. Talk on the Houston issuer's new paper is 10¼%-10½%.

And price talk of 11%-11¼% emerged Wednesday on Omnova Solutions Inc.'s $165 million of seven-year senior secured notes (B2/BB/BB). That deal, with proceeds going to repay Fairlawn, Ohio specialty chemical company's revolver borrowings and terminate its receivables sale program, is expected to price on Thursday via Deutsche Bank Securities.

"It was all new issues," a trader said, noting that little was happening among the established issues.

He saw the new U.S. Steel bonds trading around to 100.5 bid/101.5 offered level; the Medex bonds were going home quoted around 102.5 bid/103 offered.

Also on the new-deal front, the Doles were at 99.25 bid/99.75 offered, while Forest City Enterprises' 10-years exited at bid levels around par to 100.25. No trading was seen in the new Sinclair Broadcast add-on.

The other deals, including Smithfield and L-3, came too late in the session for meaningful secondary activity, traders said.

Outside of the new-deal arena, "not much was going on," a market source said.

Levi Strauss 11 5/8% notes were seen quietly better by one point at 88 bid/89 offered, while Trump Atlantic City Associates' 11¼% notes due 2006 lost a point, to 78 bid/78.5 offered, "as concern grows over possible gaming in the Poconos, " a trader opined.

Sirius Radio's 15% notes due 2007 were unchanged at 78 bid, even as the satellite radio broadcaster said that its subscriber base grew to 68,000 in the first quarter; it projected 100,000 subscribers in place by the end of the current quarter and 300,000 buy year's end. Many of those might be driving Fords, Mercurys or Lincolns; Sirius announced earlier this week that its satellite receivers would be offered as an option on all Ford Motor Co. domestic vehicles.

Telecom bellwether Nextel's 9 3/8% notes due 2009 were off marginally, at 107.125 bid, while Charter Communications' 8 5/8% notes due 2009 were a quarter-point better, at 68.

Several companies which reported earnings Wednesday saw little bond-price movement, with Callon Petroleum's 10¼% notes due 2004 at 97.5 bid and Plains Exploration' 8¾% notes due 2012 at 107.75. Loral Space and Communications' 10% notes due 2006 were unchanged, at 43 bid.

Among the usually busy energy producer issues, Calpine Corp.'s 8½% notes due 2011 were unchanged to slightly weaker, at around 70 bid/71 offered.

AES Corp. 8 7/8% notes were a point lower, at 74 bid. And Williams Companies' 7 1/8% notes due 2011 were down about a point or so, to 91 bid/92 offered.

And El Paso Corp. - bringing a new deal to market next week - was heard weaker as well, its 6.97% notes due 2007 down a point at 87.5 bid/88.5 offered.

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