Echostar deal prices; trades little changed in steady secondary

By Paul Deckelman and Paul A. Harris

New York, Dec. 20 - Echostar DBS Corp. Finally priced its long-awaited offering of seven-year bonds Thursday; once they moved into secondary dealings, they were heard little changed - pretty much the way the bulk of secondary activity went, as market players count down the days till the holiday break.

EchoStar's much talked-about $700 million deal priced at par to yield 9 1/8%, in the middle of talk of 9% to 9¼%. Bookrunners were Deutsche Banc Alex. Brown and Credit Suisse First Boston.

Although sell-side sources on and off the EchoStar syndicate had told Prospect News that EchoStar could upsize, it priced at its originally announced amount.

Thursday also saw the pricing of a $45 million add-on to Senior Housing Trust Property 8 5/8% senior notes due Jan. 15, 2012. The add-on priced to yield 8.53% via bookrunner UBS Warburg. The original $200 million 8 5/8% notes priced just over a week ago, on Dec. 13.

With those two deals priced, high yield new issuance is likely over for the year bringing the total to around $77 billion according to Prospect News data, substantially better than the previous year's $44.4 billion.

When the new Echostar bonds were freed for secondary dealings, a trader said, "they didn't trade well and they didn't trade poorly. They pretty much traded around issue (price)."

That lack of real movement in the new bonds was pretty much the story across the board in the secondary sphere as well. "The market was very quiet, with no real news," a trader said.

Another opined that there was "no major story" going on; he said the only really interesting things were happening across the ratings border in high-grade power generating and energy trading companies, still feeling the after-effects of the whole Enron Corp. debacle.

One name under scrutiny is Mirant Corp., following Wednesday's downgrade by Moody's Investors Service of about $4.9 billion debt to junk-bond status from prior levels at Baa2 and Baa3. One market watcher quoted the Atlanta, Ga.-based energy trading company's 7% notes due 2009 as unchanged at 88.5 bid; the trader, meanwhile, allowed that the bonds looked "fairly wide," but said that they weren't yet trading off the junk desk at his shop, despite the Moody's downgrade of the company's bonds to Ba2 and its placement on review for a possible further downgrade. Standard & Poor's declined to go along with Moody's, affirming its BBB bond rating Thursday and terming its outlook stable.

"They're really still a '5B' as S&P has affirmed their investment grade rating," he pointed out. "We are watching it, but it's still in high-grade land. Until it gets downgraded by S&P - which doesn't look like it's going to happen any time soon - we won't be getting it, and high grade accounts won't be forced to sell it because of their constraints."

"We were hoping to get it but it didn't happen."

Mirant, stung by the loss of half of its investment-grade rating, responded Thursday morning by unveiling a plan to radically improve its balance sheet position by cutting its capital spending by $1.5 billion, to $2.6 billion during 2002, and by selling $1.6 billion in assets. Mirant also raised $759 million in net proceeds by selling 60 million common shares at $13.70, with the proceeds earmarked to reduce debt.

Equity investors weren't thrilled by the dilution in their holdings resulting from the stock sale and dropped Mirant's shares $2.08 (12.94%) to $13.99 on the New York Stock Exchange. Volume of 37.7 million shares was over twelve times the normal turnover.

Mirant's efforts to strengthen its balance sheet follow similar actions by several of its peers, including Dynegy Inc., Williams Cos. and El Paso Co.

Calpine Corp. bonds continued to firm; they have been on the rebound since the company asserted that its downgrade to junk bond status by Moody's last Friday would not hurt its operations, a recovery helped by late Wednesday's sale of $1 billion of convertible notes, which allayed investor fears of possible capital market access problems in the wake of the downgrade.

On Thursday, there was brisk activity in the San Jose, Calif.-based power-plant operator and energy trader's 8.5% notes due 2011, which had moved up four points Wednesday to close at 86 bid. Thursday's market saw over $106 million of the bonds traded according to the Nasdaq FIPS high yield market pricing system; the bonds were quoted as high as 96 and change, well up from Wednesday's peak levels around 90. Calpine's 8 5/8% notes due 2010 were quoted at one desk up two-and-a-half points on the session, at 87 bid. Another desk pegged them up a point at 86.

Last week, Calpine had been a major victim of the market's "guilt-by-association" reaction to the whole power generating and trading sphere, following the resounding crash of Enron. The bonds of that Houston-based energy trader, meanwhile, remained essentially unchanged Thursday, bid around 19.

Outside of the energy industry, Global Crossing was reported by The New York Times to be trying to reach a restructuring plan that would include large investments from Asian and European companies. The paper quoted people close to the companies involved as saying that Li Ka-shing, a Hong Kong businessman, would invest at least $1 billion, with Singapore Telecom also considering a big investment and Deutsche Telekom also said to be possibly involved, via a potential multi-year deal to acquire capacity on Global Crossing's network .

But the troubled Hamilton, Bermuda-based international fiber optic network operator's bonds continue to languish around the 9 bid level and the Times article noted that debt speculators have largely priced in a default.

"It doesn't look a whole lot higher," said a trader who quoted Global Crossing's 9½% bonds up perhaps half a point, at 9.5 bid.

He projected that "until something concrete is actually agreed upon, not much is going to happen. The market is looking for real good news, not just speculation about what they could or couldn't get, especially given the debacles over the past few months."

Separately, Global Crossing announced Thursday that it had completed the sale of its IPC Trading System units to an investment group led by Goldman Sachs Capital Partners 2000, an affiliate of The Goldman Sachs Group, Inc., for $360 million in cash.

Overall, the trader noted, "the market pretty much held its own at (Wednesday's) levels, and that was pretty much it. Not a real exciting day, and not a whole lot getting done.

"I think we've got a lot of people just not working, and unfortunately, liquidity is not being utilized in such a slow market, with the store pretty much being closed for the year."

End

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