Loehmann, Eco-Bat price; Calpine, MediaCom lower, Graham up; funds see $8.9 million inflows

By Paul A. Harris

St. Louis, Sept. 30 - Thursday's session in the high-yield primary market saw two small deals price as Loehmann Capital Corp. sold $110 million in three tranches and Eco-Bat Finance priced an upsized €70 million add-on to its 10 1/8% notes due 2013 at right on top of the 112.5 price talk, realizing a substantial reduction in its interest rate compared to the original deal.

Meanwhile in the secondary market traders saw issues trading flat to slightly down, with existing issues of Calpine Corp. and MediaCom Communications Corp. trading down, while the newly priced notes from Graham Packaging were seen firming.

And late in the session market sources advised Prospect News that AMG Data Services is reporting an $8.9 inflow to high-yield mutual funds for the week ending Oct. 29.

It was the sixth straight week in which a net inflow had been seen.

The fund flows are considered by many in the market to be a reliable barometer of overall market liquidity trends, even though the aggregate amount of money in the junk funds represents only a relatively small percentage of funds in the broader high yield universe.

The sixth straight weekly gain follows the $101 million inflow seen in the previous week (ended Sept. 22). Although the year-to-date funds flow picture remains decidedly negative, with outflows seen in 20 of the 39 weeks since the start of 2004, for a cumulative net loss from the funds of $3.914 billion, momentum seems to have shifted to the upside of late. In the past six weeks, a total of about $1.02 billion more has come into the funds than left them in that time.

Loehman sells $110 million in 3 parts

Thursday's sole dollar-denominated new issue came from Loehmann Capital Corp., which sold $110 million of high-yield notes (Caa1/CCC+) in three tranches via Jefferies & Co.

The upscale off-price specialty retailer for women, headquartered in the Bronx, N.Y., sold $55 million of seven-year class A-1 fixed-rate notes at par to yield 12%. Price talk was 12% area.

The company also sold $20 million of seven-year class A-2 floating-rate notes at par to yield six-month Libor plus 800 basis points, right on top of the price talk.

In addition Loehmann sold $35 million of 13% seven-year class B fixed-rate notes at 95.626 to yield 14%, again right on top of the 14% area price talk.

The class A notes have payment priority over the class B notes.

Eco-Bat brings add on

Elsewhere Eco-Bat Finance plc priced an upsized €70 million add-on to its 10 1/8% senior guaranteed notes due Jan. 31, 2013 (B1/B) at 112.5 on Thursday in London, resulting in a 7.20% yield.

Price talk was the 112.5 area.

Citigroup and Credit Suisse First Boston ran the books for the deal from the Matlock, United Kingdom-based recycling company.

The add-on was increased from €65 million.

The original €165 million priced on Jan. 24, 2003, so the total size of the issue is now €235 million.

Two roadshow starts

Two prospective issuers appeared Thursday with offerings they will take out on investor roadshows.

Harvest Operations Corp. (Harvest Energy Trust) will run a roadshow next week for a $200 million offering of seven-year non-call-four senior notes (B3/B-).

Pricing is expected to take place late next week.

Morgan Stanley will run the books for the debt refinancing deal from the Calgary, Alta.-based energy royalty trust that acquires and manages oil and gas properties.

Meanwhile the roadshow started Thursday for AirGate PCS, Inc.'s $175 million of seven-year non-call-two first priority senior secured floating-rate notes (CCC+), with pricing expected to take place late next week.

Banc of America Securities and Credit Suisse First Boston are joint bookrunners for the debt refinacing deal from the Atlanta-based PCS Affiliate of Sprint.

Vendex talks fixed note, drops floater

Price talk is 7 7/8%-8% on Victoria Acquisition II BV (Vendex) €275 million of 10-year non-call-four senior fixed-rate notes (B3/B), expected to price on Friday via Citigroup and ING.

The Netherlands department store company has eliminated a planned tranche of floating-rate notes.

Meanwhile price talk of the 10%-10¼% area was heard Thursday on Polypore International's quick-to-market offering of $200 million of 10-year non-call-five senior discount notes (expected ratings Caa2/CCC+).

The books were scheduled to close late Thursday afternoon, with pricing to follow. However no terms had been heard before Prospect News went to press Thursday evening.

JP Morgan has the books for the dividend payment deal from the Charlotte, N.C., filtration technologies manufacturer.

SI pulls $230 million

Finally SI Corp. postponed its offering of $230 million of eight-year senior secured notes (Caa1/B) on Thursday, according to market sources.

One source told Prospect News that the company found the price talk on the notes to be objectionably high.

JP Morgan and Bear Stearns & Co. had the books on the debt refinancing deal from the Chickamauga, Ga.-based manufacturer of synthetic fabrics and fibers.

New bonds trade mixed

In the secondary market on Thursday recently priced issues seemed to be enjoying (or enduring) various circumstances.

Graham Packaging, the York, Pa. manufacturer of blow-molded plastic containers which sold $625 million of high-yield bonds on Wednesday, saw its bonds firm on Thursday, according to one trader.

The Caa1/CCC+ rated 8½% notes due 2012 were seen at 102.125 bid, 102.625 offered.

Meanwhile the Caa2/CCC+ rated 9 7/8% subordinated notes due 2014 were at 102.25 bid, 102.75 offered.

Both were up about a quarter of a point on the day, the trader said.

And both had appreciated significantly from their par issue price.

Also firming on Thursday were Denny's Holdings Inc.'s new 10% notes due 2012. The Spartanburg, S.C. family-style restaurant chain sold $175 million of the Caa1/CCC+ paper at par on Wednesday.

According to the trader the par-pricing Denny's bonds traded as high as 101.25 bid, 101.375 offered during the Thursday session, easing at the close to 100.25 bid, 100.75 offered.

"When you have a preponderance of triple-C rated stuff it should make people pause and take a little bit of a look around the market," one trader remarked, as it was noted that all of the deals that priced during the Wednesday primary market session, including Graham Packaging and Denny's were rated Caa1 or lower by Moody's Investor Services and CCC+ or lower by Standard & Poor's.

Encore Medical, Calpine softer

Elsewhere among the recently priced new issues, Encore Medical IHC Inc.'s new 9¾% notes due 2012 (Caa1/CCC+), which priced at 99.314 on Tuesday, eased on Thursday.

The Austin, Tex.-based orthopedic device company's notes closed at 98.25 bid, 98.75 offered, a trader said.

And Calpine Corp.'s new $785 million of 9 5/8% notes due 2014 were down, and seemed to be registering a negative impact on the San Jose, Calif., power generator's existing paper.

One trader had the new Calpine notes, which had priced at 99.212, closing Thursday at 98 bid, 98.625 offered.

The trader added that longer unsecured Calpine paper was "a little weaker on the heels of the deal," citing the 8½% notes due 2011 at 64 bid, 64.50 offered, the 10½% notes due 2006 at 96.75 bid, 97.25 offered and the 8 ½% notes due 2008 at 98.875 bid, 99.50 offered.

Ardent Health lower

Away from the new deals, one trader saw Ardent Health Services' 10% notes due 2013 down three or four points to 102 bid, 104 offered.

The Nashville, Tenn., provider of healthcare services said Thursday that its audit committee had started an internal review of possible violations of Lovelace Sandia Health System, Inc.'s accounting policies concerning how Lovelace Sandia was reconciling accounts between its internal health care provider network and its health plan.

Lovelace Sandia is an Ardent subsidiary that operates four acute care hospitals, one rehabilitation hospital, one behavioral health hospital and a 191,000 member health plan.

Ardent said it discovered the issue through its internal compliance program.

MediaCom lower

Meanwhile MediaCom, which was downgraded by Standard & Poor's, which cited the company's loss of subscribers to satellite providers, saw its existing notes ease about a point.

The 11% notes due 2013 finished the day at 106 bid, 107 offered while its 9½% notes due 2013 were at 96.25 bid, 97.25 offered.

Another trader had the 9½% notes due 2013 at 96 bid, 97 offered, down from 97 bid, 98 offered Wednesday.

Issuance still ahead of 2003

Finally, according to analysis of market data by Prospect News, issuance for the year through the end of September in both the United States and Europe is well ahead of the levels posted at this point in 2003.

U.S. issuance at September 2004's end was $104.29 billion, versus 2003's $103.19 billion.

And European issuance ended September 2004 at €15.57 billion, significantly ahead of 2003's €6.67 billion.

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