Young Broadcasting two-parter paces continued new-deal onslaught; Parmalat gyrates on bond payment

By Paul Deckelman and Paul A. Harris

New York, Dec. 12- Young Broadcasting, Inc. sold a quickly shopped $240 million two-part note offering Friday, as the high yield primary market - which had already sold more than $4.3 billion through Thursday - finished off one of its busiest weeks this year on a robust high note, with another $1 billion of new paper sold, as deals continued to clatter down the chute. Besides Young, syndicate sources said that Viasystems Group Inc., Mariner Health Care, Inc., Great Lakes Dredge & Dock Corp., and Land O'Lakes. Inc. brought new deals. The market also saw a pair of somewhat smaller, opportunistically priced add-ons to existing bond issues from Pathmark Stores, Inc. and Semco Energy, Inc.

Secondary market activity largely took a back seat to the exciting rush of new deals popping out and then mostly popping up, as well as the stock market's continued surge, which boosted the bellwether Dow Jones Industrial Average further beyond the psychologically potent 10,000 mark.

One name in focus, participants said, was Parmalat Finanziaria SpA, whose bonds have been on a roller-coaster ride all week after it failed to pay off a maturing bond as scheduled last Monday. On Friday, its bonds at first continued to erode badly but then turned around after the company belatedly made the required payment.

The roaring week of Dec. 8 came to a close in Friday's primary market session with eight tranches (Young counted for two) pricing for a total of $1.055 billion.

In terms of dollar amounts, the $5.362 billion that priced during the week of Dec. 8 puts it in third place for the year, trailing the weeks of May 19 and June 23. However by the number of deals priced, the 27 tranches in the week gone by was by far the busiest of the year, beating the previous 22 total in the year's busiest week.

As to whether or not the primary market is closing in on the new issuance record of 1998 - a threshold set by various institutions between approximately $138 billion and approximately $151 billion, all sources who commented Friday during conversations with Prospect News said: "No."

"We have the all-time record set in 1998 at $140 billion," one sell-sider said. "I show us finishing this year - depending upon whose rules you use - somewhere between $137.25 to $138.5 billion. That's unless everything that's left on the calendar upsizes by 50%.

"And I would be surprised if anything really big comes anymore this year, just because people tend to look out for those deals," the official added. "There are not a lot of situations where they can happen.

"That's not to say that we won't see a $100-$300 million deal pop up. But we're getting pretty late to announce a new deal."

Prospect News' total for the year so far is $135.02 billion, covering dollar-denominated deals offered in the U.S. as registered or Rule 144A offerings. Prospect News' data does not extend back to 1998.

The largest issuance Friday came from Young Broadcasting However its $230 million total came in two separate tranches.

The New York City-based television broadcasting company priced a $90 million add-on to its 8½% senior unsecured notes due Dec. 15, 2008 (B2/B) at 106.91, resulting in a yield to worst of 6½%, right at the 6½% area price talk.

Wachovia Securities and Deutsche Bank Securities ran the books.

The company also sold $140 million of senior subordinated notes due Jan. 15, 2014 (Caa1/CCC+) at par to yield 8¾%, again right at talk, in this case 8¾% area.

The bookrunners flip-flopped, with Deutsche Bank Securities on the left for Young Broadcasting's senior subordinated tranche and Wachovia Securities on the right. However an informed source told Prospect News that both institutions had 50% of the bonds for both tranches.

St. Louis electronics manufacturing services company Viasystems sold $200 million of eight-year senior subordinated notes (Caa2/CCC+) at par during the session to yield 10½%, well wide of the 9½%-9¾% price talk. Goldman Sachs & Co. was the bookrunner.

Great Lakes Dredge & Dock priced a slightly upsized issue of $175 million of 10-year senior subordinated notes (B3/B-) at par to yield 7¾%. The Oak Brook, Ill. dredging services provider's deal was increased by $5 million and came at the tight end of the 7¾%-8% price talk. Lehman Brothers, Credit Suisse First Boston and Banc of America Securities ran the books.

Land O'Lakes, Inc. buttered up a sufficient number of the accounts to enable it to upsize its deal to $175 million from $150 million. The Arden Hills, Minn. farmer-owned food and agricultural cooperative's seven-year senior secured second lien notes (B2/B) priced at par to yield 9%, right at the 9% area price talk. JP Morgan was the bookrunner.

Mariner Health Care, Inc. was discharged from the primary market with a healthier balance sheet Friday, having priced $175 million of 10-year senior subordinated notes (B3/B-) at par to yield 8¼%.

CIBC World Markets, JP Morgan and Lehman Brothers ran the books for the Atlanta, Ga.-assisted living and acute care facilities operator's deal, which came at the tight end of the 8¼%-8½% price talk.

In addition to the Young Broadcasting add-on, two other issuers reopened existing issues with quick-to-market deals Friday.

Pathmark Stores, Inc. priced a $50 million add-on to its 8¾% senior subordinated notes due Feb. 1, 2012 at 103, resulting in an 8.115% yield to worst. JP Morgan led the Carteret, N.J. supermarket chain operator's deal.

Pathmark priced the original $200 million at par on Jan. 23, 2002 and hence walked away with a substantially lower interest rate on Friday.

And Semco Energy, Inc. priced a $50 million add-on to its 7¾% senior notes due May 15, 2013 (Ba2/BB-) at 104.25, resulting in a 7.003% yield to worst.

Credit Suisse First Boston was the bookrunner.

The original $150 million priced at par on May 14, 2003 as part of a $300 million two-tranche deal, so Semco also saved money in interest payments as a result of its return to the red hot high yield of December 2003, despite being downgraded to junk by Standard & Poor's in the meantime. Moody's Investors Service already had Semco at junk in May.

And notwithstanding the above-quoted sell-side official's color that "it is getting pretty late to announce a new deal," the market received word of yet one more new roadshow start on Friday.

Asbury Automotive Group will begin a roadshow on Monday for $150 million of 10-year senior subordinated notes (B3 expected/B), expected to price on Thursday.

Goldman Sachs & Co. and JP Morgan are joint bookrunners on the deal from the Stamford, Conn.-based automotive retail and service company.

When the new Young Broadcasting 8½% senior notes due 2008 were freed for secondary dealings, they moved up to 107.5 bid, 107.75 offered from their 106.91 issue price, while its 8¾% senior subordinated notes due 2014, which had come at par, were bid at 100.5, "but no right side [offer level]," said a trader.

He saw the new Great Lakes Dredge & Dock 7¾% senior subordinated notes due 2013 break at 102 bid, 103 offered.

As for the new Land O'Lakes bonds, which had come at par, "I heard them quoted at 102 bid, 102.75 offered and at 100.25 bid, 100.75 offered and I never did a trade - so your guess is as good as mine on that one."

There were, he said, "a lot of deals - but not a lot of trading" in them afterward.

Another trader saw Mariner Health Care's new 8¼% senior subordinated notes due 2013 at 101 bid, 101.5 offered, with the Great Lakes bonds at 102.25 bid, 102.75 offered. Land O'Lakes, he said, had been "offered at 103 - but I think that's much too high."

Among issues which had priced on Thursday or earlier in the week, the first trader said that Krayton Polymers LLC's new 8 1/8% senior subordinated notes due 2013, which priced Thursday at par, opened at 103.5 bid, 104.5 offered Friday and pretty much stayed at those lofty levels. The new Couche-Tard Inc. 7½% senior subordinated notes due 2013 hovered at 103 bid, 104 offered, while Ship Finance International Ltd.'s 8½% senior notes due 2013, which came at par on Thursday, were treading water Friday at 99.25 bid. The new THL Bedding Co. 7 3/8% senior subordinated notes due 2014, which came at par on Wednesday, were no better than 100.25 bid, 100.75 offered Friday and "did nothing. It died," the trader said.

"The new stuff came and went, opened and closed, but beyond that, the secondary was light."

Back among the existing issues, Parmalat was "the big focus today," a trader said, with the Italian dairy products company making the payment on the €150 million of maturing bonds as it attempted to stave off an anticipated default by making the payment in full.

That sent its bonds - which had fallen to bid levels of around 60 on Thursday after a big Standard & Poor's ratings downgrade and which then continued to move down to the mid 50s in Friday's early dealings - zooming back upward again.

The trader quoted Parmalat's bonds as having opened in a 56-59 bid context, depending on the coupon and maturity, and then losing another two points to a 54-56 bid context. After the announcement that the bonds had been paid in full, he said, the debt shot back upward and was "straddling 70" before coming off that peak to end with most issues hanging on in a 61-62 to 62-64 bid context.

Despite the bond payment, S&P - which had dropped the company's debt ratings a whopping 11 notches over two sessions earlier in the week to CC from BBB- originally - said that it was keeping Parmalat on CreditWatch, with a "developing" outlook, noting that while the company had dodged a default bullet this time around, it still had major debt maturities coming due next year. The ratings agency also wondered how it could happen that a company which had claimed to have some €4 billion in cash and equivalents could get itself into a situation where it had to miss a payment deadline on an €150 million bond.

Back in the States, little movement was seen in Goodyear Tire & Rubber Co.'s bonds, which had blown out badly on Thursday - anywhere from five to seven points with the revelation of new accounting problems - the second such revelation in a matter of weeks - and the likelihood that this would cause delays in the Akron, Ohio-based tire giant's attempts to refinance its debt.

"There was not much change" in Goodyear, a trader said, noting that "most of the action was earlier in the week."

He quoted its 8½% notes due 2007 at 98 bid, 99 offered, its 7.875% notes due 2011 at 88.5 bid, 90 offered and its 6 5/8% notes due 2006 at 99.

AK Steel Corp.'s notes were seen lower after Moody's Investors Service cut the Middletown, Ohio-based steelmaker's secured bonds a notch to B1 and its unsecured a notch to B3. AK's 8 7/8% notes due 2008 and 9% notes due 2007 dipped a point each to 85, while its 7 7/8% notes finished at 82.5 bid, 83 offered and its 7¾% notes were at 80.5 bid, 81 offered.

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