Century Aluminum, Sino-Forest price; Trump gets dumped; Delta slide continues

By Paul Deckelman and Paul A. Harris

New York, Aug. 10 - Century Aluminum Co. and Sino-Forest Corp. were heard by high yield syndicate sources Tuesday to have successfully brought new deals to market.

In the secondary market, news that Trump Hotels & Casino Resorts plans to restructure its burdensome nearly $2 billion debt load via a Chapter 11 filing later this year pushed the Atlantic City, N.J.-based gaming company's notes down about three or four points. Other downsiders included Six Flags Inc., which reported what its executives called "disappointing " second-quarter numbers; Bally Total Fitness Holding Corp., which said that it would delay the filing of its scheduled financial reports; and Delta Air Lines Inc., whose bonds continue to lose altitude as the beleaguered Atlanta-based carrier seems to be flying ever-closer to an emergency landing in bankruptcy.

A quiet Tuesday session saw a single issue price in the U.S. high-yield primary market as California aluminum producer Century Aluminum completed its $250 million bond sale - a deal that went well, according to various market sources. A second deal, Sino-Forest Corp., was seen as more of an emerging markets name despite its Canadian domicile since its activities are primarily in Asia.

Meanwhile the Federal Reserve surprised no one when it boosted the short term interest rate to 1.5%, a 25 basis points increase.

Those who were listening for a hint that the Fed might be prepared to ease off of its anticipated regime of measured rate increases owing to less-than-stellar economic numbers in June and July were likely disappointed as the central bank stated that the U.S. economy "appears poised to resume a stronger pace of expansion going forward."

Louise Rieke, portfolio manager of the Waddell & Reed Advisors High Income Fund, told Prospect News that rising rates are not necessarily a bad thing for high yield.

Century's day in the sun

Monterey, Calif.-based primary aluminum producer Century Aluminum sold $250 million of 10-year senior notes (B1/BB-) at par to yield 7½%, in what various sources on both the buy- and sell-sides characterized as a deal that went well.

The Credit Suisse First Boston, Banc of America Securities, Goldman Sachs and JP Morgan-led refinancing and possible acquisition deal came at the tight end of the 7½%-7¾% price talk.

Diane Keefe, portfolio manager of the Pax World High Yield Fund, played in the deal and conjectured that it must have been oversubscribed as she received half the allocation of bonds that she had requested.

When the bonds started trading, Keefe added, they were seen at 101.5 bid, 102 offered and subsequently ended the session at 100.75 bid, 101.25 offered.

Among the aspects of Century Aluminum that Keefe found attractive were the company's $1 billion of revenues in the past 12 months, and its 3.45-times total debt to EBITDA, which Keefe characterized as low for a high-yield credit.

Sino-Forest prices

Sino-Forest priced $300 million of guaranteed senior notes due 2011 (Ba2/BB-) at par to yield 9 1/8% via Morgan Stanley.

After being free to trade, the new bond performed well, moving up to 101½ bid, 102 offered from its par issue price.

Collins & Aikman rejigs deal

The only other high-yield primary market news from Tuesday's session was price talk on a slightly restructured $400 million offering from Collins & Aikman Products Co.

The Troy, Mich.-based manufacturer of plastic interior and exterior automotive trim is talking its eight-year senior subordinated notes (B3/B-) with a 12¾% coupon to price at a slight discount on Thursday to yield 13%.

Meanwhile call protection has been increased to five years from four years.

Late in the day market watchers advised Prospect News that the eight-year non-call-five structure is an unusual one.

Deutsche Bank Securities, Credit Suisse First Boston and JP Morgan are the underwriters for the debt refinancing deal.

Rising rates not bad for junk, says Rieke

In an afternoon conversation with Prospect News Waddell & Reed portfolio manager Rieke numbered herself among the apparent legion of capital markets observers who were not surprised by Tuesday's move by the Fed to raise U.S. interest rates.

"I don't think they had a choice because if they had not raised rates what they would have been telling the market is that the economy is much weaker than they thought it was," Rieke said

"I don't think that was a signal they were ready to send."

The portfolio manager went on to say that interest rate increases, coming at a measured pace, should not adversely effect high yield.

"Historically the high yield trades more on credit quality," she said. "So if the Fed is raising rates it means the economy is doing well, which then infers that the companies are doing better and credit quality is getting better.

"So the market should be trading better, and on a relative basis I think we'll outperform other markets."

Century up in trading

When the new Century Aluminum 7½% senior notes due 2014 were freed for secondary dealings, a trader saw the bonds shoot up to 101 bid, 102 offered on the break from their par issue price. However, later in the day, a trader at another desk saw those bonds having come in to around 100.5 bid, "a lackluster showing," he declared.

As for the rest of the secondary market, he said, half jokingly," I think I'm going to quit and become a gym teacher."

He said that things were "just dead," with "real wide markets." There was little impetus to be gained by the announcement that the Federal Reserve Board had decided to raise interest rates a quarter point, and no gains to be had on the coattails of the equity market, which firmed smartly despite the Fed rate boost, or, depending on whom you talk to, because of it.

"Everyone was expecting the Fed," the trader said, in characterizing the market's low level of activity.

Trump down

There were some things going on in selected pockets, however. One such name was Trump, whose Trump A.C. 11¼% notes due 2006 were seen having fallen to about 85.5 bid from prior levels around 87.5. A market source saw the company's Trump Holdings 12 5/8% notes due 2010 as having fallen to 99.75 bid from 102.5 offered.

"I just don't get it. I don't know who would invest in them," a market source marveled. "It seems like every other year, this guy [company chairman and CEO Donald Trump] ends up in bankruptcy with these things" - but always somehow manages to escape.

Strictly speaking, the company hasn't visited the bankruptcy courts since 1992, when the Trump Taj Mahal, Trump Castle and Trump Plaza ended up in Chapter 11, weighed down by more than $1 billion in debt and hurt by the 1990-91 recession. But even after the company emerged from formal bankruptcy with the wily Trump still in control of things, the company has been tap-dancing on the edge of danger, its debt burden now nearly doubled and losing market share to the glitzy new Borgata resort, right next to The Donald's aging Trump Marina.

Under terms of the new arrangement, THCR will restructure under a pre-packaged Chapter 11 arrangement, and will emerge with a Credit Suisse First Boston private equity fund holding a majority stake in the company. Trump will stay on as chairman, although he will relinquish his CEO post and will only hold 25% ownership. Bondholders will get a combination of cash, stock in the reorganized company and new debt. The company's $1.8 billion of debt will be cut to $1.25 billion and $220 million of annual interest payments will be chopped about in half.

Bally drops on restatement

Elsewhere, news that Bally Total Fitness will delay filing its 10-Q second quarterly results with the Securities and Exchange Commission and will restate some prior results, all due to accounting problems, dragged the Chicago-based physical fitness center chain's bonds down like a barbell thrown to a swimmer in one of the company's spa's pools.

A trader saw the Bally 9 7/8% notes due 2007 offered at 85, down from prior levels around 87 bid, 89 offered. At another desk, those bonds were seen down as much as 4½ at 82.5 bid.

Bally's 10½% notes due 2011 were seen off several points at 95.

Six Flags lower on earnings

Six Flags "got beat up a little," a trader said, quoting the New York-based theme park operator's 9 5/8% notes due 2014 as having fallen to 85 bid 90 offered from prior levels at 87 bid, 88 offered, while its 9½% notes due 2009 were down more than two points at 94.5 bid. The company's 9¾% notes due 2013 took a roller-coaster ride down to 89.25 bid from 92 previously.

The bonds fell after the company reported what it called "disappointing" second-quarter results, citing the continued effects of a weakened economy and unexpected bad weather on a few weekends in some of its key markets. However, while predicting that this year's revenue and EBITDA totals would come in below last years, company officials told a conference call that they were projecting EBITDA gains for 2005 and 2006, as the economy picks up, visitors are drawn by new rides and the company benefits from its quirky, bouncy TV ads (see related story elsewhere in this issue).

Qwest, Delta down again

Another downsider was Qwest Communications International Inc., whose bonds have been declining over the past two sessions in apparent response to a bearish article on the telephone industry in this past weekend's Barron's. Qwest's 7½% notes due 2014 dropped to 89.5 bid from prior levels at 92.

Delta Air Lines debt continued its lengthening slide to nowhere Tuesday, buffeted anew by investor fears arising from company disclosures Monday that the troubled carrier had already burned through $700 million of the $2.7 billion cash cushion it began the year with and would likely burn up an equal amount - or maybe even more - in the remainder of the year, given the sharp rise in fuel prices and its inability so far to get its pilots' union to sign on to big cost concessions.

Delta's bonds were "just getting mowed," a trader said, quoting its 7.70% notes due 2005 at 42 bid, 44 offered, down from prior bid levels in the 46-48 area, and its 8.30% notes at 27 bid, 29 offered, down around two points from recent levels.

"Oh, they're looking really sharp," the trader said sarcastically, noting that the smart thing for investors to have done would have been to "short the bonds after they shot up on the news that the pilots would consider deeper concessions" several weeks ago, when the 8.30s were seen as high as a 47 bid and the 7.70s had pushed into the upper 60s.

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