NRG Energy, Telenet price upsized mega-deals; Solutia bonds slide on Chapter 11

By Paul Deckelman and Paul A. Harris

New York, Dec. 17- NRG Energy Inc. and Telenet Communications gave the high yield primary market something the new-deal sector hadn't seen in weeks, even though activity has been running at a red-hot pace lately - two upsized deals of more than $1 billion equivalent face amount each (the last previous mega-deal was split-rated Tyco International's $1 billion 10-year tranche back on Nov. 6). Resolution Performance Products also brought an upsized - through considerably smaller - offering to market.

In secondary dealings, the new NRG and Telenet bonds were heard to have firmed smartly when they were freed for aftermarket trading. Among existing issues, bonds of Solutia Inc. were reeling after the St. Louis-based chemical producer filed for Chapter 11 protection from its creditors.

The primary market saw just over $1.7 billion and €500 million price in four tranches as the Dec. 15 week passed the midway point. While only one tranche upsized (slightly), three priced tight to talk, with the fourth coming on top of talk.

"As we are heading into the holidays it looks like everything is going to get done," one sell-side official commented as Wednesday's business cleared out of the market.

The source noted that only $300 million, evenly split between two deals, remained on the calendar for the present week.

The week's biggest deal, NRG Energy Inc.'s $1.25 billion, sold in a Wednesday transaction which saw the Minneapolis power company's 10-year senior secured second lien notes (B2/B+) price at par to yield 8%.

The notes, which will help to finance NRG's emergence from bankruptcy, came at the tight end of the 8%-8¼% price talk, with Lehman Brothers and Credit Suisse First Boston running the books.

Also Telenet, the Belgian communications company, priced two tranches of notes - one each at the operating company and holding company levels - on Wednesday.

At the operating company level Telenet Communications NV sold €500 million of 10-year senior notes (B3/B-) at par to yield 9%.

JP Morgan, Goldman Sachs & Co., Merrill Lynch & Co. and Royal Bank of Scotland ran the operating company tranche which priced at the tight end of the 9%-9¼% price talk.

At the holding company level Telenet Group Holding NV sold $558 million principal amount of senior discount notes due June 15, 2014 (Caa2/CCC+). The five-year zero coupon notes priced at 57.298 resulting in an 11½% yield to maturity.

JP Morgan and Goldman Sachs & Co. were bookrunners on the holding company tranche, which came right on top of price talk of 250 basis points behind the senior notes. The sale generated approximately $320 million of proceeds.

Finally Resolution Performance Products LLC priced an upsized $140 million of six-year senior secured notes (B+) at par to yield 8%. The offering was increased from $125 million.

The Houston-based epoxy resins manufacturer's deal, via Morgan Stanley, also came tight to the 8%-8 1/8% price talk.

Of the above-mentioned $300 million of deals that remain on the calendar for the week of Dec. 15, price talk was heard Wednesday on both offerings.

The price talk is 7¾%-8% on Asbury Automotive Group's planned $150 million of 10-year senior subordinated notes (B3 expected/B), with pricing expected on Thursday afternoon.

Goldman Sachs & Co. and JP Morgan are running the books for the Stamford, Conn.-based automotive retail and service company's deal.

And price talk of 7%-7¼% emerged Wednesday on Suburban Propane Partners, LP and Suburban Energy Finance Corp.'s upcoming $150 million of 10-year senior notes (B1), expected to price late Thursday afternoon.

Wachovia Securities and Goldman Sachs & Co. are joint bookrunners on the Whippany, N.J. propane supplier's deal.

Pax World High Yield Fund portfolio manager Diane Keefe told Prospect News that she likes the company, but at 7%-7¼% she will not become involved in Suburban Propane.

One other deal that has been positioned on the Prospect High Yield Daily forward calendar as December business is also likely to be completed before the holiday break, according to an informed source.

Nexstar Finance LLC and Nexstar Finance Inc.'s proposed $125 million of 10-year senior subordinated notes (B3/B-) to fund the acquisition of Quorum Broadcast Holdings, sponsored by Abry Partners, is "imminent," according to the source.

Banc of America, Bear Stearns & Co., Lehman Brothers and UBS Investment Bank are bookrunners on the Irving Tex.-based firm's deal.

Finally, Prospect News heard on Wednesday that Communications & Power Industries Inc. is expected to bring $125 million of new high-yield notes to market in early 2004.

The company will also obtain a $130 million credit facility via Bear Stearns and UBS Investment Bank.

The Communications & Power deal is also an acquisition financing, with proceeds slated to help support the Palo Alto, Calif. company's acquisition by The Cypress Group from Leonard Green & Partners LP and other investors, valued at approximately $300 million.

Prospect News caught up with Evergreen High Yield Bond Fund manager Prescott Crocker on Wednesday. As with so many high yield players in the presently red-hot market, Crocker has been neglecting his Christmas shopping.

"I've been shopping for junk bonds, foreign currency-denominated sovereign bonds, emerging markets bonds, Treasury bonds and most importantly precious metals investments," he said.

Crocker professed the belief that new issues are pricing at extremely tight levels - levels which he does not expect get too much tighter.

"I think the market is fully priced and eager for stuff," he said. "There is no value in the new issue market. That's why none of them go at premiums except the smaller specialty deals."

Crocker also noted that it is next to impossible to buy bonds, at present, in the secondary market.

When the new NRG Energy 8% notes due 2013 were freed for secondary dealings, they were heard to have firmed right up to 102.5 bid, 103 offered from their par issue price earlier in the session.

The new Telenet zero-coupon notes due 2014 did even better, on a percentage basis; after pricing at 57.298, the discount notes jumped to 62 bid, prompting a trader to say, with considerable understatement, "I think it went pretty well."

At another desk, a trader saw the dollar-denominated step-up bonds at that same 62 level, while the euro-denominated cash-pays, which had priced at par, were also on the rise, ending at 103 bid, 104 offered.

In the secondary market, Solutia was the disaster of the day after the chemical company sought bankruptcy code protection from its liabilities, including retired-employee pension costs and environmental cleanup obligations it inherited from former corporate parent Monsanto Corp. when Solutia was spun off from Monsanto in 1997.

A trader saw Solutia's bonds "up and down like a yo-yo," with its 11¼% senior notes due 2009 falling as low as 67 bid, 70 offered from their Tuesday closing levels at 91 bid, 93 offered, although these did manage to recoup most of their early losses and close at 87 bid, 89 offered.

But he said that the company's junior bonds, like its 6.72% debentures due 2037, were a real roller-coaster," opening at 78 bid, 81 offered, then plunging as low as 45 bid, jumping back up to the 58 level, but then eroding back down to a close at 41 bid, 43 offered.

Another disaster was Italian dairy products producer Parmalat, whose 6 5/8% dollar-denominated notes due 2010 lost about six points on the session to end at 54 bid, 55 offered, while its various issues of euro-denominated bonds closed in a range of 53 to 58 depending on their coupon and maturity, also off about six points across the board, on fears the cash-strapped company would be forced to pony up $400 million to buy the 18% stake in its Brazilian unit held by a group of shareholders; however, late in the session, after trading had pretty much wound down, Reuters reported - quoting an unidentified "source" close to the talks - that the investors had agreed to not immediately put their stake back to the company but rather, to continue negotiations.

Elsewhere, a trader said that Goodyear Tire & Rubber Co. bonds "looked like they were a little weaker"; he quoted the Akron, Ohio-based tiremaking giant's 7.857% notes due 2011 as having dropped to 84 bid, 86 offered from prior levels at 88 bid, 89.5 offered, despite a lack of fresh negative information about the company, aside from last week's news that it had uncovered accounting irregularities in its European operations - the second such accounting blow-up in under two months. The accounting problems mean Goodyear will have to delay the filing of its re-stated 2002 annual report, and will likely not be able to meet its timetable for new debt and equity financings before the end of the year.

The trader also saw Level 3 Communications Inc. "a skosh better," its 9 1/8% notes due 2008 up half a point to 90.75 bid, while Charter Communications Holdings LLC "felt better," its bellwether 8 5/8% notes due 2009 a point improved at 84 bid, 85 offered.

The bonds of iStar Financial Inc. were seen firmer after the New York-based commercial real estate financing company announced plans to sell 5 million shares of common stock and use the estimated $191 million of expected proceeds to repay secured debt. Its 7% notes due 2008 were a point better at 107, while its 8¾% notes due 2008 were two point ahead at 114.5.

Revlon's widely traded 8 5/8% notes due 2008, which had fallen back Tuesday even though the cash-strapped New York-based cosmetics company announced that its board of directors had okayed acceptance of two loans totaling $125 million from MacAndrews & Forbes Holdings Inc. and said that it would consider issuing new debt or shares to help improve its balance sheet, were rebounding Wednesday, firming to 48 bid from 43 on Tuesday. Its 8 1/8% notes due 2006 were up two points, at 68.

Sirius Satellite Radio's 15% notes due 2007 were unchanged at 104. Rival satellite radio broadcaster XM's 12% notes due 2010 were off one quarter point at 113.25.

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