IMC Global prices upsized offering; AK Steel dives on loss

By Paul Deckelman and Paul A. Harris

New York, July 18 - IMC Global Inc. came to market Friday with an upsized offering of 10-year notes, although the deal had to price well below par to produce an acceptably fat yield. But the new notes - the only transaction completed in the primary market - firmed when they were freed for secondary dealings.

The big news in the secondary arena was AK Steel's slide, after the specialty steel maker reported a considerably wider-than-expected second quarter loss - a sharp reversal from its profitable year-ago quarter.

In addition to IMC's pricing, two new issuers approached the starting line in primary activity Friday, while four other issuers seen recently lurking about the high-yield market also produced timing, structural and syndicate information on their prospective offerings.

However one sell-side source told Prospect News that Friday's pace seemed rather slack.

"Things slowed down rather quickly, today, both in the primary and the secondary market," said the source during a telephone conversation late in the session.

"But it's going to get busy again," the official warned. "There are lots of deals coming."

However on Friday only one deal came. Lake Forest, Ill. agrichemical-maker IMC Global found the junk market fertile as it upsized its 10-year notes offering (B1/B+) to $400 million from $310 million. The coupon on the new IMC Global 10-years is 10 7/8% and they were priced at 97.782 to yield 11¼%, wide of the 10¾%-11% price talk.

Goldman Sachs & Co. and JP Morgan did the bookrunning on IMC Global's deal.

During Friday's primary session the market learned of two new offerings.

Augusta, Ga. newspaper publisher Morris Publishing Group LLC will begin a roadshow on Monday for an offering of $200 million 10-year non-call-five senior subordinated notes, which expected to price in the middle of the July 28 week.

JP Morgan is the bookrunner on the offering, proceeds from which will be used to repay debt.

Also, from the emerging markets universe Companhia Brasileira de Petroleo Ipiranga (CBPI), a Brazilian refiner and distributor of petroleum products, was heard to be heading for the road early in the July 21 week with $100 million of five senior notes, putable in two years.

Proceeds from that Bear Stearns & Co.-led offering are slated to repay debt.

One emerging markets source told Prospect News on Friday that U.S. institutions which are known to heavily favor American high-yield issuers have lately been spotted in significant numbers crossing over the fence into the emerging markets.

In addition to the two issuers of which the market learned on Friday, four deals that have been widely reported to be in - or nearly in - the high-yield new-issuance shop took shape during the session.

ACC Escrow Corp. - part of Dobson Communications Corp. and American Cellular Corp.'s restructuring of American Cellular's debt - which had earlier in the week announced itself to be in the market with $900 million of eight-year senior notes, conveyed its intention to begin roadshowing those notes early in the July 21 week.

Bear Stearns and Morgan Stanley are joint bookrunners for the eight-year non-call-four notes offering, proceeds from which the Oklahoma City-based wireless company intends to use to help restructure $1.6 billion of debt.

The roadshow is also expected to commence early in the week of July 21 for a $340 million offering from Haights Cross Communications comprised of $260 million of senior notes due 2011 (Caa1/B-) and $80 million of senior discount notes due 2013 (Caa2/B-).

The White Plains, N.Y. publisher's deal, via Bear Stearns, is expected to price late in the July 21 week.

Seabulk International, Inc., which signaled "Ahoy" Thursday, weighed anchor on Friday and began to market its offering of $150 million of 10-year non-call-five senior notes, which are expected to price during the week of July 28.

Credit Suisse First Boston is harbormaster on Seabulk's deal.

Finally on Friday price talk of 11% area was heard on MSX International's $100 million of four-year non-call-two notes. The Southfield, Mich.-based company, which provides technical business services, expects to price its deal on Monday afternoon, via Jefferies & Co.

When the new IMC Global 10 7/8% senior notes due 2013 were freed for secondary dealings, they were seen having firmed to 99 bid, par offering, up from their 97.782 issue price.

"The deals seem to be getting done," a trader opined. "But the dealers [who have the paper] are feeling a little heavy. They're hitting bids and taking offerings.

At another desk, a trader said that he had seen "no trades" in Reddy Ice Inc.'s new 8 7/8% senior subordinated notes due 2011, which priced Thursday at 99.297, but then jumped to as high as 103 bid in initial dealings.

He did see "a lot of [the new] Calpines trading," although the San Jose, Calif.-based power producer's 8½% second priority senior secured notes due 2010 and 8¾% second priorities due 2013 remain well under their par issue price, seen Friday in a 96-97 context for both issues. The new El Paso Natural Gas Co. 7 5/8% senior notes due 2010, which priced at 98.667 on Wednesday, were seen at 97 bid, 99 offered.

Back among the established issues, Calpine's 8½% notes due 2011 were down a point at 78.25 bid and Dynegy Inc.'s 8¾% notes due 2012 were down two points to 93.

But the disaster du jour clearly was AK Steel, which "got nailed," in the words of one trader, who said they were "down a whole bunch." Other steel sector bonds were also lower in sympathy.

"AK's earnings were a disappointment," said another, "and its bonds ended down five to seven points across the board."

AK said that it lost $78.2 million (72 cents per share), in the second quarter - a far cry from its year-ago profit of $16.2 million (15 cents a share).

Wall Street was expecting a loss - but nowhere near that large, with analysts generally forecasting a 43-cent-per-share deficit.

A trader said the bonds of the Middletown, Ohio-based maker of specialty steels were "trading quite a bit," on a day in which otherwise, he said, "nothing" was happening.

He quoted the AKs as having fallen into mid-to-low 70s, down about three or four points on the session.

Another trader saw AK's 7 7/8% notes due 2009, which had finished Thursday at 81.5 bid, 82.5 offered, as having "blown up," careening down to 71 bid at Friday's opening, although after that, he said, the bonds had managed to creep back up to 75 bid, 77 offered by mid-morning, but then "seemed to stop after around 11.30 [a.m. ET]."

He saw the company's 7¾% notes due 2012, which went home at 78.75 bid, 79.75 offered, as having opened Friday at 70 bid, 74 offered, before climbing part of the ways out of that hole to 74 bid, 76 offered.

AK - which makes stainless steel, flat-rolled, carbon and electrical steel products, got hit with a double whammy - it said that steel shipments slid 7% from a year ago to 1.4 million tons. At the same time, its average price per ton of flat rolled steel fell to $682 from $708 last year.

AK - once considered the most financially solid of the high yield steelers, with its bonds trading at or near par levels as recently as the springtime, blamed the revenue decline, in part, on weaker demand from Detroit for AK's steels in auto production.

Also taking some of the blame was a surge in pension and retiree health-care costs - an industrywide problem which has driven many AK sector peers, such as Bethlehem Steel Corp., LTV Corp. and National Steel, into Chapter 11 in the past year or so - as well as what it called a "poor environment" in the industry.

The company is considering cutting costs by shuttering its carbon-steel operations, which employ about 10% of its 10,000 workers.

Shareholders were meanwhile shocked by the numbers and took the company's New York Stock Exchange-traded shares down 49 cents (15.65%) to $2.64 Friday, on volume of 3.14 million shares, more than triple the average turnover.

Among AK's peers, Oregon Steel Mills Inc.'s 10% notes due 2009 were seen two points lower, at 85 bid, While United States Steel LLC's 10¾% notes due 2008 were also down two points at 102.5. The Pittsburgh-based steel giant's 9¾% notes due 2007 dipped to 99.75 bid, 100.75 offered, down a point on the session.

Elsewhere, "it was a painfully slow day," a trader said. "A lot of people seem to be taking their bank holidays, there's just not much going on. Some people say 'why bother?'"

He did see some activity among the tech names, such as Amkor Technologies, Xerox Corp., Flextronics and Solectron.

Amkor's 7¾% notes, which had fallen down to 95 some weeks ago, have now "crept back up to 98." Xerox, on the other hand, has been knocked "a couple of points below par recently" on both its 7 1/8% senior notes due 2010 and 7 5/8% seniors due 2013, which priced at par in mid-June.

Charter Communications Holdings LLC was seen a point-and-a-half to two points better on the day, its 10% notes due 2011 at 81 bid. Nextel Communications Inc.'s zero-coupon notes due 2008 were more than a point better at 105 bid.

A trader saw U.S. Timberland's 9 5/8% notes due 2007 firming about a point or two. "There was light trading in the issue but a lot of buyers around," he said. The forest products company, he said "is affected by lumber prices and lumber prices have been going up recently. That's got to be bullish for them."

Other than that bright spot, though, he declared "today was just pretty lackluster."

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