Revlon zooms on exchange offer; Solo, Phillips-Van Heusen price; funds see another $1 billion outflow

By Paul Deckelman and Paul A. Harris

New York, Feb. 12 - Bonds of Revlon Inc. jumped more than 25 points Thursday, traders said, after the debt-laden cosmetics company announced that it was getting a complete balance sheet makeover to get rid of $930 million of debt, most of it within the next month-and-a-half via a debt-for-equity exchange.

In the primary sphere, Solo Cup Co. filled up, pricing a $325 million offering of 10-year bonds. Other deals pricing included Phillips-Van Heusen Corp., Erico International Corp. and Woodcraft Industries Inc.

Whether the new-deal market will remain that robust in the wake of a second big high yield mutual fund outflow in as many weeks remains to be seen.

Late in the session, after trading had wound down for the day, market participants familiar with the weekly fund flow statistics compiled by AMG Data Services of Arcata, Calif. reported that in the week ended Wednesday, $1.039 billion more left the junk funds than came into them. It was the second consecutive week of outflows in the billion-dollar-plus range, following the previous week's $1.568 billion bleed.

Outflows have only been seen in two weeks out of the six since the start of the year - but those two weeks alone total $2.067 billion, eclipsing the inflows which had been seen in the first four weeks. So far this year, a net outflow of $1.242 billion has been recorded, according to a Prospect News analysis of the AMG statistics, counting only those funds which report on a weekly basis and excluding distributions.

Net inflows had totaled $20.126 billion for all of 2003, and that hefty momentum had continued into the start of 2004. But the big outflows seen in the last two weeks have coincided with a secondary market downturn, as measured by the performance indexes compiled by many major investment banking houses.

However, up till now, the primary side has held up, although how much longer that can go on if liquidity starts drying up, is anybody's guess.

"I'd imagine that this is going to snuff out some deals," a trader said. "If they haven't come by now, this is going to take some of those deals off the table."

However, he opined that "this is probably healthy, to remove a lot of supply. That will get this thing [the market] back up to where it will start drawing money back in."

As things stand right now, the market "has lost its verve. It just doesn't trade very well. Not very perky."

"This outflow did not necessarily take us by surprise," one senior sell-side official commented late Thursday.

"It doesn't bode well for the primary market. For the past two weeks we have been seeing executions that have been less than outstanding, however that being said the primary market is still turning out deals that are pricing inside normal levels.

"We think there is still tons of cash in the market," added the official. "It's easy to issue a ton of bonds when market conditions are frothy. Now people are going to actually have to do the work, and go out there and get stories across, one by one."

Revlon soars

One issue which certainly was perky - and then some - was Revlon, after the New York-based cosmetics maker announced plans for its exchange offer. Among the debt it will be offering to buy back with new class A common stock and, maybe, some cash, are the company's 8 1/8% and 9% senior notes due 2006 and 8 5/8% senior subordinated notes due 2007 (see report on page one of this issue).

The news caused its 8 1/8% notes and 9% notes to rocket up to par from prior levels at 75, a market observer said, while the 8 5/8% notes climbed to 93 bid from prior levels at 57, a move which he characterized as "not bad," obviously with some degree of understatement.

At another desk, a trader pegged the senior bonds as high as 102 bid, 104 offered, while the juniors went home at 94 bid, 96 offered.

Traders noted that the bonds were trading far above the take-out level in the cash portion of the exchange offer - probably because, as one said, "nobody cares about the cash offer, since the terms of the exchange make the stock-for-debt swap a much more lucrative option."

Trump jumps

Elsewhere, Trump Atlantic City Associates' 11¼% notes due 2006 and Trump Holdings & Funding's 11 5/8% notes due 2010 both had a hot hand, as parent Trump Hotels & Casino Resorts Inc. announced that it had entered into an agreement with DLJ Merchant Banking Partners III, a Credit Suisse First Boston affiliate, which will give the debt-laden casino company a sizable equity infusion, which will allow it to restructure its debt and substantially de-leverage.

The Trump A.C. 11¼% first mortgage bonds jumped to 84 bid from 79, while the Holdings & Funding 11 5/8s pushed up to 102 bid from 98 earlier.

Both Moody's Investors Service and Standard & Poor's cut Trump Hotels & Casino Resorts' ratings in response to the DLJ announcement, which envisions offering bondholders a discounted price for their notes.

R.J. Tower up, Goodyear down again

R.J. Tower Corp.'s 12% notes due 2013 jumped about four points, to the 99 bid level, even though the automotive component maker reported a fourth-quarter net loss of $25 million (43 cents a share) versus year-ago net income of $17 million (29 cents a share); investors were said to have been heartened by the company's full-year 2004 projections of earnings per share in a range of 25 cents to 40 cents on revenue of about $3.2 billion - up from $2.8 billion in 2003. It cited the impact of new business coming on line.

On the downside, Goodyear Tire & Rubber Co.'s bonds - which had already deflated during Wednesday's dealings on news that the Securities and Exchange Commission was formalizing its previously informal probe on the company's accounting, along with an S&P downgrade - were down still further Thursday, after the Akron, Ohio-based tire giant announced plans to sell $650 million of new bonds in a private placement - hardly auspicious timing.

Goodyear's 6 5/8% due 2006 dipped to 97 bid, 99 offered from 98.5 bid, par offered on Wednesday. Its 6 3/8% notes due 2008 fell to 91 bid. 93, while its 8½% notes due 2007 lost a point to end at 97.5 bid, 99 offered. Goodyear's 7.857% notes retreated to 88 bid, 90 offered, while its 7% notes due 2028 skidded down to 79.82 bid, around two or three points lower on the session.

News that Plains Exploration & Production Co. has agreed to buy Nuevo Energy Co. for about $600 million in stock did not fuel any rise in either company's debt, traders said. Nuevo's 9 3/8% notes due 2010 were unchanged at 109.5 bid, "priced near their call [level], a market source said, while Plains Exploration's 8¾% notes due 2012 were likewise unchanged at 111.

Among recently priced new issues, Time Warner Telecom Holdings Inc.'s new 9¼% senior notes due 2014, which priced Tuesday at par and then struggled to stay there "were firm, a little better," the source said, quoting them 100.25 bid, 100.5 offered, up from slightly below par on Wednesday.

However, a trader at another desk said that he only saw the new bonds "straddling par," going home at 99.75 bid, 100.75 offered.

Four deals price, one pulled, one repriced

The high yield market saw $736 million of new issuance sold in four offerings on Thursday, while one deal was postponed and another was repriced owing to a downgrade from a credit rating agency.

Solo Cup Co. sold $325 million of 10-year senior subordinated notes (B3/B-) at par, on Thursday, to yield 8½%, at the tight end of the 8½%-8¾% price talk.

Banc of America Securities and Citigroup ran the books for the issue from the foodservice company from Highland Park, Ill.

Also on Thursday, Phillips-Van Heusen Corp. sold $150 million of seven-year senior notes (B2/BB-) at par to yield 7¼%.

Credit Suisse First Boston, JP Morgan and Lehman Brothers ran the books for the New York City-based apparel company's deal which came spot on the 7¼% area price talk.

In addition Erico International Corp. priced an upsized issue of $141 million of eight-year senior subordinated notes B3/B- at par to yield 8 7/8%.

Price talk was for a yield in the 8¾% area.

Deutsche Bank Securities and JP Morgan were underwriters of the issue from the Solon, Ohio-based company that manufactures engineered metal products for niche applications.

And Woodcraft Industries priced a downsized issue of $120 million eight-year senior notes (B2/B-) at par to yield 10%, spot on the 10% area price talk.

Credit Suisse First Boston ran the books on the Saint Cloud, Minn. cabinet maker's deal which was restructured from what had initially been marketed as a senior subordinated notes offering.

After a downgrade in its credit ratings AmeriPath Inc. repriced the $75 million add-on to its 10½% senior subordinated notes due April 1, 2013.

Moody's downgraded the notes to Caa1 from B3, according to market sources.

The new price is 106.0, resulting in a yield to worst of 9.324%. Price talk was 107 area.

The add-on initially priced on Feb. 4 at 107.125, which had resulted in a 9.116% yield to worst.

Credit Suisse First Boston, Deutsche Bank Securities, Citigroup and Wachovia Securities were joint bookrunners.

JSG postpones

And JSG Holdings plc postponed its offering of €250 million (equivalent) of 10-year senior discount notes (B/CCC+), citing market conditions, on Thursday.

Deutsche Bank Securities was the bookrunner.

A market source said that the company, the parent of Dublin, Ireland-based Jefferson Smurfit Group plc, balked at the 12% level at which the notes were being talked late in the game.

Overseas Shipping, Comstock, Jo-Ann join calendar

Overseas Shipping, Inc. plans to sell $125 million of 20-year senior notes (Ba1/BB+) on Friday. UBS Investment Bank is running the books for New York City-based ocean-going crude oil transportation company.

Comstock Resources Inc. plans to sell $150 million of eight-year senior notes late in the week of Feb. 16, via Banc of America Securities.

And Jo-Ann Stores will start a three-day roadshow Tuesday for a $100 million offering of eight-year senior subordinated notes (B2/expected B-). The deal is expected to price on Thursday Feb. 19, via Merrill Lynch & Co.

Also on Thursday, Goodyear Tire & Rubber Co. announced its intention to sell $650 million of senior secured notes due 2011.

Marketing is expected to commence before the end of February.

JP Morgan, Citigroup and Credit Suisse First Boston will act as placement agents for the true private offering.

Price talk of 6 3/8%-6 5/8% emerged Thursday on Russel Metals Inc./RMI USA LLC $175 million of 10-year senior notes (Ba3/BB-), expected to price on Friday via Citigroup.

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