Denny's, Graham Packaging deals price; aaiPharma continues to firm

By Paul Deckelman and Paul A. Harris

New York, Sept. 29 - Denny's Holdings Inc. and Graham Packaging Holdings Co. successfully sold new deals Wednesday - the latter a two-part offering. Unlike some of the other recently priced new offerings, Wednesday's deals were heard by secondary traders to have firmed when they were freed for aftermarket dealings.

Among the already established secondary names, meanwhile, aaiPharma Inc.'s 11½% notes due 2010 - which had pushed upward by about four points Tuesday concurrently with news of another senior executive shuffle - were heard to have replicated that move in Wednesday's dealings.

In total the mid-week primary market session saw $950 million of issuance in four tranches from three issuers.

And although the companies that sold bonds Wednesday varied from plastic packaging to fast food to wireless telecommunications, sources pointed out that they shared one factor in common: the bonds they sold all came with "triple-hooks" - issues rated Caa1 or below by Moody's Investors Services and CCC+ or lower by Standard & Poor's.

Triple hooks all over the place.

"This market is hot to the point of being crazy," one investment banker observed late Wednesday.

"It's been that way for a little while, and now even though we have seen some negative signals - people selling off Treasuries today, concerns over the economy, rising oil prices, all of which should weaken things a little - we haven't seen any weakening.

"Combine those factors with a relatively light calendar and you have people out there scooping it up."

The source also said that a current imbalance that pits high demand against a comparatively low supply of new paper can be attributed to an assortment of non-traditional players who have come to the junk bond market with one goal in common: the highest possible yield.

"Hedge funds are becoming a bigger and bigger part of the market," the sell-sider said. "Investment grade guys are slipping down into high yield, just to get some yield because investment-grade yields have been so close to Treasuries that people are reaching for yield wherever they can get it.

"You're seeing derivatives accounts, arbitrage firms...everybody wants a piece of high yield."

Set to continue

The sell-sider also specified that barring an unforeseen headline news event the high-yield market appears poised to carry on in the current fashion for another month.

"You can always do more deals," said the source. "There are still plenty of bonds out there to refinance. People can take money now and put it away to use later. It doesn't just have to be a maturity that's coming up.

"Just when things start to peak off of the frothy top of this market we might see some more supply. But I don't think it's going to be enough to knock this market off the tracks."

3 issuers, 4 tranches, 24 Cs

All tallied, the junk market saw three issuers price four tranches totaling $950 million on Wednesday.

Graham Packaging LP Co. in conjunction with GPC Capital Corp. I priced $625 million of high-yield bonds.

The company priced a downsized $250 million of eight-year senior notes (Caa1/CCC+) at par to yield 8½%, on the tight end of the 8½%-8¾% price talk. The issue was downsized by $100 million, the amount by which the company upsized its term loan.

The company also priced $375 million of 10-year senior subordinated notes (Caa2/CCC+) at par to yield 9 7/8%, at the tight end of talk that had the subordinated notes coming 150 basis points behind the senior tranche.

Citigroup, Deutsche Bank Securities and Goldman Sachs & Co. ran the books for the debt repayment/acquisition financing deal from the York, Pa. packaging manufacturer

Elsewhere Wednesday Denny's Holdings Inc. sold $175 million of eight-year senior notes (Caa1/CCC+) at par to yield 10%, right on top of the 10% area price talk.

UBS Investment Bank, Goldman Sachs & Co. and Banc of America Securities ran the books for the debt refinancing deal from the Spartanburg, S.C. family-style restaurant chain.

Finally Ubiquitel Operating Co. priced an upsized $150 million add-on to its 9 7/8% senior notes due March 1, 2011 (Caa1/CCC) at 103.5 on Wednesday, resulting in a 9.04% yield to worst.

Price talk was 103.5 area and the deal was increased from $135 million.

Bear Stearns and Banc of America Securities were joint bookrunners for the debt refinancing deal.

More CCCs for Thursday

Loehmann Capital Corp. is poised to price its restructured $110 million offering of high-yield bonds (Caa1/CCC+) on Thursday.

The Bronx, N.Y. upscale off-price specialty retailer for women is selling $75 million of class A1 seven-year non-call-four fixed-rate notes, talked in the 12% area, and class A2 seven-year non-call-one floating-rate notes, talked at Libor plus 800 basis points. Tranche sizes remain to be determined.

The company will also sell $35 million of class B seven-year non-call-four fixed-rate notes, talked in the 14% area.

The class A bonds have payment priority over class B.

Jefferies is running the books on the deal that had previously been structured as $110 million two-part fixed/floating deal.

One for the road

A single roadshow start was heard during Wednesday's session.

The roadshow starts Thursday for Southern States Cooperative Inc.'s high yield debut, a $100 million offering of eight-year senior notes, which is expected to price on Oct. 8.

Wachovia Securities will run the books for the debt refinancing deal from the Richmond, Va.-based supplier of agricultural products and services.

Denny's, Graham up in trading

When the new Denny's eight-year bonds were freed for secondary dealings, a trader said that the Spartanburg, S.C.-based fast-food operator's newly minted notes traded up to 101.25 bid, 101.75 offered, up from their par issue price.

And the new Graham Packaging bonds did even better, with both the 8½% senior notes due 2012 and the 9 7/8% senior subordinated notes due 2014 quoted at 102 bid, 102.5 offered, well up from their par issue price.

The trader said that the new Graham issue was "doing pretty well, as expected. It was oversubscribed and it seems the customers I talked to" were interested in the York, Pa.-based blow-molded plastics packaging company's paper.

Another trader had said earlier that Graham would be "a blowout," and had predicted "good aftermarket demand" for the company's paper as well.

Graham and Denny's seemed to be the exception to the recent trend of new deals getting done but then fizzling out when freed for secondary activity.

Market softer

Apart from Wednesday's new deals, the first trader said, "quite a lot of new issues have come - none of which has done very well" in the aftermarket. About the only thing that could be said for them, was "they're soaking up a lot of the excess cash" that's in the marketplace after five straight week of high-yield mutual fund inflows - a barometer of overall junk market liquidity trends - totaling over $1 billion in that stretch.

The softness in the recently priced bonds of such names as Calpine Corp., PanAmSat Corp., Encore Medical ICH Inc. and Celanese AG mirrors the overall easier market tone, which the trader said was taking its cue from generally weaker equity prices (though not on Wednesday), near-record high oil prices and other factors causing a drag on market prices.

"The market has been softer the last couple of days," he noted. "We're seeing bid lists. The market is not down dramatically, but stuff is being offered, where before it was only bid.

PanAmSat's s new zero-coupon notes due 2014, which priced Monday at 59.46, "were below issue," he said, at 58.5 bid, 59.5 offered, while Encore Medical's new 9 ¾% senior subordinated notes due 2012, meantime, which priced Tuesday at 99.314 and then eased in early secondary dealings to 98.625 bid, 99 offered, continued to soften Wednesday, to 98.25 bid, 98.75 offered.

The Celanese 10½% discount notes, which priced around 60 several sessions ago, were languishing around 59.5 bid, 60 offered and Calpine's new 9 5/8% notes due 2014 "were down too," seen around the 98s after pricing Tuesday at 99.212.

Calpine down again

Calpine's existing notes continued to erode Wednesday. They had been mostly lower Tuesday in response to the new debt sale, which adds another big chunk of secured debt to the San Jose, Calif.-based power generator's capital structure, well above the company's senior unsecured bonds on the creditor food chain in the event of a default.

The company's 8½% notes due 2011 lost a further quarter-point Wednesday to end at 65.5 bid, while its 7 5/8% notes due 2008 were half a point lower at 69 bid.

Calpine Canada's 8½% notes due 2008 were heard down 1½ points to 68 bid, while its 8¾% notes due 2007 lost a point to end at 81.

aaiPharma gains again

On the upside, aaiPharma's 11½% notes were seen by several traders having pushed up to 64 bid, from Tuesday's close around 60 and from levels before that in the low-to-mid 50s.

The second straight day of gains followed Tuesday's announcement by the troubled Wilmington, N.C.-based pharmaceuticals company that that Ludo Reynders, who most recently held executive posts at Quintiles Transnational, a medical research services unit of Durham, N.C.-based Pharma Services, would immediately take over as president and chief executive officer, replacing the company's founder, Frederick D. Sancilio, who had stepped into those jobs on an interim basis back in February, replacing Philip Tabbiner. Sancilio also immediately relinquishes his chairman's position to board member and former North Carolina governor James G. Martin, who will serve as non-executive chairman. Sancilio will remain a member of the company's board.

The personnel shake-up is the latest chapter in a sorry saga that began with Tabbiner's exit and which accelerated with the company's March 1 announcement of "sales abnormalities" in key product lines, and the resulting need to delay earnings as it recalculates data for several recent quarters.

Pliant falls

Elsewhere, Pliant Corp's bonds were seen lower, its 13% notes due 2010 declining to 85 bid from 86.5, its zero-coupon notes due 2009 backtracking to 84.5 bid from 85.25 earlier and its 11 1/8% notes due 2009 half a point lower at 102.5. There was no fresh negative news out on the Schaumburg, Ill.-based packaging company, which did announce that it would host a Nov. 12 conference call to discuss its third-quarter operating results.

A trader opined that the bonds might be dropping "in sympathy with the rest of the packaging sector, particularly Tekni-Plex." Those companies, he said, "have been so high lately that it wouldn't surprise me if they went down."

AMF higher

AMF Bowling Worldwide Inc.'s 10% notes were up nearly a point, to 106 bid, apparently on news that the Richmond, Va.-based maker of bowling equipment and operator of bowling centers had amended its credit facility. The new terms allow the company to buy back more of its bonds.

American Greetings lower

American Greetings Corp. announced improved results for the fiscal second quarter ended Aug. 31 and told investors and analysts on its conference call following release of the earnings data that it was raising its estimate for fiscal 2005 cash flow by 25% to $250 million from $200 million previously. Among the factors the Cleveland-based greeting card company cited as contributing to its better performance was "significantly relaxed interest expense," due to early debt extinguishment that took place in the fiscal first quarter ended May 31, when it took out most of its remaining 11¾% senior subordinated notes due 2008 via a tender offer (see related story elsewhere in this issue).

The company's few remaining 113/4s were quoted having eased slightly to 112.25 bid from 112.375 previously.

Besides announcing income from continuing operations of $5.9 million (nine cents per share) and total net income of $6.9 million (10 cents a share) versus a year-ago continuing operations loss of $10.6 million (16 cents per share) and $9.7 million net loss (15 cents a share), the company also said that it would begin paying a 6-cent per share dividend next month.

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