Western Oil Sands upsizes deal; Prime Hospitality sells drive-by; Nextel higher

By Paul Deckelman and Paul A. Harris

New York, April 16 - Canadian-based energy operator Western Oil Sands Inc. upsized its offering of 10-year secured notes on Tuesday, syndicate sources reported. They also noted that lodging company Prime Hospitality Corp. checked in with a quickly shopped $200 million issue late in the session.

In secondary dealings, the new Western Oil Sands notes were heard to have firmed smartly from their issue levels. Among already established names, Nextel Communications Inc. was enjoying what one trader called "a pretty significant bounce."

Calgary, Alta.-based Western Oil Sands upsized its offering to $450 million of new 10-year senior secured notes (Ba2/BB+) and priced them at par to yield 8 3/8%. Salomon Smith Barney and TD Securities ran the books on the Western Oil Sands deal, which was increased from $425 million.

One sell-side official commented that the Western Oil Sands execution is emblematic of the present demand in the high yield market. Western Oil Sands, the official recounted, had been flushed out of the market by the events of Sept. 11. The present demand for new issuance, this official added, undoubtedly saved the company some money, in retrospect.

"I think that 315 basis points for a company with no cash flow is pretty darn good," the sell-side source commented.

"They were in the market back in September. Nothing has really changed except they had a little bit more equity. But they also had a little higher cost. So the debt to cap is a little bit lower: instead of 66% it was 62%.

"But at the end of the day it was a similar structure. And they were going to price the last deal maybe inside 9%. Now they're down in the low eights."

As news of the Western Oil Sands deal circulated through the market, price talk was heard on XTO Energy. The oil and gas exploration and production company from Fort Worth is in the market with $300 million of 10-year senior notes (Ba2) that are being talked at 7½%-7 5/8%, according to syndicate sources.

Asked if that price talk was "rich," the same sell-side source who commented on the Western Oil Sands deal said "Yeah it is, but put it this way: if you took Western and put them a year further developed, when they had tons of cash flow, then that's probably what you'd be looking at.

"Cross Timbers has very long-lived reserves - not as long as Western, obviously, but similar; one of the longer-lived reserves, in fact.

"XTO will be one of those things like Forest did, where they go and get the higher rating," the sell-sider added, alluding to Forest Oil's $160 million of 10-year senior notes (Ba3/BB) that priced last Dec. 4 at par for a yield of 8%.

"This will put XTO right on the cusp of investment grade, with the idea that they'll be kicked up," the source continued. "It will probably come on the high side of double-B, with a pretty quick time-horizon to upgrade, which is why people are attracted to it."

XTO is set to price Wednesday via joint bookrunners Lehman Brothers and Salomon Smith Barney, according to the syndicate sources.

In what one syndicate source characterized as a "pretty standard drive-by deal," Prime Hospitality Corp. brought $200 million of 10-year senior subordinated notes which priced Tuesday afternoon at par to yield 8 3/8%, via bookrunner Bear Stearns & Co.

Price talked also emerged Tuesday on Associated Materials, Inc.'s offering of $165 million of 10-year senior subordinated notes, according to a syndicate source. The deal, via joint bookrunners Credit Suisse First Boston and UBS Warburg, is talked at 10%-10¼% and is expected to price late Thursday.

UBS Warburg is sole bookrunner on Petroleum Helicopters, Inc.'s $170 million of seven-year senior notes (B1/BB-) which were talked Tuesday at 9 3/8%-9 5/8% and will price late Wednesday or early Thursday, a syndicate source said.

Finally Tuesday Prospect News learned that throughout the week talk has tightened on an emerging markets deal from Russian wireless telecom services provider VimpelCom.

Its approximately $200 million of three-year notes (B3/B) were being talked late Tuesday at 10.45%, according to a syndicate source who added that VimpelCom went out at 10.675%, and had subsequently tightened to 10.45%-10.60%, before arriving at the current talk.

VimpelCom's Rule 144A bullets are set to price Wednesday.

Back in the secondary sphere, Western Oil Sands' new bonds were heard to have pushed up to closing levels around 101.625 bid/102 offered from their par issue price.

Among already established issues, Nextel Communications "was up a lot," a trader said, quoting the Reston, Va.-based No. 5 U.S. wireless telecommunications provider's benchmark 9 3/8% bonds up four points on the session to 67 bid/68 offered, which he termed "a pretty significant bounce." Nextel's zero-coupon notes due 2008 were meanwhile up three points on the day to close at 60.5 bid.

Nextel's shares meantime jumped $1.48 (33.11%) in Nasdaq dealings to close at $5.92, taking part in a general wireless sector rally on the strength of industry giant Sprint PCS's first-quarter results. The separately traded wireless unit of Sprint Corp. reported a narrower-than-expected loss for the quarter and said it was on track to meet its subscriber-addition goals. Shares of other wireless operators such as AT&T Wireless Services Inc. and the corporate parents of Cingular Wireless, Bell South and SBC Communications were all higher Tuesday on the assumption that Sprint's good news would likely mean better times ahead for the whole industry, recently beset by concerns about large debt loads and smaller-than-anticipated subscriber additions.

Another sector beset recently by similar worries has been cable-TV operators, whose shares and bonds had fallen last week in the wake of Adelphia Communications Corp.'s disclosure of sizable off-balance-sheet debt obligations. They were on the rebound on Monday and Adelphia's bonds continued in that same vein Tuesday - although at first it didn't seem like that was going to happen. The Coudersport, Pa.-based No. 6 U.S. cabler reported during the morning that it would again delay the filing of its 10-K report with the Securities and Exchange Commission, contending that it needed more time for its independent auditor to review the recently announced co-borrowing obligations, which could leave the company on the hook for as much as $2.3 billion of debt in addition to the $14 billion which it had previously acknowledged.

A trader said that Adelphia's bonds "were mostly being offered without bids, with its 10 7/8% notes due 2010 at 91.75 and its 10.5% notes due 2004 at 93.5.

But later in the session, another trader said, there was talk of possible asset sales and debt paydowns, with Bloomberg News reporting that Adelphia's Los Angeles-area cable systems could be on the block and might fetch as much at least $5.4 billion in bids from Adelphia rivals such as Cox Communications, Charter Communications or AOL Time Warner Inc.

Powered by the asset-sale scuttlebutt, Adelphia bonds "moved up a bit," he said, with the 10 7/8s ending at 91.5 bid/92.5 offered, versus 88 bid/89 on Monday. Adelphia stock was also on the upside, ending up 39 cents (5.11%) at $8.02, after having dipped as low as $7.16 earlier in the proceedings.

A trader saw Nortel Networks Corp. bonds "rebounding after they got hit on the [recent ratings agency] downgrade" to junk bond status. He quoted the Canadian-based telecommunications equipment maker's 6 7/8% notes due later this year up half a point to 95.5 bid and its 6 1/8% notes due 2006 a point better at 74.

Outside of the communications sphere, the trader saw Regal Cinemas recently issued 9 3/8% senior subordinated notes due 2012 "lower for the first time in a while," easing to 104 bid, half a point lower. The Knoxville, Tenn.-based movie theater giant - now controlled by billionaire Denver theater mogul Philip Anschutz - sold $200 million of the bonds at par back in mid-January when it emerged from Chapter 11 reorganization.

A trader saw Conseco Inc.'s bonds continuing to firm in the wake of the Carmel, Ind.-based insurer's announcement Monday of the successful completion of its tender offer for its outstanding Conseco Finance Corp. 6.5% notes due this Sept. 26 and 6.52% notes due next April 7, as well as its announcement that it would continue (and extend till Wednesday) its exchange offer for more than $2.5 billion of the parent company's debt, which has so far been subscribed to by the holders of more than half of the bonds, who agreed to take new debt with longer maturities. Conseco's 10¾% senior notes due 2008, one of the issues involved in the exchange offer, gained between 1½ and two points to close at 59 bid/60 offered.

The trader saw Trump Atlantic City Associates' 11¼% first mortgage bonds due 2006 as having pushed up to 76.5 bid, a gain of a point-and-a-half for the Atlantic City, N.J. based gaming and hotel company. "There was no news, but there were buyers, he said," although after trading had wound down, the company announced that it had gained the approval of the National Indian Gaming Commission to manage the Trump 29 Casino in Southern California on behalf of the 29 Palms band of Luiseno Mission Indians. The casino is located in Coachella, Calif., about 140 miles east of Los Angeles, but still less of a drive from L.A. than the Nevada casinos.

Also on the gaming front, Station Casinos Inc. lost $257,000 in the first quarter - breakeven on a per-share basis - but said that its operating earnings rose 10% due to improved margins and the impact of its newest Las Vegas casino. Excluding special items, operations earned 21 cents per share - up from 19 cents a year earlier and up further still from the 17 cents per share the analysts had expected. But a trader said there was little upside to the Las Vegas-based local gaming operator's bonds, which he said were "already pretty fully priced." Station's 9 7/8% notes were unchanged at 107.5 bid/108.5 offered

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