Allied Waste, Rogers Wireless off on downgrade threats; D.R. Horton prices 10-year drive-by

By Paul Deckelman and Paul A. Harris

New York, Sept. 14- Bonds of Allied Waste North America Inc. and Rogers Wireless Communications Inc. were each quoted down at least a point in Tuesday's dealings after Moody's Investors Service issued downgrade warnings for the two companies in response to Allied Waste cutting its guidance and Rogers Wireless saying it would pay more than $1.3 billion to buy back a big chunk of its own shares from AT&T Wireless Services Inc.

In the new-deal arena, homebuilder D.R. Horton Inc. priced a quickly shopped drive-by offering of 10-year notes while Chiquita Brands International Inc. unwrapped a new deal in order to take out some existing bonds via a tender offer announced Tuesday.

D.R. Horton's rapid sale was the second time in the first six post-Labor Day sessions that the primary market saw drive-by business.

The Texas home builder showed up early Tuesday morning with a $250 million 10-year deal and priced it before the market closed. The 5 5/8% senior notes due 2014 (Ba1/BB+) came at 99.174 to yield 5.735%, via UBS Investment Bank.

The D.R. Horton bond offering priced too late for any aftermarket trading.

Opportunistic deals

One investment banker, noting that D.R. Horton's new notes priced at a mere 158 basis points spread over the 10-year Treasury, compared the deal to the only other drive-by to have priced thus far in the post-Labor Day primary market, MGM Mirage.

The Las Vegas casino and resort company priced an upsized $450 million add-on to its 6% senior notes due Oct. 1, 2009 (Ba1/BB+) at 101.50 last Wednesday, resulting in a 5.653% yield.

"These two deals paint kind of an interesting picture of how the primary market is working right now," said the sell-side source.

"Here you have two opportunistic debt refinancing deals," the source added, noting that both D.R. Horton and MGM Mirage used the proceeds from the bond deals to repay debt outstanding on their respective revolving credit facilities.

"Both of these credits are familiar to investors and both come from sectors [gaming and home building] which are often described as defensive plays," added the sell-sider.

"I think the executions on these two deals illustrate that the market is open right now to these kinds of opportunistic debt refinancing deals."

Chiquita to peel off $250 million

The forward calendar topped the $3 billion mark on Tuesday with regard to deals now being actively on the way to the dollar-denominated high-yield primary market.

One new roadshow start was heard during the session.

Chiquita Brands International, Inc. will begin marketing $250 million of 10-year senior notes (existing ratings B2/B-) on Wednesday.

Pricing is expected to take place in the early to middle part of the Sept. 20 week.

Morgan Stanley will run the books for the debt refinancing deal from the Cincinnati, Ohio-based banana company.

Cesky Mobil joins crowded euro pipeline

Elsewhere Tuesday Cesky Mobil, the Czech Republic subsidiary of Montreal-based Telesystem International Wireless Inc., is coming with €350 million of senior secured bonds in early October.

UBS Investment Bank and JP Morgan will have the books.

Although only two euro-denominated deals are presently in the market - Grohe Holding GmbH's €335 million (price talk 8 ¾% area, expected to price Wednesday) and Culligan Finance Corp BV's €185 million, now on the road and expected during Sept. 20 week - the list of companies that are expected to bring euro issuance continues to grow.

A European market source advised Prospect News on Tuesday that there are rumors in the market that the mezzanine debt forming part of the package backing Kohlberg Kravis Roberts & Co.'s secondary buyout of German auto parts retailer Auto-Teile-Unger AG may end up being high yield bonds via Morgan Stanley.

Also, the source added, Brenntag Finance GmbH, which pulled its €190 million offering of 10-year senior notes (B3/B) on May 13, may be returning - again via Goldman Sachs & Co.

Talk tightens on Fisher

Finally on Tuesday revised price talk of 8 5/8%-8¾% surfaced on Fisher Communications Inc.'s $150 million of 10-year senior notes (B2/B-).

Talk on the deal, which is set to price Wednesday, tightened from 8¾%-9%.

Wachovia Securities is the bookrunner.

Allied Waste drops on cut in forecast

In the secondary sphere, Allied Waste North America's bonds were trashed by the market to the tune of anywhere from half a point to 1½ points after the Scottsdale, Ariz.-based solid waste disposal company's corporate parent, Allied Waste Industries Inc., cut its 2004 earnings forecast for the second time in three months.

"Their earnings [in the most recent quarter] were a little weak, and their costs were up," a trader said in analyzing the company's lowered guidance. He saw the company's 7 7/8% notes due 2013 as having dipped about 1¼ points on the session to 105.25 bid, 106.25 offered from prior levels at 106.5 bid, 107.5 offered.

However, another trader saw the Allied bonds down only about half a point, dismissing the latest news as "not that significant,"

At another desk, a market source saw Allied's 10% notes due 2009 down just half a point, at 105 bid, although he pegged its 6 1/8% notes due 2014 a full point lower at 93.75 bid. He quoted the bonds of Allied's Browning-Ferris Industries Inc. unit likewise lower, with the BFI 7 5/8% notes due 2005 half a point down at 100.5, while its 6 3/8% notes due 2008 went to 101 bid from 101.75. Allied's 6½% notes due 2010 were likewise down ¾ point at 100.5 bid.

The bonds began heading south after the company - which was presenting Tuesday at a Deutsche Bank Securities investors conference - lowered its projections for 2004 earnings by 3% to 4% from prior forecasts.

Investors could be forgiven if they were getting a feeling of deja vu all over again, as the saying goes, since Allied had already cut its original forecast of $1.6 billion of full-year operating income before depreciation and amortization by that same 3% to 4% amount back in July. Assuming those projections are borne out, that would put EBITDA for the year at $1.475 billion to $1.505 billion neighborhood.

The company said on Tuesday that earnings will be down - even though it still expects revenues to grow by 2% - because in a still soft economy the company is experiencing its sales growth in its lower margin businesses rather than its more lucrative landfill operations.

The company's chairman, Tom Van Weelden, said in a statement that "general economic activity continues to offer only modest growth opportunities."

That was enough to convince Moody's to put parent Allied Waste's debt, along with that of Allied Waste North America and Browning-Ferris, under review for a possible downgrade.

Moody's said its review was triggered by "[the] company's weaker operating earnings and cash generation, and higher leverage than anticipated by Moody's over the last 12 months ended June 30, 2004, as well as the company's announcement today of a downward revision in earnings guidance for the balance of the year."

Moody's called the company's performance in the last two quarters "lackluster" versus that of its peers.

Rogers lower

Moody's also expressed some concern with Rogers Wireless' plans to buy back the 34% stake in the company currently held by AT&T Wireless for about $1.33 billion (C$1.8 billion).

It put the ratings of parent Rogers Communications Inc., plus Rogers Wireless and Rogers Cable Inc. all under review for possible downgrade, noting that "if funded only with debt, Moody's estimates that [Rogers Communications'] consolidated net debt (including fair value of derivatives) would increase to approximately C$7.9 billion at the end of this year on a pro-forma basis. At the same time the estimated annualized interest expense of C$100 million associated with the acquisition might drive RCI's consolidated 2004 cash use (cash from operations less capital expenditures and dividends) from approximately C$150 million to C$250 million, in Moody's estimation."

A market source saw the Rogers Wireless 6 3/8% notes due 2014 slip to 94 bid from 95.5 previously, while its 9 5/8% notes due 2011 lost a point to 113.5.

A trader at another shop pegged those bonds at lower levels than that, fixing the 6 3/8s at 92 bid, 93 offered, a point lower on the day.

Rogers Cable's 7 7/8% notes due 2012 meantime lost a point, to 106.75.

Tekni-Plex Inc.'s 12¾% due 2010 "have been active," said a trader, who quoted the bonds about two points lower at 93.5 bid, 94.5 offered, with "better buyers coming in at lower levels." He said that the Somerville, N.J.-based packaging company was scheduled to have a meeting with its bank lenders.

Rent-A-Center rebounds

On the upside, the trader saw the bonds of Rent-A-Center Inc. firming a bit from the lows they hit last week after the Plano, Tex.-based operator of a nationwide chain of furniture and appliance rentals stores lowered its third-quarter outlook.

That, he said, had knocked the company's 7½% notes down to 103.5 bid, 104.5 offered from pre-news levels at 105 bid, 106 offered. On Tuesday, he said, those bonds "were a little firmer," at 104.25 bid, 104.75 offered.

He said that despite the company's warning for the third quarter, "it's two times levered and 11 times [interest] covered - and in bond terms that's hardly levered at all."

NRG rises on sale

Another upsider was NRG Energy Inc., which announced that it was transferring its Kendall generating plant in Minooka, Ill. to an affiliate of LS Power Associates, LP. Minneapolis-based NRG will only get $1 million of cash proceeds from the deal - but will deconsolidate its balance sheet by some $450 million of debt.

"The sale of Kendall, once completed, will mark another major milestone in our effort to reduce the debt on NRG's balance sheet, while preserving the strength of our portfolio in our core regions," David Crane, NRG's president and CEO said in a statement. "With the sale of Kendall, we are nearing the end of our non-core asset divestment initiative enabling us to focus on managing our core assets intensively, implementing further cost control measures and seeking to enhance our ability to supply the load serving entities in our core regions."

NRG's 8% notes due 2013 were quoted in morning dealings up nearly two points at 109 bid, although later in the session, the bonds had fallen back from that peak to still end up ¾ point at 108.125 bid.

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