Constellation Brands, Deluxe deals price; Clear Channel drops, Tembec gains

By Paul Deckelman and Paul A. Harris

New York, May 9 - Constellation Brands Inc. uncorked a quickly shopped $700 million offering of new 10-year bonds on Wednesday. However, secondary market participants weren't drinking many toasts to the Fairport, N.Y.-based alcoholic beverage distributor's new bonds, which rose only marginally when freed for aftermarket dealings.

On the other hand, Deluxe Corp.'s considerably smaller issue of new eight-year seniors were well received in the secondary market.

Also pricing was a euro-denominated issue of seven-year bonds from Central European Media Enterprises Ltd.

And flash memory device manufacturer Spansion Inc. announced plans for a half-billion-dollar issue, with plans to use the proceeds to repay bank loans.

In the secondary market, apart from the movement of the Deluxe bonds and the non-movement of the new Constellations, Clear Channel Communications Inc.'s bonds were seen down several points on investor uncertainty whether the revised buyout offer for the San Antonio, Tex.-based radio and outdoor advertising giant will be sufficient to convince shareholders to back it. Bondholders are hoping that it will not be.

Elsewhere, Tembec Inc.'s bonds rose solidly, although there was no particular fresh news seen out on the Canadian lumber company. However, currency fluctuations were a possible explanation.

The bonds of New York-based defense contractor L-3 Communications Inc. were seen up about a point, in line with a rise in the company's stock. However, no firm news was seen out on the credit.

Back on the downside, Station Casinos Inc. bonds were easier, as the Las Vegas-based operator of locally-oriented gaming halls reported lower quarterly earnings that came in below Wall Street's expectations.

A market source said that the mention of inflation concerns by Federal Reserve's Federal Open Market Committee as it left the short term rate unchanged on Wednesday failed to rattle the red hot junk bond market.

Meanwhile a senior high yield syndicate official told Prospect News late Wednesday that the market looks good, and added that high yield investors continue to be flush with cash which they are looking to put to work in junk.

The primary market saw a pair of dollar-denominated issues priced - one apiece from two different issuers.

Both came at the tight end of price talk.

Constellation prices $700 million

Beverage company Constellation Brands placed the session's biggest tranche of new notes.

The company priced a $700 million offering of 10-year senior bullet notes (Ba3/BB-/BB-) at par to yield 7¼%, on the tight end of the 7¼% to 7 3/8% price talk.

Banc of America Securities was the left bookrunner for the debt refinancing deal. Citigroup was the joint bookrunner.

When asked how the deal went, one informed source suggested that you might draw an analogy between the popularity of Constellation Brands' new notes and its line of products.

The source said that the deal went very well, with good participation from high-grade and high-yield accounts.

Deluxe a blowout

Elsewhere Deluxe Corp. priced a $200 million issue of eight-year senior notes (Ba2/BB-) at par to yield 7 3/8%, at the tight end of the 7½% area price talk.

JP Morgan and Wachovia Securities were joint bookrunners for the Minnesota company's debt refinancing deal.

A source close to the deal said that Deluxe was a blowout, trading in the aftermarket at 101.0 bid, 101.50 offered.

The source added that the deal was more than 10-times oversubscribed

Central European Media brings €150 million

Also pricing tight to talk was Central European Media Enterprises.

The Bermuda-based company, which has broadcast operations in Central Europe, priced a €150 million issue of seven-year senior floating-rate notes (Ba3/expected B+) at par to yield Euribor plus 162.5, at the tight end of the Euribor plus 175 basis points area price talk.

JP Morgan, Lehman Brothers and ING were joint bookrunners for the Regulation S transaction.

Spansion launches $550 million

Elsewhere computer memory company Spansion will host investor presentations on Thursday for its $550 million offering of six-year senior secured floating-rate notes (B1/B+), which is expected to price the offering on Friday.

Banc of America Securities LLC is the left bookrunner and Deutsche Bank Securities is the joint bookrunner for the debt refinancing and general corporate purposes deal.

Other dollar-denominated deals expected to price before the end of the week include Noranda Aluminum Holding Corp.'s $510 million offering of eight-year senior unsecured floating-rate toggle notes (B3/B-).

The Merrill Lynch deal was talked on Tuesday at six-month Libor plus 400 to 425 basis points.

Also Verasun Energy Corp. is doing a brief roadshow for its $450 million two-part offering of senior notes (B3/B-).

The Brookings, S.D.-based producer of ethanol is offering tranches of seven-year notes and 10-year notes via Lehman Brothers, Morgan Stanley and UBS Investment Bank.

Euro-denominated deals expected to price this week include SGL Carbon AG's €175 million of seven-year senior floating-rate notes (Ba1/BB+) via Morgan Stanley and Deutsche Bank, and New World Resources BV's €300 million of eight-year senior notes (B3/B), also being led by Morgan Stanley, with Barclays Capital and Citigroup.

Deluxe bonds rise

When the new Deluxe 7 3/8% were freed for secondary dealings, traders saw them shoot up on the break from their par issue price earlier in the session.

A trader saw the new bonds at 101.25 bid, 101.75 offered.

Another observed that the deal "came on the tight side" of pre-deal market price talk and "managed to squeeze in there before the Fed" announced its decision to keep interest rates steady.

He saw the new bonds make their aftermarket debut at 101.5 bid, 101.875 offered. Yet a third trader saw them at 101 bid, 101.5 offered.

Constellation has little fizz

On the other hand, the new Constellation bonds apparently failed to intoxicate anyone when they started trading in the secondary. Two traders at different shops saw them at 100.25 bid, 100.75 offered, versus their par issue price.

Another trader, however, saw them a little stronger, at 100.5 bid, 100.75 offered.

One of the traders meantime saw MGM Mirage's new 7½ senior notes due 2016, which priced at par on Tuesday but did not go very far after that, as having gained a little strength on their first full day of aftermarket dealings, firming to 100.75 bid, 100.875 offered.

'Ridiculously' quiet market seen

Traders said that apart from the new issues, not too much was going on, with players sidelined most of the day as they waited for the Fed to announce what everyone pretty much knew was coming - the key loan rate would remain at 5¼%, and the Fed would remain concerned and wary about a possible revival of inflation - pretty much a guarantee that there will probably be no interest rate cuts in the near-term.

A trader termed the activity levels over the past several sessions ahead of the Fed "ridiculous," although now that that is out of the way, things could prick up.

Or not. A trader lamented a lack of activity and the early onset of the summer doldrums.

The widely followed CDX index of junk market activity was seen up 3/16 on the day, at 100.375 bid, 100.625 offered.

A trader saw no change in the widely held benchmark automotive issues, with General Motors Corp.'s 8 3/8% notes due 2033 hanging in at 91 bid, 91.5 offered, while arch-rival Ford Motor Co.'s 7.45% notes due 2031 held steady at 80.25 bid, 80.75 offered.

Tembec takes off

Traders saw Tembec's bonds better, although none saw any news out on the Montreal-based forest products company that might explain the gain, although it should be noted that Canada's dollar - which previously had been near an 11-month high - was in retreat Wednesday.

A trader quoted Tembec's 8 5/8% notes due 2008 as having firmed all the way up to 63 bid, 64 offered from prior levels at 58 bid, 60 offered, while its 8½% notes due 2011 jumped 4 points on the day to 55 bid, 57 offered. Its 7¾% notes due 2012 were also up by 4, at 54 bid, 56 offered.

A market source at another desk saw the 81/2s 3 points better to close at 55.

Market-watchers have for some weeks been noting the inverse movements of the Canadian dollar on the one hand and the bonds of Tembec and such other Canadian lumber and paper companies as Abitibi-Consolidated Inc. and Ainsworth Lumber on the other. Abitibi's 8½% notes due 2029 were up a point, at around the 86 level.

A high Canadian dollar makes Canadian exports, such as lumber and paper, more expensive, crimping sales to the U.S. and other foreign markets.

The loonie was seen lower on the day Wednesday, falling after the Federal Reserve kept U.S. interest rates at 5.25% and saying inflation represents the "predominant" risk for the economy, and as prices for oil - a major Canadian export commodity - fell to their lowest levels in seven weeks on larger than expected gains in U.S. gasoline and heating fuel inventories.

L-3 higher - and Cramer likes it.

Elsewhere, a trader saw L-3 Communications' 6 1/8% notes due 2014 up about ½ point at 99 bid, par offered, although he said the rise came on "no news."

Another source pegged its 5 7/8% notes due 2015 up ¼ point at the 98 level.

Equity investors, meantime, lifted its New York Stock Exchange-traded shares $1.53 (1.63%) to $95.44. The company - which supplies translators for the U.S. military - got a vote of confidence from widely watched CNBC market guru Jim Cramer on his "Mad Money"' show.

Six Flags gains on numbers

Also on the upside, bonds of Six Flags Inc. were better, a trader said, after the New York-based theme and amusement-park operator reported a smaller quarterly loss versus a year ago.

He saw the company's 9¾% notes due 2013 half a point better at 98 bid, 99 offered.

Six Flags - the biggest theme-park operator after Walt Disney Co. - lost $176.1 million ($1.86 per share), versus year-ago red ink of $246.5 million ($2.63 per share). Excluding discontinued operations, the loss from continuing operations was $161.2 million ($1.76 per share) versus $240 million ($2.14 per share) last year. Analysts on average were looking for a loss of $1.93 per share.

Clear Channel roiled by buyout uncertainty

On the downside, a trader saw Clear Channel Communications bonds lower, with its 5½% notes due 2014 down a deuce at 85.75 bid, 86.75 offered.

He declared that "[bond] investors believe that the LBO is going to happen" - a negative development from the point of view of bondholders, since it means loading the company up with more debt, most of it senior to their bonds, to finance the acquisition. Under the plan, Clear Channel would borrow more than $22 billion to get the buyout deal done, should it be okayed by the shareholders - $2.6 billion of junk bonds, which would be one of the largest junk megadeals this year, and $19.525 billion of bank credit facilities.

Bain Capital Partners LLC and Thomas H. Lee Partners LP are trying to get the company's board of directors to sign off on their buyout offer. Last week, the board rejected the latest offer by the two private equity companies, which would have paid shareholders $39.20 per share, or $19.6 billion total. That offer was up from the $39 per share offer, or $19.5 billion total, which they had proposed in April, and which was, in turn, higher than their original $37.60 per share bid made last fall.

Although the board had already nixed the second sweetened offer and had scheduled a shareholder vote on Tuesday, with more than enough proxies already submitted to kill the buyout transaction, it announced Monday that Tuesday's meeting had been postponed until May 22, and said it was in continued discussions with Bain and Lee.

Station retreats on numbers

Another downsider was Station Casinos, whose 6½% notes due 2012 lost ½ point to close at 93.5 bid, 94.5 offered.

Another market source saw Station's 6% notes due 2012 down ¼ point at 97.5 bid.

Station - which operates casinos geared more to local residents than to the high-roller tourists that its Las Vegas competitors seek out - earned $23.1 million (41 cents per share) in the first quarter, down from $41.1 million (62 cents per share) a year earlier. Its adjusted earnings, less special items, came in at 51 cents per share, down from the 59 cents Wall Streeters had expected.

Station blamed the reduced profit on new project expenses and costs from its pending management-led buyout.

Rite Aid bonds retreat after downgrade

Rite Aid Corp. bonds were seen a bit lower in the wake of the announcement Tuesday after the market's close that standard & Poor's had downgraded the Camp Hill, Pa.-based drugstore chain operator's ratings, which brought its senior unsecured bonds down a notch to CCC+ from B- previously.

Rite Aid's 8 5/8% notes due 2015 were seen ½ point lower at 96 bid, while at another shop that issue was seen down ¼ point at 96.25

Another source, however, was quoting those same bonds actually up ¼ point on the day at 96.5, while its 8 1/8% notes due 2010 were ¼ point better at 103.625.

In downgrading Rite Aid's bonds, S&P cited the company's upcoming $1.22 billion bond issue which will help finance its purchase of some 1,500 Eckerd and Brooks drugstores from Jean Coutu Group, noting the company's "significant debt burden and thin cash flow protection."

Toys 'R' Us off on Moody's move

Ratings agency action also pushed Toys "R" Us Inc.'s bonds lower, as Moody's Investors Service threatened to drop its ratings, including the B2 corporate family rating. That followed the company's announcement Friday that it would be delayed in filing its financial reports with the Securities and Exchange Commission. It now expects to have that data in to the regulators by May 21. Moody's said it was concerned that "Toys' liquidity could be hampered in the event the 10-K is not filed prior to the deadline."

A trader saw its 7 3/8% notes due 2018 down ½ point at 87.5 bid, 88 offered.

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