Four deals join slate; heavy secondary takes cue from stocks

By Paul Deckelman and Paul A. Harris

New York, May 19 - With a forward calendar already swollen to the bursting point with $5.5 billion of new-deal paper expected to price this week, the logjam got even more intense Monday. Just one of the nearly two dozen deals already lined up priced but market participants still heard details of four more upcoming deals; at least two of those offerings - Crum & Foster's $200 million 10-year note deal and Ingles Markets, Inc.'s $100 million add-on offering - are expected to come clattering down the already crowded chute this week.

Secondary market activity, meanwhile was limited, with participants characterizing the market variously as "heavy," "soggy, sloppy," and saying that it seemed to be taking its cues from equities - which were getting pounded.

"Everything was either unchanged or down a couple of points," a trader said. "I didn't see any specific huge news in the headlines today. It was just across-the board profit-taking, [the] gloomy economy, blah, blah, blah. Nothing positive to report."

He added "you know what stocks did today. I personally wouldn't be surprised if you saw high yield do the same thing," although he allowed that while the junk market "was weak, it wasn't like stocks - everything was [just] unchanged to off a couple of points."

At another desk, a trader agreed that unchanged to weaker was "a very fair statement, very fair."

He said that there was "not a lot of activity - so I don't think anything's over-exaggerated, whether it's weaker or unchanged."

He continued that "you have your pockets of stuff trading up, whether it's covering shorts - but definitely there's some more things offered that you have not seen, and you're seeing them a little cheaper, that's for sure."

That having been said, however, there was "no major sell-off in any sector that I could see. But definitely a little softer, and it was slow, from my vantage point." He said that even recently priced new deals that have appeared over the past several sessions "were really not trading today with any type of activity. You see some quotes - but there's really nothing happening. It's kind of like one day of excitement when [a new deal] comes - and then it quiets down."

Yet another trader opined that "everybody is concentrating on the 20 deals that are coming this week," with the calendar essentially sucking all of the oxygen out of the overall junk market.

The market "is softer, offered down without many transactions taking place, as it follows the stock market - the only real-time economic indicator available right now."

As far as any specific features Monday, he speculated that the energy producer sector "got hit pretty good today," in the wake of a story out of Rio de Janeiro, originally reported by the Valor Economico newspaper there and picked up by the Bloomberg news service, that AES Corp, Mirant Corp. and a third partner, Opportunity Asset Management, had missed an $87 million payment to Brazil's state development bank, BNDES.

Bloomberg said that the newspaper was reporting that after missing the May 15 payment on a $700 million loan which the partners used to buy Brazil's third-largest electric power generator, the partners told the development bank they will need to reschedule the debt. The newspaper item was reportedly based on information from unidentified sources.

The trader said that the news put "some pressure" on AES and Mirant paper, and said that he had seen "prices quoted down in Mirant," although he had no specific levels, and had not seen any reaction in AES paper.

One of the other traders noted, however, that while AES's bonds were a bit lower - he saw the Arlington, Va.-based global power producer's 9½% notes due 2009 a point lower Monday, at 90 bid/92 offered, the missed Brazilian payment was already "last week's news," and there was now a possibility that Brazil "may" be able to provide them with some assistance. "Prior to that, they said they weren't going to be able to do that, so [the bonds] had weakened up, but now they said they may be able to give them some sort of money. Now they said they will be able to help them out, so that should change things."

BNDES, which met with AES executives last week, said at that time that it would analyze the U.S. company's new debt rescheduling proposal.

Also among the power generators, he said, Calpine Corp. "was off a couple" of points, even though the San Jose, Calif.-based independent power producer announced some positive news - that it completed the $82 million monetization of an existing power sales agreement with the Bonneville Power Administration. Calpine said that the deal "represents another contract monetization completed by the company as a part of its 2003 liquidity-enhancing program."

It was the second monetization deal Calpine had announced within the week, coming on the heels of last week's announcement that it would receive a $106 million payment from Aquila Corp. as part of a complex transaction involving a joint-venture Louisiana power plant that buys natural gas from Aquila and supplies it with saleable electricity.

Besides the overall market heaviness weighing on Calpine, he said that the company has a revolving credit agreement of approximately $1 billion that's coming due around the end of the week and has to be extended but so far has not been.

He quoted Calpine's 8 ½% notes due 2011 at 67.5 bid/68.5 offered, down about a point and a half on the session.

It was back to business as usual for Charter Communications Holdings LLC, which had initially soared on Friday on talk that it might be close to an asset sale, before giving up most of its early gains. The St. Louis-based cable TV operator's bonds were little changed on Monday, its benchmark 8 5/8% notes due 2009 quoted at 68.5 bid/69.5 offered, "flat on the day." the trader said.

Over the weekend, Barron's ran an article speculating that asbestos-challenged companies such as Georgia Pacific, Crown Cork and Seal and Owens-Illinois Inc. would likely benefit from plans to set up a $108 billion trust fund, which would be used to pay out awards to plaintiffs claiming asbestos-related infirmities. The magazine said that legislation setting up such a trust fund might be introduced in Congress this week.

That having been said, little movement was seen Monday in the bonds of such companies. Crown Cork's 9½% notes due 2011 were quoted at 103.75 bid/104.75 offered, while the Philadelphia-based packaging company's 10 7/8% notes were at 104.5 bid/106 offered and its 8% bonds due 2023 were pegged at 68.5 bid/70.5 offered.

Another trader quoted Crown Cork's 7% notes due 2006 at 91 bid/93 offered, "flat, with no real action today." Georgia Pacific's 8 1/8% notes due 2011, he said, were at 101.5 bid/102.5 offered and its 9½% bonds due 2022 were at 98 bid/99 offered, "not a heck of a lot changed."

Another trader, summing up, declared that "everything was weak today - especially the things that have run [up] so much in the past couple of weeks - they were off a couple of points today, just because."

As the mammoth new issuance week got underway on Monday only one transaction priced in the high-yield primary market, a 10-year discount notes deal from Compass Minerals Group holding company Salt Holdings - paper for which investors paid 55.677 for a yield of 12%.

Meanwhile word of three new junk bond offerings and one split-rated deal surfaced Monday, including $600 million of new eight-year paper from Texas Industries, Inc., scheduled to start its roadshow on Tuesday.

And there was plenty of news on deals situated on the massive forward calendar as business expected to be completed before the pre-Memorial Day week of May 19 comes to a close. Before the wheels started rolling Monday one sell-side source told Prospect News that the calendar contained 18 offerings that are set to price over the coming four days.

A decent chunk of that business is expected to be completed by the end of Tuesday's session, that source added, pointing to El Paso Production Holding Co.'s $1.2 billion of 10-year senior notes (B2/B+) via Credit Suisse First Boston and Citigroup. Price talk of 7½%-7¾% was heard on the deal during Monday's session.

In addition to El Paso, sources also anticipate terms Tuesday on the eurobond deal from French specialty chemical company Rhodia SA, which upsized its offering to the equivalent of €1 billion from €700 million Friday, adding two senior notes tranches. Goldman Sachs & Co., Bear Stearns & Co. and BNP Paribas are joint bookrunners.

In the single junk bond pricing to take place during Monday's session, Salt Holdings, parent of Compass Minerals Group, sold a $179.6 million face amount offering of 10-year senior subordinated discount notes at 55.677 for a 12% and $99.996 million proceeds.

Credit Suisse First Boston was the bookrunner on the deal, with proceeds pegged to pay a dividend.

Three new high yield offerings surfaced on Monday.

The most conspicuous in terms of size was Dallas-based cement and structural steel-producer Texas Industries with is set to begin the roadshow on Tuesday for $600 million of eight-year non-call-four senior notes (BB-). The deal, via Banc of America Securities and UBS Warburg, is expected to price on May 30.

Also on Monday the market learned of a $200 million 10-year notes offering (B1/BB) from Crum & Forster, which started Friday, May 16, and is expected to price on May 22, via JP Morgan.

Ingles Markets heard to be coming with a $100 million add-on to its 8 7/8% senior subordinated notes due Dec. 1, 2011 (Ba3/B+ existing), which it expects to price on Tuesday via joint bookrunners Banc of America Securities and Wachovia Securities, Inc.

No price talk was heard on the add-on deal from the Asheville, N.C.-based supermarket operator, which sold the original $250 million - a deal that was reported to have been "multiple-times oversubscribed" - on Dec. 4, 2001 at 99.186 to yield 9% via Merrill Lynch & Co. and Banc of America Securities.

In addition to those three straight-up high yield deals, word also was heard Monday that a roadshow began for a split-rated $125 million 10-year notes offering from Thomas & Betts (Ba1/BBB-). The deal, which will be jointly-marketed by the high-grade and high-yield desks, is expected to price Thursday or Friday.

Credit Suisse First Boston, Wachovia Securities and Banc of America Securities are joint bookrunners on the registered notes that are being sold by the Memphis-based company that manufactures electronic components.

In addition to the above-mentioned El Paso Production price talk, the market also heard price talk Monday on Advanced Accessory Systems LLC's $150 million of eight-year guaranteed senior notes (B2). Talk is 10¾%-11% on the deal which is expected to price on Tuesday via Deutsche Bank Securities.

And price talk is 8 7/8% area on Hard Rock Hotel Inc.'s $140 million of 10-year second lien notes (B3/B), expected to price Tuesday morning via Banc of America Securities.

All of Monday's primary market activity notwithstanding, a sell-side source speaking late in the session on background concurred, more or less, with market color heard during the final two sessions of the preceding week - that market observers had been sensing a certain heaviness in high yield, which might be poised to take "a breather."

"Supply now appears to have caught up with demand," the official said. "I heard that with some of the deals that priced last week a there were indications that they weren't as oversubscribed as a lot of the deals have been recently. And you're starting to see some stuff come out toward the wide end of talk.

"That being said I think the conditions and execution are still favorable for the primary issuers," the official added, "although the secondary market is very muted, and the funds flows may be starting to taper off.

"I think people have been waiting for a while now to see just how long this market could hold up as it has. A breather wouldn't hurt."

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