Dobson up on better preliminary numbers; Chesapeake Energy, Grupo TFM deals price

By Paul Deckelman and Paul A. Harris

New York, April 13 - Dobson Communications Corp. bonds, and those of its American Cellular Corp. subsidiary, firmed smartly Wednesday after the Oklahoma City-based provider of telecommunications services to rural markets reported favorable preliminary first quarter 2005 results.

Meanwhile the parched primary market outlived what more or less amounted to a new deal drought, as the session produced nearly $1.5 billion of new issuance, easily eclipsing the combined totals of the previous two weeks - $300 million for the March 28 week and $155 million for the April 4 week.

Wednesday became the first $1 billion-plus day in the primary market in nearly a month - since March 15 when almost $2.2 billion priced.

However the fortunes of Wednesday's transactions were various, and none of the three tranches that priced came tight to talk. One came in the middle, one came on the wide end and one came wide of price talk.

"It still seems to be somewhat of an uphill battle in the primary market, even for defensive plays," one syndicate official observed on Wednesday afternoon.

The official was especially referring to energy companies that have moved toward the center of the primary market stage since high yield began selling off in mid-to-late March.

Indeed most of Wednesday's new issue activity involved energy companies.

Chesapeake Energy prices $600 million

The session's biggest deal came from Oklahoma City-based Chesapeake Energy Corp. which priced a $600 million issue of 6 5/8% senior notes (Ba3/BB-/BB) at 99.069 to yield 6¾%, on the wide end of the 6 5/8% area price talk.

Lehman Brothers, Banc of America Securities, Credit Suisse First Boston, Deutsche Bank Securities and UBS Investment Bank were joint bookrunners for the acquisition financing.

Sources had been anticipating a blowout, and the new Chesapeake 6 5/8% notes were seen firming in the secondary market when released for trading.

Elsewhere Valley Forge, Pa. propane distributor AmeriGas Partners LP/Finance Corp. priced an upsized $415 million issue of 10-year senior notes (B2/BB) at par to yield 7¼%, wide of the 7% area price talk but increased from $400 million.

Credit Suisse First Boston ran the books for the debt refinancing deal.

Restructured TFM in the middle of talk

Beyond the energy sector, Mexican freight railroad company Grupo Transportación Ferroviaria Mexicana, SA de CV priced a restructured $460 million issue of seven-year senior notes (B2/B+) at par on Wednesday to yield 9 3/8%, in the middle of the 9¼% to 9½% price talk.

Morgan Stanley ran the books for the debt refinancing deal.

An informed source told Prospect News that although TFM priced somewhat late the bonds went out at 100.50 bid.

The deal went well, the source stated, adding that the book was anchored by "blue chip high-yield accounts."

More names for the forward calendar

Elsewhere on Wednesday roadshow timing was heard on deals from two, and possibly three, issuers.

Hawaiian Telecom Communications, Inc. will start a roadshow on Monday for a $550 million three-part bond deal.

The company will sell eight-year non-call-two senior floating-rate notes, eight-year non-call-four senior fixed-rate notes and 10-year non-call-five senior subordinated notes.

Goldman Sachs & Co. has the books for the acquisition deal.

Meanwhile South African wireless operator CellC (Pty) Ltd. will begin a roadshow Thursday in London for a €625 million two-tranche deal, via Citigroup.

The company plans to sell tranches of seven-year non-call-four first-priority secured notes and 10-year non-call-five senior subordinated notes, with proceeds going to repay debt.

And an informed source told Prospect News that Movie Gallery Inc. is expected to begin a roadshow on Monday for its $325 million offering of senior notes, via Wachovia Securities and Merrill Lynch.

The Dothan, Ala.-based video rental chain company will use the proceeds to help fund the acquisition of Hollywood Entertainment Corp.

Thursday's deals talked

Finally, price talk emerged on two offerings that are expected to price during the Thursday session.

Hughes Network Systems LLC's $325 million of eight-year non-call-four senior notes are talked at a yield of 9¾% to 10%. Pricing is expected on Thursday afternoon via JP Morgan and Bear Stearns.

And Whiting Petroleum Corp.'s $220 million of eight-year non-call-four senior subordinated notes (expected ratings B2/B-) are talked at 7% to 7¼%. Merrill Lynch & Co. and Lehman Brothers are joint bookrunners.

Chesapeake edges up in trading

When the new Chesapeake Energy 6 5/8% senior notes due 2016 were freed for secondary dealings, a trader saw them quoted at 99.5 bid, 99.75 offered, up from their issue price earlier in the session at 99.069. Another trader saw an even smaller gain, quoting the bonds at a tight 99.25 bid, 99.375 offered.

The new Grupo TFM bonds were generally not seen trading around, although one trader did hear a quote on the issue of 100.5 bid, 101 offered, up from their par issue price.

"I didn't see them trade," he said very late in the day. "They must have just broken."

Dobson jumps

Back among the existing bonds, a market source saw Dobson's 8 7/8% notes due 2013 up three points on the day to 82, while its 10 7/8% notes due 2010 firmed to 91.5 bid from 88. The 10% notes due 2011 of Dobson unit American Cellular were seen up two points at 95.5

At another desk, a trader who saw those two series of Dobson bonds at those same levels, also saw the company's 9 7/8% notes due 2012 and 8 3/8% notes due 2011 both at 102.25 bid, 104.25 offered, although he pointed out that those are senior bonds which are usually not seen moving around much.

Dobson's Nasdaq-traded stock, meantime, jumped 27 cents (14.67%) to close at $2.11, in busy trading of 8.7 million shares, about seven times the usual volume.

Dobson - which expects to report full results for the first quarter ended March 31 in early May - said late Tuesday that it expects to report about 122,000 total gross subscriber additions for the first quarter of 2005, up from 112,300 for the 2004 fourth quarter, and up even more from the 99,600 gross subscriber adds in the year-ago 2004 first quarter.

Dobson expects that first-quarter ARPU - average revenue per unit, a key telecommunications industry financial metric - will be around $42.90, sequentially up from $42.17 for the 2004 fourth quarter and well up from $38.83 a year earlier.

It said that roaming revenue for the first quarter is expected to be approximately $53 million, based on about 395 million roaming minutes of use by its customers - a 23% increase from 322 million a year ago, although down a bit from 399 million in the fourth quarter.

Pathmark gains on earnings

Also out with numbers - this time, actual quarterly results - was Pathmark Stores Inc., which reported results for the fiscal fourth quarter ended Jan. 29.

The Carteret, N.J.-based supermarket chain recorded a net loss for the quarter of $262.3 million ($8.73 per share), a sharp deterioration from its year-ago profit of $9.6 million (32 cents per share).

However, the loss was due almost entirely to a $270.4 million charge that Pathmark took for intangible assets and other unusual items. Excluding those one-time factors, the company's adjusted earnings were $2.5 million (eight cents per share) - beating the consensus Wall Street expectations that it would do no better than break even.

That better-than-expected performance - was well as the lingering afterglow from the recent announcement that billionaire supermarket entrepreneur Ron Burkle's Yucaipa Group will invest $150 million into the company - helped give the company's 8¾% notes due 2012 a boost, with one trader quoting the bonds as having moved as high as 98 bid before going out at 97.75 bid, 98 offered, up from 96.75 bid, 97.75 offered on Tuesday.

Pathmark's Nasdaq-traded stock was up 86 cents (13.76%) Wednesday, rising to $7.11 on volume of 2.9 million shares, more than eight times the average daily activity level.

Bally rises

A market source quoted Bally Total Fitness Holding Corp.'s bonds better, after the recently problem-plagued Chicago-based fitness club operator released fourth-quarter and 2004 year-end "operating highlights" late Tuesday, and then held a conference call which apparently calmed investor angst.

Bally's 9 7/8% subordinated notes due 2007 were seen a point better at 86 bid, while its senior 10½% notes due 2011 edged up half a point to 99.

Bally said that it expected to report a net loss for the quarter and the 2004 year ended Dec. 31 - but also said that it was making progress in getting more bodies working out, boosting its new membership by 20% in the quarter, and by 22% for the full year. It also reported positive trends in the amount of membership revenue it was generating, and said that it was in good shape, debt-wise, with just $13.7 million of outstanding advances under the $100 million revolving credit portion of its $275 million credit facility, including $9.7 million in letters of credit.

Delphi leads autos lower

On the downside, the hard-hit automotive supplier sector continued to take its lumps, with the latest bad news du jour being a widening of the Securities and Exchange Commission probe of Delphi Corp., with the Troy, Mich.-based automotive electronics component maker's former corporate parent and still largest customer, General Motors Corp., asked to produce documents relating to its dealings with Delphi as part of an ongoing SEC probe of Delphi announced last month, around the time when Delphi said it expected to restate results from 2001 and beyond, and said its chief financial officer had quit, after coming under pressure from Delphi's audit committee.

Delphi's 6½% notes due 2009 fell to 85.5 bid from 87 on Tuesday, while its 7 1/8% debentures due 2029 were likewise 1½ points down, to 73.5. Its 6½% notes due 2013 lost a point to 77, while its 6.55% notes due 2006 lost ¾ point to end at 97 bid.

Overall, a trader signed resignedly, "ah, this market's brutal. What a bloodbath.

"It hasn't been fun," he continued.

CDX confusion

He also noted that adding to the market's confusion, the widely followed CDX index measuring high-yield credit default swaps "seemed like it got a little screwed up. They had a couple of new series come out and there was a lot of confusion about what was in it and how to evaluate it."

Effective Wednesday, Dow Jones & Co. and a consortium of banks, which jointly compile the index, have dropped a number of names which are in line for an upgrade to investment-grade status, and hence are unlikely candidates for default, including Nextel Communications Inc., Caesar's Entertainment Inc. and MCI Inc., each of whom is in the process of being acquired by a financially stronger partner, as well as Hilton Hotels Corp. and J.C. Penney & Co. Inc. The index compilers are adding such recently problem-plagued names as auto sector suppliers Visteon Corp. and Delphi, as well as aircraft maker Bombardier Inc.

"A lot of people got stung on that," he said of the portfolio shuffle. "One series was down 1 5/8 or 1¾ points, while another series was only down 5/8 point. So there was just a lot of confusion out there. "

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