Trump jumps on coupon payment; Curative lower on California setback

By Paul Deckelman and Paul A. Harris

New York, May 28 - Trump Hotels & Casino Resorts Inc.'s bonds were solidly higher Friday, after the Atlantic City, N.J.-based gaming company made the scheduled May 1 payment on its 11¼% Trump A.C. first mortgage notes due 2006 within the 30-day grace period. Also on the upside during Friday's light-volume, abbreviated pre-holiday session was Goodyear Tire & Rubber Co. paper, bouncing back from a ratings downgrade earlier in the week with the help of news that the Akron, Ohio-based tiremaking giant's lenders have given it more time to file its earnings reports with the Securities and Exchange Commission.

On the downside, however, Curative Health Services Inc. bonds were on the sick list after the Hauppauge, N.Y.-based provider of medical products and services warned that that a proposed change in reimbursement for blood clotting therapies in California's Medicaid program could hurt its earnings.

The primary market - which had seen a flurry of news deals pricing in the sessions leading up to Friday's half-day - saw no pricings Friday, although U.S. Oncology was heard by syndicate sources to be readying a $675 million note issue for pricing some time in June and Stater Bros. Holdings was gearing up for a roadshow to market its $685 million two-part new deal.

The Trump Atlantic City Funding 11¼% notes were quoted by a trader as having firmed to 85 bid, 86 offered, from prior levels around 82 bid, 83 offered, after the company said that it had made the $73.125 million interest payment that was due May 1 on the $1.3 billion of bonds, narrowly avoiding a default that could have jeopardized company founder and chairman Donald J. Trump's debt-laden gambling empire. The company also paid $594,000 extra in interest for exceeding the original May 1 deadline.

"I don't know how he does it," a trader marveled at the way Trump had dodged yet another bullet, quipping "maybe he used his money from 'The Apprentice,'" The Donald's surprise hit TV show of this past season.

Even having made the payment, though, the company is by no means out of the woods yet, as it must still gain the OK of the holders of its $1.8 billion of bonds for a restructuring deal that would have a Credit Suisse First Boston unit pump $400 million into the company - no easy task - while at the same time trying to compete with the glitzy new Borgata resort, located just a silver dollar's throw from Trump's smaller, aging Trump Marina property.

Goodyear up on bank waiver

Elsewhere, the trader said, Goodyear "was flying," with its 8½% notes due 2007 up a point at 99.5 bid and its 6 3/8% notes due 2008 also a point better at 91, "even if their credit line got downgraded," as happened earlier in the week, when Standard & Poor's cut the company's corporate credit rating to B+ from BB- previously and dropped its senior unsecured bonds to B- .

Another trader also saw the 81/2s a point better at 99 bid, par offered.

The credit downgrade news, which had caused the bonds to retreat earlier in the week, was overtaken by better news at the end of the week, with the company's lenders extending until June 30 the deadline for Goodyear to file its 10-Q report with the SEC, which was delayed as the company looked into alleged accounting irregularities and restated some previous results, reporting its 2003 fourth-quarter and full-year results on May 19.

The move by the lenders is seen as a continued vote of confidence in the company as it seeks to clean up the fallout from the accounting problem, which surfaced late in 2003. It also means that the delay in filing the first quarter financials will not prevent Goodyear from accessing its credit facilities or obtaining letters of credit.

Goodyear's 6 5/8% notes due 2006 traded up to around the 99.5-99.75 bid level from 98.75 earlier, "which is pretty substantial for a short piece of paper," the first trader said. He also saw Goodyear's 7.857% notes due 2011 up around a point to 87.5

Dex higher on Moody's review

Also on the credit rating front, news that Moody's Investors Service may upgrade the ratings of Dex Media Inc. and the Englewood, Colo.-based telephone directory publisher's various subsidiaries helped to boost its bonds, albeit in light trading.

A market source saw Dex's 8½% notes due 2010 moving up to 109 bid from 108.5, while its 8% notes due 2013 were likewise half a point better at 95. Dex's zero-coupon notes due 2013 firmed to 64.5 bid, also a half point gain.

Moody's said that its review, in contemplation of a possible upgrade "follows the company's recent announcement that it plans to use the net primary proceeds of its proposed initial public offering to delever its balance sheet by retiring $184 million of Dex Media East subordinated debt and $273 million of Dex Media West subordinated debt through the 35% equity clawback provisions incorporated in the respective bond indentures governing these entities.

"The review will consider the likelihood that the IPO will be successfully concluded, and the debt will be permanently retired in accordance with the company's current intentions," the ratings agency said. In addition, the review "will consider the impact of the proposed debt retirement on Dex's consolidated and subsidiary leverage and assess management's commitment to further reduce leverage."

Tyco rises

Tyco International Group SA's bonds were quoted higher Friday, culminating a week in which the rebounding Bermuda-based industrial conglomerate saw Standard & Poor's elevate its already investment-grade rating on its corporate credit and senior unsecured debt by one notch, to BBB (Moody's Investors Service still considers Tyco a junk bond, at Ba2). This was followed by the company's announcement Thursday that it plans to use a sizable chunk of its $3.1 billion of cash on hand to reduce on- and off-balance sheet debt over the next several quarters. Tyco had some $17.7 billion of balance-sheet debt as of March 31. On Friday, its 6 3/8% notes due 2011 were seen up better than two points on the session, around the 106 level.

Little movement was seen in the bonds of Riggs National Corp., even though the Washington, D.C.-based banking company's stock was sharply higher after it confirmed it hired Lehman Brothers to help it review "strategic alternatives," including a possible merger or other business combination with a third party.

Riggs' 9.65% notes due 2009 were unchanged at 104 bid, even as its shares firmed $3.10 (16.54%) to $21.84 in Nasdaq dealings of 1.6 million shares, about 13 times the usual volume.

A trader said overall, "the market in general was pretty strong," and said it had shrugged off the latest high-yield mutual fund outflow number, although he acknowledged that the $162.3 million loss of cash from the funds in the week ended Wednesday (May 26) was a drop in the bucket compared with the $985 million outflow seen the previous week and the mammoth $2.145 billion hemorrhage the week before that.

Among issues he saw doing better was dairy producer Land O'Lakes, whose 8¾% notes were "up sharply" to around 94 bid from prior levels 92.25 bid, 92.5 offered; and Oregon Steel Mills Inc., whose 10% notes "have been on a real tear" recently, buoyed by higher steel prices; the stock, he said, had firmed smartly on Thursday, while the 10% bonds rose Friday to 104 bid from 102.5.

Curative Health drops

Curative Health Services bonds were one of the few losers seen Friday, after it warned that a proposed change in reimbursement for blood clotting therapies in California's Medicaid program could hurt its earnings. It said the changes, if enacted, could amount to far more than the 5% to 10% decline in revenues from that program that the company had previously been expecting and could impact its earnings guidance.

Curative's 10¾% notes due 2011 tumbled to 95 bid from prior levels at 101. Its Nasdaq-traded shares fell $1.98 (15.85%) to $10.52, on volume of 756,000 shares, about four times the usual turnover.

Primary quiet but tone better

During Friday's abbreviated pre-holiday session in the high yield primary market no transactions took place.

However two big deals came into view as roadshow dates were heard for two tranches totaling $685 million from Stater Bros. Holdings and US Oncology's $675 million two-tranche deal was heard to be June business.

One syndicate official, speaking to Prospect News shortly after the market closed Friday, said that there is recent evidence that the new issue market has regained its footing.

"The market has had a positive tone during the past couple of days," said the sell-sider.

"The secondary levels have not returned to where they were at the peak. But the primary market, which was shut down for a little while, has reopened for new issuance, although at slightly wider levels.

"The calendar has not returned to where it was - we're not in the $8-$9 billion range - but I think it will pick up once people get back from the holiday.

"I think that starting Tuesday afternoon we'll see some deal announcements."

Strong transactions dominated week

For evidence of the primary market's recent rejuvenation, the official selected four recent transactions: one apiece from Aztar Corp. and Herbst Gaming, Inc., and two tranches from Samsonite Corp.

To briefly recap, on Wednesday, Aztar, a Phoenix based casino operator, price an upsized quick-to-market $300 million issue of 10-year senior subordinated notes (Ba3/B+) at par to yield 7 7/8%, spot on the 7 7/8% area price talk. It was increased from $250 million.

The following day another gaming company, Las Vegas-based Herbst Gaming, priced an upsized $160 million issue of 8 1/8% senior subordinated notes (B3/B-) at 99.284 to yield 8¼%, again spot on the 8¼% area price talk. The deal was increased from $150 million.

Earlier in the week, on Tuesday, Denver suitcase maker Samsonite priced the first tranche of an offering very similar to the one that it had postponed due to market conditions on May 14.

Samsonite priced a slightly upsized issue of $205 million of seven-year senior subordinated notes (B3/B-) at par to yield 8 7/8% - once again spot on the 8 7/8% area price talk. It was increased from $200 million.

The following day Samsonite priced a slightly downsized €100 million of six-year floating-rate notes (B1/B+) at par to yield three-month Euribor plus 437.5 basis points. As with all of these tranches, the Samsonite floater came right on top of the price talk: three-month Euribor plus 437.5 basis points area. It was reduced from €105 million.

"In just the past few days we've seen some real strength in the new issue market," the syndicate official commented. "A couple deals got upsized. Aztar was upsized by 20% of the deal size. Herbst was upsized a little.

"That's very different from the second week of May, where everything fell apart. Deals were getting downsized, pricing wide of talk or on the wide end, and deals were getting pulled.

"In the past week we also saw Samsonite - which had pulled its deal - reintroduce it."

Tail end of a "liquidity event"?

With regard to the most recent news from the high-yield mutual fund weekly fund flows numbers, this sell-side source said that despite declines in outflows - from the $2.15 billion outflow for the week ending May 12, through the $989 million outflow for the week ending May 19, up to the most recent week's $162.3 million outflow - a reversal in the tide of money cannot be inferred.

"It's tempting to look those figures and project that next week we will see a modest inflow or even a substantial one," the source said.

"However I don't think anyone around here is following that line of reasoning.

"We have gone through a period of modest outflows followed by a couple of weeks that saw huge outflows, roughly $3.1 billion in two weeks.

"I think that was a liquidity event, a kind of a hiccup. Those outflows did not take people by surprise either. People were anticipating them based on activity in the secondary market during those weeks on the part of the accounts.

"Right now we're not seeing that kind of activity."

Friday turns up two big offerings

Stater Bros. Holdings starts a Tuesday and continues it through June 9 for a $685 million deal coming in two tranches (BB-).

The Colton, Calif-based supermarket chain operator is offering $525 million of eight-year senior fixed rate notes due 2012, non-callable for four years and $160 million of six-year senior floating-rate notes, non-callable for two years.

Banc of America Securities will run the books for the deal, proceeds from which will go to refinance debt and to pay for the acquisition and construction of a new distribution center.

And Prospect News learned Friday that US Oncology will bring $675 million of new high-yield issuance in two tranches (B-) during June.

The Houston-based cancer treatment services company plans to sell $200 million of eight-year non-call-four senior notes and $475 million of 10-year non-call-five senior subordinated notes.

Citigroup, JP Morgan and Wachovia Securities will run the books on the LBO financing.

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