Owens-Brockway deal is first U.S. junk offering to show all-round strength since June, BofA says

By Paul A. Harris

St. Louis, Nov. 8 - Owens-Brockway Glass Container Inc.'s $450 million bond offering was the first deal to pass a key test of strength in the U.S. high-yield market in five months, according to Ali Balali, senior high yield strategist at Banc of America Securities.

The phrase "upsized and priced at par at the tight end of talk" customarily denotes a strong high yield transaction. However prior to Nov. 5 observers of the U.S. junk bond market had not heard the phrase applied to a deal since June, according to Balali.

Balali referred to Owens-Brockway's offering of $450 million 10-year senior secured notes (B2/BB), which was upsized from $300 million and priced at par on Tuesday to yield 8¾%, at the tight end of the 8¾%-8 7/8% price talk. The Toledo, Ohio packaging firm's deal came to market via Salomon Smith Barney, Banc of America Securities and Deutsche Bank Securities Inc.

The transaction was the first dollar-denominated par bond from a U.S. issuer to be priced at the tight end of talk and to be upsized since the JLG Industries transaction priced on June 12, Balali said.

"We think the present market presents a good opportunity for repeat issuers such as OI [Owens-Illinois, parent of Owens-Brockway] - issuers with bonds outstanding, whose stories are known - to come back into the market," Balali commented. "And probably they will."

The June transaction to which Balali referred was JLG Industries, Inc.'s upsized offering of $175 million of 10-year senior subordinated notes (Ba2/BB+), increased from $150 million and priced at par to yield 8 3/8%, at the tight end of the 8 3/8%-8 5/8% price talk. The McConnellsburg, Pa.-based producer of mobile aerial work platforms, variable-reach material handlers and telescopic hydraulic excavators brought its deal via Wachovia Securities, Inc. and Credit Suisse First Boston.

A recent emerging markets corporate offering also passed the strength test - although it was not widely followed among U.S. high-yield players. On Oct. 31 Russian oil company Tyumen Oil sold $400 million of loan participation notes due 2007 (Ba3/B+/B+), upsizing the deal from a planned $300 million size and pricing them at par to yield 11%, at the tight end of talk of 11% to 11¼%. Credit Suisse First Boston and Salomon Smith Barney were joint bookrunners.

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