Mirant bonds firm as company claims holder backing; three quickie deals price

By Paul Deckelman and Paul A. Harris

New York, June 30 - Mirant Corp. bonds firmed smartly Monday, as the energy company announced amended terms for its pending exchange offer and expressed optimism that it would reach the required holder participation threshold.

In the primary market, three quickly emerging deals surfaced - much as market players had recently predicted that they would.

As the holiday-abbreviated week of June 30 got underway the market learned that Vivendi Universal will reel out €1.1 billion equivalent of new issuance, Cincinnati Bell Inc. figures to ring in with $300 million, and Mohegan Tribal Gaming Authority will put $330 million in play. All three deals are expected to price well before the U.S. capital markets pause to watch the rockets' red glare.

And one pricing transaction actually took place during the final session of the very, very busy June 2003. Jacuzzi Brands, Inc. whirled out terms of its upsized $380 million offering, which priced inside of talk.

Shortly before Monday's session came to a close, one sell-side source advised Prospect News that last week's reported outflow of $177.184 million from the high yield mutual funds for the week ending June 25 - the third negative flow in six weeks - does not appear to be registering an impact in the primary market.

"The market is definitely still strong," the official said Monday. "There is still so much cash out there that last week's outflow is a needle in the haystack.

"We've had $17 billion come in, this year."

The terms of the Jacuzzi deal would certainly seem to bear out that assessment.

The West Palm Beach, Fla.-based bath and plumbing products manufacturer upsized its offering to $380 million (from $370 million) of seven-year senior secured notes (B3/B), and priced them at par, Monday, to yield 9 5/8%.

The Credit Suisse First Boston-run deal priced inside of the 9 3/4-10% price talk.

Two new offerings, both of them drive-bys, appeared on Monday - pretty much what market sources had advised Prospect News would take place in the run-up to July 4.

French entertainment giant Vivendi Universal expects to price €1.1 billion (equivalent) of five-year senior notes due (B1/B+), via Goldman Sachs.

Cincinnati Bell Inc. - formerly Broadwing Communications Services, Inc. - will bring a quick-to-market $300 million of 10-year senior notes (B2), via joint bookrunners Credit Suisse First Boston, Banc of America Securities and Goldman Sachs.

Both deals are expected to be completed on Wednesday.

And price talk of 6 3/8-6 5/8% was heard late Monday on Mohegan Tribal Gaming Authority's $330 million of six-year senior subordinated notes (existing ratings Ba3/BB-), which are expected to price on Tuesday afternoon, via Banc of America Securities and Citigroup.

The market also heard price talk Monday on the $150 million notes offering from Wackenhut Corrections Corp., of Boca Raton, Fla. The private jailer will attempt to lock up an interest rate in the 8 1/4-8 ½%, when it completes its 10-year non-call-five senior notes (B1 stable/B stable) transaction Tuesday via BNP Paribas and Lehman Brothers.

Finally on Monday, Westlake Chemical Corp. was reported to be coming with a $350 million offering of senior notes.

No timing, structure or syndicate names were heard.

The Houston-based petrochemical company will also obtain a $350 million credit facility led by Bank of America.

A trader said that when the new Jacuzzi 9 5/8% senior secured notes due 2010 were freed for secondary market dealings, investors decided to take the plunge and ran the new bonds up to bid levels around 102.625-102.875.

Also on the new-deal front, he quoted the recently priced Xerox Corp. 7 1/8% notes due 2010 as hovering in the 99.75-par area. The Stamford, Conn.-based copier king's bonds had priced at par on June 19.

At another desk, a trader saw PG&E Corp.'s new 6 7/8% senior secured notes due 2005 continuing to power up, pegging the San Francisco-based utility's issue at 103.5 bid, 104.5 offered. "It was very well received, he said." Those bonds had priced at par on Friday and had quickly pushed up to 102.5 bid, 103.5 offered later that session.

Back among the established issues, traders and other market observers said dealings were generally "pretty slow", with some opining that hardly anything would get done this week, which will see a Bond Market Association-recommended 2 p.m. ET close on Thursday ahead of Friday's Independence Day holiday, which will completely shutter U.S. financial markets. "Nah, nothing much stuck out," one said. "It was pretty quiet."

"There were so few people around," another noted, figuring that "a lot of people just took the whole week off."

However, there were pockets of activity, most notably in the debt of Mirant Corp. The Atlanta-based energy producer - which is currently offering to exchange new debt, plus cash and, where applicable, equity warrants, for three series of bonds, announced amended terms of its offer, adding the cash and warrants as a sweetener, and said that it had been informed that two-thirds of the target junk bond and convertible debt holders have indicated that they will back the offer (see Tenders and Redemptions elsewhere in this issue for full particulars).

Mirant's bonds were "up big," a trader said, quoting its 7.40% notes due 2004 at 75 bid, 77 offered, and its 2 ½% convertible senior debentures due 2021 (but putable in 2004) 74 bid, 76 offered. Mirant Americas Generating LLC's 7 5/8% notes due 2006 were at 77 bid, 79 offered, all up several points on the session. All three issues are being exchanged for.

He also saw Mirant's 7.20% 08 notes firmer at 63.5 bid, 65 offered, while the 7.90% notes due 2009 had risen to 53.5 bid, 55.5 offered. The MAG 8.30% notes due 2011 rose to 62 bid.63.5 offered, with the Mirant subsidiary's 8 ½% notes due 2021 were at 55 bid, 60 offered, and its 9 5/8% bonds due 2031 closed at 58.5 bid, 60.25 offered.

At another desk, an observer had seen the parent Mirant 7.4s jump to 74.5 bid from 71.5 on Friday, while the MAG 7 5/8s had improved two points, to 78.

Elsewhere, HealthSouth Corp.'s bonds were in improved condition, after the Birmingham, Ala.-based operator of rehabilitation facilities and diagnostic imaging centers said that it would meet with its creditors and stockholders in New York next Monday afternoon to review its preliminary business plan and to provide current financial projections for the next twelve months.

HealthSouth was "up pretty good," a trader said, quoting its 7 5/8% notes due 2005 at 79 bid, 81 offered and its 7 3/8% notes due 2006 at 77.5 bid, 79.5 offered.

Goodyear Tire & Rubber bonds, which had fallen several points on Friday on fears that down-to-the-wire talks with the union representing 19,000 of the Akron, Ohio-based tire giant's employees would fail to produce a new contract, remained around those same low levels Monday on news that the talks had, in fact failed, and had been broken off. However, while Goodyear's shares dropped 6% on Monday, its 8 ½% notes due 2007 remained around the same 83 bid level to which they had fallen Friday, while its 7 7/8% notes due 2011 were "pretty solid" at about 71.5 bid Monday, a trader said, noting that the bonds had already "weakened considerably" on Friday.

While the United Steelworkers of America broke off the talks with Goodyear early Saturday, and said it is prepared to strike, as of Monday morning had not given the 72-hour notice required for such action at the company's 11 U.S. plants.

A trader said that Levi Strauss & Co. "had reached its levels after going up on earnings last week and trading back down on its subsequent conference call."

He quoted the San Francisco-based apparel maker's debt as having "settled in," with its 11 5.8% notes at 85 bid, its 7% notes at 82 and its 12 ¼% notes at 84.25.

"The shot up like a bat out of hell" after Levi reported a considerably smaller loss in the just-passed quarter from a year ago," he said, but "then they came back down - they still have a lot of debt [hanging over their financial performance] and other economic issues."

Junk traders saw little or no movement in R.J. Reynolds bonds in the wake of Standard & Poor's not-unexpected decision to downgrade $2.5 billion of its debt to junk. S&P cut the tobacco giant's senior unsecured debt and corporate credit ratings to BB+ from BBB- previously and lowered the senior unsecured ratings on selected debt issues not guaranteed by RJR's material operating subsidiaries to BB from BB+.

S&P said RJR "continues to face intense competition in the U.S. cigarette market and future pricing uncertainty arising from increased state excise taxes and the corresponding growth of deep discount manufacturers. "

The ratings agency added that: "These factors will result in continued declines in RJR's domestic cigarette volume and cash flow."

The move completes the company's fall from investment grade; Moody's Investors Service junked Reynolds' ratings two weeks ago, and Fitch Ratings downgraded it in May.

Even with those earlier downgrade, Reynolds was still being traded off the high-grade desks at many shops, although one junk marketer said now, his desk would likely be getting the bonds "soon."

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