Waste Services sells notes; Regal scrubs deal; Cincinnati Bell lower

By Paul Deckelman and Paul A. Harris

New York, April 26 - Waste Services Inc. was heard by high yield syndicated sources to have sold its issue of 10-year notes on Monday and those bonds were seen by traders having firmed smartly when they were freed for secondary dealings.

Elsewhere, Regal Entertainment announced that it would not be selling a new issue of bonds, but would instead increase its credit facility borrowing. In the secondary arena, Cincinnati Bell's bonds were heard lower on the session.

Monday's new issue market saw the completion of a single junk bond transaction as Waste Services Inc. hauled away $160 million from the accounts.

One senior sell-side official told Prospect News acknowledged that the deal in and of itself didn't generate a great deal of news. However in light of recent instability seen throughout the capital markets the Waste Services deal might nonetheless be viewed as welcome news.

The Burlington, Ont.-based solid waste services company sold $160 million of 10-year senior subordinated notes (Caa1/B-) at par to yield 9½% via Lehman Brothers.

The notes priced at the tight end of the 9½%-9¾% price talk. And shortly after they were freed up for trading the new 9½% notes due 2014 were spotted by a trader at 103.25 bid, 103.75 offered.

"The Waste Services deal has traded up about three points," said the senior sell-side official, generally confirming the trader's information.

"I'm sure the underwriter was supporting that," the source added. "That would seem to indicate that it priced a little bit wide but left plenty of juice for the market.

"It indicates that when things price where the market wants them they trade up.

"And that bodes well for new issuers."

Aside from the Waste Services deal the watchword for this official as Monday's session came to a close was stability.

"We're certainly seeing light volumes," said the source. "For once we're not having any sell-offs. There are actually some bids out there.

"There has been some stabilization that we have seen from the various indexes," the official added, mentioning the indexes of Credit Suisse First Boston, Lehman Brothers and Morgan Stanley.

"Everything is roughly flat," said the sell-sider. "Returns are slightly up.

"With regard to the outflows from the high yield mutual funds [the most recent of which was a significant $425.8 million outflow for the week ending April 21], by the time we receive those numbers the accounts have already felt it and adjusted for it. We tend to be on a one-week lag with respect to that.

"I think the market will remain relatively flat. And I think people are hoping for a more stabilized market, with Treasuries staying flat as well."

The source made note of the closing yield of the 10-year Treasury: 4.42%, in from its 4.46% close last Friday.

What has changed, commented this sell-sider, is credit quality. The spate of "discount notes and holding company paper issued to fund dividend payments," seen in the early part of 2004, may have gone the way of $1.50 per gallon gasoline.

"You're not going to see people issuing those when the market is so unstable because you pay up for it so much.

"The credit quality is now better, which makes the market more closely tied to Treasuries. So the recent sell-off in Treasuries has had an unmistakable impact."

Pipeline continues to build

Unstable or not, the forward calendar of the high yield new issue market continued to build on Monday.

NCL Corp., a wholly owned subsidiary of Hong Kong-based Star Cruises Ltd., announced it was starting a roadshow in Asia for a $350-$450 million offering of 10-year senior notes (B2/B+) via JP Morgan.

The debt repayment and potential capital expenditures deal from the cruise ship company will hit the road in the U.S. on Tuesday, with pricing expected on May 6.

The roadshow starts Thursday for Milacron Inc.'s offering of $225 million senior of seven-year secured notes via Credit Suisse First Boston

The Cincinnati-based global supplier of plastics-processing technologies and industrial fluids will use the proceeds to repay debt.

Regal dumps bonds for loan

Regal Entertainment Group announced in a Monday press release that it intends to upsize its new credit facility to $1.75 billion from $1.35 billion and pull Regal Cinemas Bonds Corp.'s proposed $400 million subordinated notes offering.

According to an informed source the company elected to abandon the high yield component of its debt reduction and dividend payment financing because of strong interest among investors in participating in the leveraged loan.

"The bank deal is going so well that it represents a significant reduction in the cost of capital for the company," said one source familiar with the deal.

"The company could not refuse the offer to upsized the credit facility and still achieve that pricing."

Credit Suisse First Boston, the lead arranger of the credit facility, also had the bookrunning mandate on the abandoned bond deal.

Rhodia upsizes by €75 million

Rhodia announced Monday that it has upsized to €700 million equivalent from €625 million equivalent its planned offering of six-year senior notes (confirmed B3/expected B-).

The bonds are expected to be sold in dollar and euro denominations, with tranche sizes to be determined.

Credit Suisse First Boston, BNP Paribas and Goldman Sachs & Co. are joint bookrunners.

Global launch is scheduled to take place during week of May 3.

Meanwhile price talk of 6¾% area emerged Monday on Emmis Operating Co.'s $350 million of eight-year senior subordinated notes (expected B2/confirmed B-), expected to price on Tuesday via Goldman Sachs & Co., Deutsche Bank Securities, Banc of America Securities and Credit Suisse First Boston.

Price talk is for a yield in the 8¼% area on Giant Industries Inc.'s $150 million of 10-year senior subordinated notes (B3), which are expected to price on Wednesday via Banc of America Securities.

And price talk emerged on both the fixed- and floating-rate tranches of the €475 million Tele Columbus AG high yield bond deal, via Merrill Lynch & Co.

Price talk is Euribor plus 325-350 basis points on the €195 million of senior floating-rate notes due 2010 (B1/B), which will be non-callable for one year.

Meanwhile, price talk is 9% area on the €280 million senior subordinated fixed-rate notes due 2012 (B3/B-), which will be non-callable for four years.

A one-day U.S. roadshow is expected to conclude on Tuesday, with the deal pricing shortly thereafter.

Waste Services trades higher

When the new Waste Services bonds were freed for secondary dealings, they "performed well" in secondary, a trader said, seeing the new issue firm to 103 bid, 103.5 offered from their par issue price earlier in the session.

Another trader, agreeing that the new bonds "did pretty well," quoted them as having traded up to levels above 103, before dropping off those highs to close at 103 bid, 103.25 offered.

Back among the established issues, traders said there really wasn't that much doing. "It was a typical Monday, pretty dismal," the trader said, "although deals keep getting cranked out."

He noted that the claim of credit by Al-Qaeda for a weekend attack on Iraq's major oil facility would likely further roil the financial markets and keep some investors on the sidelines.

"Flows were extremely light," another trader said, "even for a Monday. Everyone was complaining that in fact there was nothing going on," with stocks generally lower and Treasuries also seemingly cowed a little by a considerably better than expected number for March new-home sales.

"Stuff in some areas was firmer, but the market overall was softer. It felt a little heavier - a continuation of what we saw on Friday."

Cincinnati Bell slips

One name which definitely seemed heavier, a market source said, was Cincinnati Bell; he saw the Ohio-based telecommunications and broadband operator's bonds "off a little bit," with its 7¼% notes due 2013 having drifted down to 97.25 bid from prior levels around par and its 8 3/8% notes due 2014 at 95.5 bid, down from 98.

He could give no real explanation - "who knows?" he shrugged - and there seemed to be no fresh negative news out on the company.

At another desk, a trader said that he had "seen them getting softer - but I didn't see them [Monday.]"

Level 3 down again

Another telecom credit which has been continually softening of late is Level 3 Communications Inc., even though there has been no hard negative news out on the Broomfield, Colo.-based telecom fiber optic network provider that might explain the erosion in its bonds.

On Monday, the company's benchmark 9 1/8% notes due 2008 were seen down another three points to around 72.5 bid.

Even a distressed-debt trader was watching the company's bonds fall, although there has been no indication that Level 3 - which was one of the few high yield telecom names to survive the industry implosion several years ago and which has moved to aggressively cut debt and acquire assets - is in any kind of trouble.

"They were down about a point," he said. "We started seeing them when they drifted down to the lower 70s."

aaiPharma unchanged

Elsewhere, aaiPharma Inc.'s bonds were seen little changed, even though the Wilmington, N.C. -based pharmaceuticals maker announced that it had completed an asset sale, had closed on a new $140 million credit facility, had made the $9.6 million coupon payment that came due on its 11% notes due 2010 back on April 1, and had received waivers of existing defaults from its noteholders.

Even so, the 11% notes were seen unchanged at 94, although a market source noted that the bonds "had recently made their move" up into the lower 90s from prior lows all the way down in the lower 80s.

"I don't know," he said, "Maybe [the investors] figured that all of that would be coming, and it was already built in."

Beverly Enterprises' 9 5/8% notes due 0229 were being quoted at 116.5 bid; the Fort Smith, Ark.-based nursing home operator's bonds, a trader said had been at 114.5 "just a couple of days ago."

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