Oxford sells deal, Belden plans notes; Huntsman higher on suit settlement; market still quiet

By Paul Deckelman and Paul A. Harris

New York, June 23 - Oxford Industries, Inc. successfully priced an offering of $150 million six-year senior secured notes Tuesday. However, the issue came too late in the session for any kind of real aftermarket.

Replacing it on the forward slate of upcoming deals was St. Louis-based electrical wire and cable manufacturer Belden Inc., which unveiled plans for a $200 million offering of 10-year notes.

High yield syndicated sources meantime heard that Canadian agribusiness operator Viterra Inc. is likely to price a C$300 million bond offering sometime this week.

In the secondary market, Huntsman International LLC's bonds were seen several points better on the session, given a boost by the news that the chemical company had agreed to a more than $1.7 billion settlement of its lawsuit against several banks which had pulled out of its ill-fated buyout transaction last year.

Office Depot Inc.'s bonds shot up to the lower 80s from prior levels in the low 70s, spurred by the news that the Delray Beach, Fla.-based office supplies retailer had received a $350 million investment from private equity firm BC Partners.

Traders otherwise mostly saw a continuation of the largely becalmed market seen on Monday, the first official trading day of the new summer season. One said there was 'not much to report."

Oxford Industries prices atop talk

Continuing what has been a quiet start to the final full week of June, the primary market saw just one new issue clear during the Tuesday session.

Oxford Industries priced a $150 million issue of 11 3/8% six-year senior secured notes (B1/BB-) at 97.353 to yield 12%.

The yield priced on top of yield talk. The issue price came within the context of the approximately 3 points of original issue discount price talk.

Banc of America Securities and SunTrust Robinson Humphrey were joint bookrunners for the deal.

Proceeds will fund a tender for the Atlanta-based apparel design company's outstanding 8 7/8% notes due 2011.

Indeed a good portion of the accounts participating in Oxford Industries' new deal were those who tendered their notes, according to an informed source, who added that the small transaction went very well.

Backloaded week

Although Monday and Tuesday were quiet days in the primary market, the remainder of the week could be anything but quiet, sell-side sources said.

With four deals already on the calendar as business to price before Friday's close, there could be half a dozen or more announcements of deals to price late this week, or early in the foreshortened pre-Independence Day week ahead, they advise.

"There is apt to be a bit of a rush," one syndicate source said late Monday.

"There are still a lot of people who have cash to put to work, although perhaps not quite as much as they had a month ago," the banker added.

"With the weakness in the market, and the holiday weekend ahead, some people may be tempted to the sidelines."

Investor pushback

Although Tuesday's deal from Oxford Industries was not particularly subject to investor pushback, recent market weakness finds the buy-side planting its feet and demanding more yield, the banker said.

"You don't see it in the small deals.

"But in the bigger deals you're definitely seeing some pushback, in terms of price," the source said.

As an example the banker pointed to the Wendy's/Arby's Restaurants, LLC $565 million issue of 10% senior unsecured notes due 2016 (B2/B+) which priced last week at 97.533 to yield 10½%.

In that instance the yield was printed 50 basis points beyond the wide end of the 9¾% to 10% price talk.

Belden for Wednesday

Only one new deal announcement surfaced on Tuesday.

Belden will host an investor call at 10 a.m. ET on Wednesday for its $200 million offering of 10-year senior subordinated notes (Ba2/B+).

The deal is expected to price later in the day on Wednesday.

Wachovia Securities and Citigroup are joint bookrunners for the bank debt refinancing deal from the St. Louis-based signal transmission solutions provider to businesses.

Meanwhile more information surfaced on Viterra's C$300 million offering of senior notes.

The deal is presently roadshowing, and is expected to price this week, via TD Securities.

The exact structure of the bonds remains to be determined.

It is being marketed primarily to Canadian accounts.

Recent new issues a mixed bag

Traders said Oxford Industries' new bonds came to market too late for any kind of secondary activity.

Among recently priced issues, one said, Quicksilver Resources Inc.'s 11¾% notes due 2016 were "still hanging in there."

He said that the Fort Worth, Tex.-based energy exploration and production company's $600 million of bonds - which had priced last Thursday at 97.17 to yield 12½ but then moved smartly higher on the break, topping the par level - "traded up a tiny bit from [Monday] and were fairly active."

He saw them move as high as 101¾ bid and trade in a context of 101½ to 1013/4, up from around 101¼ to 101½ earlier.

"So they've hung in there very well," he suggested.

Another market source quoted the bonds at 1011/2, on mid-afternoon volume of around $8 million traded.

The first trader meantime said that Wendy's International Holdings LLC's new 10% notes due 2016 were "going nowhere," with the Atlanta-based fast-food restaurant operator and franchiser's bonds trading at 95½ bid, 96¼ offered.

That was well down from the 97.533 level at which the $565 million of bonds priced last Thursday to yield 10½%.

A market source meantime saw the company's existing 7% bonds due 2025 move up to 71.5 bid from prior levels at 70.25.

Virgin Media Finance plc's 9½% notes due 2016 firmed slightly to 98½ bid. That was up from 98 1/8 on Monday and well up from the 95.754 level that the New York-based provider of U.K. broadband service priced its $750 million of paper on May 29 at, to yield 10 3/8%, as part of a two-part dollar-and euro-denominated deal worth around $1 billion equivalent.

Market indicators mixed

Back among the established issues, the CDX Series 12 High Yield index - which had lost 3/8 point on Monday -came part of the way back, with a trader seeing it up 1/8 on Tuesday at 81 ¼ bid, 81 ¾ offered.

The KDP High Yield Daily Index, which had lost 31 basis points on Monday, dropped another 17 bps on Tuesday to end at 61.63, while its yield widened by 6 bps to 10.82%.

In the broader market, advancing issues - which fell behind decliners on Monday by a nearly two-to-one margin - remained behind the 8-ball on Tuesday, trailing by a six-to-five margin.

Overall market activity, measured by dollar-volume totals, jumped by 63% versus Monday's depressed levels.

Even so, a trader said it was "not a very exciting day." Despite the nominally busier market according to the overall stats, he said that Tuesday's session was "probably about the same" as Monday's snoozefest.

"There was just not a lot of notable stuff," to be honest, he added.

A trader at another shop called it "a kind of wishy-washy day."

While the televised U.S. Open Golf Tournament - market participants' favored distraction over the last week - finally wrapped up on Monday with the unheralded Lucas Glover improbably slogging through the muddy course past the struggling big names like dethroned champ Tiger Woods and perennial also-ran Phil Mickelson, "we still had a U.S. Open hangover," the first trader said. Meanwhile the televised Wimbledon tennis championship and the Confederations Cup international soccer tourney are also just starting to heat up, promising still more athletic distraction for anybody seeking an excuse to not do anything in the currently murky market.

Huntsman hops on suit settlement news

One of the few really notable movers on the session was Huntsman International LLC, which moved up after the company announced that its corporate parent, Huntsman Corp., had agreed to a $1.73 billion settlement of its lawsuit against Credit Suisse and Deutsche Bank, bringing to an end the legal battle that started last year when the two big banks pulled their promised funding of Hexion Specialty Chemicals Inc.'s $6.5 billion buyout of Huntsman, claiming that market conditions made the deal no longer viable.

A trader said that Huntsman's bonds were definitely firmer, with its 7 7/8% notes due 2014 -- its most widely traded issue Tuesday - having jumped "probably from the high 60s to the mid-70s," seeing that paper going out around 76 bid, 77 offered.

Another trader saw them go as high as 77, after first having traded as low as 681/2. He saw the last trade around the 761/2-76¾ area. Noting the big swing between the day's low and its zenith, he remarked "that's pretty wild."

A market source saw busy large-block trading in those bonds, which had most recently been trading at around 71 bid. They opening Tuesday moving initially lower, dipping below the 69 mark, but bounced back on the settlement news to soar nearly 10 points from that nadir into the upper 70s, although the final round-lot trading level was a little lower than that, around 76.

After much legal wrangling last year over whether Salt Lake City-based Huntsman could force Hexion, of Columbus, Oho, and its controlling shareholder, the private equity firm Apollo Management, LP, to go through with the 2007 buyout deal, inked before the credit markets started to seize up, the two chemical companies finally terminated their merger accord and settled all outstanding issues between them in December. That left Huntsman free to pursue its claims that the two banks improperly interfered in its transaction with Hexion.

Preferring to settle rather than risk losing in the Texas state court where Huntsman's suit demanding $4.6 billion in compensatory damages and potentially up to $8 billion in punitive damages was being heard, the banks agreed to pay Huntsman a total of $1.73 billion -- $620 million in cash, $12 million in reimbursed legal fees and another $1.1 billion in financing.

The settlement is definitely a positive from a bondholders' perspective, according to Timothy J. Doherty, a vice president and credit analyst at KDP Investment Advisors, Inc. in Montpelier, Vt.

"The bonds reacted very favorably - I think their bonds are up 7 to 10 points on the news. So the bondholders like it," even as the company's equity, he said, "tanked."

While he emphasized that Huntsman is not getting the whole settlement in cash, even so, that cash infusion "is certainly going to help with [Huntsman's] liquidity, and the loans" -- $500 million in senior-debt financing and $600 million in unsecured note financing - "are priced very attractively. The loans are definitely priced well below market levels." The senior debt financing will be a seven-year term at Libor plus 225 bps, while the unsecured note financing calls for a seven-year term at 5.5%.

Doherty said that getting that chunk of cash plus another $1.1 billion total in below-market-rate financing will alleviate "a lot of the liquidity risk that I think the market was expecting that Huntsman was going to run into."

Liquidity to survive

With the overall chemical industry in the doldrums - some operators, like Lyondell Chemical Co. and Tronox Inc. are currently in bankruptcy, and, Doherty notes, Canada's Nova Chemicals Corp. "was headed for bankruptcy before they got bailed out by Abu Dhabi" - many companies are "just trying to tread water" until conditions eventually improve. A key factor in surviving, he said, is having the liquidity to do so, and "this certainly pushes [Huntsman] out and allows them to survive until markets turn around. I think that's the key for Huntsman. Nothing, of course is guaranteed, but this certainly helps to alleviate" a lot of the concerns that were hanging over the company from a debtholder perspective.

Huntsman said that including a $1 billion settlement it got from Hexion and Apollo last December to settle that litigation, the cumulative settlement proceeds will total over $2.7 billion. The settlement proceeds from the banks "will be used to repay certain of Huntsman's outstanding indebtedness and further enhance the company's liquidity." Huntsman said it currently plans to use settlement proceeds to repay its $295 million of 11 5/8% senior secured notes due 2010, and to "substantially" reduce the size of its current revolving credit facility due 2010.

While bondholders were pleased, shareholders were peeved, both at the size of the settlement - Doherty opined that "perhaps some equity investors were going long on the stock basically for a Lotto ticket, and were hoping to get a massive payout" - and because the company did not specifically say it was going to give any of the settlement money back to the shareholders in the form of a special dividend, something company officials had mentioned as a possibility on a recent conference call; instead, they will merely continue paying the regular quarterly dividend of a dime per share. He said that Huntsman could still decide to take such a step and institute a special payment, but for now, there's no mention of it in the news release announcing the settlement, so "I think that's why they're disappointed."

Huntsman's New York Stock Exchange-traded shares slid as much as 76 cent, or 12.6%, at midday, after the settlement was announced, before finally ending down 9 cents on the session, or 1.50%, at $5.92. Volume of 36.7 million shares was about nine times the norm.

Office Depot gets BC boost

Elsewhere, Office Depot's 6¼% notes due 2013 were seen by a trader having moved up to 82½ bid around "lunchtime" - the last trades of the session - from prior levels in the low 70s.

The bonds were seen by a market source to have shot as high as 83½ bid from around 72 last week - the most recent previous trades. After hitting that early peak, the office supplies retailer' bonds dropped to around 80 before coming off that day's low to settle in at 821/2.

The sharp rise came on the news that funds advised by BC Partners, a London-based private equity firm, had invested $350 million in Office Depot, taking an approximately 20% stake in the company, which has been lately looking to raise money so it can ride out the current tight conditions in its industry. Sales have slid as corporate customers and individuals alike have cut back their purchases of office supplies and equipment.

BC's funds will purchase $275 million of Office Depot's newly created 10% series A redeemable convertible perpetual preferred stock and $75 million of its newly created 10% series B redeemable conditional convertible perpetual preferred stock. That would equate to an initial ownership interest of about 20%, assuming Office Depot's shareholders okay the issuance of the series B preferreds and assuming the full conversion of each series of preferred into common stock at the conversion price of $5 per share, a 32% percent premium to Office Depot's Monday closing stock price of $3.79 per share. On Tuesday, its NYSE-traded shares were up as much as 6% at one point, before finishing up 10 cents, or 2.64%, at $3.89. Volume of 14.8 million shares was more than 1½ times the norm.

The company - which operates 1,604 stores worldwide and employs 42,000 people - had previously announced plans to close about 9% of its North American stores and cut 2,200 jobs in response to the downturn, which has bitten into its revenues; sales last year totaled $14.5 billion.

Office Depot - which competes with the somewhat smaller Office Max and the considerably larger Staples office supplies-store chains - plans to use the investment proceeds for general corporate purposes. The company's chairman and chief executive officer, Steve Odland, said in a statement that the cash infusion, combined with "the continued success of our liquidity and cash flow initiatives, significantly strengthens our balance sheet," and will give the company increased financial flexibility.

E*Trade activity trails off

A trader saw E*Trade Financials Corp.'s bonds "not really active at all" on Tuesday - a switch from the busy trading levels and explosive upside moves seen over the last five sessions after the company announced that some of its bonds would be taken out.

"It was pretty quiet. The stock was somewhat volatile, which I think has an impact on what bonds are doing - but today was the definitely the quietest day since the announcement" last week that the New York-based online financial services company would exchange new convertible debt for all of its 8% notes due 2011 and its 12½% springing lien notes due 2017, which had caused both of those issues to surge by more than 30 points over several sessions to levels well above par.

He called the levels "about unchanged," with the 8s continuing to trade in a 108-110 range, the 121/2s around 104-106, and the company's other two issues not being exchanged for, its 7 3/8% notes due 2013 and its 7 5/8% notes due 2015 in an upper 70s-80ish context.

Another trader saw the 7 3/8s down a point at 82, on one round-lot trade, while the 121/2s were "not too much different" from Tuesday's levels around 106-107, with "not a lot of trading in the name today."

Market benchmarks seen mixed

A trader said that there was "a bunch of" First Data Corp. 9 7/8% notes due 2015 traded. He saw the Greenwood Village, Colo.-based electronic transaction processor's bonds - considered by many in the market to be a benchmark issue reflecting overall market trends - "a little softer. Somebody hit a 68 bid [Monday], but almost all of the trades today had a 67 handle, including someone hitting a 67 bid late in the day."

He also saw Community Health Systems Inc.'s benchmark 8 7/8% notes due 2015 "trading up the first thing this morning, making me believe that it was going to be a pretty strong day."

He said the Franklin, Tenn.-based hospital operator's bonds "opened at 96½ -97½ and got lifted" at 97½ and actually reached a peak of 973/4, before finally settling in, "a little bit better," around the 97 level.

A market source saw the ever-popular Freeport-McMoRan Copper & Gold Inc. 8 7/8% notes due 2017 - as usual, the most actively traded junk issue, with some $45 million having changed hands heading into the last hour of trading - having gained 1½ points on the day to stand a shade over 102 bid.

However, there was no fresh news out on the Phoenix-based metals mining company.

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