Mountain Gods, Fisher Scientific price deals; ladder-maker Werner tumbles, Loral also lower

By Paul Deckelman and Paul A. Harris

New York, Oct. 21- Inn of the Mountain Gods Resort & Casino priced an upsized offering of seven-year notes Tuesday, and the junk bond gods were smiling on the new issue, which firmed smartly when it was freed for secondary dealings. Fisher Scientific International Inc. was also heard to have priced an add-on issue to its existing 8% notes.

In secondary dealings, while the new Mountain Gods bonds were ascending, Werner Holding Co. Inc.'s notes were in a headlong plunge for a second straight session after it lost a major supply contract with its biggest customer and Loral Space & Electronics Ltd.'s bonds - recently flying high - were heard to have come back down to earth.

In Tuesday's primary market action Fisher Scientific, which had come to the choppy junk bond market in the dog days of August, enjoyed a reversal of fortune as it reopened that deal and fetched a far superior rate.

And Inn of the Mountain Gods completed its upsized $200 million deal, but not before the price talk ascended by 25 basis points.

Meanwhile Nashville restaurant company O'Charley's Inc. began presenting its bill of fare to junk investors. Wachovia Securities is the maitre d'.

Fisher Scientific priced a $150 million add-on to its 8% senior subordinated notes due Sept. 1, 2013 (B2/B+) at 107.5 for a yield to worst of 6¾%.

The Hampton, N.H.-based manufacturer of scientific and laboratory products brought the original deal on the fateful day of Aug. 6.

During that Wednesday session, in what was then reported to be a notably "choppy" new issue market, two of four deals that priced ended up downsized. In addition, two came wide of price talk, with a third, Fisher Scientific, coming at the wide end of revised talk. Fisher's downsized $150 million of 8% notes due 2013 came on Aug. 6 at par after talk was revised to 7¾%-8% from 7¼%-7½%.

"Their timing back in August could not have been much worse," suggested one sell-side source who mulled the terms of Tuesday's add-on.

"But it looks as though they made up for it today," added the sell-side official who noted that Tuesday's add-on was equal in size to downsized transaction of Aug. 8, and represents an interest savings of well over 100 basis points to the company.

Carolyn Miller, Fisher Scientific's director of investor relations, perhaps understandably did not care to dwell on the August transaction when she spoke to Prospect News after the add-on priced.

"Right now we think that it's a good market," Miller said. "We believe that we came away from this transaction with a great rate."

Deutsche Bank Securities ran the books for Fisher Scientific's deal.

Elsewhere in the primary, Inn of the Mountain Gods Resort & Casino priced an upsized $200 million of seven-year senior notes (Caa1/B) at par to yield 12%. The deal was increased from $185 million.

Price talk on the Citigroup-led deal had been revised to the 12% area from 11½%-11¾%.

The deal from the South Central N.M.-based resort and casino, owned by the Mescalero Apache tribe, was said by two market sources to have met resistance at its original price talk. One source, however, said that when the issuers agreed to covenant changes the deal really started "heating up."

After the notes were cleared for trading in the secondary market one source reported seeing a 101 bid.

In the wake of the session's pair of completed deals one offering climbed aboard the forward calendar.

The roadshow began Tuesday for O'Charley's Inc.'s planned $125 million of 10-year senior subordinated notes.

Wachovia Securities will run the books for the deal from the Nashville-based restaurant company's deal, which is expected to price mid-week during the Oct. 27 week.

Price talk of 7 7/8%-8 1/8% emerged Tuesday on Paramount Resources Ltd.'s $150 million of seven-year notes (B2/B), which are expected to price mid-afternoon on Wednesday.

UBS Investment Bank is the bookrunner for the Calgary, Alta. natural gas company's offering.

Meanwhile Prospect News heard unofficial price guidance 8%-8¼% on Genesis Healthcare Corp.'s $200 million of 10-year senior subordinated notes (B3/B-). However a source close to the deal, which is being led by joint bookrunners Lehman Brothers, Credit Suisse First Boston and UBS Investment Bank, declined to confirm that guidance and said that official price talk might emerge on Wednesday.

When the new Mountain Gods 12% senior notes due 2010 were freed for secondary dealings, they were heard to have immediately moved up to 101 on the break from their par issue price. But that was not the summit; by the end of the day, they were heard to be going home at 104 bid, 105 offered, after having traded as high as 104.5 earlier.

On the other hand, the new add-on Fisher Scientific 8% senior subordinated notes due 2013 went nowhere after pricing at 107.5; a trader saw them going home "offered where they came," at 107 bid, 107.5 offered.

He also saw the new Hovnanian Enterprises Inc. 6½% senior notes due 2014 continuing to hover around the par level at which the Red Bank, N.J.-based homebuilder's bonds had priced as a drive-by offering on Monday.

Actually, "all of the homebuilders were firm today," said another trader in quoting the new Hovnanians at 100.25 bid, 100.5 offered. He further saw Meritage Corp.'s 9¾% notes due 2011 hanging in above 110.5 bid, after the Scottsdale, Ariz.-based builder of Sunbelt homes reported third-quarter earnings of $25.8 million ($1.86 per share) versus $22.4 million ($1.58 per share) a year ago. It also raised its 2003 earnings forecast to a range of $6.45 to $6.65 per share, from its previous guidance of $6.20 to $6.40 per share. Wall Street is expecting earnings for the year to come in around $6.43 a share.

"All of the homebuilders have been good," the trader reiterated. It's not hard to see why, with business booming, aided by mortgage rates which continue to hold not far from their historic lows. Last week, the Commerce Department reported stronger-than-expected September new housing starts and building permits, the latter a leading indicator pointing to continued strong results for the sector.

Another homebuilder, D.R. Horton Inc.'s 6 7/8% notes due 2013 were seen up a point-and-a-half on Tuesday to close at 103.5, while its 8% notes due 2009 were half a point better at 111.75. The gains followed a point-and-a-half rise Monday in its 7 7/8% notes due 2011, which ended at 110.5.

However, homebuilder Toll Corp.'s 8¼% notes due 2011 were quoted a bit easier, down a point on the day, to a still-healthy 110 bid level.

Executives - and investors - of Greenville, Pa.-based steel ladder manufacturer Werner Holding Co. can meanwhile only hope and pray that companies like Toll, Horton, Hovnanian and Meritage and their peers will see the need to buy an awful lot of new ladders the only way the company can stave off looming disaster.

Werner's 10% senior subordinated notes due 2007 tumbled around 10 points Monday to the 92.5 level, in the wake of Friday's announcement by Werner that its biggest customer, Home Depot, will stop purchasing stepladders from Werner and is also reviewing its purchases of extension ladders. On Tuesday, the bonds were heard to have taken a headfirst dive down to the lower 60s, with one trader even having seen them quoted at an extremely wide, and extremely distressed, 55 bid, 75 offered. Later in the session, quotes were heard in the 62-64 bid range, although one trader opined that such a level might be "too low."

The stepladder sales to Home Depot, the nation's largest home improvement products retailer, account for 16% of Werner's sales and the extension-ladder sales to Home Depot another 15%, for a whopping 31% total. Standard & Poor's, which on Friday had dropped Werner's corporate credit rating to B from B+, warned that " it will be very difficult for Werner to replace these lost sales, as this is a mature market," and said the ratings could be lowered again should Home Depot decide to close up its extension-ladder business with Werner as well.

Another name seen taking its lumps on Tuesday was Loral, which was "just getting pummeled," a trader said, quoting the New York-based communications satellite company's 9½% notes due 2006 as having fallen at least eight points on the session to 40 bid, 41 offered, while its Loral Orion 10% notes due 2006 were down eight points at 79 bid, 80 offered.

Another trader reported seeing "weird prices on the stuff," which he described as "all over the place. Blink your eyes and they'd be down five points."

He quoted the 91/2s at 40 bid, 42 offered and the 10s at 80 bid, 82 offered - actually a little higher for the 10s from the lows in the upper 70s that he had seen them at late Monday, although the 91/2s were below Monday's close. At any rate, he said, the bonds were "down dramatically" from where they had been earlier Monday, before the bankrupt Loral concluded its auction of five satellites, a sale won by Intelsat Ltd. with a bid of $1.1 billion. Loral is expected to urge the bankruptcy court overseeing its re-organization to accept the Intelsat bid, a decision which could come as early as Wednesday.

The auction followed Loral's earlier decision to accept a $1 billion offer from Intelsat for the satellites - a decision which drew the ire of the company's unsecured creditors, including bondholders, who last week officially filed objections with the bankruptcy court, feeling that other players might make substantially better offers.

Indeed, EchoStar Communications Corp. - which had made an earlier, unsuccessful bid to buy all of Loral out of bankruptcy for $1.85 billion - came in with a $1.03 billion bid for the five satellites, which forced Intelsat to up its own bid to $1.1 billion.

The creditors had objected to what they termed the company's "completely inappropriate" deal with Intelsat, and had held out the hope that EchoStar might make another offer or that some other potential buyer might step forward to make a bid for the assets that would be "vastly" higher. But the bankruptcy court chose to instead go ahead with the two-company auction Monday, in which EchoStar failed to sweeten its bid.

Meanwhile, three state attorneys general - in New York, Pennsylvania and Missouri - were reported Tuesday to be expressing concern over another EchoStar initiative involving Loral - its offer to buy several satellites which Loral is currently building for EchoStar's main rival satellite TV programmer, DirecTV; the attorneys general fear that such moves could undercut competition in the satellite TV industry.

Back on the ground, a trader said Calpine Corp. bonds were about a point or two lower on the session after Moody's Investors Service downgraded the San Jose, Calif.-based independent power producer's debt ratings late Monday.

He saw its 8½% notes due 2011 at 73 bid, 74, down from 75 bid, 76 late Monday. Its 8 5/8% notes due 2010 were down a deuce at 73.50.

The ratings agency had cut Calpine's senior implied rating to B2 from Ba3 and its senior unsecured notes to Caa1 from B1, citing the company's "weak cash flow and near-term outlook.'

A trader said that developments in the investment-grade world had some fallout Tuesday in junkbondland, with the high yield automotive sector coming under some pressure after Standard & Poor's cut DaimlerChrysler bonds a notch to BBB, and said it might also cut Ford Motor Co.'s bonds, which are already at BBB. Such a cut would leave the bonds of the largest U.S. corporate issuer just a notch above junk.

Bonds of the two giant carmakers, as well as those of industry leader General Motors Corp., widened out by between 20 and 40 basis points Tuesday (like most investment grade issues, the automakers' bonds are quoted on a spread-over-Treasuries basis rather than on a dollar-price basis as junk bonds are).

The Chrysler downgrade "weighed on the sector," a trader said of the junk automotive names.

He said that Tenneco Automotive's third-quarter earnings "came in as expected," and he said the Lake Forest Ill.-based auto parts maker's bonds were largely unchanged, its subordinated notes at 103.5 bid, 104.5 offered "after a big run-up over the last couple of weeks." He said he had seen no movement in the company's senior bonds, which he pegged as "close to 110 on the bid side. They tried to take them up in the morning" after the results, "but left them unchanged on the day."

The numbers came in as expected, but the weakness in the overall market has "bids backing off on the [auto component] manufacturers," he opined. He saw high yield auto retailers like AutoNation and Asbury Automotive still unchanged.

Parts manufacturer Tower Automotive's 12% notes, however, had eased to 94 bid, 96 offered at the close from levels "a little over par" at the beginning of the week, he said, "down significantly."

He saw Collins & Aikman Products Co. bonds "probably down a point, though I'm not seeing many bids on them," with the Troy, Mich.-based auto components maker's 11½% notes due 2006 offered around 75-77;" I don't think the bids were there in any size," he said." Collins & Aikman's 10¾% notes due 2011 were offered late in the day at 86.75. "There were 86 bids in the morning," he said, "but I'm not sure they were there in the afternoon."

On the emerging markets corporate credit front there was little activity to speak of on Tuesday.

"There has been a lot of issuance in our market over the past week to 10 days," a sell-side official told Prospect News. "I think the market is just digesting what has already come. But the market is still in reasonably good shape.

"The Bradesco deal priced yesterday," the official added, referring to the bank's $500 million of 8.70% notes yielding 8 7/8% via Merrill Lynch.

"It's a Brazilian bank that did a deal with political risk insurance. It actually had a Baa1 rating from Moody's. So it went to a mix of institutional and retail accounts - the retail accounts being more global.

It was sort of a funny structured deal," the source added. "It would have been non-investment grade from Standard & Poor's. So I think they just didn't get that rating. But apparently because of that they were still able to get it into the Lehman Aggregate, which struck me as strange."

This official went on to comment that "Brazil has been generally pretty tight. They did a $1.5 billion deal last week, so their bonds had been a little heavy late in the week. But they've generally come back.

"That new issue that they did is trading inside of where it had come now. Overall their bonds are very tight compared to where they have been for most of the year.

"Our market, in general, is trading at very tight levels," the source added.

Another familiar Brazilian name, Petrobras, has its name on a deal now wending its way along the road. However, the official said, the issuer in this instance, Petrobras Energia, SA, is actually an Argentinean company.

"They (Petrobras) bought Argentina's Perez Companc, an energy producer, last year. And they are in the market right now with a small deal," the source said, referring to Petrobras Energia's minimum $100 million bond offering due 2013 Caa1/B-/B-).

"It's actually called Petrobras Energia, which is the new name for the old Perez Companc," the official added. "It's stand-alone risk of the Argentine company. But it cross-defaults to Petrobras in Brazil. So people feel that you don't have a formal guarantee from Petrobras, which is a good credit, and would make people feel more comfortable versus the country risk of Argentina. But the cross-default to the Petrobras debt gives people a lot more comfort."

Also from Brazil, Braschemical is heard to be in the market with a $50 million five-year offering via UBS Investment Bank, which is expected to price during the present week.

"It will be oriented to the local investor base rather than the international investor base," the sell-side official commented.

The sell-sider told Prospect News that the real market-moving news continues to be Russia's promotion to investment grade, which ocurred on Aug. 8.

"The Russian upgrade has a wide impact," said the official "I think a number of people went and bought Brazil because Russia was upgraded.

"That's something that spills over to the rest of the market very definitely because Russia is such a big portion - over 20% - of our index. When something like that happens it sets off relative value waves across the market."

David Rolley, emerging markets strategist of the Loomis Sayles Global Bond Fund, concurred that the Russian upgrade exerted a positive force in the emerging markets.

"It encouraged people," Rolley said Tuesday. "There was an improvement in outlook in Turkey today as well. And prior to Russia there were a number of upgrades in Asia.

"So generally the ratio of upgrades to downgrades in emerging markets has been positive. I think that has encouraged some performance and some spread-tightening."

As to whether the emerging markets are presently working through an extra-heavy load of recent new issuance, Rolley said: "To the degree that there has been any pushback, it's been technical. We've had roughly $7 billion in recent new issuance. But we've also had probably $1 billion in recent new mandates.

"It's kind of a mixed picture in technicals right now," he added. "Briefly when supply gets ahead of demand you will see spreads widen a bit. But as far as I can see people are continuing to allocate money to new dedicated emerging market mandates.

"So I do not think that the new money flow is by any means over."

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