Six Flags, Cognis deals price; Western Wireless jumps on takeover buzz; funds see $138.7 million inflows

By Paul Deckelman and Paul A. Harris

New York, Jan. 6 - Six Flags Inc. was heard by high-yield syndicate sources Thursday to have brought its $195 million issue of add-on notes to market successfully, while Cognis Holding GmbH & Co. KG likewise successfully priced an upsized issue of euro-denominated floating-rate bonds.

In the secondary market, Western Wireless Corp.'s bonds and shares were both up solidly on news reports - at this point still unconfirmed - that the Bellevue, Wash.-based provider of wireless telecommunications services to rural markets was in talks with another rural telecom operator, Alltel Corp. That speculation excited investors looking for consolidation in the wireless arena, and they also took the bonds of other rural-oriented cellular operators like Rural Cellular Corp. and American Cellular Corp. several points higher.

And after trading had wrapped up for the day, market participants familiar with the weekly high-yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif. told Prospect News that in the week ended Wednesday, $138.7 million more came into the junk funds than left them, beginning the new year on a positive note, and breaking a six-week losing streak that had stretched all the way back to mid-November.

During that six-week stretch, some $712.5 million more flowed out of the funds than came into them, according to a Prospect News analysis of the figures, including the $87.5 million outflow seen in the previous week, ended Dec. 29. That outflow in the final week of 2004 brought the total cumulative outflow for the year to $3.26 billion, according to the Prospect News analysis.

The numbers measure only those funds that report on a weekly basis, and exclude distributions. The ebb and flow of the high yield funds is seen by many to be a reliable barometer of overall junk market liquidity trends, although the mutual funds make up only a relatively small percentage of the total high yield universe.

The market tone continued weaker on Thursday, according to sources, as terms emerged on two junk bond deals in the primary.

Six Flags, Inc. priced a $195 million add-on while German specialty chemical concern Cognis Holding GmbH & Co. priced an upsized €530 million issue of floating-rate PIK notes.

Slight weakness in U.S., Europe

Sources continued to make reference to the release of minutes Tuesday from the Federal Open Market Committee's Dec. 14 meeting as perhaps the main force contributing to the market's listlessness over the ensuing sessions.

One source had the U.S. high yield market off "a quarter of a point to three-eights of a point," while the euro market was lower Thursday morning, "following the U.S. market sentiment over the past two sessions."

"It's been really quiet," said a high yield portfolio manager, who spoke on background. "In some ways it seems like there is a little more on the offer side. But the offers haven't come down. And you don't have any real new issue.

"The market still looks pretty good."

This buy-sider maintained that the FOMC minutes released Tuesday afternoon can't have revealed much, if anything, to investors that wasn't already known.

"Those minutes just gave more certainty to the Fed raising rates," the source.

Deals price in U.S., Europe

The new issue markets on both side of the Atlantic saw business on Thursday.

The biggest deal came from Düsseldorf, Germany-based specialty chemical maker Cognis Holding GmbH & Co. which priced an upsized €530 million issue of 10-year senior floating-rate PIK notes (B-) at 99.00.

The notes will bear interest at a floating rate of six-month Euribor plus 900 basis points. Price talk was Euribor plus 900 to 925 basis points price talk. The deal was increased from €500 million.

Goldman Sachs & Co. and Deutsche Bank Securities ran the books for the dividend-funding deal.

One source told Prospect News late in the session that the Cognis bonds, having been released from trading, were down a little over a point.

Meanwhile in the U.S. market, Oklahoma City-based theme park company Six Flags priced a $195 million add-on to its 9 5/8% senior notes due June 1, 2014 (Caa1/CCC) at 99.50, resulting in a yield of 9.704%.

The deal came toward the wide end of the 99.25-100 price talk.

Lehman Brothers ran the books for the debt refinancing deal.

The company originally sold $325 million of the 9 5/8% notes due 2014 on Dec. 2, 2003 in an issue that was upsized from $300 million and was priced at par. Hence the print on the Thursday add-on notes was just shy of eight basis points higher than that of the original notes.

The total issue size for the Six Flags 9 5/8% notes due June 2014 now stands at $520 million.

Del, Fage to start roadshows

The U.S. and European high-yield forward calendars took aboard one name apiece on Thursday, with both prospective issuers announcing Monday roadshow starts.

Del Laboratories is set to run a Jan. 10 to Jan. 18 roadshow for its $150 million offering of seven-year non-call-three senior subordinated notes via Bear Stearns & Co. and JP Morgan.

The Uniondale, N.Y.-based manufacturer and marketer of over-the-counter pharmaceuticals will use the proceeds to fund the acquisition of Del Laboratories by Kelso & Co. and Church & Dwight, Co., Inc.

And the roadshow starts Monday for Fage Dairy Industry SA's €120 million of 10-year non-call-five senior notes (BB-).

The notes are expected to price on Friday, Jan. 14, via Citigroup, with proceeds to refinance debt and fund the Athens, Greece-based dairy producer's U.S. expansion.

Six Flags up in trading

When the new add-on Six Flags 9 5/8% senior notes due 2014 were freed for secondary dealings, they were seen having moved up to 99.75 bid, 100.25 offered, up from their 99.5 issue price earlier in the session and in line with the level that the existing 9 5/8s had fallen to since news that the theme park operator was doing a new deal hit the market on Wednesday.

A trader remarked that the bonds were "under a little pressure," having dipped to that 99.75 bid, 100.25 offered level from par bid, 101 offered going home Wednesday, and from 101.5 bid, 102 offered earlier Wednesday before the news of the impending new deal.

Another trader saw the Six Flags bonds "definitely weaker," and said that the existing 9 5/8s had gotten as low as 98.5 bid at the session's open, before coming off that low and trading around par for most of the day, and he saw the new bonds and the existing notes doing a little better than that, at 100.25 bid, 101. He characterized the new deal as "not having a ton of people involved," since it was a Rule 144A placement, and "no one gets too excited about add-ons."

The first trader said that the company's 9½% notes due 2009, which are going to be taken out with the proceeds from the add-on issue, meanwhile firmed to 105.25 bid, from their prior levels at 104.75 bid, 105.75 offered. Traders said that the bonds had been hovering around that 105 market for quite some time on the expectations that the company would take them out.

Western Wireless leaps

Back among the existing issues, Western Wireless' 9¼% notes due 2013 were the beneficiary of speculation that the company is negotiating its sale to Alltel. A market source quoted Western's 9¼% notes due 2013 as having moved up to 115.25 bid, a gain of nearly six points on the session.

At another desk, a trader saw the bonds ending the day as high as 116.25, a gain of around eight points on the day.

Equity investors were equally enthused as bondholders, with Western's Nasdaq-traded shares jumping $4.70 (15.16%) to end at $35.70. Volume of 20.1 million shares was 20 times the usual turnover.

A report in The New York Times said that the deal, should it happen, could be valued at as much as $4 billion, or $40 per share.

The deal is seen as a possible harbinger of a wave of consolidation among some of the smaller players in the cellular industry, following on the heels of Sprint Corp.'s pending acquisition of Nextel Communications Inc., as well as the planned acquisition of Sprint PCS affiliate AirGate PCS by another Sprint affiliate, Alamosa Holdings.

Other rural wireless names up

The notion that some of those smaller players - who generally provide wireless service in medium-to-smallish cities and rural markets that the larger players have largely eschewed for more profitable large metro areas - could be acquisition targets sent the bonds of several of them upward on Thursday.

For instance, Rural Cellular's notes were seen "up a bit," a market source said, quoting the company's 6 5/8% notes due 2008 at 97 bid, up 2¼ points on the day. He saw its 6.99% notes due 2010 and 8¼% notes due 2012 both up 1¾ points, at 104.25 and 106.75 bid, respectively. And he quoted the 11 3/8% notes due 2010 a point better at 82 bid.

Another gainer from that same industry was Dobson Communications' wireless subsidiary American Cellular, whose 9½% notes due 2009 and 10% notes due 2011 were both seen up 1¾ points, at 88.5 bid. Another trader saw those 10% notes ending up at the same level, but had them beginning even further down, for a three-point gain on the session. He also saw the bonds of company parent Dobson up a point on the day, with its 10 7/8% notes firming to 79.5 bid, 80.5 offered.

The first source also saw Centennial Communications Corp.'s 10 1/8% notes due 2013 half a point better at 112.5 bid and its 10¾% notes due 2008 unchanged at 104.375.

Toys 'R' Us better

Outside the telecom sphere "same-store sales for December were out for a number of retailers," a trader said. "Some did well, and some did not."

Among those posting lower numbers than a year earlier for those stores open more than a year, the key retailing industry economic metric, was Toys 'R' Us, whose comparables slipped 2.2% from year-ago levels. However, sales at the company's Babies 'R' Us infant toy and clothing store locations were up 1.6% in a generally soft retailing environment - a hopeful sign for the Wayne, N.J., company, which plans to spin off the profitable Babies operation to its shareholders and then sell its underperforming toy business.

A trader said that Toys 'R' Us bonds were up about a point, with its 6 7/8% notes due 2006 firming to 103.25 bid, 104.25 offered. He saw the company's 7 5/8% notes due 2011 and 7 7/8% notes due 2013 both up more than a point at 101.25 bid, 102.25 offered, up from 99.5 bid, 100.5 offered two or three days earlier. And the Toys 7 3/8% notes due 2018 "showed a little strength" in pushing up to a solid 94 bid, 95 offered from 92.75 bid, 93.75 previously.

Saks Inc.'s same-store figures were up 6% in December, completely blowing through analysts' estimates of a 2.4% rise. That helped its 7½% notes due 2010 gain half a point to 106.75 bid, 107.75 offered.

But Dillards Inc.'s comps were down 1% from a year ago, and while its shorter dated paper "held the status quo," the trader said, from 2012 on out, the bonds retreated, its 6 5/8% notes due 2018 falling to 98 bid, par offered from 101.5 bid, 102.5 offered, "getting softer over a couple of days."

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