Enterprise prices upsized hybrid; Williams up on asset sale; Alltel tumbles on LBO, downgrade to junk

By Paul Deckelman and Paul A. Harris

New York, May 21 - Enterprise Products Operating LP priced a quickly shopped and upsized offering of 60-year hybrid notes, which start out as fixed-rate instruments but then become floaters 10 years after issue.

The primary market remained otherwise quiet, pricingwise, although pre-deal market price talk emerged on a number of issues, for Claire's Stores Inc., Neff Corp., Bonten Media Acquisition Co. and UHS Merger Sub Inc. Meanwhile, Compucom Systems Inc. was heard by high yield syndicate sources to be doing a six-year offering of holding-company toggle notes.

In the secondary sphere, bonds of Williams Cos. were seen higher, after the Tulsa, Okla.-based energy company announced a major asset sale.

MGM Mirage's bonds, on the other hand were seen in retreat in late trading, following word that the Las Vegas-based gaming giant's principal shareholder, billionaire tycoon Kirk Kerkorian's Tracinda Co., will evaluate potential strategic options for its 56% stake in the company.

And junk bonders were watching the precipitous fall in Alltel Corp.'s bonds, which began the day as solidly investment-grade rated paper, but which finished up having been busted down to junk status by two of the three major ratings agencies, and put on watch for a likely downgrade to junk by the third after the company announced plans to go private via a leveraged buyout.

Enterprise sells $700 million

Just one junk-rated deal was completed during the Monday primary market session.

Enterprise Products priced an upsized $700 million issue of 60.5-year (non-call-10) junior subordinated notes (confirmed Ba1/expected BB/confirmed BB+) at 99.979 to yield 7.034%, at a 225 basis points spread to Treasuries.

JP Morgan, Citigroup, Lehman Brothers and Wachovia Securities were joint bookrunners for the quick-to-market SEC registered transaction which was upsized from $500 million.

The notes will bear interest at a 7.034% fixed rate from May 24, 2007 to Jan. 15, 2018, then the coupon will float at three-month Libor plus 268 basis points.

The Enterprise deal was pricing even as trading ground to a halt, and that transaction was not finished until well after the usual close of the session, and there was no aftermarket activity.

Front-loaded week

With the pending May 23-24 celebration of the Jewish holiday Shavuot, sources late last week forecasted that much of the primary market business set for the May 21 to May 25 week would take place by Tuesday's close.

Most but not all of the news that surfaced on Monday supported that thesis.

Claire's Stores set price talk for its $935 million three-part notes offer.

The Pembroke Pines, Fla., specialty retailer plans to sell $535 million of eight-year senior notes (Caa1/CCC+) in two tranches: a fixed-rate tranche which is talked at 9¼% to 9½%, and a toggle notes tranche talked 37.5 basis points behind the fixed-rate notes.

Meanwhile Claire's Stores talked a $400 million tranche of 10-year senior subordinated notes (Caa2/CCC+) to price 125 basis points behind the senior fixed-rate notes.

The Bear Stearns, Credit Suisse and Lehman Brothers deal is expected to price Tuesday.

Universal Hospital talk

Also in the market with a deal expected to price on Tuesday is UHS Merger Sub Inc. (Universal Hospital Services Inc.).

The Edina, Minn.-based company set price talk on Monday for its $460 million two-part offering of eight-year second-lien senior secured notes (B2). A $230 million tranche of floating-rate notes is talked at Libor plus 350 basis points and a $230 million tranche of fixed-rate notes is talked at the 8 5/8% area.

Merrill Lynch & Co., Bear Stearns & Co. and Wachovia Securities are joint bookrunners.

Talk on Neff Rental

Elsewhere Neff Corp. set price talk for its downsized $230 million offering of eight-year senior unsecured notes (Caa2/B-) at 10% to 10¼% on Monday.

That deal, led by Banc of America Securities, is also expected to price on Tuesday.

Neff Corp. downsized the bond offer to $230 million from $250 million late last week.

The Miami-based construction equipment rental company shifted $20 million of the acquisition financing to its second-lien term loan, upsizing it to $290 million from $270 million.

Bonten talked at 9 1/8% area

Finally, Bonten Media Acquisition Co. set price talk for its $125 million offering of eight-year senior subordinated PIK toggle notes (Caa1/CCC+) at the 9 1/8% area.

The transaction, which is being led by bookrunner Lehman Brothers, is also expected to price on Tuesday.

Compucom launches $150 million

One deal surfaced on Monday that is expected to price late in the week.

CHR Intermediate Holding Corp., the holding company for Compucom Systems, Inc., will commence two days of marketing for its $150 million offering of six-year senior floating-rate toggle notes on Tuesday in New York.

Marketing will continue on Wednesday in Boston.

Pricing is expected on either Wednesday or Thursday.

Banc of America Securities LLC is the left bookrunner for the dividend-funding deal from the Dallas-based information technology services provider. Citigroup is the joint bookrunner.

Williams a winner on asset-sale deal

Back among the established issues a trader saw Williams Cos. 8 ¾% notes due 2032 up 2 points on the session at 118 bid, 119 offered.

"They were up pretty big today," another trader said, quoting the company's 7½% notes due 2031 as having risen to 108.25 bid, 109.5 offered from 106.75 bid, 107.75 offered previously, while its 7 5/8% notes due 2021 firmed to 112.75 bid, 113.75 offered from 108.5 bid, 109.5 offered.

"They were all up 2 points, 3 points, 4 depending on the issue," he said.

In the credit default swaps market, Williams contracts narrowed 27 bps to 78.8 bps, the lowest level in more than five years.

The bonds firmed and the CDS contracts fell as Williams announced that it has agreed to sell its energy-trading assets to Bear Stearns & Co. for $512 million, which lets the largest U.S. pipeline operator to focus on that core business, while getting rid of as much as $2.4 billion of trading liabilities.

Both Moody's Investors Service and Standard & Poor's said they would consider upgrading their current ratings on Williams, Ba2 for Moody's and BB+ from S&P. The latter agency, in announcing that it is eyeing Williams for what would amount to an upgrade to investment grade, noted that Williams' operating cash flows from the unit it is giving up were "volatile and frequently negative," meaning the deal is a positive.

Fitch Ratings, which also rates Williams at BB+, meantime lifted its outlook on the company to positive from stable previously.

Alltel tumbles on LBO, ratings cuts

The ratings agencies were meantime far less approving of Alltel's latest developments, as the Little Rock, Ark.-based Number Five U.S. wireless company announced that it has agreed to be acquired by TPG Capital and the buyout arm of Goldman Sachs & Co., in a $24.8 billion deal, which includes the assumption by the buyers of $2.7 billion of existing Alltel debt.

S&P and Fitch both cut Alltel's ratings multiple notches down to junk levels in response to that announcement on the assumption that the buyout will result in a significant increase in the company's leverage - published reports say as much as $23 billion on top of the current debt.

S&P dropped the corporate credit to a junky BB from prior levels at a high-grade A- while Fitch also cut Alltel to BB from A-. Both agencies kept Alltel under scrutiny for a possible further downgrade.

Moody's, which rates Alltel's senior unsecured debt at A2, held off on an immediate downgrade - but warned that a multiple-notch ratings cut to junk levels will be the likely outcome of its review process.

The prospect of billions of new debt in the capital structure - most of it likely to be senior to the existing bonds - and downgrades to junk, present and future, caused the company' bonds to retreat markedly in active trading.

A trader said the company's 7% notes due 2012 were trading at a bid spread of 215 basis points over the comparable Treasury issue, and an offered spread of 205 bps, having widened out from pre-news levels of a bid around 150 bps over.

In dollar terms, those 7s fell to about 100.5 bid at the close, a 3 point downturn from Friday's levels.

And its 6.80% notes due 2029 were extremely volatile, seen gyrating in a more than 10 point swing between 85 and 95, before finally going home quoted around 88 bid - about 10 points down from where those bonds were on Friday.

Its 7% notes due 2016 were quoted as having lost more than 4 points on the day to finish at 99, while its 7 7/8% notes due 2032 were 6 point losers at 96.

MGM Mirage falls on sale prospect

Another downsider - though nowhere nearly as dramatically - was MGM Mirage, pushed lower by the late-day announcement that majority owner Kirk Kerkorian is looking at possible "alternatives" for his investment for his more than $9 billion investment in the gaming giant, which could include the sale of his position in it, or a financial restructuring of the part of MGM that his Tracinda holding company does not already own.

The billionaire investor will also open talks with the company aimed at his possible purchase of its Bellagio resort on the Las Vegas Strip.

While MGM Mirage shares surged more than 14% in after-hours trading on the New York Stock Exchange, its bonds were seen going in the opposite direction, with its 6¾% notes due 2012 off about 1¼ points at 101.25, and its 6 5/8% notes due 2015 down more than 3 points to the 97 level.

Chiquita gets Barron's boost

A trader saw Chiquita Brands International's 7½% notes due 2015 at 93 bid, 94 offered, and its 8 7/8% notes due 2015 at 98 bid, 99 offered, each up ¾ point.

He cited a favorable article over the weekend in Barron's on the Cincinnati-based fruit and vegetable company's core banana operations.

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