WorldCom jumps on possible new chief; Allied Waste, Amerisource Bergen price deals

By Paul Deckelman and Paul A. Harris

New York, Nov. 12 - The bonds of WorldCom Inc. firmed smartly on Tuesday on speculation that the newly resigned president of Hewlett-Packard Co. might be headed for Clinton, Miss., to take command of the troubled telecom giant, now in the throes of a Chapter 11 reorganization.

In the primary market, two companies made quick passes by investment bank drive-up windows - and both Allied Waste North America, Inc. and AmerisourceBergen Corp. increased their rapidly marketed transactions to $300 million from the originally announced sizes.

Meanwhile Bway Corp./Bway Finance Corp. was heard to be on the road with a $190 million deal. And Constar International, Inc. downsized its bond offering and decreased the share size and price range of its concurrent initial public offering.

Scottsdale, Ariz.-waste management firm Allied Waste North America increased its junk offering to $300 million from $250 million, sold in a drive-by deal via Credit Suisse First Boston and Deutsche Bank Securities Inc. The new 10-year senior notes (Ba3/BB-/BB-) priced at par to yield 9¼%, within the 9%-9¼% price talk.

"We are pleased to put in place 10-year financing with attractive terms and reduce our 2003 required debt maturities by about $90 million," said Thomas W. Ryan, Executive Vice President and CFO of Allied Waste, in a statement release shortly after terms emerged. "We are gratified by the support we have received in the marketplace."

Valley Forge, Pa. medical and pharmaceutical products and services distributor AmeriSourceBergen persuaded investors to take a $300 million dose of notes that came at the tight end of the prescribed 7¼%-7½% price talk. The offering was increased from $275 million.

AmerisourceBergen's 10-year senior notes (Ba3/BB-/BB+) - with Credit Suisse First Boston again occupying the right side of the syndicate list that included joint bookrunners Banc of America Securities and JP Morgan - priced at par, making it the second deal in seven days to upsize and price at par, at the tight end of price talk. Ali Balali, senior high yield strategist at Banc of America Securities, told Prospect News last Friday that prior to Owens-Brockway Glass Container Inc.'s upsized offering of $450 million 10-year senior secured notes (B2/BB), which priced on Nov. 5 at par to yield 8¾%, the most recent U.S. junk bond transaction to have done so was JLG Industries, which priced on June 12, 2002.

One sell-side source pointed to the two upsized drive-by deals that priced Tuesday and made reference to a "rising tide" in the high yield market. This source said that offerings from Cummins Inc. ($200 million of 10-year notes (Ba2/BB+/BB-) via Salomon Smith Barney and JP Morgan) and National Waterworks Inc. ($200 million of 10-year notes (B3/B) via Goldman Sachs and JP Morgan), both presently on the road, are "getting good receptions."

Meanwhile Constar is reported by market sources to be getting a long reception. The Philadelphia-based container manufacturer downsized its notes offering, which was originally set to price late in the week of Nov. 4, to $175 million from $200 million, and decreased the share size and price range of its concurrent IPO, according to a syndicate source who added that timing on the notes portion remains to be determined.

Salomon Smith Barney and Deutsche Bank Securities are joint bookrunners on Constar's 10-year senior subordinated notes, proceeds from which will go to help fund the spin-off of Constar from Crown Cork & Seal and to repay debt to Crown Cork & Seal.

Finally on Tuesday sources reported that the roadshow is underway on an offering of $190 million of senior subordinated notes due 2010 (B3/B-) to be sold by Bway Corp. and Bway Finance Corp., via Deutsche Bank Securities, sole books. The Atlanta-based steel container manufacturer expects to conclude its marketing of the deal on Nov. 21.

A trader said that when the new AmeriSourceBergen bonds were cleared for secondary dealings, they traded up to 101 bid/102 offered, from their issue price at par. There were no levels immediately available on the new Allied Waste bonds.

Back among already established issues, WorldCom bonds, and those of its MCI long distance subsidiary, were "up significantly," a trader said, with WorldCom debt , such as its 7½% notes due 2011, having moved up to 23.25 bid/24.25 offered from prior levels at 18.5 bid/19.5 offered. MCI's bonds, like its 7½% notes due 2004, firmed to 44.5 bid/45.5 offered, from 41 bid/42 offered.

All of the WorldCom bonds trade at the same levels, regardless of coupon or maturity, as do all of the MCI bonds, since the company is in bankruptcy.

WorldCom was "where the bulk of the action was today," the trader said, citing news reports that Michael D. Capellas - the former chairman and chief executive officer of Compaq Computer Corp and, most recently, the president of Hewlett-Packard (which absorbed Compaq via a merger) - heads the list of possible candidates for the chief executive's job at WorldCom.

"They were up on the idea that the Hewlett-Packard guy will come in - and then sell the company," now in Chapter 11.

HP, the Palo Alto, Calif.-based computer and printer company, said in a statement Monday that Capellas would leave the company effective Dec. 1 to pursue "other career opportunities."

The Wall Street Journal and other publications reported that Capellas was in line to replace John D. Sidgmore, the departing chief at WorldCom.

Sidgmore, who took the reins of the troubled long-distance and telecom services provider in the spring after its board ousted long-time chief Bernard J. Ebbers amid allegations of accounting irregularities, which were later termed fraudulent by federal prosecutors, said in September that he would step down from WorldCom's leadership. News reports said that Sidgmore has been lobbying for the Hewlett-Packard executive, although the WorldCom board is said to be considering several candidates and is still not ready to make an announcement on Sidgmore's successor.

Given WorldCom's problems - it was driven into bankruptcy amid allegations of systematic accounting fraud, which could now total as much as $9 billion, making it the biggest accounting scandal in U.S. corporate history, taking the reins of the company could be compared to becoming the captain of the Titanic - "with the ship already half under water," a distressed-debt trader quipped.

He marveled that the bonds continue to firm despite all of the problems and the mounting size of the earnings restatements - "first it was $7 billion, then went to $9 billion, and they've still moved up since then. It's unbelievable."

Besides speculation about a new chief, WorldCom has also firmed recently after the company reported July and August financial data to the bankruptcy court overseeing its reorganization, and some market players saw cause for optimism about the cash-flow potential that a debt-free WorldCom might have once it emerges from bankruptcy.

That cash flow buzz - with the two months' combined actual cash flow total extrapolated over a full year to as much as $5 billion - helped the beleaguered bonds rise to the upper teens from prior levels in the 10-12 range.

Beyond WorldCom, not much else was doing, as the high yield market (and the larger U.S. debt market as a whole ) got back into the swing of things after a three-day Veterans Day holiday break, which had seen an abbreviated 2 p.m. ET close on Friday and a full market closure on Monday, even though equities were traded.

A trader saw some strength in the debt of another bankrupt communications company, the Coudersport, Pa.-based cable operator Adelphia Communications Corp.; its 10¼% notes due 2011 were quoted three points better, at 35 bid/36 offered. However, fellow cabler Charter Communications Holdings LLC's 8 5/8% notes due 2009 were a point down at 42 bid/43 offered.

AES Corp. debt was weaker on the news that the Arlington, Va.-based independent power generator had again extended its ongoing offer to exchange $500 million of bonds for a combination of cash and new debt, and had been forced to sweeten the terms of its offer somewhat due to the tepid response of noteholders to the offer. One series of notes involved in the offer is scheduled to mature on Dec. 15 while the other is putable next year, and AES is trying to extend the maturity of that debt; it has indicated that would probably default on $384 million in debt payments due next month if it can't push back maturities on over $2 billion in bank and public debt through 2003.

Also on the merchant energy front, Williams Cos. 7 1/8% notes due 2011 were quoted four points better, at 66 bid/67 offered, after the Tulsa, Okla.- based company said that it had reached agreement with the state of California settling price-gouging allegations that grew out of the Golden State's power crunch in late 2000 and early 2001. Williams agreed to a multi-part settlement that includes to payment of a nearly $150 million fine and discounting long-term power contracts with California.

While the settlement disposes of pesky lawsuits filed at the state level, Williams is not entirely out of the woods yet - the Justice Department subpoenaed the company - as well as other energy players such as Dynegy Inc., Mirant Corp., Reliant Resources and Duke Energy - for information on whether any of them had conspired to drive up power prices during California's energy crisis.

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