Williams Scotsman prices; calendar keeps building; Primus slides on Canada developments

By Paul Deckelman and Paul A. Harris

New York, Sept. 20 - Williams Scotsman Inc. successfully brought an upsized offering of 10-year notes to market Tuesday, high-yield primary players said; afterward, the Baltimore-based modular structures manufacturer's new bonds were about a point higher on the break.

Amid various other pieces of new-deal sphere news - including Pogo Producing Co.'s planned "drive-by" offering of 12-year notes, expected to price Wednesday - came the word that the massive $15 billion leveraged buyout of Ford Motor Co.'s car-rental business, Hertz Corp., will be funded in part by $3 billion of new bonds, although that deal is considered 2006 business.

In the secondary market, Primus Telecommunications Group Inc.'s bonds, and its shares, fell sharply. The most common explanation offered was investor angst over the Canadian government 's continued delay in issuing new tax rules for companies seeking to become an income trust, which is seen affecting the possible spin-off of Primus' Canadian operations.

Delphi Corp.'s bonds continued to retreat for yet another session, a drop accelerated by more bankruptcy speculation about the troubled Troy, Mich.-based automotive electronics manufacturer.

Overall on Tuesday, the high-yield market remained mired in the soft patch that it hit late last week, sources said.

Citing the Fed's 25 basis points hike in short-term interest rates as well as softness in the equity market and a continued build-up of the high-yield new issue calendar, sources again marked junk down a quarter to half a point.

Automotive names, which had shown a little strength prior to the Fed's announcement that the short term rate would go up to 3.75%, were waiting by the side of the road for the tow truck by session's end, one source commented.

Williams Scotsman upsized, trades higher

Only one issue priced Tuesday in the primary market.

Williams Scotsman Inc. completed an upsized $350 million issue of 10-year senior notes (B3/B) at par to yield 8½%.

That yield was on the wide end of the 8¼%-8½% price talk. The deal was increased from $325 million.

Deutsche Bank Securities, Banc of America Securities, Citigroup and Lehman Brothers ran the books for the debt refinancing from the Baltimore-based modular space solutions company.

A buy-side source noted that the new Williams Scotsman 8½% bonds due 2015 were trading at a premium on Tuesday afternoon.

According to Prospect News data, of the eight dollar-denominated high-yield tranches that have priced in the past three sessions, seven have either priced at the wide end of talk, as with Williams Scotsman, or have priced wide of price talk altogether.

The buy-side source attributed this phenomenon to the build up in the forward calendar, as well as to a buy-side that appears to be exercising more caution than was the case earlier in the summer.

Meanwhile another source told Prospect News on Tuesday that while the impression is that junk investors presently have a lot of cash, they are sitting on that cash, waiting to see how far things will widen.

A busy approach ramp

Meanwhile the busy forward calendar to which sources have been alluding for the past 10 days - and indeed were forecasting during the run-up to Labor Day - saw more traffic headed toward the high-yield roadway on Tuesday.

Houston oil and gas exploration and production firm Pogo Producing Co. is talking its $350 million offering of senior subordinated notes due 2017 at Treasuries plus 250 basis points, a market source told Prospect News.

The quick-to-market acquisition deal is expected to price on Wednesday via Goldman Sachs & Co.

Proceeds will be used to fund a portion of the purchase price of Northrock Resources Ltd.

On Tuesday Standard & Poor's assigned its B+ rating to the notes.

S&P also lowered the corporate credit rating on Pogo to BB from BB+, the subordinated debt rating to B+ from BB and the preferred stock rating to B from B+ and removed the ratings from CreditWatch with negative implications.

A buy-side source commented that given the S&P downgrade the Treasuries plus 250 price talk is "pretty ambitions.

"It's still a great company," the source added, "and it's in a sector that everybody wants."

Also elbowing onto the forward calendar was Garfield Heights, Ohio, low-temperature products and systems company Chart Industries, which will start a roadshow Thursday for its $170 million offering of 10-year senior subordinated notes.

Morgan Stanley and Citigroup are joint bookrunners for the acquisition deal.

Williams Scotsman up in trading

When the new Williams Scotsman 8½% senior notes due 2015 were freed for secondary dealings, the new bonds were heard to have firmed to bid levels in the 101-101.25 area, up from their par issue price earlier in the session.

A trader observed that there was "good two-way flow on the break."

InSight new, existing bonds drop

A trader said that the new InSight Health Services Corp. floating-rate notes due 2011, which priced Friday at 99.5, has already fallen to 95 bid, 98 offered. He also saw the Lake Forest, Calif.-based diagnostic services provider's existing bonds getting clobbered. Its 9 7/8% notes, which closed Monday at 85 bid, 86 offered, were being quoted Tuesday morning at 78 bid, 80 offered, the trader said.

There was no fresh news seen out on the company. Earlier in the month, InSight said in an 8-K filing with the Securities and Exchange Commission that it expects revenues and EBITDA for the first quarter of fiscal 2006 to come in below the year-earlier levels, and sees revenues for the quarter - though not EBITDA - to be lower than the 2005 fiscal fourth quarter.

Tenet lower

The trader also saw heaviness in other healthcare sector bonds. Tenet Healthcare Corp.'s bonds were down "about a point or so" on the day after the Dallas-based hospital operator said that Hurricane Katrina would likely cause the company major losses. Its 6 3/8% notes due 2011 were down a point at 93.5.

Tenet said that the giant storm and the flooding that accompanied it damaged six of its hospitals in Louisiana and Mississippi and caused the evacuation of five of them.

Tenet said that the flooding may have caused damages greater than the $250 million of flood losses for which it is insured.

It said that even though it has property and business-interruption insurance, it will probably have to write down the value of affected assets, although it offered no dollar estimate.

"They're not sure what the impact is going to be," the trader said. He added that the company statement made no mention of the 44 people who died in one of the company's New Orleans hospitals during the storm. The company previously addressed the issue, characterizing the deaths as occurring among very sick, weak elderly patients who could not survive the emergency conditions at the facility caused by the storm, including loss of electricity and air conditioning and lack of running water. "Most of those people were already dead," he said. "That news has been out, and had no effect."

Iasis off on sub poena

Also in that sector, he noted that Iasis Healthcare's 8¾% notes due 2014 were down some 2½ points on the session, to 104 bid, 105 offered from 106.5 bid, 107.5 offered earlier, after the federal Department of Health & Human Services subpoenaed the Franklin, Tenn.-based hospital operator's books and records going back to 1999. The feds are probing contractual arrangements between certain physicians and the company's hospitals, including leases, medical directorships and recruitment agreements.

Primus plunges

Elsewhere, Primus Telecom's 8% notes due 2014 were seen by a trader to have fallen to 60 bid from prior levels at 67, while its 12¾% notes due 2009 retreated to 53 bid from 57.5.

Another trader also quoted the 8s at 60-61, although that was down six points at that particular shop.

At another desk, the 8s were seen down seven points at 60, while the 123/4s were more than five points lower at 52.

Primus' Nasdaq-traded shares plunged 12 cents (10.26%) to $1.05, on volume of 6.7 million, about three times the norm.

One of the traders mentioned that Primus had announced some restructuring moves in its Australian operations that could lead to as many as 100 jobs being cut, about 10% of the company's Down Under workforce, but doubted that would be significant enough to cause those kinds of bond moves.

However, there was other news out - including the Canadian government's latest postponement of its decision on whether to change the tax laws related to conversions of regular companies to income-trust formats. Over the past year or so, the government has lost over C$300 million from such conversions. It said on Sept. 8 that it was studying the issue with an eye toward possible tax changes to make up for the revenue shortfall, but so far has announced nothing new. Primus bonds and shares shot up about a month ago after the company was reported to be considering a spin-off of its Canadian operations, which news stories said would go into an income trust valued in the $330 million to $410 million range. Investors at the time believed that this could pave the way for some or all of the business to be sold, and the proceeds used to buy back debt.

However, with Ottawa continuing to drag its feet, the trader said, "the ruling makes it difficult for them to do what they were going to do."

Another bit of news seen possibly impacting on Primus' fortunes negatively came out of Denver Tuesday, as Qwest Communications International Inc. and Microsoft Corp. announced plans to team up to offer Voice-over-Internet-Protocol (VoIP) phone service to small- and medium-sized customers within Colorado-based Qwest's 14-state territory in the Midwest and Rocky Mountain states. Primus already offers VoIP service to businesses, and the entry of the fourth-largest U.S. local phone provider and the giant high-tech company into the market could be seen as a competitive negative for smaller players like Primus.

The news did not do much for Qwest's own bonds in the meantime; its 7¼% notes due 2011 actually fell to 96.5 bid from 97.25, and "all of its bonds were off a quarter, a half, three-quarters," a market source said.

Delphi down yet again

It was another tough day for holders of Delphi Corp.'s bonds; the market source quoted its benchmark 6.55% notes due 2006 as falling below the psychologically significant 70 mark for the first time, declining to 69.75 bid from 73 previously. He saw Delphi's 6½% notes due 2009 off almost four points to 64.5, while its 6½% 2013 bonds were down a full five points at 63. Its 7 1/8% notes due 2029 ended at 60 bid down 4½ points.

Another trader said that as has been the case over the past few sessions, the rumors about the company's possible bankruptcy between now and Oct. 17 "were hot and heavy," which dragged the '06 bonds as low as 68, the '09 bonds as low as 63 and the '29s are low as 58, before they recovered a little off lows, though they still ended down three to five points. "They just got pummeled," he declared.

Delphi, which was spun off from General Motors Corp. several years ago but saddled with high labor costs under a United Auto Workers union contract as part of the spin-off deal, has asked GM and the UAW to give it a break and allow it to cut its labor costs, possibly by handing some of the more costly inherited factories back to its former parent. Delphi has warned that it must have help with the labor costs or it faces bankruptcy, most likely before Oct. 17, when changes in the federal bankruptcy laws making them less favorable to debtor companies are slated to take effect.

Delphi's New York Stock Exchange-traded shares nosedived another 35 cents (10.39%) to $3.02, on volume of 22 million shares, nearly four times the average daily turnover.

Auto sector weak

Delphi continues to cast a pall over the whole automotive sector; GM's 7 1/8% notes due 2013 were seen falling to 86.5 bid from 88.25, although the giant automaker's benchmark 8 3/8% notes due 2033 were unchanged at 79.5, one market-watcher said.

Dana Corp. - whose bonds have been falling ever since last week, when the Southfield, Mich.-based automotive drive-train components supplier issued sharply lowered 2005 earnings guidance and had its debt ratings cut down to junk-bond levels - was again heading lower, with its 7% notes due 2028 and 2029 each down a point, at 79, its 6½% notes due 2008 down 2½ points at 93.5 bid, and its 6½% 2009 notes off nearly a point at 92.25, while its 10 1/8% notes due 2010 almost a point down at 104.5.

Simmons, Sealy sink

The bonds of rival mattress-makers Simmons and Sealy were each down several points, in sector sympathy after competitor Tempur-Pedic lowered its earnings guidance and warned of industry weakness.

A trader saw Simmons' 7 7/8% notes due 2014 fall to 92.5 bid from 94.75 previously, while its zero-coupon notes due 2014 lost two points to close at 54.

Sealy bondholders will likewise suffer some sleepless nights, as the company's 8¼% notes due 2014 dipped nearly three points on the day to 102.25, while its 9 7/8% notes due 2007 were a point down at 101.5.

Calpine dips, mostly recovers

Calpine Corp.'s bonds initially fell two or three points in morning dealings, traders said, with investor fears about the impact that higher natural gas priced will have on the San Jose, Calif.-based power generating company the probable cause - especially because Calpine recently sold its domestic natural gas holdings to raise cash for debt reduction, leaving it now at the mercy of the volatile energy market.

However, by the time trading wrapped up, emotions had cooled down and the bonds "came back toward the end of the day," a trader said, "to end just a little bit off."

He saw the 8½% notes due 2008 come off its morning lows at 68.5 bid, 69 offered to end around 70, while its 8½% notes due 2011 firmed from its morning low at 62 to end at 63.5 bid, 64 offered, down "just a little."

The market "just seemed heavy the whole day," another trader said. " I think people believe there's a little bit of air in this market, and people are just sitting on the sidelines, waiting for it to settle in before they put their money back to work."

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