Jarden, Qwest, Levi bonds better on earnings; Solectron prices 10-years

By Paul Deckelman and Paul A. Harris

New York, Feb. 14 - The normally little-traded bonds of Jarden Corp. were seen moving solidly higher Wednesday in line with a jump in the Rye, N.Y.-based consumer products company's stock following its release of favorable fourth-quarter results.

Other names seen moving higher on results included Levi Strauss & Co. and Qwest Communications International Inc.

On the downside, the bonds of video rental chain operators The Movie Gallery Inc. and Blockbuster Inc. were each seen having lost several points, in apparent reaction to news that entertainment behemoth The Walt Disney Co. and several partners are putting together a movies-on-demand service that could make deep inroads into the rental stores' finances.

Overall, a high-yield syndicate official marked the broad market "a touch better" on Tuesday.

In the primary arena, Solectron Corp. was heard by high yield syndicate sources to have successfully priced a new issue of 10-year bonds, which were well-received when they were freed for secondary dealings. Wind Telecom was meantime seen getting ready to sell a two-part add-on issue of dollar- and euro-denominated bonds.

Favorable earnings seemed to be the catalyst for movement in several high yield names, including Jarden. A trader saw the company's 9¾% notes due 2012 up three points on the session at 102 bid, while another saw those bonds up 2¼ points on the day at 101.25 bid, 102.25 offered. Yet another trader also saw them at 102 bid, 103 offered, but considered that a one-point rise in the bonds, which usually don't trade around very much.

The rise in the bonds came in tandem with a jump in the company's New York Stock Exchange-traded shares, which zoomed $3.22 (13%) to close at $27.99. Volume of 3.2 million shares was about triple the norm.

Those gains followed the release of good fourth-quarter numbers by the company, whose diversified lineup of niche consumer products ranges from Sunbeam and Mr. Coffee small appliances and First Alert home fire extinguishers and smoke detectors to Bee and Hoyle brand playing cards.

The company moved back into the black, posting a fourth-quarter profit versus a year-ago loss, helped by recent acquisitions, which boosted revenues more than fourfold to $975.4 million, up from $236.7 million a year ago.

In the quarter ended Dec. 31, Jarden posted net income of $2.5 million (four cents per share), a solid turnaround from its year-earlier loss of $3.4 million (eight cents per share). Excluding special items, Jarden reported adjusted net income of $33.8 million, or 50 cents per share, about in line with analysts' expectations. On a full-year basis, net income rose 43.2% to $60.7 million from $42.4 million in 2004

Levi rises on results

Also riding the crest of better earnings was Levi Strauss, after the venerable San Francisco-based blue jeans maker posted a fourth-quarterly net profit of $44 million versus a year-earlier loss of $19 million. Its operating profit jumped 29%, to $121 million, or 11% of net sales, from $94 million, or 8%.

A market source saw the company's 9¾% notes due 2015 up 1¼ points at 106 bid, although he said "that was the only one that really moved; the others are trading too close to their maturity or their call [price]," including the 12¼ % notes due 2012. He saw that bond up only ¼ point at 114.

Another trader saw smaller gains for the 93/4s, pegging them up only half a point at 106 bid, 106.5 offered, while agreeing that the 121/4s were up just ¼ point to 114.

"There was a lot of trading in the bonds," yet another trader said, "but it was all pretty flat, nothing much exciting." He saw the 121/4s at 113.5 bid, 114.5 offered and the 93/4s at 105.5 bid, 106.5 offered, both pretty much unchanged.

Levi, while swinging to a profit from a loss, reported net sales for the quarter pretty much flat at $1.16 billion, and said it was approaching the new year with some caution, feeling that conditions will be challenging in the first half of the year due to consolidation of the U.S. retailing industry and anticipated slow conditions in Europe.

Qwest gains after beating estimates

Qwest Communications bonds were also up, as the Denver-based regional Bell operating company telecommunications provider posted a wider fourth-quarter net loss - but broke even if special items like a big debt-extinguishment charge it took were excluded, thus beating Wall Street's expectations.

A trader saw Qwest's 7½% notes due 2014 up ¾ point at 102.25, while its 7 7/8% notes due 2011 were half a point better at 106.25.

"All of its issues were up ¼ point to ¾ point," he said.

At another desk, Qwest's 6 7/8% notes due 2028 were ¼ point up at 91.375 bid, 91.875 offered.

Qwest lost $528 million (28 cents per share), a wider loss than the $139 million (four cents per share) of red ink seen in the year-earlier quarter. But excluding special items such as a $430 million charge for the early retirement of debt and other one-time costs, the company essentially broke even on a per-share basis with a loss of less than a penny versus the nickel-per share ex-items loss analysts had on average been forecasting.

Qwest attributed its stronger performance to robust sales of high-speed internet, advanced data products, long-distance and wireless services, which accounted for more than half of its $3.48 billion of quarterly revenues, which were up 1.3% from $3.4 billion a year ago, in line with expectations. It also cited its success with selling bundles of different services to customers to enhance their appeal; a bundled package might include high-speed internet access, a national wireless offering, traditional local and long-distance service and integrated TV services.

Qwest also boasted of progress in whittling down its debt, tendering for and retiring some $3 billion of old high-coupon debt during the quarter using lower-cost financing. That enabled the company to cut interest expenses to $338 million for the fourth quarter and $1.48 billion for the full year, from $366 million in the year ago quarter and $1.53 billion in 2004 (see related story elsewhere in this issue).

Video rental sector hurt

Apart from earnings, the movie rental operators were the major movers, apparently knocked lower by the news that Disney - one of the largest producers of filmed entertainment in the world - along with Cisco Systems, Intel Corp., and several financial partners, is forming a new Burbank, Calif.-based venture, MovieBeam, which will provide movies-on-demand service, some in high definition, in 29 major metropolitan areas across the United States, including New York, Los Angeles and Chicago.

Such a service could further hurt revenues at The Movie Gallery and its Hollywood Entertainment subsidiary, the second-largest U.S. home video rental chain, as well as those of rental industry leader Blockbuster, whose sales have already been reduced by competition from the popular Netflix service and various pay-per-view movie options offered by cable television and satellite broadcast providers.

Dothan, Ala.-based Movie Gallery "really got hit today [Tuesday]," a trader said, seeing its 11% notes due 2012 fall to 59 bid from prior levels at 66.75. He saw Dallas-based Blockbuster's 9½% notes due 2012 down three points in sympathy to 83.5.

Another trader saw the Movie Gallery bonds finish at 60 bid, down from 66 bid, 68 offered, although at another desk a trader only saw those bonds down three points on the day, at 59 bid, 60 offered. He saw Blockbuster's 91/2s "off a couple of points at 83 bid, 84 offered."

AMR gains as oil sinks

Back on the upside, the third trader saw AMR Corp., as "a big mover," with the Fort Worth, Tex.-based world's largest air carrier company's 9% notes due 2012 up two points at 93 bid, 94 offered, helped by softer world crude oil prices - they closed below $60 per barrel - which are often seen as a predictor of likely future price trends for jet fuel, an increasingly expensive component of airlines' operating costs. AMR shares were meantime higher despite the news that veteran chief financial officer James Beer will leave that post shortly to take a similar job at software security company Symantec Inc.

GM steady

In the automotive arena, General Motors Corp.'s much ballyhooed announcement of plans to spend $545 million to upgrade five of its Michigan assembly plants, as generally expected, had not much impact on the troubled carmaker's bonds. A trader saw its benchmark 8 3/8% notes due 2033 unchanged at 69.75 bid, 70.25 offered, while another saw those bonds up ¼ point at 70.25, but said that most of the Detroit giant's other bonds, which are not as widely traded, were unchanged.

In its announcement, GM said it was creating about 300 jobs at those factories. Those positions are expected to be filled by GM workers laid off from other facilities through the "jobs bank" the carmaker and the United Auto Workers union maintain.

A trader meantime saw General Motors Acceptance Corp.'s 8% notes due 2031 better by ¼ point at 94.25 bid, 94.75 offered, while GM rival Ford Motor Co.'s 7.45% notes, also due in 2031, were half a point better at 71 bid, 71.5 offered. Ford Motor Credit Co.'s 7% notes due 2013 were also up half a point at 90 bid, 90.5 offered.

Secondary still subdued

Meanwhile the primary market continued to parse out news in mean amounts.

Solectron Corp., issuing via Solectron Global Finance Ltd., priced a $150 million issue of 10-year notes at the tight end of price talk.

And Italy's Wind Telecomunicazioni showed up with plans for a €250 million equivalent deal tapping its existing euro-denominated and dollar-denominated notes due December 2015.

Still looking for yield

A buy-side source said on Tuesday that there is still a significant amount of cash out there chasing yield, and added that people are shopping the relatively small issues presently in the market carefully.

For now credit concerns are a wisp on the horizon, the source added. Whether that will continue to be the case as earnings start coming into focus may be another matter, the buy-sider said.

Solectron tight to talk

Tuesday's only finished deal came in the form of an overnight drive-through from Milpitas, Calif., electronics manufacturing services provider Solectron.

The company priced a $150 million issue of 10-year senior subordinated notes (B3/B-/B+) at par to yield 8%, at the tight end of the 8% to 8 1/8% price talk.

Banc of America Securities, Morgan Stanley and Citigroup were joint bookrunners for the debt refinancing deal.

Although no one volunteered the book size, sources suggested that the deal saw demand significantly in excess of the issue amount, which was not upsized.

When the new Solectron 8% notes due 2016 were freed for aftermarket activity, several traders saw the company's bonds push up to 101.25 bid, 101.75 offered from their par issue price earlier in the session.

Wind to tap 2015 notes

The Tuesday session also produced news of a pending drive-by from Rome-based Wind Telecomunicazioni.

Wind Acquisition Finance plans to price a €250 million equivalent add-on to its senior notes due Dec. 1, 2015 (B3/B-/B) on Wednesday.

The add-on is expected to be a 50:50 tap of the company's euro-denominated 9¾% notes and its dollar-denominated 10¾% notes.

Both tranches are talked at the 105.50 area.

Deutsche Bank Securities, ABN Amro and Banca IMI are joint bookrunners for the debt refinancing deal.

The company priced €825 million and $500 million, both at par, on Nov. 22, 2005.

The only other deal thought to be in the market is Steinway Musical Instruments Inc.'s $175 million offering of eight-year senior notes (Ba3/BB-), which began a comparatively brief roadshow on Monday, via UBS.

That deal is expected to price before the end of the week.

Eyes to the horizon

Late Tuesday the Prospect News primary market desk asked a high-yield syndicate official when the presently sparse new issue calendar might be expected to build meaningfully.

This source responded that such a build-up does not appear imminent.

The source added that potential issues of significant size - acquisition-related deals as well as debt refinancings - are on the horizon, but none are expected to materialize before the second quarter of 2006 is underway.

Meanwhile, the source said, smaller deals, such as the Solectron issue and the Steinway offering may have to suffice.

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