WorldCom active on credit agreement; Qwest up on Dex sale; Huntsman, Perry Ellis unveil deals

By Paul A. Harris

St. Louis, Sept. 9 - The high-yield new issue market continued to sail on light breezes Tuesday although with all the cash that has come into junk sources gave voice to expectations that the sails will soon begin to fill.

Huntsman LLC provided details on a deal sized at the lower end of its anticipated range although it could upsize, sources say.

And Miami sports apparel company Perry Ellis International, Inc. told Prospect News that the firm expects to slip into a little tighter yield than the one it left the market with in March 2002.

And while the primary market luffed along on light breezes the secondary market is reported to have begun Tuesday's session riding noticeably higher in the water. However the preponderance of sources said that by session's close the aftermarket seemed to have taken on some ballast and was seen riding about where it had been at the open.

Telecommunications names that were grabbing the headlines on the financial pages also made their share of telephones ring on trading desks, during the session.

Early Tuesday one source said that World Com paper was up 2½ to three points - to 32.25 bid, as the market mulled the word that creditors who had been dissenting from the company's plan to emerge from bankruptcy had been accommodated. Quips-holders - who reportedly had been left out of the settlement altogether - and MCI debt holders, who had previously been offered a price of 36, both figure to do substantially better. The Quips holders will receive 45, and the MCI debt holders figure to get 50.

The name apparently failed to maintain its luster as the session wore on, however. Late in the afternoon a trader reported that WorldCom paper along with that of its MCI and Intermedia units, had traded off their morning highs, ending around unchanged on the session.

WorldCom senior paper, said this source, had traded as high as 33, but was later seen 31.75 bid, 32.50 offered. MCI paper, which had been as high as 81, later was seen 78.5 bid, 79.5 offered. And Intermedia was trading 79.5 bid, 80.5 offered.

Another trader, late in the day, gave WorldCom levels of 31.5 bid, 32 offered, and commented "We had both buyers and sellers today."

And another market source speaking shortly after the close also reported World Com up early, "then back to unchanged, around 31.5, whereas they were as high as 32.5.

"MCI around closed at 78," added the source, noting that the MCI paper had been seen as high as 80.

Meanwhile Qwest Communications International Inc. also saw a pop Tuesday, responding to news that it had completed its sale of QwestDex, to Dex Media Inc., an entity owned by the private equity firms of The Carlyle Group and Welsh, Carson, Anderson & Stowe.

"Qwest continues to look better," commented a trader, adding that the Qwest Holding Co. 7¾% notes of 2006, which ended Monday at 93.5 bid, 94.5 offered, were at 94.5 bid, 95.5 offered, Wednesday, on news of the sale.

And the tide that lifted Qwest also appeared to cause Dex to ascend; one trader reported that the paper of buyers Dex Media West and Dex Media East was "all up about half a point."

And Global Crossing, on news that the Bush administration is anticipated to be poised to give the green light to the $250 million bid by Singapore Technologies Telemedia to buy the bankrupt U.S. telecom, later this month, also was reported to have gotten a lift.

"Yesterday the Global Crossing 9½% notes of 2009 were 4 bid, 4 3/8 offer," said a trader. "Today I saw 5 to 5 3/8. Not a bad percentage move."

Nor does Tuesday's telecom story end there.

"Nextel Communications bonds had a pretty good run today," a trader reported late in the session.

He closed them at 101.5 bid, 102 offered, up "a full point, just on good buying" from opening levels of 100.5 bid, 101, offered.

Another trader said Nextel's 7 3/8s of 2015, one of the new deals, were at 101.125 bid, 101.5 offered by the close, up from 100.5 bid at the open and 100.25 bid, 101 offered on Monday.

And yet another secondary market source speaking late in the session gave the Nextel 9 3/8s at 109, up a point.

Another name that generated activity during the session was Levi Strauss & Co.

One source, who reported quite a lot of action around the mid-session mark gave the following levels: the 7% notes of 2006 at 89.25 bid, 91.25 offered; the 11 5/8% notes of 2008 at 97.25 bid, 98.25 offered and the 12¼% notes due 2012 at 94.5 bid, 95.5 offered.

Another source saw them at slightly lower levels on the 7% and 11 5/8% notes while quoting the 121/4s at the same price.

A trader who spoke to Prospect News just prior to the close said there was no absolutely compelling explanation for the moves at hand although he noted: "Levi's were a better seller this morning."

He added that the 7% notes had been 87 bid, 89 offered at Monday's close and had lurched up to as high as 90 bid, 91 offered Tuesday morning before heading down to close at 88 bid, 90 offered.

"The 11 5/8s, which is the one that is difficult to come by, was offered as high as 99.5, which was too high," the trader said. He said it closed at 96.5 bid, 97.5 offered.

"The 11 5/8s are a little difficult to borrow, the trader explained, "so it always creates a short. And people continue to look for it.

"The 7s and the 121/4s are really high from the last time they dropped," added the trader when pressed for color. "I would say they do this every two months. They run 10 or 12 points and then drop down about eight points in the morning and run back up again. We're right near where they usually get their butt kicked."

On that note, one of the names that similarly received rude treatment was athletic clothing-maker Russell Corp., as the Atlanta-based firm went into full retreat on its lowered third-quarter and full-year profit forecasts.

Russell's 9¼% senior notes due 2010 were seen down two points on the session at 105.5, a source said.

Traders also reported some activity in Calpine Corp. bonds.

"I saw a little buying in Calpines, which had really run up," said one.

He added that the 8½% notes due 2011, "the real barometer for retail and institutional investors," closed at 74 bid, 75 offered. They had been as low as 72 bid, 73 offered and as high as 76 bid, 77 offered about a week ago.

"There's a little life in that one again," the source added. "There are some guys buying that paper."

Another trader said: "Calpine might have been a little better."

He saw a trade at 93 in Calpine's 8½% notes due 2010, one of the new deals, compared to 92, bid 92.75 offered Monday.

Meanwhile the 8½% notes due 2011 were a half point better at 73.5 bid, 74.5 offered, up from 73 bid, 74 offered Monday.

Finally a trader noted southward movement in the paper of Lyondell Chemicals Co.

"I'm seeing a little weakness across the board in chemicals," the source said.

Lyondell's 9 5/8s and the 9 7/8s "have really had amazing runs over the past two weeks," the trader said, adding that they had been as good as 99.5 bid, par offered a couple of days ago.

"Now we are seeing a little pressure, a little profit-taking," he added. They closed at 97.75 bid, 98.75 offered.

But another source saw both issues unchanged, the Lyondell 9 5/8s at 99.5 and the 9 7/8s at par.

"The market was kind of bid early this morning," one trader commented on Tuesday's session. "It looked to be up a quarter of a point to a half a point, pretty much across the board, maybe more in some spots.

"But as the day wore on things softened up a little bit. I would say we're back to earlier levels."

However a trader at a different institution reported no such retreat.

"Everything was up a quarter point to half a point," this source said, "Even though stocks were off high yield felt a little stronger.

"There haven't been a whole lot of new deals, so you have to bid up the secondary a little," the trader added. "But it's getting to the point now where it's not that interesting. You really have to do your homework to find the credits.

"We hear that the economy is starting to turn. Guidance is pretty good. But we're still not out of the woods, as far as the employment situation.

"Things are kind of rich, here. I wouldn't be surprised - nor would I mind - if we had a little bit of pull-back, to try to find some more value."

Primary market sources assented to that trader's color as Tuesday's session drew to a close.

Although no transactions were completed during the session, two new offerings were bled into what some sources report to be a slightly anemic pipeline.

Huntsman LLC, formerly Huntsman Corp. announced a Thursday roadshow start for $375 million of seven-year non-call-four senior secured notes via Credit Suisse First Boston and Deutsche Bank Securities

The Salt Lake City petrochemical firm's deal is expected to come at an interest rate in the vicinity of 11½%, one market source advised Prospect News, adding that there is a good chance the company may sell more than $375 million since they are looking for approval to sell up to $600 million under a credit facility amendment nearing completion.

And the roadshow starts Wednesday for Perry Ellis International, Inc.'s offering of $150 million 10-year senior subordinated notes (expected ratings B3/B-) via Wachovia Securities and Merrill Lynch & Co.

The Miami, Fla.-based company is a branded apparel marketer intends to use the proceeds to redeem its existing 12¼% senior subordinated notes due 2006 and to repay bank debt.

Rosemary Trudeau, the firm's vice president of finance, told Prospect News that she expected the new notes to price in "the high-eights to low-nines," adding that it is the company's understanding that at present the high-yield market is invitingly liquid.

Asked if the reported liquidity of the asset class caused the company to pull the trigger now, Trudeau responded in the negative. "Our bonds are callable in April. And we're going through an acquisition: we acquired our largest licensee, Salon Corp., in a cash and stock deal.

"We needed to get through it before we even looked at the financing options."

Perry Ellis International did a $57 million offering in March 2002 via Wachovia, when the company acquired Jantzen Swimwear.

Those notes came with a 9½% yield, Trudeau noted, confirming that the company expects to do somewhat better this time around.

Finally on Tuesday Pinnacle Entertainment, Inc. disclosed in a press release that it will bring $130 million of debt financing to fund its tender of $125 million of 9½% senior subordinated notes due 2007. Bear Stearns is dealer manager on the tender which expires Oct. 3.

Through the first two sessions of the Sept. 8 week sources have confided that with the substantial flows of cash AMG reported to come into high yield mutual funds during recent weeks one might reasonably anticipate a more purposeful buildup in the new deal pipeline than has so far materialized post-Labor Day.

"What's different about the inflows during this past month, as compared to the beginning of the summer when we were having a tremendous amount of inflows - and every piece of crap was going up for no reason - now the market is firm but the accounts are not reaching for just anything.

"They're being a little more picky. They're looking for high coupon stuff. The stuff that's tied into Treasuries, the lower-coupon stuff, is getting hit a little bit."

Another source also cited Treasuries while unreeling a somewhat similar judgment.

"It's been pretty quiet," said this observer. "There are three or four in the pipeline.

"They need Treasuries to settle down in here. Then maybe you'll see a couple of drive-bys and add-ons.

"Other than that it has been pretty quiet on the new deal front."

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