Jorgensen prices; Trump, D&E pulled; $1.475 billion new deals announced

By Paul A. Harris

St. Louis, Mo., May 17 - The primary market ended the week of May 13 with a burst of activity that brought word of $1.475 billion new junk bond deals from Asbury Automotive Group, Inc., H&E Equipment, Trico Marine Services and Wyndham International.

And the market heard Friday that cash had flowed into high-yield mutual funds for the week ending May 15, as AMG Data Services reported an inflow of $102.8 million.

With regard to transactions, however, Friday's score was one for three.

Earl M. Jorgensen Co., Inc. priced its deal, but D&E Communications told Prospect News that it pulled its offering because it found a better deal outside of the junk bond market.

And the epic voyage of "the Trump deal" ended Friday. However as the poet said, Trump ended "...not with a bang but a whimper."

In secondary market activity traders told Prospect News Friday that attention was largely focused on the same two names that have been hogging market attention recently: Adelphia and WorldCom.

Word on the Trump $470 million of first and second mortgage notes came in the form of a press release late Friday. It stated simply that the interest rates were "unacceptable" to the company, and hence it was postponing the deal.

A sell side source who spoke with Prospect News in the wake of the postponement said that the word was Trump's first mortgage notes, which were talked at 9¾%-10%, had been faring lots better than the second mortgage notes, 12¾%-13%.

"I was hearing that a lot of it got placed," the source said. "I think, were Deutsche able to structure the entire deal as a first mortgage piece, and had it been a smaller deal they probably could have gotten it done.

"Nobody wants to be on the second mortgage piece, though. I think that was the problem."

This sell-sider said that the people who got most excited about the latest Trump offering were the existing bondholders.

"Anyone who owns Trump paper that was going to be taken out with the proceeds of this deal - the Castles, and the DJT 151/2s - they don't want new Trump bonds. They wanted them to get taken out and be finished with them."

The press release that Trump issued announcing the postponement alluded to the company coming back to the capital markets later in the year. As far as high yield goes however, the sellside source said, Trump could not have picked much better market dynamics than the ones that are presently in play: a record amount of cash on the sidelines of a market that is reported to be starved for paper.

"The market's starved for paper, but it's also starved for new paper in gaming," the official said. "There's been nothing that has come out that's not tight. The entire gaming sector in high yield trades inside of 8%. So when you're proposing to bring a deal that's going to give you a 9¾%-10% coupon - and truthfully I think they probably would have priced that at a pretty good discount to get up into that 10¼%-10½% range - it should have been no problem."

However, this official concluded, Donald Trump, with his hardball tactics a few months back of threatening investors with delayed or withheld coupon payments, might in the end have been a decisive factor as investors turned away from the deal.

Trump was not the only horse that failed to make it out of the gate in Friday's primary market activity. Ephrata, Pa.-based integrated communications services provider D&E Communications pulled its offering of $175 million 10-year senior notes in favor of a financing comprised of bank debt with CoBank in the lead. Jefferies & Co. had been the high yield dealrunner.

"The deal we presented to the company Thursday night was more that 100 basis points spread between (price talk) and the bank debt," a syndicate source told Prospect News. "They've elected to just go with the bank debt."

So of the three transactions the market expected to price on Friday, only one was transacted as the pollen settled: Earle M. Jorgenson Co., Inc. priced $250 million of 10-year senior secured notes (B2/B-) at par Friday to yield 9¾%, via joint bookrunners Credit Suisse First Boston and Deutsche Bank Securities.

Friday also brought news of an emerging markets corporate credit, TuranAlem Finance BV, a Kazakhstan bank, pricing its $100 million of Rule 144A-eligible five-year bonds (Ba2/B+) to yield 10¼%. Price guidance was for a yield in the 10¼% area. Deutsche Bank Securities was the bookrunner

And four new offerings took positions on the forward calendar of the high yield primary during the last day of the week of May 13.

Asbury Automotive Group, Inc. will start roadshowing $200 million of new 10-year senior subordinated notes (expected: B3/B) on Monday via Goldman Sachs & Co. The Stamford, Conn.-based automobile retailer expects to price its deal on May 31.

The early part of the week of May 20 will also see a roadshow commence for H&E Equipment Services' offering of $275 million of 10-year senior secured notes (B3/B) via joint bookrunners Credit Suisse First Boston and Banc of America Securities. Private equity sponsor Bruckman, Rosser, Sherrill, which owns H&E, will use the proceeds to fund the merger of H&E with ICM Equipment Co., LLC. The notes are expected to price during the week of May 27.

And the executives of Dallas upscale lodging firm Wyndham International, Inc. should be checked out of their corporate offices Monday as they begin roadshowing $750 million of six-year-non-call-three senior secured notes (B-). JP Morgan and Bear Stearns & Co. are joint bookrunners. That deal is expected to price late in the week of May 27.

A shorter marketing regime is in store for Trico Marine Services $250 million of 10-year senior notes (expected: B1/B+). Its three-day roadshow starts on Monday via joint bookrunners Lehman Brothers and Bear Stearns & Co. The Houston-based marine support services-provider to the oil and gas industry expects its deal to price Wednesday.

Counting Trico the forward calendar contains five deals expected to price during the week of May 20, for a total of $1.7 billion. Included is another gaming credit, Venetian Casino Resort LLC/Las Vegas Sands, Inc. which is bringing $850 million of eight-year second mortgage notes (Caa1/expected B-) via Goldman Sachs. The Las Vegas-based gaming, lodging and retail company expects to price its deal Wednesday.

Sources at work in the secondary market last Friday told Prospect News that most of the attention was focused on the paper of Adelphia Communications and WorldCom, as has been the case recently.

Bear Stearns maintained its buy-recommendation on Adelphia's senior notes, Friday, stating in part that John and Timothy Rigas have relinquished management responsibilities, and that an independent committee had been formed to investigate possible further improprieties involving the Rigas family.

"While uncertainty and volatility are likely to remain, we still suspect that the parent company senior notes could end up being par securities at the end of the day," noted Stephen Weiss, Bear Stearns high yield analyst, in his report.

A trader who spoke Friday with Prospect News said that there was a lot of quoting going on, but not necessarily many trades, with regard to Adelphia.

"My personal feeling is they're almost certain to file at some point," this official said. "So I immediately start looking at asset coverage numbers. Of course that's always tempered by how well the disclosed liabilities equal the actual liabilities."

Another trader said Adelphia's paper traded relatively flat on Friday.

"That was the name of the game today," the trader stated. "The go-go's - the 10 7/8s - were 69-70. The 101/4s of '11, that's the other go-go: 70.25-71.25. And the 73/4s, 67-68.

"That's about where they went out last night; up or down about a half or so, spread across the curve. So it's pretty much unchanged."

The same did not hold, however, with regard to the bonds of certain Adelphia subsidiaries, the trader said.

He saw the Century Communications Corp. paper up "a couple of points" at 73 bid, 75 offer while FrontierVision 11s ended the session at 88 bid, 90 offer and its 11 7/8s at 83 bid, 84 offer.

"The Century and the Frontier Visions - that's what you want to own. Those are the best assets. They have different kinds of indentures. And if they sell anything, Century and Frontier Vision are going to be sold first because they're sale-able. And they'll probably be sold to a better credit. In that case those bonds will go first and re-create par.

"The rest of that Adelphia paper is hovering anywhere between 68-70 to 70.5-71, something like that."

Of the beleaguered telecom credit WorldCom, a recent initiate to the universe of speculative grade credits, one trader noted a certain amount of vigor.

He saw the 81/4s due 2031 starting the day at 39 bid, 41 offer and reaching as high as 40 bid, 42 offer.

The 71/2s of 2011, the benchmark with $4 billion outstanding began the session at 40 bid, 42 offer and traded as high as 43 bid, 44 offer.

"So there was a little strength but not a tremendous amount of activity. But it was more on the upside than it was on the downside," the trader said.

Finally, one secondary market source noted positive activity in the paper of another recent arrival to high yield land - the Gap, Inc., which beat expectations when it reported its first-quarter numbers late Thursday.

"Gap was the big mover in retail," the trader said. He saw the company's 6.90% bonds due 2007 as high as 93 bid on Friday, three points better than their 90 bid, 91 offer close on Thursday.

The shorter paper, the 5 5/8%s of 2003, rose a point to 99 bid, par offer from 98 bid, 99 offer late Thursday.

"There's definitely some interest there on the numbers, even though they lost some dough," the trader said. "They said they have a ton of cash on hand and I think that was what was advantageous to the paper."

Another secondary market source reported that the Gap's paper was up "two points across the board."

He saw the 8.80% notes up about 2.25 points.

"We were hearing there was a big short in the Street on that one. So everybody got squeezed out," he commented.

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