IFCO prices, hopes for more euro-deals; Boise Cascade announces deal; secondary flat

By Paul A. Harris

St. Louis, Oct. 6 - The Yom Kippur holiday kept things quiet in junkland during the opening session of the Oct. 6 week.

From the new issue market in Europe terms emerged on the €110 million seven-year deal from Netherlands provider of logistics services and reusable plastic containers IFCO Systems NV.

Stateside details circulated on DRS Technologies, Inc.'s plans to start roadshowing a $200 million 10-year deal on Tuesday.

And Moody's Investors Service yelled "Timber!" as it dropped Boise Cascade Corp. to junk, citing the additional debt that the Idaho company will take on when it acquires OfficeMax. A sentence in that ratings release pertained to a Ba2 rating on $500 million of new junk bonds. Standard & Poor's already has Boise Cascade at junk and put it on CreditWatch negative on July 15, also because of the upcoming acquisition.

Meanwhile with the market becalmed by the holiday, sources in the secondary seemed more inclined to discuss baseball and Roy Horn's unfortunate incident with a tiger in Las Vegas.

However one secondary source had the paper of Collins & Aikman slightly higher, after the company's junk bonds recovered a little from as much as a "15-point plummet" last week when news reports quoted a Chrysler Corp. official as suggesting that the car-maker, which represents a third of Collins & Aikman's sales, was unhappy, and might take its business elsewhere.

However others saw Collins & Aikman's debt continuing to slip, although at a slower pace.

Regarding Monday's new issuance, the only news surfaced in Europe where IFCO Systems priced €110 million of seven-year senior secured notes (B2/B-) at par to yield 10 3/8%.

Price talk on the Deutsche Bank Securities-led deal was 10¼%-10½%, with IFCO'S new notes pricing in the middle.

In the wake of the IFCO terms, Prospect News heard positive views Monday as to the outlook for the European high-yield market for the remainder of 2003 and 2004.

"The pipeline for Europe currently looks a bit bare for the last quarter, although this could change rapidly if some of the so-called fallen angels that are mooted elect to issue before Christmas," one senior sell-side official commented.

"European buy-out activity has picked up significantly in the last eight weeks, and I would expect a stream of resulting high yield transactions in the first quarter 2004."

This source went on to profess knowledge of "four-to-five" deals mandated for the first quarter of 2004, and stated the expectation that some large cable deals might hit the market either late this year or early next year.

"We're seeing some temporary lull," added the sell-sider. "But certainly we expect the market to return strongly in the first quarter of 2004, if not before."

Another sell-side official also sounded upbeat, Monday, when sounded out by Prospect News about the prospects of the eurobond market in the immediate and intermediate future.

"I think the fourth quarter is shaping up to be a big one in high yield," said this source. "Investors are much happier with the progress in documentation and structure, which should put them in a stronger footing in an insolvency scenario.

"Benchmarks remain very low and everything in the market is strongly bid. In addition, overall yields are extremely attractive, and investors have made an outstanding return this year. So everyone is feeling good about things."

Stateside, meanwhile, the primary market heard news of a long-anticipated business from Parsippany, N.J. defense electronics supplier DRS Technologies, emerged from the pillbox with an offering of $200 million of 10-year senior subordinated notes (B2/B). The deal, via Bear Stearns & Co., had been reported in the vicinity of the market several weeks ago, when the company announced its acquisition of Integrated Defense Technologies.

At the time of the announcement one informed source told Prospect News that the company anticipated an interest rate on the bonds of 7½% to 8%.

The roadshow starts Tuesday for the new DRS deal.

And Boise Cascade announced an offering of $500 million of senior unsecured notes (Ba2), via Goldman Sachs, late Monday. Earlier in the session Moody's announced the downgrade of Boise Cascade's debt to junk levels, because of the additional debt it will incur in its acquisition of OfficeMax.

A source close to the deal said that the company would soon announce timing, as well as other details.

On the news of the $500 million Boise Cascade deal a buy-side source commented late Monday "At least they waited till after the downgrade, rather than bringing the deal first."

Meanwhile, of Monday's secondary market activity one source concisely summed up color heard from around the market, saying "Trades are few and far-between but what trades there have been at the unchanged level."

This source reported activity in energy/drilling names Parker Drilling Co., Chesapeake Energy, and GulfTerra Energy Partners, "but again pretty much unchanged on the day."

One source saw some improvement in the previously tumbling bonds of auto parts supplier Collins & Aikman - which had suffered a dive of as much as "15-points," according to one market source. The bad news: Chrysler Corp., which represents one-third of Collins & Aikman sales, was reported to be poised to dump its contracts with the parts supplier.

However on Monday afternoon sources reported that the bleeding appeared stanched. One even suggested a modest improvement in the paper.

"They got crushed last week, but today we didn't see any movement," said one source. He saw the 11½% notes due 2006 at 61, unchanged.

A trader went a little further, reporting that Collins & Aikman paper may have "felt a little better."

"I think there is just some posturing going on right now," this trader commented on the reported acrimony between Chrysler and Collins & Aikman.

"But it doesn't bode well," this source added. "Any time a customer represents a third of your business and they are threatening you, that's not good.

"You have to wonder whether they can survive something like that."

But another trader quoted the auto parts supplier's 10¼% notes due 2006 2 points lower than Friday at 76 bid, 78 offered. On Friday, that issue had dropped to 78 bid from 87 bid.

One trader saw the "highly volatile" paper of Levi Strauss & Co. generally maintain "Friday levels," citing the 7% notes at 80 bid, 82 offered, the 12¼% notes at 83 bid, 85 offered, and the 11 5/8% notes at 84.5 bid, 86.5 offered.

Another trader put Levi's 7% notes due 2006 at 79 bid, 81 offered, the 11 5/8s at 85 bid, 87 offered and the 12¼% notes at 83 bid, 85 offered.

Meanwhile Las Vegas-based gaming firm Boyd Gaming Corp., which took a beating in the stock market when it announced that it expects below-guidance third quarter earnings, appeared to be standing pat in the junk bond market, sources said.

One market source saw Boyd's 8¾% notes at 108.25, 7¾% notes at 103.5 and the 9¼% notes at 111.5.

"The stock was off $1.59 to $13.57," said a trader who reported no movement in the company's bonds.

"Their third quarter profit fell because of lower-than-expected results with its Stardust property in Las Vegas, and the Paradise Property in East Peoria, Ill.

"Boyd is blaming higher taxes in Illinois for cutting profit at the Paradise property. The state raised its top tax rate paid by casinos to 70% this year, and increase the admission tax paid by gamblers to as much as $5 per person.

"Boyd is absorbing these costs rather than passing it on to gamblers," added the trader.

A trader reported seeing a cessation of hemorrhaging in the paper of AK Steel Corp., which had been "under pressure last week."

They seem to be maintaining their Friday bounce," said the source. "This morning the 7¾% notes were bidding 55.5, 56.6."

Nor were recently priced issues registering any meaningful movement during Monday's session.

B/E Aerospace, Inc. priced $175 million of senior notes due 2010 (B3/B+) at par last Thursday to yield 8 ½%. Those notes were remained unchanged from Friday's level of 102.5 bid, one trader said.

Another trader saw the same B/E Aerospace paper 102 bid, 102.5 offered.

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