Homebuilding sector produces two more new deals; Dura upsized, trades up in secondary

By Paul A. Harris

St. Louis, Mo., April 4 - The homebuilding credits continued to put up deals in the high-yield primary market Thursday, with new issuance from Auburn Hills, Mich. builder Champion Enterprises, and Dallas-based vinyl siding company Associated Materials, Inc.

However, in another quiet day of trading in the secondary no explanation could be found for the recent spate of homebuilders, exterior supplies producers and REITs.

"Hovnanian went out 96 1/2-971/2, down a point or so from the last couple of days," one trader commented on K. Hovnanian Enterprises, Inc.'s 8 1/8%s of 2012 (Ba3/BB-), which priced March 19.

And sources in both the primary and secondary market told Prospect News late in Thursday's session that talk widened to 8 5/8% from the 8¼% area on D.R. Horton, Inc.'s $250 million of 10-year senior notes (Ba1/BB). The company then priced them late in the session at 99.171 to yield 8 5/8%. Salomon Smith Barney ran the books.

Terms also surfaced Thursday on American Seafoods Group's $175 million of eight-year senior subordinated notes, which priced at par to yield 10 1/8%, at the tight end of the 10¼% area talk, according to a syndicate official. Banc of America Securities ran the Seattle-based company's deal.

Dura Operating Corp. priced an upsized offering of $350 million (up from $250 million) ten-year seniors (B1/B+) at par, to yield 8 5/8%, on Thursday. And the new Dura notes received a reception in secondary trading that was immediate and warm, according to one trader.

"They got to be at least as good as 101 bid, so they broke up," the trader said, adding that 101 3/8-101 5/8 was "the best and tightest" level he saw them at.

The three new deals added to the primary calendar Thursday included Champion Home Builders Co., a wholly-owned subsidiary of Champion Enterprises, Inc., which will bring $150 million of five-year senior notes via Credit Suisse First Boston. It is expected to price the notes late in the week of April 8.

Associated Materials starts on the road Tuesday with $165 million of 10-year senior subordinated notes via joint bookrunners Credit Suisse First Boston and UBS Warburg. That deal figures to price April 15.

Petroleum Helicopters, Inc. is planning $170 million of seven-year senior notes that will start roadshow stops Tuesday, according to a syndicate source. UBS Warburg is sole bookrunner on the Lafayette, La.-based petroleum industry transportation services provider.

Finally, price talk of 12% area yield to worst emerged Thursday on Pliant Corp. $100 million of 13% senior subordinated notes due June 1, 2010 (Caa1/B-), a deal that will likely price Friday. JP Morgan is the bookrunner

While the primary was busy, the secondary was generally quiet.

Fleming Cos., Inc.'s new issue of 10-year notes was trading right around its issue price. The company sold $260 million at 98.436 to yield 10 1/8%.

One trader saw the bonds trading at 98 bid, 98¼ offer during the session and saw closing at 98 1/8 bid 98 3/8 offer - similar to levels seen at other desks.

The recent names in the news also showed little movement during the session.

Adelphia Communications Corp.'s bond were holding steady around Wednesday's close.

One trader saw the company's 91/2s at 85-87 and its 9 7/8s at 86-88.

"Not a ton of action today," the trader commented.

He was a little surprised, given the steady flow of negative news on the company since it revealed $2.3 billion of off-balance-sheet debt during its earnings announcement last week.

"We read in the Wall St. Journal that the [Rigas] family is not really saying too much," the trader commented.

"I think if they don't come out and say something soon - more than what they've been doing - you're going to see this thing really drift lower. That's my opinion."

Calpine Corp. drifted lower by about a point.

One trader saw the San Jose, Calif. energy company's benchmark issues - its 8 5/8s and 81/2s - at around 79-80 Thursday, down from 80-81 Wednesday. The securities had similarly lost around a point in secondary action Wednesday.

Nortel Networks Ltd. debt bounced around but largely survived a three-notch downgrade to junk by Moody's Investors Service.

"That is not on our desk yet, believe it or not. It's still with the investment-grade guys," one trader commented. "We should be getting it. It will be here soon. We'll match it up with our Lucents."

While now split-rated - and therefore technically the responsibility of the high-grade desks - the telecommunications equipment company's bonds have been trading at junk levels for some time now.

But Moody's announcement was largely expected and the bonds settled where they started the session.

One trader saw the debt due 2006 going out at 74 bid.

"That's right where they were before the downgrade," he commented.

"The new I think wasn't that unexpected. People tried at one point; they were like 733/4-743/4. Then after the news came out they were 70 bid. Then they became 72 bid.

"Then sure enough, by 2:30 they were back to 74 bid."

Overall, secondary players said, it was another quiet session in a quiet week as business has not returned to normal after the Easter break and Jewish holidays continue.

"The whole week's been slow; maybe not as dead as Monday, or yesterday, which was very dead," one secondary player said. "There was a little activity in the morning but it's been very quiet.

"The whole week's been quiet. And tomorrow, with opening day at Yankee Stadium, I'd say half of New York City's going to be at the games, so it should be another real great day."

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