Tenneco, Dex West, others price drive-by deals; Collins & Aikman gyrates on earnings

By Paul Deckelman and Paul A. Harris

New York, Nov. 9 - Tenneco Automotive Inc., Dex Media West, Flextronics International, Nevada Power and Inmarsat Finance II plc were heard by high-yield syndicate sources Tuesday to have priced quickly-shopped "drive-by" deals, hoping to opportunistically take advantage of firm junk market conditions to get their financings done. Quickie deals from possibly several other prospective issuers were also heard to be waiting in the wings, alongside offerings that have been on the regular forward calendar for a while.

In the secondary market Collins & Aikman Corp. was one of a number of companies reporting quarterly earnings, and after initially skidding lower, the Troy, Mich.-based automotive components maker's bonds got back on the road and ended the day with a gain, traders said. Also on the upside were the bonds of the battered and bankrupt Adelphia Communications Corp., after creditors of the Greenwood Village, Colo.-based cable operator proposed a plan that values the company at $17 billion and would give them stock in the reorganized entity in the event that it emerges from bankruptcy as a stand-alone operation.

Tuesday turned into the day of the drive-by in the high yield primary market, which saw just under $2 billion of business price in six high yield tranches.

Investors, lately lamenting a chronic shortage of new bonds, were treated to the full buffet ranging from a Ba1/BB+ floating-rate tranche from JetBlue Airways Corp. to a Caa1/CCC+ discount notes deal from Inmarsat.

The fixed-rate notes came with prints ranging from the high fives (Dex Media and Nevada Power both sold notes at par to yield 5 7/8%) to the mid-tens (again Inmarsat, with a 10 3/8% yield).

And all six tranches were drive-bys.

"It got busy again," one investment banker coyly observed as the bits from Tuesday's session were swept up.

"It was wild today. But all of this in one day will not make up for the dearth of supply that we have had so far. We would have to see this for a couple of more days to see the kind of weeks we had back in March and May."

Flextronics, Tenneco finish $500 million deals

The session's two biggest issuers, Flextronics International Ltd. and Tenneco Automotive Inc., each came with half a billion.

Flextronics priced $500 million of 10-year senior subordinated notes (Ba2/BB-) at par to yield 6¼%, at the wide end of the 6% to 6¼% price talk.

Credit Suisse First Boston and Deutsche Bank Securities ran the books for the debt refinancing and general corporate purposes deal from the Singapore-based manufacturing services provider to electronics companies.

Meanwhile Tenneco priced an upsized $500 million issue of 10-year senior subordinated notes (B3/B-) at par to yield 8 5/8%, at the tight end of the 8 5/8%-8¾% price talk. It was increased from $350 million.

Banc of America Securities, Citigroup, Deutsche Bank Securities and JP Morgan ran the books for the debt refinancing deal from the Lake Forest, Ill.-based cruise and emissions control company.

Inmarsat has day's highest-yield

Inmarsat, the London-based satellite company, came with the day's lowest-rated bonds.

The company sold $450 million of zero-coupon eight-year senior discount notes (Caa1/CCC+) at 66.894 to yield 10 3/8%, raising $301 million of proceeds.

The Credit Suisse First Boston-led deal came in the middle of the 10¼%-10½% price talk.

Inmarsat intends to use the proceeds to redeem subordinated preference certificates issued by Inmarsat Holdings Ltd. and held by certain of Inmarsat's shareholders.

Oversubscribed, upsized Dex deal

The day's lowest-yielding bonds were sold by Dex Media West LLC and Nevada Power Co., each of which wound up with 5 7/8% prints on their par pricing bonds.

Dex Media West LLC in conjunction with Dex Media West Finance Co. priced an upsized $300 million of seven-year senior notes (existing ratings B1/B) at par to yield 5 7/8%, in the middle of the 5¾% to 6% price talk. The deal was increased from $200 million initially planned.

JP Morgan ran the books for the debt refinancing deal from the directories publisher.

According to a market source the deal was oversubscribed.

And Nevada Power Co. sold $250 million of series L general and refunding mortgage notes due Jan. 15, 2015 (Ba2/BB) at par to yield 5 7/8%, right on top of the 5 7/8% area price talk, with Merrill Lynch and Lehman Brothers in the lead.

The Las Vegas-based regulated public utility will use the proceeds to repay debt.

JetBlue brings junk tranche

Finally on Tuesday Forest Hills, N.Y.-based air carrier JetBlue Airways Corp. brought the highest-rated deal of the day.

JetBlue priced a $136 million high-yield tranche of floating-rate enhanced equipment trust certificates due May 15, 2010 (Ba1/BB+) at par to yield three-month Libor plus 310 basis points.

The tranche was part of an overall $498.2 million sale of certificates that also included two investment-grade tranches.

Morgan Stanley led the deal.

Hornbeck Offshore weighs anchor

New Orleans-based provider of offshore supply vessels for the oil industry, Hornbeck Offshore Services Inc., had been sitting in the harbor for a fortnight, but finally weighted anchor on Tuesday.

The Hornbeck roadshow is set to start Friday for $225 million of 10-year non-call-five senior notes (B1/BB-), with pricing expected to take place on Thursday, Nov. 18.

Goldman Sachs & Co. has the books for the debt refinancing and general corporate purposes deal.

American Achievement also plans drive-by

In addition to the six companies that priced quick-to-market deals on Tuesday, one other prospective issuer AAC Group Holding Corp. (American Achievement Corp.), announced its intentions Tuesday to sell $85 million proceeds of eight-year senior discount notes on Wednesday, via Goldman Sachs & Co.

Price talk is 10% to 10¼% on deal from the Austin, Tex.-based scholastic products company, proceeds from which will be distributed to the stockholders of AAC Group Holding Corp. and will also be used to repurchase a portion of the outstanding shares of common stock.

Also on Tuesday Integrated Alarm Services Group Inc. announced a restructuring of its $125 million offering of seven-year notes and issued revised price talk.

The company intends to sell senior second-lien notes, which are talked at 12%. Formerly the company had been in the market with an offering of senior notes that were talked at 10¼% to 10½%.

Morgan Joseph & Co. is the bookrunner for the deal from the Albany, N.Y.-based company, which is expected to price on Wednesday.

And price talk is 9% to 9¼% on Ultrapetrol (Bahamas) Ltd.'s $150 million of 10-year senior secured first preferred ship mortgage notes due 2014 (B3/BB-), which are expected on Wednesday via Credit Suisse First Boston.

Finally, well after the Tuesday close, Prospect News inquired of the investment banker who is quoted in the opening paragraphs of this market report whether to expect the volume resembling the Tuesday session in the days to come.

The response: "Perhaps not quite as busy, but there are definitely a couple more deals out there waiting to be announced.

"I think Wednesday is going to be another busy day."

Tenneco up in trading

When the new Tenneco 8 5/8% notes due 2014 were freed for secondary dealings, they firmed to 101.75 bid, 102.25 offered.

"Finally, they managed to price their deal," a trader said. "I guess the third time was a charm."

He was referring to the Lake Forest Ill-based auto parts maker's previous efforts to tender for their existing 11 5/8% senior subordinated notes due 2009 using the proceeds of new deal offerings, which ultimately fell flat due to market conditions and which had to be pulled.

Those 11 5/8% notes, meantime, were "nowhere to be seen," he said. "They're going to bye-bye. Since [Tenneco] got their act together and when it looked like this deal would finally be done, everyone's just been holding on to that [11 5/8%] coupon."

A market source at another shop quoted the 11 5/8s at 106.5 bid, unchanged on the day, and meantime saw the company's 10¼% notes due 2013 at 117, also unchanged.

The original game plan called for the company to sell $350 million of the new notes and use the proceeds to take out a like amount of the existing bonds, out of the $500 million currently outstanding. But after the deal went better than expected and was upsized to $500 million, Tenneco said late in the day that it would use the net proceeds, plus cash on hand, to redeem all $500 million of the 11 5/8s.

A trader said "the [new] deals are doing pretty well - and Tenneco did really well." He saw the new bonds get as good as 102 bid, 102.5 offered from their par issue price before coming off that high print to end at 101.75 bid, 102.25 offered.

The Flextronics, Inmarsat, Dex Media and Nevada Power deals broke too late in the day for any kind of meaningful aftermarket activity, sources said.

However, the trader also saw the new Citizens Communications Co. 6 ¼% senior notes due 2013 at 100.125 bid, 100.675 offered, up slightly from their par issue price late Monday.

Collins & Aikman ends higher

Among existing issues, he said that Collins & Aikman bonds firmed, after having first taken a hit as the market digested the company's third-quarter earnings release and then because "they were saying all kinds of things on the conference call. The bonds were jumping all over the place."

At the end of the day, however, he said, the bonds had finished with gains, the 10¾% notes due 2011 closing at 101.25 bid, 102 offered and the 12 7/8% notes due 2012 at 87.5 bid, 88.5 offerered.

"The numbers were well received," he declared. "It was a successful day for them."

At another desk, the Collins & Aikman 12 7/8s were seen as high as 89 bid, with the 103/4s at 101.25 bid, and the company's 9¾% notes due 2010 at 106.75 bid, although this was estimated to be down a quarter point.

On the face of it, there didn't seem to be much to cheer about in the parts maker's third-quarter numbers. The company reported a loss of 67 cents per share, which included after-tax charges for restructuring and long-lived asset impairments and loss on early extinguishment of debt of $25.1 million (30 cents per share). In contrast, a year earlier, the company had a loss of 38 cents per share, which included after-tax charges for restructuring and long-lived asset impairments of $16 million (19 cents per share).

And Collins & Aikman also forecast lower fourth-quarter and full-year numbers than previously, citing reduced production by the Big Three, its bread-and-butter customer base. Collins & Aikman now expects full-year 2004 sales to be about $3.875 billion, reflecting a $25 million decline from plan in the third quarter and an approximate $100 million reduction in fourth quarter revenue. It said that 2004 full-year EBITDA before restructuring and impairment charges would now likely be $335 million to $345 million, reflecting approximately $25 million in lower contribution margin on reduced third and fourth quarter sales.

However, there were still some nuggets of good news for Collins & Aikman bulls to cling to, including EBITDA of $48.7 million, versus $41.9 million a year earlier.

"For the fifth consecutive quarter our EBITDA performance, excluding restructuring and impairment charges, was up from the prior year on a comparable basis," asserted Collins & Aikman's chairman and chief executive officer, David Stockman, in a company statement. "This was achieved despite the headwinds from increased commodity costs and OEM production cuts. The savings from the restructuring program that began in the third quarter of 2003 has generated significant fixed cost reductions."

Ziff Davis gains

Elsewhere, a market source saw Ziff Davis' 12% notes due 2009 "up a lot" for a second straight session, following better quarterly results released Monday by the New York-based publishing concern. He quoted the company's bonds as having firmed to 104 bid Monday from 99 previously in response to the earnings, and then having replicated that gain Tuesday to bring the notes up to the 110 bid level.

Six Flags falls on earnings

Six Flags Inc. reported sharply lower third-quarter earnings versus year-ago levels Tuesday, citing the effects of unseasonably cool weather and even hurricanes on attendance in some of its markets, as well as sizable impairment charges the theme park operator took.

That helped push its bonds down, with the company's 8 7/8% notes due 2010 losing 3/8 point to end at 97.125 bid, while its 9¾% notes due 2013 were a quarter point lower at 98.

However, on the upside, company executives said they look forward to a rebound next year, in part because of an ambitious capital spending plan aimed at bringing in new rides and attractions - something which critics say was downplayed too much this year (see related article elsewhere in this issue).

And there was movement in Adelphia Communications bonds, with a trader quoting the zero-coupon notes that were to have matured in 2003 at 98 bid, well up from 92.5, and certain other of its notes better as well.

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