Market down 1/4; Adelphia holdco paper takes 10-point dive; Brigham, Williams Scotsman price deals

By Paul A. Harris

St. Louis, April 12 - The broad high-yield market traded off a quarter of a point on Wednesday as Treasuries came under pressure.

During a quiet pre-holiday trading session good news seemed scarce, as the bonds of Adelphia Communications Corp. dropped significantly when the bankrupt company filed a modified reorganization plan in an attempt to mitigate disputes among the creditors who have claim at various levels of the capital structure.

The primary market, meanwhile, saw two comparatively small issues price as Brigham Exploration Co. completed a $125 million transaction trailing an investor roadshow and Williams Scotsman Inc. did a $100 million quick-to-market add-on.

Market lower with Treasuries

A source who spotted the 10-year U.S. Treasury going out with a yield "around 4.98%" said that government paper sold off during the session, and some of the junk market went with it.

"When the Treasuries backed up in the middle of the day we saw the Treasury-sensitive paper go a little lower," the source commented.

"It felt like the market turned over a little.

"It may have been bid early in the morning, but then when Treasuries sold off high yield sold off as well."

This source, a trader, said that activity in the junk secondary market had been "spotty and very situational," and added "there were bid lists coming in from a variety of different types of accounts, and in larger sizes than we have seen in quite some time - probably close to $80 million."

The trader asserted that while junk in general appeared to be holding in, "The aggressive buying that we have been seeing is no longer there."

Adelphia's ticking clock

Adelphia's bonds took a tumble after the company filed an amended plan of reorganization, a trader said late Wednesday. Two sources told Prospect News that the holding company notes, particularly the 10¼% notes maturing in 2011, had dropped during the course of the session by as much as 10 points.

Another trader noted that the amended plan that Adelphia filed Wednesday is its fourth, and added that it fails to address some of the key disputes among creditors.

Meanwhile, the trader added, the clock keeps ticking toward the July 31 "drop-dead date" by which time the sale of Adelphia to Time Warner and Comcast must be concluded.

"This thing just keeps dragging on," said the trader.

"It's the same old thing. As they get close the drop-dead date in July the potential for the thing not going through increases. And they could end up owing Time Warner $400 million if that happens.

"I think a lot of people are nervous about it."

Meanwhile another source said that under the new terms the subsidiary's creditors appear to get better treatment than the holding company creditors, and added that it was the holding company paper that came under the most pressure.

The bond most sources mentioned was the 10¼% notes due 2011. One trader spotted the bonds going out at 52.50 bid, 53.50 offered, whereas they were in the low 60s on Tuesday.

Another saw the paper going out at 53 bid, 53.75 offered, after having traded as low as 52. This source remarked that the bonds had finished Tuesday night at 63 bid, and opened Wednesday morning at 59 bid.

Calpine paper weakens

Also on the move, Wednesday, was the paper of Calpine Canada Energy Finance, traders said.

The 8½% senior notes due May 1, 2008 - "the ones that have a double-dip claim at Calpine Canada and Calpine Corp.," a trader said - were trading at 61.75 bid in the morning.

They had been as high as 65 bid within the last week, the trader added, but were probably down half a point in early trading Wednesday.

Meanwhile, the trader saw Calpine Corp.'s second priority secured 8½% notes maturing in 2010 unchanged at 93.50 bid, and the Calpine Corp. 8½% notes due 2011 half a point better at 37.75 bid.

"There continues to be a lot of rumors floating around on this credit," the trader said.

"A lot of people who think they have claims on different entities of Calpine are pushing rumors to see what they can stir up to affect the bonds.

"It's been a tough one to trade."

The trader added that distressed debt players, in particular, seem to be pushing the paper around.

At Wednesday's close another trader saw the Calpine Canada 8½% bonds due 2008 off a point at 61 bid, 62 offered.

New Avis Budget notes ease

Among recently priced issues, sources saw the above-mentioned Treasury sell-off register a negative impact on the Avis Budget Car Rental LLC bonds that priced in a $1 billion three-part transaction (Ba3/BB-) on Tuesday.

To recap, the company, formerly Cendant Car Rental LLC, priced a $250 million tranche of eight-year floating-rate notes at par to yield three-month Libor plus 250 basis points, a $375 million tranche of eight-year fixed-rate notes at par to yield 7 5/8%, and a $375 million tranche of 10-year fixed-rate notes at par to yield 7 ¾%.

Early Wednesday a source saw both fixed rate tranches trading in a context of 101.50 bid, while the floating-rate notes were in a 102.75 bid context.

"The deal went fine," the source said. "I think they probably priced it where they needed to - probably a little cheap to the market to get it done.

"People have cash but it doesn't seem like they want to spend it on what they're seeing in the market. Avis was something that people are comfortable with. They're familiar with the business, and that helps at this point.

"There are a lot of small deals out there in the low single-B to triple-C range that people aren't that familiar with. It's hard to make that leap of faith at this point in the market, with things coming at par, unless you're really getting paid for it.

"Avis is a little bit more of a down-the-middle-of-the-fairway type of deal."

Another source, Wednesday morning, saw the Avis Budget 7 5/8% notes due 2014 trading at 101.50 bid, 102 offered, while the 7¾% notes due 2016 were at 101.50 bid, 102.25 offered, and the floating-rate notes due 2014 were at 102.25 bid, 103 offered.

Later in the session, however, a trader saw the 7 5/8% notes due 2014 at 101.25 bid, 101.75 offered, down an eighth to a quarter of a point through the course of the afternoon.

Still later another trader marked all three issues down a quarter of a point on the day.

Spectrum bouncing along the bottom

Also under pressure Wednesday were the bonds of consumer products company Spectrum Brands Inc.

A trader said that the company's 7 3/8% senior subordinated notes due 2015 were going out at 80.50 bid, 81.50 offered, down half a point, while Spectrum Brands' 8½% senior subordinated notes due 2013 were at 85.25 bid, 86.25 offered at the close, also down half a point.

"They've been volatile," the trader commented.

"Last week [the company] came out with 2006 guidance. They had a conference call and wouldn't allow questions.

"The bonds dropped about seven points last week and have been bouncing around at the lows since then."

Primary sees $225 million

Meanwhile a relatively quiet session in the primary market saw $225 million of new issuance in two tranches from two issuers.

Austin, Texas-based independent exploration and production firm Brigham Exploration priced a $125 million issue of 9 5/8% eight-year senior notes (Caa1/B-) at 98.629 to yield 9 7/8%.

The yield came 12.5 basis points wide of the 9 3/8% to 9 5/8% price talk.

Banc of America Securities and Credit Suisse were joint bookrunners for the debt refinancing and general corporate purposes deal, which priced on the heels of an investor roadshow.

In drive-by action Baltimore modular space solutions provider Williams Scotsman priced a $100 million add-on to its 8½% senior notes due Oct. 1, 2015 (B3/B) at 101.75 to yield 8.18%.

The issue price came in the middle of the 101.50 to 102.0 price talk.

Deutsche Bank Securities and Banc of America Securities ran the books for the debt refinancing.

The original $350 million issue priced at par on Sept. 20, 2005, so the add-on notes represent a 32 basis points savings in yield to maturity for Williams Scotsman.

With Wednesday's business in the basket, primary market sources look for a single issue to price during the shortened Thursday session.

Packaging Dynamics Corp. talked its $150 million offering of 10-year senior subordinated notes (B3/B-) at 10% area on Wednesday.

Deutsche Bank Securities and Jefferies & Co. are joint bookrunners for the acquisition financing from the Chicago-based producer of flexible packaging products.

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