Qwest prices upsized deal; Blockbuster up as company plans deal; Sprint soars on takeover talk

By Paul Deckelman and Paul A. Harris

New York, Sept. 14 - Qwest Communications International Inc. came to market Monday with a quickly shopped, upsized offering of six-year notes. However, once the bonds had moved over to the secondary side, little movement was seen - in contrast to such well-received new issues last week from Global Crossing Ltd. and Standard Pacific Corp., both of which moved up solidly after pricing.

On Monday, though both of the latter deals were seen little changed from where they had finished on Friday, their strong runs apparently over.

Besides the Qwest deal, the telecommunications sector was the source of the day's other big story in Junkbondland - the sharp gain in Sprint Nextel Corp.'s paper on a weekend news report indicating that Deutsche Telekom AG, Europe's largest telecom operator, was considering making a multi-billion offer for Overland Park, Kan.-based Sprint Nextel, the third-largest U.S. cellular carrier.

Back in the primary market, upcoming new offerings were announced by Acco Brands Corp., Blockbuster Inc. and Continental Resources Inc. Blockbuster's existing bonds were better on the news that the Dallas-based DVD Blu-Ray and videogame rental company is bringing a deal

Price talk was heard on Concho Resources Inc., whose offering of eight-year notes is expected to price on Tuesday

Qwest at tight end

Qwest Communications International Inc. priced Monday's only straight-up high-yield deal - an upsized $550 million issue of 8% six-year notes (Ba3/B+) at 98.244 to yield 8 3/8%.

The yield came at the tight end of the 8 3/8% to 8½% price talk. The deal was increased from $300 million.

Citigroup, Barclays Capital, Credit Suisse and UBS Investment Bank ran the books.

Proceeds will be used for general corporate purposes, including repayment of debt, and funding and refinancing investments in the company and its subsidiaries' telecommunications assets.

Split-rated deals active

In the crossover space, DirecTV Holdings and DirecTV Financing priced $2 billion of split-rated notes (Ba2/BBB-/BBB-) on Monday in two tranches.

The $1 billion of 4.75% five-year notes priced at 99.729 to yield 4.811% with a spread of Treasuries plus 245 basis points.

A $1 billion tranche of 5.875% 10-year notes priced at 99.259 to yield 5.974% with a spread of Treasuries plus 255 bps.

Price talk for both tranches was initially in the "high 2[00]s," the source said. It was later brought down to the 262.5 bps area for the five-year notes, he said, and it priced at the tight end of that talk.

Guidance for the 10-year tranche was in the 275 bps area, with the notes pricing tighter than that margin.

And Textron, Inc. priced an upsized $600 million of split-rated senior notes (Baa3/BBB-/BB+) in two tranches: $350 million of 6.2% six-year notes priced at 99.881 to yield 6.226%, and $250 million of 7¼% 10-year notes priced at 99.749 to yield 7.285%.

The deal increased from $500 million.

Bank of America Merrill Lynch, Goldman Sachs & Co. and J.P. Morgan Securities were active bookrunners. Barclays Capital Inc. and Citigroup Global Markets Inc. were passive bookrunners.

Concho sets talk

Back in the high-yield primary, Concho Resources Inc. set price talk for its $250 million offering of eight-year notes (B3/BB-/) at 8¾% to 9%, with 1 to 2 points of original issue discount, an informed source said on Monday.

Timing of the deal has been moved up. It is expected to price mid-day on Tuesday. Initially the roadshow was expected to conclude on Sept. 19.

J.P. Morgan Securities Inc., Bank of America Merrill Lynch, BNP Paribas Securities Corp. and Wells Fargo Securities are joint bookrunners for the debt refinancing deal.

Blockbuster to sell $340 million

Blockbuster Inc. will host investor calls on Tuesday and Wednesday for a $340 million offering of five-year first-lien senior secured notes (expected ratings B1/B), according to an informed source.

Pricing is expected late this week.

JP Morgan is running the books for the Rule 144A/Regulation S for life deal.

The non-callable notes come with a springing maturity in May of 2012 if the company's 9% senior subordinated notes are not refinanced.

The notes feature a mandatory amortization at 106 covering approximately 33% by May 2012 and 63% by maturity.

The notes will rank pari passu with Blockbuster's bank debt.

They will feature covenants including a maintenance capital expenditures covenant, a mandatory asset sale debt paydown and an excess cashflow sweep covenant.

Proceeds will be used to repay the revolver, as well as the Canadian revolver, and for general corporate purposes.

The movie rental company is launching a concurrent amendment and extension of its term loan B.

Continental Resources to start roadshow

Finally, Continental Resources, Inc. will begin a roadshow on Tuesday for a $300 million offering of 10-year senior notes, which is being led by Bank of America Merrill Lynch, is expected to price early next week.

RBS Securities Inc. and Wells Fargo Securities are joint bookrunners for the debt refinancing.

New Qwest bonds quiet

A trader, who noted that Denver-based Qwest had "upsized its deal quite a bit" in bringing it up to $550 million from the originally announced $300 million, saw the new 8% notes due 2015 initially at 98¼ bid, 99½ offered, "and I assume that will tighten up."

Sure enough, a few minutes later, he said that the new bonds had tightened slightly on the offered side to 98¼ bid, 99 offered.

A trader at another desk saw the bonds "right around" their issue price of 98.244.

Sprint up on Deutsche Telekom story

If the new Qwest notes were going nowhere, Sprint Nextel was certainly going somewhere, in response to a weekend story in the U.K. newspaper The Sunday Telegraph, which reported that Europe's largest telecom operator, Deutsche Telekom, was considering making a bid for Sprint Nextel, with a possible eye towards combining the third-biggest U.S. wireless carrier with the Number-Four player in the market, Deutsche Telekom's own T-Mobile, to create a more formidable competitor to the two top dogs in the industry, Verizon Wireless and AT&T Mobility - the former Cingular Wireless - than either Sprint or T-Mobile could be on their own.

A trader said that "Sprint Nextel stuff was higher," although he said he didn't know on how much activity.

He saw the company's 8 3/8% notes due 2012 "all over the lot." He saw the bonds start the day at 103½ bid, 104, but then retreat as low as 102½ bid, 103 offered.

Going out, he said, they were "maybe 103, still up a point, 1½ points, on good volume in that issue."

A second trader noted that the issue is a relatively new deal - Sprint Nextel priced $1.3 billion of the bonds on Aug. 10, upsized from the original $500 million. The new bonds priced at 98.575 to yield 8 5/8%, "and then they traded down quite a bit."

In Monday's dealings, he said, "they're back to that level" at which they priced, around 98 5/8, pushed higher by the Deutsche Telekom buyout buzz. In fact, at one point, he said, "they traded as high as par."

The trader also saw the Sprint Capital Corp. 8¾% notes due 2032 trading in a 901/4-91 context, after having hit a peak level earlier in the day of 921/2, although he allowed that such a high print "might [just] be somebody covering a short, or something."

Earlier in the day, he noted, those same bonds were as low as 89, "so they've been all over the lot."

The bonds had moved up from lower levels seen last week - "841/2-ish" on Friday, "so they were up quite a bit today."

A market source at another shop pegged the Sprint Capital '32s ending up nearly six points on the day, at 901/4, while seeing the capital unit's bonds at 80 bid, ending up more than 7 points on the day.

No change in Nortel, despite sale news

Elsewhere in the telecom world, a trader saw Nortel Networks Ltd.'s bonds "on a little ride, based on the news" that Avaya Inc. is to acquire the bankrupt Toronto-based telephone equipment manufacturer's corporate networking business for $915 million in cash - almost double its initial $475 million "stalking horse" offer.

He said "there was a lot of volume" in the Nortel 10¾% notes due 2016, seeing them start the day at 54½ bid, 55½ offered, but ending at 52½ bid, 53 offered, which he called "almost unchanged" versus their late-Friday levels.

"The news of the sale took them up a couple of points, but they're ending unchanged. They came back down [from the earlier peaks]."

New Global Crossing holds steady

A trader said that the Global Crossing's new offering of 12% notes due 2015 "was in pretty good share all day," quoting the bonds at "103 and change."

He said they "stayed strong" in holding to the higher levels to which the Hamilton, Bermuda-based international telecom operator's new issue had risen Friday, with the bonds going out at 103½ bid, 103¾ offered.

Another trader, however, said that he had not seen much of the new bonds, contending they stayed at their late Friday levels almost by default.

On Friday Global Crossing had priced a $750 million issue of the bonds - upsized from the originally announced $650 million - at 97.944 to yield 12½%.

The new bonds were seen by traders to have firmed anywhere from 4 to 5 points in initial aftermarket dealings, finishing that session quoted north of 103.

Smithfield slates equity offering

Apart from the bond activity coming out of the telecommunications sector, a trader said that "the other big news of the day" was Smithfield Foods Corp.'s late-day announcement that it will do a $250 million equity offering, with plans to use the proceeds from the transaction for working capital and general corporate purposes, "with a goal of continuing to strengthen its balance sheet, which may include the retirement of debt."

The trader said that he did not see any immediate bond-price reaction to the news, although at another desk, a market source said that the Smithfield, Va.-based hog producer and pork processor's 7% notes due 2011 were being quoted down as much as 3 7/8 points to the 93 5/8 level - perhaps on the lack of any specific mention of using the proceeds for bond buybacks.

But the first trader said that "they don't have that much [debt] outstanding at the banks, so maybe they will take out some bonds." He noted that the company had just recently renewed a term loan, pushing its maturity out to 2014 from 2012 earlier. Smithfield has $206 million of 8% bonds maturing on Oct. 15, but "they already have the cash for that one" - a company executive said on Smithfield's quarterly conference call last week that it expects to be able to use cash on hand to meet that maturity, "so as they're shoring up the balance sheet, maybe they'll take out some more debt."

Recent new deals seen little changed

A trader said that "not much was said" Monday on very many of the new deals from last week, even including the standout secondary performers such as Global Crossing and Standard Pacific. The latter's $280 million notes due 2016 - upsized from $200 million originally - had priced at 91.997 on Thursday to yield 12½%, immediately moved up a point to around the 93 area - and then added to that on Friday, up another several points to about the mid-95 level.

Another trader said that the Irvine, Calif.-based homebuilder's new bonds traded as high as 95 3/8 on Monday and "didn't leave a great follow-up."

While he said the new bonds "were trading very well, it wasn't a good follow-up market after that trade - like 941/4-961/4, pretty wide. "

Blockbuster boost from new debt deal

Blockbuster's bonds continued their climb, following news that the movie rental chain was planning a new debt issue.

One trader said about $4 million to $5 million of the company's 9% notes due 2012 traded between 69 and 701/4. Another trader remarked that the issue "cracked 70," quoting the debt at 70 bid, 70½ offered. That compares to 67 bid, 69 offered last week.

Another trader said the notes closed around "plus/minus 70."

On Monday, Blockbuster revealed that it would give its term loan B lenders the option to trade their debt in for new notes or extend the maturity on their debt.

The notes that are being offered in exchange for term loans are senior secured notes due in 2014 that will have equal priority to liens granted under the company's credit facility.

Blockbuster is offering to sell up to $340 million of these new notes.

Proceeds from the notes that are not exchanged for term loans will be used to repay all outstanding debt under the company's revolver and Canadian asset-based revolver, and for general corporate purposes.

Some recent movers keep moving...

Elsewhere, a trader saw Freescale Semiconductor Inc.'s 8 7/8% notes due 2014 around a 77-78 range, with the last trade at 771/2, "which is up a point from last week, but on not a lot of volume."

The Austin, Tex.-based computer-chip maker had been a solid gainer last week, helped by the news that it will re-hire some workers it had let go, as orders start to pick up.

And Rite Aid Corp.'s bonds saw "some decent activity," a trader said, with its 10 3/8% secured notes due 2016 getting up to 991/2, which he called up 1½ points, "on some volume."

The Camp Hill, Pa.-based drugstore chain operator's 9½% notes due 2017 traded up to 791/2, up a point from last week, "on some volume there as well."

...but others don't

A trader said Claire's Stores Inc.'s bonds seemed to have subsided after gaining robustly across two sessions last week following the release of better than expected numbers by the Pembroke Pines, Fla.-based specialty retailer.

"I didn't see them quoted a lot today," he remarked "so I think they might have run their course." He saw the company's bonds "right around 50, still," with the 9 5/8% notes due 2015 in the same 50-51 context at which they had traded at the tail end of last week.

"I saw a lot of quotes," he said, but the bonds ended "about unchanged" from last week.

Market indicators gain again

A trader saw the CDX Series 12 index up 3/8 point at 92¼ bid, 92¾ offered, continuing the momentum seen on Friday when the index had risen ¾ point. Monday's advance was the sixth consecutive gain for the index.

The KDP High Yield Daily Index rose by 23 basis points on Monday to 67.71 while its yield tightened by 7 bps to 8.86%. The index continued the definitively positive trend seen on Friday when it had risen by 48 bps while its yield had tightened by 12 bps.

In the broader market, advancing issues led decliners for an eighth straight session on Monday, continuing to hold a roughly seven-to-four advantage.

Junk market activity, reflected in dollar-volume totals, slid by23% from Friday's level.

Stephanie N. Rotondo contributed to this report

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