Six Flags, Hanover Compressor deals price; Levi bounces back from slide

By Paul Deckelman and Paul A. Harris

New York, Dec. 2- Six Flags, Inc. priced an upsized, quickly shopped offering of 10.5-year notes Tuesday, while an issue of zero-coupon notes due 2007 from Hanover Compressor Co. came to market. Several issuers were also heard to be getting ready to hit the road on Wednesday to sell prospective deals, including Sweetheart Cup Co. Inc., Mariner Health Care, Inc. and Krayton Polymers LLC.

In the secondary arena, Levi Strauss & Co. bonds - which on Monday had fallen around four to five points across the board on the market's assumption that a debt restructuring was near, following the abrupt departure of the company's chief financial officer and his replacement by an executive of a well-known turnaround specialist firm - bounced off their lows, seemed to recover all of their lost ground, but ended somewhat below those highs, although they were still up two to three points on the session.

The primary market got its legs beneath it during Tuesday's session as over half a billion of business went down in two transactions. Meanwhile issuers continued to stuff the pre-Christmas pipeline with offerings of new junk bonds.

Sources in the investment banks who have lately been telling Prospect News that form alone should keep people from trying to price new issues during the abbreviated Christmas week (three sessions counting Christmas Eve) did a little bit of reassessing on Tuesday.

"The market is on fire," exclaimed one sell-side source who stopped a moment to parse the session's high yield news.

"But this won't last very much longer, I don't think. It used to be that nobody really tried to do very much throughout the month of December. Obviously that's not the case this year.

"Still," concluded the official, "I don't think you start a roadshow after tomorrow for a deal that you plan to price before Christmas."

However another source from the sell-side said that recent years provide little in the way of useful reference for the presently rallying high yield.

"The pipeline is really filling out," said the source. "From what we're seeing we think it's going to be busy right up to the end. It may even spill over into Christmas week; hopefully not, but there might be one or two things wrapping up."

This official also said that the burst of drive-by activity that was seen in the primary market during the run-up to Thanksgiving is likely to continue.

Theme park operator Six Flags rolled in with Tuesday's sole drive-by deal an upsized $325 million of 10.5-year senior notes (B2/B-) that priced Tuesday at par to yield 9 5/8%.

Lehman Brothers ran the books on the refinancing deal, which came at the tight end of the 9 5/8%-9¾% price talk and was increased from $300 million.

Also on Tuesday terms emerged on a seller note offering of bonds issued by Hanover Compressor. Schlumberger Ltd. sold $262.6 million face amount of the Hanover Compressor zero-coupon subordinated notes due March 31, 2007 (Caa1/B-) at 69.307 for a yield to maturity of 11 3/8%, in the middle of the 11¼%-11½ price talk. Goldman Sachs & Co. ran the books on the zero-coupon-for-life notes, the sale of which generated $182 million of proceeds for Schlumberger.

Meanwhile Tuesday the forward calendar continued to build.

The roadshow starts Wednesday for Kraton Polymers LLC and Kraton Capital Corp.'s offering of $230 million of 10-year senior subordinated notes (B3/expected B-), which are expected to price on Dec. 11 or 12.

Goldman Sachs and UBS Investment Bank will run the books for the LBO deal from the Houston specialty chemicals company.

Another roadshow starting Wednesday will feature the new offer from Sensus Metering Systems Inc., of Raleigh, N.C.: $225 million of 10-year subordinated notes (Caa1/B-), which are expected to price on Dec. 11 or 12.

Credit Suisse First Boston and Goldman Sachs are joint bookrunners on the acquisition financing deal.

Mariner Health Care, Inc. will also begin its roadshow Wednesday for $175 million of 10-year senior subordinated notes (B3), which are expected to price on Dec. 12.

CIBC World Markets, JP Morgan and Lehman Brothers are joint bookrunners on the offering from the Atlanta, Ga.-based owner-operator of skilled nursing and assisted living facilities, and long-term acute care hospitals.

Canton, N.C.-based paper products and packaging manufacturer Blue Ridge Paper Products Inc. will also start its roadshow Wednesday for $125 million of five-year senior secured notes, with Jefferies & Co. as bookrunner on the debt refinancing deal.

And Jefferies will also run the books for Sweetheart Cup's offering of $95 million of senior secured notes due 2007 (expected ratings Caa1/CCC), with the roadshow, again, starting Wednesday.

The Owings Mills, Md. converter and marketer of disposable food service products will also sell $20 million of 9½% junior subordinated notes due 2008 to International Paper Co.

In emerging markets action Tuesday Petrobras International Finance Co., the Brazilian petroleum giant, was heard to be in the market with a 15-year deal (Ba2), via Lehman Brothers and Credit Suisse First Boston.

Prospect News asked one senior emerging market sell-side official whether the new Petrobras paper was expected to mature in 2018 or 2019.

"I don't know," the official responded, "but I would think that they would go with 2018, because 15 years is already a tough maturity for a lot of people.

"In emerging markets, on the sovereign side, the markets go out with a lot of liquidity after 30 years. And Petrobras is certainly like a lot of other companies in our market - Pemex, for instance - which would have no trouble issuing for 30 years.

"But given that Petrobras has tried to market itself to the crossover universe, and especially the high yield universe, I think 15 years is a long maturity."

Meanwhile the roadshow starts Wednesday in London for a $300 million 10-year notes offering from Telemar, a holding company for Brazilian fixed wireline and cellular telephone company Tele Norte Leste Participacoes.

Although the notes have a Baa3 rating from Moody's Investor Services, they are expected to generate interest among crossover and high yield-focused names, according to an informed source.

JP Morgan will run the books.

Prospect News asked one emerging markets sell-side official, on Tuesday, whether the stage was set for the rally in that market to carry on into 2004 - a question to which the official responded with guarded optimism.

"The emerging markets have been rallying amazingly and Brazil has probably been more amazing than anything," the official said.

"The emerging markets fund index, JP Morgan's EMB-Plus, is now at a spread of 441," the source added. "At the beginning of the year we said it would get to 500 by the end of the year, so it has rallied beyond expectation.

"Anytime you get that tight you get cautious about projecting further tightening. But in general we are constructive on the fundamentals of the market."

When the new Hanover Compressor zero-coupon notes due 2007 were freed for secondary dealings, a trader saw the bonds move up to 71 bid from their 69.30 issue price earlier in the session. The Six Flags bonds emerged too late in the session to trade in the aftermarket.

As had been the case on Monday, Levi Strauss bonds were clearly the day's big mover - though on Tuesday they were moving in the opposite direction from Monday's activity.

On Monday, the Levi bonds had fallen around four or five points across the board, down to the mid-to-upper 60s, after the San Francisco-based blue jeans giant announced that it had retained the turnaround specialist firm Alvarez & Marsal, one of whose executives, managing director Jim Fogerty, was named Levi's interim chief financial officer in an abrupt management shuffle, replacing five-year CFO Bill Chiasson. The move was interpreted by many in the market as a sign that a debt restructuring - with the possibility of a bondholder haircut - is now seen as much more likely.

But however vivid those fears may have been on Monday, they had receded in Tuesday's session, with investors taking advantage of the five-point cheapening up to buy the bonds.

"They were down this morning," a trader said, "but then they moved back up." He quoted Levi's 11 5/8% notes due 2008 as having opened around 69 bid, 71 offered, then having moved as high as 74 during the session before coming off that peak to close at 72 bid. 74 offered, "up maybe three points on the bid side," he said.

The trader also saw Levi's 7% notes due 2006 as having opened around 65 bid, 68 offered, then having moved up, before falling from the day's peak level to end at 69 bid, 70 offered.

At another desk where the day's gains were estimated at a more modest two points, the 11 5/8s closed at 72.5 bid, while the company's 12¼% notes due 2012 went home quoted at 70.5.

A source at that shop meantime said that there had been some activity in Burns Philp & Co. Ltd. debt, despite an apparent lack of fresh news about the Sydney, Australia-based baking supplies firm.

The company's 9¾% notes due 2012 were seen having improved to 106 bid from 103.5 on Monday, while its 10¾% notes had moved up to 108.25 from 104 previously.

Elsewhere, a market source saw Seagate Technology's 8% notes due 2009 having moved up to 108.5 bid, well above recent levels just above par, although he could give no explanation for the firmness in the computer disk drive manufacturer's paper.

Also in the high-tech area, Flextronics International Ltd.'s 6½% notes and its 9¾% notes were at 109, up half a point in each case, after the electronics manufacturer said its outlook for the current quarter and next was unchanged from prior projections, which see business strengthening.

Beverley Enterprises Inc.'s 9 5/8% notes due 2009 were seen up about 1¼ point to 110 bid after the Fort Smith, Ark. -based nursing home operator said it would post a gain from its sale of 21 nursing facilities in the western U.S. for an undisclosed sum. It said the proceeds would go to pay down debt.

On the downside, Hollywood Entertainment Corp.'s 9 5/8% notes due 2011 lost a point-and-a-half to end at 106.5, after the Oregon-based movie rental chain warned that its fourth-quarter results could come in below expectations due to continued weakness in the video rental market.

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