Advanced Medical, Coleman Cable deals price; Technical Olympic gyrates; Bowater off

By Paul Deckelman and Michelle Anderson

New York, March 27 - Advanced Medical Optics Inc. priced an upsized offering of 10-year senior subordinated notes Tuesday and traders saw the Santa Ana, Calif.-based ophthalmic medical devices company's new issue trade quietly higher when it was freed for aftermarket activity.

Also pricing was a $120 million add-on tranche to Coleman Cable Inc.'s existing 9 7/8% senior notes due 2012.

And French sugar producer Tereos was seen getting ready to hit the road later this week to market a €400 million offering of seven-year notes to prospective investors.

In the secondary market, apart from the gains in the new Advanced Medical Optics bonds, traders saw a mostly down market, largely becalmed with many decision makers away at not one, but two large out-of-town industry conferences.

Against that backdrop of relatively thin overall activity, the troubles of the homebuilding sector came home to roost, with Beazer Homes USA Inc.'s bonds falling in late trading on the news that the Atlanta-based builder is being investigated by the FBI.

Another name in the sector which has been getting solidly whacked all this past week, Technical Olympic USA Inc., was seen bouncing crazily around at mostly lower levels before settling in with relatively small losses on the day.

Paper and forest products names were seen getting crushed, traders said, after major industry player Bowater Inc. forecast lower first-quarter results. One particularly hard-hit name was Tembec Inc., which has already been heading lower recently in response to factors such as foreign exchange rate fluctuations.

Advanced Medical upsizes deal

Advanced Medical Optics kicked off the activity in the new-deal market by pricing $250 million of new 10-year notes (B2/B), up from the $200 million originally planned.

The bonds priced at par to yield 7½%, at the tight end of pre-deal market price talk envisioning a yield in the 7½% to 7¾% area. The spread over comparable Treasuries was 290 basis points.

The Rule 144A/Regulation S deal, sold with registration rights, was brought to market via joint bookrunners managers UBS Investment Bank and Goldman Sachs & Co.

The bonds are non-callable for five years.

The company plans to use the deal proceeds to partly finance its acquisition of Intralase Corp.

Coleman Cable prices add-on

Also heard successfully coming to market Tuesday, junk market sources said, was Coleman Cable's upsized add-on offering of 9 7/8% senior notes due 2012 (B2/B). The Waukegan, Ill.-based electrical wire and cable products manufacturer had initially expected to sell $100 million of additional notes, on top of the original $120 million of notes which it first sold in September 2004.

The add-on bonds priced at 102.875, for a yield-to-worst of 8.9% and a spread of 443 bps over Treasuries.

The bonds will be callable in October 2008.

Wachovia Securities brought the Rule 144A/Regulation S deal, sold with registration rights, to market.

Proceeds will be used to partially fund the company's acquisition of Copperfield LLC.

Continental prices equipment certificates

Late in the session, details of a high-flying deal from Continental Airlines made the rounds of the market.

The carrier priced three tranches of equipment certificates, each at par, one of them junk rated.

Tranche A, with a face amount of $756.762 million and rated A by Standard & Poor's, carries a coupon of 5.983%. Tranche B, with a face amount of $221.85 million and rated BBB- by S&P, carries a coupon of 6.903%. Tranche C, for a face amount of $168.198 million and rated B+, carries a 7.339% coupon.

Underwriters on the deal were Morgan Stanley & Co. Inc., Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith, Inc., Citigroup Global Markets Inc., UBS Securities LLC, Calyon Securities (USA) Inc., and JP Morgan Securities Inc.

Sweet deal for French firm

And sources heard French sugar producer Tereos going on the road starting Thursday to sell its €400 million of seven-year senior notes.

Calyon is the bookrunner for the Rule 144A/Regulation S deal, which is being sold without registration rights.

The roadshow starts in London on Thursday and then makes stops around continental Europe, including Frankfurt and Paris, with pricing set for the middle of next week.

The company will use the proceeds of the deal to refinance a subordinated bridge loan.

New Advanced Medical notes move up

When the new Advanced Medical Optics 7½% notes due 2017 were freed for secondary dealings, a trader saw the bonds hit as high as 101.25 bid, before they settled in at 100.75 bid, 101.25 offered, up from their par issue price.

Another trader saw them at 100.875 bid, 101.125 offered.

However, another trader, while quoting the new bonds about a point higher, said "it must not have been too hot a deal. It was definitely quiet, a smallish deal. I saw not too many flashes on it." He further called it "a sleeper."

Conferences limit market participation

That's pretty much the way another trader saw the whole market, noting that many portfolio managers and other buyside decision makers were off at either the Lehman Brothers high yield and leveraged loan conference in Phoenix, or at the Citigroup conference taking place in Colorado.

That, he said, left "the whole market dead in the water. Nobody cares about anything."

Homebuilders seen heavy

The trader said that against that backdrop of reduced activity, "Lennar set the tone. Things were heavy right out of the chute."

The biggest U.S. homebuilder, whose bonds trade off the investment-grade desks at most shops, reported a 73% fall in fiscal first-quarter earnings from a year ago, demolishing the company's earlier, more optimistic forecasts of better times ahead in 2007.

"The homebuilders got crushed," he said. "The stuff was overdone on the upside," when virtually the whole sectors' bonds traded at or well above par, "and now, its overdone on the way down."

One junk-rated homebuilder seen bringing down the sector was Beazer Homes, stung by the news that the FBI will investigate allegations of mortgage fraud and other problems. A trader saw its 8 3/8% notes due 2012 at 97 bid, 98 offered, down a point, and estimated all of the company's bonds down half a point to a point.

Another trader though saw the Beazer bonds down "3 to 5 points on the longer end."

He pegged the five-year CDS contracts on the company's debt as having widened out to as much as 420/450 bps over Treasuries from prior levels around 300/310 bps, before steadying and ending about 400/420 bps over.

However, he admitted this was "a touch overdone."

Another trader saw the 8 3/8s at 96 bid, down from 102 "the other day."

Technical Olympic gyrates

Elsewhere in the sector, Technical Olympic "was the big mover," a trader in distressed credits opined. "That was the most exciting one."

He saw the company's beleaguered 10 3/8% notes due 2012 - which on Monday had fallen another 5 points to around 68 bid, 70 offered - collapsing down to lows around 58 bid in Tuesday's early trading, but later coming off those lows to end around 66 bid, which given the context of the bonds' wild swing, he termed "just under unchanged."

"What a difference a day makes," said another trader, who noted that the bonds had been trading in the lower 70s for much of Monday, before sliding down into the upper 60s on rumors that all of troubled Transeastern's more than $600 million of outstanding debt may end up head of Technical Olympic's own bonds in the event of a bankruptcy filing or other restructuring scenario.

He too saw the bonds picking up early Tuesday where they had left off late Monday, and continuing to plummet, before hitting rock bottom around 58.5 bid, 61.5 offered, and then moving back up to closing levels around 65.

A market source reported that the bonds - one of the most actively-traded issues of the day, according to Trace, Nasdaq's bond-transaction tracking system - pushed as high as a 70-71 context during the afternoon, before ending at 69 bid, actually a bit higher than Monday's levels.

The Technical Olympic bonds managed to rebound off their nadir after RBC Capital Markets issued a research report, the first trader said, "essentially saying that the assets are covered" in the event of a bankruptcy or restructuring scenario, or even up to a liquidation.

"I think that the assumption that the parent [i.e. Technical Olympic] takes over Transeastern, is already well out there. So that's going to happen," he declared. He said the report outlined two potential scenarios - Technical Olympic taking on $400 million in debt, or, alternatively, all $625 million of its half-owned subsidiary's obligations.

"Basically, what they're trying to do is haircut the assets and say there's still asset coverage. I don't think I'd buy it, based on that - but somebody is."

Addressing the concerns that caused the bonds to fall on Monday - bondholder angst about the prospect of the parent's bond debt being pushed lower on the food chain than the subsidiary's debt - he declared that "there's no doubt that a portion of [Transeastern's debt] is going to be higher" than Technical Olympic's bonds. "Everybody accepts the fact that at least $400 million of debt taken on, if they consolidate this JV, is going to be higher" in Technical Olympic's capital structure than its own bonds - "it's going to be bank debt," which routinely ranks ahead of bond debt in any corporate restructuring scenario.

The big question, he continued, "is what about the other $225 [million] - where is that going to fit in? It's still up in the air, really. They're still trying to negotiate with Deutsche Bank, which owns most of it."

"Tech Olympic definitely continued to be the worst performer of the [homebuilders'] group," said another trader of the big drop in the bonds Monday and the bounces seen Tuesday, "as the whole Transeastern thing continue to put serious pressure on them."

Besides the 10 3/8% notes, he said that the company's 7½% notes due 2015 and its 7½% notes due 2011 were also rocking and rolling crazily, with the former coming off its lows to end the day around 67.5 bid, and the latter doing the same and going out at 64.5.

"The research report said that if there is a possible Chapter 7 [liquidation proceeding], there's enough asset coverage that they'll be OK," he said, so the bonds "had a nice move today, down and up."

Bowater gets bopped

Outside of the homebuilders, the paper names were weaker after Bowater said first-quarter operating income will drop as much as $20 million from the previous period because of slumping demand for newsprint and lumber.

A trader quoted its 6½% notes due 2013 "off a couple of points," with its 6½% notes due 2013 down a deuce at 89.5 bid, 90.5 offered. Its 9 3/8% notes due 2021 were off 2½ points at 98.

Abitibi-Consolidated - being acquired by Bowater - was also off, its 8 3/8% notes due 2015 off more than 2 points at 93.5.

Tembec tumble continues

With the whole sector already moving lower, Tembec "was a mover today," a trader in distressed bonds said, quoting the Montreal-based forest products company's 8 5/8% notes due 2008 at 68 bid, 70 offered, down from 71 bid, 73 offered previously, and its 8½% notes due 2014 and 7¾% notes due 2012 each down 2 points on the day at 62 bid, 63 offered and 60 bid, 61 offered, respectively.

Tembec's bonds have come off recent high levels, some market participants have said, because of currency fluctuations, which hurt the company's sales to customers in the United States and elsewhere outside Canada. The latter country's currency meantime was markedly stronger on Tuesday, with foreign exchange traders citing the failure of the separatist Partie Quebecois, which wants to break the mostly French-speaking province away from largely English-speaking Canada, in Monday's provincial legislative elections.

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