Nextel prices billion-dollar deal; Mandalay Resort upsizes offering

By Paul Deckelman and Paul A. Harris

New York, July 22 - Nextel Communications Inc became the latest in a recent string of borrowers to tap the junk bond market for issues of $1 billion or more. The wireless carrier's new bonds were heard to have initially firmed, before coming off their peak levels to end only moderately higher on the day.

And Mandalay Resort Group was heard to have upsized its quickly marketed six-year note issue.

Those two deals sent the rip-roaring 2003 junk bond market over yet another significant threshold.

The Nextel deal, in addition to the upsized $250 million drive-by from Mandalay Resort Group, which also priced Tuesday, set the 2003 new issuance mark at $78.59 billion in 271 tranches, according to data compiled by Prospect News. Year-to-date new issuance, which had already left the total 2002 new issuance ($59.65 billion in 252 deals) and the 2000 new issuance ($44.44 billion in 152 deals) trailing in its wake, has now, with Tuesday's transactions, topped the 2001 total: $77.37 billion in 288 deals.

With seven sessions remaining in July - and just shy of half a year's worth of calendar pages left to turn - 2003 appears poised to mount a meaningful assault on 1999's numbers: $92.56 billion in 377 tranches.

"High yield is obviously very hot," one sell-side source commented late Tuesday. "There are maybe 20 deals in the market.

"Actually, with a few of them it's a little difficult to say who is in and who isn't," the source added. "I think there are some people pacing the sidelines, watching to see how these transactions are going to go.

"But I think that the deals that we've been hearing about over the last couple of days are deals that are supposed to get done before the August holidays roll around and everybody heads out on vacation. Those would include the ones that showed up Monday and the ones that showed up today.

"And we will probably see a few more show up tomorrow," the official warned during the late Tuesday telephone conversation with Prospect News.

Tuesday's session saw a quartet of prospective issuers join hands with their investment bankers as they prepared to head out onto the busy high yield road.

Marietta, Ga. based box-maker Riverwood International Inc. came off of the sidelines Tuesday, announcing that it will begin marketing $850 million in two tranches during the present week

The company will sell one tranche of senior notes due 2011, non-callable for four years (B2/B-) and one tranche of senior subordinated notes due 2013, non-callable for five years (B3/B-).

Goldman Sachs & Co., Deutsche Bank Securities Inc., JP Morgan, Morgan Stanley, Credit Suisse First Boston and Citigroup are joint bookrunners on the Riverwood deal, which is expected to price late in the week of July 28.

Boston-based business information firm Advanstar Communications Inc. got down to business on Tuesday, as it began roadshowing a $400 million two-tranche offering second priority senior secured notes (B-). The deal includes a tranche of fixed rate notes due 2010, which will be non-callable for four years, as well as a tranche of floating rate notes due 2008.

Credit Suisse First Boston is the bookrunner on the Rule 144A deal. Fleet Securities is a co-manager.

The roadshow is set to begin Thursday for Southern Star Central Corp.'s offering of $180 million of seven-year non-call-four senior secured notes (B1/B+), which is expected to price on August 1 via Lehman Brothers.

And a July 23-28 roadshow was heard to be in the offing for Select Medical Corp.'s $175 million of 10-year non-call-five senior subordinated notes (B2/B), also expected to price on July 28. JP Morgan and Merrill Lynch are joint bookrunners for the Mechanicsburg, Pa.-based company's deal.

During Tuesday's session one more mammoth waded through the high yield market, as Reston, Va.-based wireless communications company Nextel Communications sold $1 billion of 7 3/8% senior serial redeemable notes due Aug. 1, 2015 (B2/B+) at 99.803 to yield 7.4%, according to syndicate sources.

Bear Stearns & Co. and Goldman Sachs were joint bookrunners.

Also pricing Tuesday was an upsized, quick-to-market offering from Mandalay Resort Group of $250 million senior notes due July 31, 2009 (Ba2/BB+). The notes, which priced at par, were increased from $200 million and came with a yield of 6½%, spot on the 6½% area price talk. Banc of America Securities, Deutsche Bank Securities, Citigroup, Credit Suisse First Boston and Merrill Lynch were bookrunners.

During Tuesday's session two deals were heard to be completing their marketing regimens.

The price talk is 7¼%-7½% on Kinetic Concepts Inc.'s offering of $205 million 10-year non-call-five senior subordinated notes (B3/B), which are expected to price on Wednesday via Morgan Stanley and Credit Suisse First Boston.

And price talk of 8¼%-8½% emerged Tuesday on Payless ShoeSource, Inc.'s $200 million of 10-year non-call-five senior subordinated notes (Ba3/B+), which are also expected to price on Wednesday, via Goldman Sachs.

When the new Mandalay 6½% senior notes due 2009 were freed for secondary activity Tuesday afternoon they were heard to have moved up to 100.5 bid, 101 offered from their par issue price.

Meantime, when the new Nextel 7 3/8% senior notes due 2015 began changing hands in the secondary sphere they traded at bid levels as high as 101-101.25, before falling back to end at par bid,100.5 offered, a trader said. Another trader, who pegged the bonds going home at 100.25 bid,100.5 offered, said that having firmed from their 99.803 issue price, the new Nextels were "doing OK."

Traders also noted little or no movement in the Reston, Va.-based wireless operator's existing debt, even after Standard & Poor's raised its corporate credit a notch to BB- from prior levels at B+ on Monday, while Moody's Investors Service on Tuesday jumped on the upgrade bandwagon, raising its senior unsecured rating for Nextel to B2 from B3 previously.

But those in the market said that ratings upgrades or no, "there's not a lot of room for that name to move up," with Nextel's 9 3/8% notes due 2009 already trading at 108 bid, 108.5 offered.

A market observer concurred with that assessment, pegging Nextel's 9½% notes due 2011 at bid levels around 111.75-112.

Elsewhere, Lucent Technologies Inc.'s bonds were heard trading at least a point better across the board, after the Murray Hill, N.J. -based maker of telecommunications equipment announced that it had signed a $1 billion contract with Sprint Corp. to upgrade the latter's U.S. wireless network. Under the terms of the multi-year pact, Lucent will provide Sprints' PCS wireless unit with advanced mobile equipment, including base stations, switching equipment, and related software and services.

"Yeah, they were up alright," a trader said, quoting Lucent's 7¼% notes due 2006 at 95.125 bid, 95.875 offered. Another trader quoted those bonds left bid at 95.5, with Lucent's 2008 notes at 84 bid, 85 offered, and its 6.45% bonds due 2029 offered at 69.5, "up a little on that big contract." A market source saw those latter bonds at 68 bid, up a point-and-a-half.

Also in the telecom sphere, a market source saw American Cellular Corp.'s 9½% notes due 2009 "up a lot" over the past few sessions, "five or six points," at 63 bid, 63.5 offered.

Steel issues continued to slowly regain the ground that they had lost after AK Steel Corp. reported poor second-quarter results on Friday, continuing a trend which was also seen in Monday's dealings.

AK's 7 7/8% notes due 2009, which had initially fallen more than 10 points on Friday before firming off those lows to come halfway back during that session and then added on another point or so Monday, were quoted at one desk at 76 bid, up a point. Its 7¾% notes due 2012 - which trade a point or two behind the 7 7/8s - were likewise seen in the mid 70s Tuesday.

Oregon Steel Mills Inc.'s 10% notes due 2009, which had dropped two points on Friday and a third on Monday, got most of that back Tuesday, when they were up more than two points to end at 86.25. United States Steel LLC's 10¾% notes due 2008 were in the 102.5-103.5 bid range.

Levi Strauss & Co.'s bonds were "a little better, though on no news," a trader said, quoting the San Francisco-based apparel maker's 11 5/8% notes due 2008 as having gone home Monday at 90.5 bid, 92 offered, but then having risen to 91.5 bid, 92.5 offered at the opening Tuesday and at 92.5 bid, 93.5 offered by Tuesday's close.

On the earnings front, Tenneco Automotive Inc. bonds were firmer and its shares jumped after the Lake Forest, Ill.-based auto parts maker said its second-quarter earnings rose to $24 million (58 cents a share) from $19 million (45 cents a share) a year ago. Analysts had only expected 28 cents a share of earnings in the latest period. The company cited the strong euro and higher sales of emission-control products in Europe in explaining its substantially better-than-expected quarterly performance.

Tenneco's shares jumped 90 cents (21.58%) in New York Stock Exchange dealings, to $5.13. On the bond side, the company's 11 5/8% notes firmed half a point, to 86.5 bid, 88.5 offered.

"There was nothing spectacular in them," a trader said, "but there a defined market - something you don't often see with this name."

Another trader saw Tenneco's 7 5/8% notes at 86.5 bid, 87.5 offered and its 10¼% notes at what he termed "a 102-103ish-type bid.

"But other than that - it was a little quiet today."

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