Nextel sells $1 billion add-on; Broder also prices; Levi bounces off lows, Atlas Air gains

By Paul Deckelman and Paul A. Harris

New York, Sept. 17 - Nextel Communications Inc. brought a strongly upsized $1 billion mega-offering of 7 3/8% notes due 2015 to market on Wednesday as an add-on to its existing notes. Smaller deals also priced for Broder Brothers ($175 million) and emerging markets issuer PT Aneka Tambang ($200 million).

In the secondary market Levi Strauss & Co. bonds continued to gyrate around in the wake of last week's ratings agency criticisms of the San Francisco-based apparel maker, this week's assertions by Levi that an internal committee had found no evidence of improper tax-related transactions, and Levi's continuing efforts to nail down a new $1.15 billion credit facility. They opened well down from Tuesday's levels, but recovered most of the lost ground by late afternoon Wednesday.

Atlas Air Worldwide Holdings Inc. bonds were meanwhile being quoted up around five points from previous levels, in the wake of the cash-strapped cargo carrier winning the approval of its secured bondholders for terms of a proposed restructuring, which Atlas says will be achieved through a prepackaged Chapter 11 filing at year's end.

Wednesday in the new deal domain Nextel Communications, Inc. speed-dialed a massively upsized $1 billion add-on that was double from the original $500 million size and priced at 101.

Price talk had been 100.5-101, according to market sources.

The quick-to-market deal, an add-on to the 7 3/8% senior serial redeemable notes due Aug. 1, 2015 (expected ratings B2/B+) via Bear Stearns and Morgan Stanley, came with a 7.204% yield to worst.

Nextel slated "general corporate purposes," as the use of proceeds. However in Wednesday afternoon's investor conference call the company announced its intention of calling its 9¾% senior discount notes due 2007 and 12% senior notes due 2008.

In the original deal which priced on July 22, 2003 the Reston, Va.-headquartered telecommunications firm sold $1 billion at 99.803 to yield 7.4%.

"There's not that much on the forward calendar right now," commented a source close to the Nextel add-on late in the session. "However I imagine, as well as this went today, that people will start coming in."

Plymouth, Mich. sportswear distributor Broder Brothers also took off the sweats, pricing $175 million of seven-year senior notes (B3/B-) at par to yield 11¼%.

Market sources reported Tuesday that price talk on the deal, run by UBS Investment Bank, had widened to 11¼% from 10¾%-11%.

"I hear it's trading up in the secondary," said a sell-sider who did not work on the deal a couple of hours after terms emerged.

"I think, all things considered, they got pretty good execution at 11¼%. I thought it would have priced wider than that."

High yield sources also made mention of a six-B offering from Toys 'R' Us, which was said to have been played by some junk names.

The company sold $400 million of 7 3/8% 15-year notes (Baa3/BBB-) at 99.551 to yield 7.424% or 325 basis points over Treasuries via Citigroup and Wachovia Securities.

Sell side sources seemed somewhat divided as to the level of high yield play in Toys 'R' Us.

"You saw some of the usual suspects but I wouldn't say it was dominated by high yield guys," commented one, shortly after terms were heard.

Meanwhile, from the currently bristling realm of emerging markets corporate deals, terms were heard on PT Aneka Tambang/Antam Finance Ltd.'s $200 million of 7 3/8% offshore notes due 2010 (B3/B), which priced Tuesday at 97.348 to yield 7 7/8%. The notes, with ABN Amro running the books, had been marketed with a 7¾%-8% indicative coupon.

Andrew Feltus, an assistant portfolio manager with Pioneer Investment Management, told Prospect News that lately Indonesian paper, such as that which came to market from Indonesian gold- and nickel-miner Aneka Tambang, has been a little rich for his blood.

"The Asia deal-flow has been pretty consistent," said Feltus. "But you really should look at Brazil.

"AmBev came with a deal ($250 million six-B rated 10-year), which we played. It's actually one of our favorite names, and has been for a long time. With that deal you got 9% for a company that's one-times leveraged. You don't see that every day.

"We also own some Petrobras, but did not get involved with their recent deal [$250 million add-on to the 9 1/8% senior notes of 2013, Ba2, at 103.07 to yield 8.65%].

"With AmBev, Petrobras and Brazil all coming on the same day I wanted AmBev, which was the best one at the best price, with the highest yield."

Feltus also specified that Pioneer played the Innova S de RL de CV upsized $300 million 10-year senior notes (B3/B+), which priced at par to yield 9 3/8%.

"We bought it and added to it in the aftermarket," he said.

However Feltus declined the CSN Island VII offering of $200 million 10¾% five-year notes (B2/B+) that priced at 99.527 on Sept. 5 to yield 10 7/8%. "It just came to market too fast," he specified.

Overall, said the investor from Pioneer Investment Management, new issuance of emerging markets corporates is presently coming at a brick pace.

"The EM corporate pipeline is definitely getting bigger," he said. "Six months ago corporate EM had underperformed the sovereigns by a humongous amount. That has reversed, especially recently.

"Now you have names like Vitro SA trading 97, 99. That bond was trading at 82 a year ago.

"You had the CSN deal, a week before that. You had CBRD. So you are probably seeing more out of Latin America during the last month than you saw six months before that."

One additional name came into that EM corporate pipeline Wednesday. Korea Exchange Bank Credit Service Co. Ltd. will make take an offering of subordinated fixed rate notes and warrants (B3/CCC+) on a roadshow during the week of Sept. 22, via Credit Suisse First Boston.

The new Nextel 7 3/8% senior serial redeemable notes due 2015 were heard to have priced fairly late in the session - too late to move into the secondary. Meantime, a trader said, the add-on "didn't do very much for the [existing Nextel] paper.

"If anything, it softened up a little," he said, quoting Nextel's benchmark 9 3/8% senior notes due 2009 as having opened around 109 bid, 110 offered, and having eased slightly to 108.5 bid, 109.5 offered by the close. The existing 7 3/8% notes due 2015 opened at 101.5 bid, 102 offered, and finished at 101.25 bid, 101.75 offered, "a touch softer but not much trading," he said. Nextel's 9¾% notes also were easier at 103.

The trader saw Levi Strauss bonds "opening much softer," with the blue jeans giant's 11 5/8% notes due 2008 opening at 88 bid - well down from Tuesday's closing levels around 92 bid, 94 offered. But by day's end, he said, the bonds had crept at least part of the way back up, to 91 bid, 93 offered. Levi's 12¼% notes due 2012, which had finished up Tuesday at 89 bid, 91 offered, opened Wednesday offered at 89, and went out at 88 bid, 89 offered. The company's 7% notes due 2006, after finishing Tuesday at 85 bid, 86 offered, opened at 83 bid, but had crept back up to 84 bid, 85 offered by quitting time.

At another desk, the 11 5/8% notes were seen at 90 bid, the 12¼% notes at 86.5 and the 7% notes at 85.

Levi's bonds had been soundly thrashed last week after the company admitted that it would not be able to remain in compliance with all of the covenants in its existing credit facility and would instead seek a waiver from its lenders, as it continues to negotiate with the bankers on a new $1.15 billion credit facility. The company's acknowledgment that it was in covenant difficulty caused Standard & Poor's to downgrade its ratings, and Moody's Investors Service to contemplate a similar step.

Then this week, the bonds had turned north again, after Levi said that its internal audit committee - which retained an independent outside counsel and an independent accounting consultant - found no evidence that the company had engaged in fraudulent tax-related transactions, as two former Levi executives had alleged when they sued the company earlier this year for alleged wrongful dismissal.

Elsewhere, a market observer said that Atlas Air's bonds were "up big," citing news that the troubled Purchase, N.Y.-based air cargo carrier had "settled with its lenders" - probably a reference to the term sheet agreement on a likely restructuring, announced Friday, which Atlas had reached with a majority of the holders of its Class A enhanced equipment trust certificates, which are secured by liens against aircraft and other tangible assets. The agreement extends till mid-December previously reached agreements under which the EETC holders agreed to forbear on taking any action to enforce claims against the airline, provided Atlas lives up to the terms it provided in the term sheet.

Atlas further announced that it intends to implement its financial restructuring by entering into restructuring agreements with substantially all of its major creditors and lessors prior to consummating the restructuring through a pre-negotiated Chapter 11 filing in early December.

The observer said that Atlas' 8.70% notes due 2021 had firmed to 92 bid from prior levels at 85, while its subordinated 7.68% notes due 2015 improved to 35 bid from 30 previously.

Another gainer he saw was Metris Cos. Inc., which announced that it had sold $590 million of assets from its portfolio of credit-card loans (most of them to borrowers with spotty credit histories). It also announced that it had obtained $610 million in replacement funding for asset-backed debt which was scheduled to mature in January.

The Minnetonka, Minn.-based financial services company's 10% notes due 2004 and its 109 1/8% notes due 2006 were both quoted as having moved up to 71.5 bid from prior levels at 68.

International supermarket giant Royal Ahold's 6¼% notes due 2009 gained two points to close at 97.5 bid, after the Dutch-based company announced that its non-executive chairman, Henny de Ruiter, would resign at a shareholders' meeting likely to be held next month.

The company also said that chief executive officer Anders Moberg would give up his guaranteed severance pay and instead link what previously had been his fixed bonus pay to his performance. The company retreat on the executive pay issue followed a torrent of outrage from shareholders, bondholders and other interested parties about Moberg's lucrative deal with the company, which is still struggling to put accounting problems and underperformance by some units behind it.

At another desk, however a trader said that he had seen "no real change" in the Ahold bond levels, quoting the 61/4s at 97 bid, 99 offered, "up maybe a point," and its 6 7/8% long bonds due 2029 at 86 bid, 87 offered, "no real change, or maybe up a half [point]." He quoted Ahold's 8¼% notes due 2010 at 105 bid, 107 offered, but said those bonds had been at that level for at least a week.

Solutia Inc.'s bonds were seen firmer, with the St. Louis-based chemical company's 7 3/8% bonds due 2027 having firmed to 60.125 bid from recent levels around 58.25 bid; its 11¼% notes due 2009 were more than a point better than beginning of the week levels at 92.75 bid; and its 6.72% bonds due 2037, which are putable in 2004, were a point better at 89.75.

A trader said that the bonds had had "a pretty decent run," but said he didn't know what was behind the latest advance; in late August, Solutia's bonds had risen after the company and former corporate parent Monsanto Co. reached a settlement with the community of Anniston, Ala. over the town's claims for damages for decades of PCB pollution. Last week, Solutia said that two Alabama judges had approved the $600 million settlement, under which Solutia will be responsible for $50 million, payable over a number of years - far less than it was potentially liable for,

And court developments gave a boost to the bonds of BBB issuer Altria Group Inc., which announced that the Illinois Supreme Court had agreed to hear its appeal of a lower court's $10.5 billion smoking damage verdict against its subsidiary, cigarette maker Philip Morris USA. The high court also cut in half the $12 billion bond which the lower court had ordered the cigarette company to post in order to appeal the ruling.

Hopes that the company might prevail on appeal and avoid having to possibly consider bankruptcy sent Altria's bonds up anywhere from half a point to three points, except among the very shortest issues, which were unchanged. Altria's 8¼% notes due Oct. 15 and its 6.80% notes due Dec. 1 were both unchanged at 100.25 bid and 100.625, respectively; its 7% notes due 2005 were three-quarters of a point better, at 104.5 bid, and its 7.75% bonds due 2027 were three points better, at 101 bid.

Tobacco industry peer RJ Reynolds rose in sympathy with Altria, and on the company's announcement that it planned some belt-tightening measures; RJR's 7¼% notes due 2012 moved up to 89 bid from 85 while its 6½% notes due 2007 rose to 93.5 bid from 91.

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