Chiquita bonds lower on numbers; semiconductors strong; primary quiet

By Paul Deckelman and Paul A. Harris

New York, Aug. 3 - Bonds of Chiquita Brands International Inc. were seen lower Friday as investors reacted to the disappointing earnings numbers released after the market close Thursday by the Cincinnati-based fresh fruit and vegetables concern. Sector peer Dole Food Co., affected by many of the same industry dynamics, was also lower.

Another name on the downside was Boston Scientific Corp., whose debt ratings were cut to junk level by Standard & Poor's and Fitch Ratings, bringing them in line with Moody's Investors Services' prior demotion of the debt to below investment grade.

On the upside, high-tech names like Freescale Semiconductor Inc., Advanced Micro Devices Inc. and Amkor Technology Inc. were seen higher, possibly helped by a semiconductor industry report showing sales up slightly in the year's first half versus year-ago levels.

A high yield syndicate official said that the broad market ended the Friday session weaker, but added that it had held in through much of the session before trading off in tandem with the rout in the equities markets which took shape late in the day.

No news whatsoever emerged from the primary market on Friday.

Chiquita gets chopped

A trader saw Chiquita Brands' 8 7/8% bonds due 2015 at 85, which he called down a point or two from prior levels.

Another trader saw both of the company's bond issues down 2 points, the 7½% notes due 2014 at 82 bid, 83 offered and the 8 7/8s at 84 bid, 85 offered.

A market source also called the 71/2s down a deuce at 82.

Chiquita's New York Stock Exchange-traded shares meantime got peeled to the extent of $4.17 (22.81), ending at $14.11. Volume of 4.5 million shares was more than five times the norm.

That slide followed the announcement late Thursday that the company, best known as a leading banana importer and salad producer, saw its second-quarter profit fall 62% year over year to 20 cents per share, well down from the 47 cents per share that analysts were looking for.

The profit slide was mostly due to higher raw product and food-safety costs, which hurt its salads and healthy snacks segment.

A trader said that Dole's 8 5/8% notes due 2009 were down a point at 96.5 bid, 97.5 offered, calling it a case of sector sympathy, since the two companies are affected by much the same industry dynamics.

Another market source saw the Westlake Village, Calif.-based produce producer's 8 7/8% notes due 2011 down 1½ points at 92 bid.

Boston Scientific lower on downgrade

A trader saw Boston Scientific's 6.40% bonds due 2016 mostly trading in the 85 to 87 area, declaring that the paper had already been in that region and the twin ratings downgrades from S&P and Fitch "had already been priced in."

But a market source saw the Natick, Mass.-based medical products company's busily traded 6.40% notes going home quoted just below 87, down about 2 points, while its 7% bonds due 2035 were off more than 3 points at 81.75.

Its 5 1/8% notes due 2017 were quoted as having fallen to 76.75 bid - well down from the levels around 90 at which the bonds had traded in June.

The ratings agencies cut the company to junk status after Boston Scientific announced that it would not go through with a planned IPO for one of its units, which might have brought in as much as $1 billion of proceeds that could have been used to cut debt.

Semiconductor names higher

Technology names were seen better, led by Freescale's 10.13% bonds due 2016, which were up nearly 3 points on the day at 88.75.

Also up were AMD's 7¾% notes, seen better by 1½ points at 89. And Amkor's 7¾% notes due 2015 were up nearly 2 points at 91.75.

The companies were probably helped by a new report from the San Jose, Calif.-based Semiconductor Industry Association, which said that worldwide sales of semiconductors grew to $121 billion in the first half of 2007, up 2% from the $118.4 billion reported for the first half of last year.

Sales were $20 billion, down 1.7% from $20.3 billion the preceding month.

Homebuilders weaker again on subprime jitters

A trader saw WCI Communities' 9 1/8% notes due 2012 "stronger in the morning" when the market "had a firm tone, though on not a lot of volume." By the end of the day, he said, they had come in about 4 points, finishing around 78, down from their early highs at 82.

Another market source saw an even more pronounced retreat in the issue as the day went on, seeing the bonds start out around 81 bid and trade in the lower 80s all morning and into the mid-day - only to then start edging down into the high 70s, and then the mid 70s, on busy dealings, before ending the session around the 76 area.

Yet a third trader saw the bonds down 5 points at 75 bid, 77 offered

In that same sector, the first trader saw erosion in Beazer Homes USA Inc.'s bonds, which had initially gotten crushed on Wednesday on bankruptcy rumors and continued investor concern about ongoing federal investigations of the Atlanta-based homebuilder; those bonds then firmed off their lows later Wednesday to end only moderately lower on the day, and continued to rebound on Thursday.

However in Friday's dealings, the trader saw the 8 3/8% bonds due 2012 retreating to 78.5 bid, 79.5 offered from Thursday's close around 82.

Another trader saw the company's 6½% notes due 2013 dip to 74 bid, 75 offered, down 3 points on the day.

And continuing the theme of homebuilder sector weakness, he saw Technical Olympic USA Inc.'s 10 3/8% notes due 2012 down 2½ points at 53 bid, 56 offered.

Overall, a trader said that the market was "a little dull," owing to the summer Friday effect, "with not a whole lot of volume. It looked like we were getting a little whipsawed here."

He said that "there's still a fair amount of bids out there, still a good base - I'm not saying things are running up in here, but I think accounts are trying to take advantage of some weakness in some paper here."

A shutout

No high yield issues were priced during the July 30 to Aug. 3 week.

Hence at Friday's close, year-to-date issuance came to $111.3 billion in 288 dollar-denominated tranches.

Nevertheless the 2007 primary market maintains a commanding lead in year-over-year issuance versus that of the record-setting year of 2006.

At the Aug. 3, 2006 close, the primary market had seen $79.8 billion in 231 tranches.

Market's closed

Very little discussion of any kind surfaced Friday concerning the new deal market, and, as had been the case throughout the latter part of the July-August crossover week there were sources who maintained that "the credit markets are closed" until further notice, and possibly until after Labor Day.

Nevertheless there were at least two high yield syndicate officials who advised Prospect News to post on its forward calendar the following deals, as business that could possibly be concluded by the Friday, Aug. 12 close, with the emphasis on "possibly":

• GE Plastics with a $2.765 billion equivalent two-part offering of eight-year notes made up of $1.95 billion and €590 million via Citigroup, ABN Amro, GE Capital and HSBC;

• East Valley Tourist Development Authority with a downsized $275 million (from $290 million) offering of senior secured notes (B+). The Coachella Valley, Calif.-based gaming company decreased the maturity of the notes to seven years from eight years, and increased the price talk to a 10½% coupon with an 11% yield from the previous 9½% area talk.

The Merrill Lynch-led deal is believed to be the only offering in the market with price talk;

• Downstream Development Authority of the Quapaw tribe of Oklahoma with a $235 million offering of eight-year senior notes (B-) via Banc of America Securities. Like East Valley Tourist Development it is a project financing deal;

• Aeroflex Inc.'s $370 million offering via Goldman Sachs; and

• Alliant Holdings I, Inc.'s $290 million offering of 7.5-year senior notes (Caa1/CCC) via JP Morgan and UBS Investment Bank.

Sources say that the likelihood that all of these offering would price by the Friday close is extremely remote.

And they concede that it is indeed possible that none of them will happen during the first full week of August.

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