Invista, Inmarsat price deals; PanAmSat bonds up, earnings power Abitibi

By Paul Deckelman and Paul A. Harris

New York, April 23 - Invista was heard by syndicate sources Friday to have priced an upsized $675 million offering of 10-year notes Friday, after having restructured the deal into a single tranche by eliminating the euro-denominated portion of the deal. Inmarsat brought an add-on offering to its existing 7 5/8% notes due 2012.

In secondary dealings, PanAmSat Corp. bonds continued to gain altitude in the wake of the announcement earlier in the week that the communications satellite arm of 80% owner DirecTV group will be bought out by Kohlberg Kravis Roberts & Co. for $3.55 billion.

But in general there was "something of a malaise in the market place," a trader said, with some players still trying to read the tea leaves on Federal Reserve Chairman Alan Greenspan's testimony on Capital Hill earlier in the week, and what it might mean for stocks and Treasuries, from which the junk market often gets its cue.

But malaise or not, there was trading going on in some issues, notably PanAmSat's 8½% notes due 2012. Those bonds had pushed up to around the 112 bid level on Thursday and they continued to gain Friday, finishing at 114, up another two points on the session.

A market source agreed that "SPOT had a big run-up" earlier in the week, moving up to 113.5 bid from prior levels around 105 over the space of a day or two and then holding at those lofty levels on Friday.

Elsewhere, a trader said that Canadian forest products producer Abitibi-Consolidated Inc.'s bonds "traded well after their earnings, quoting the company's 6.13% notes due 2013 as having pushed up to 93 bid, 94 offered from prior levels at 90 bid, 91 offered. Its 8.85% notes due 2010 were quoted at 108.75 bid, 109.75 offered, up from 107.25 previously, "and that was pretty good," he asserted.

The company reported a first-quarter loss of $31 million, a sharp deterioration from net earnings of $180 million a year ago, but a sequential improvement from a loss of $81 million in the fourth quarter of 2003.

Abitibi said the latest results included an after-tax loss of $35 million on the translation of foreign currencies, mainly the company's U.S. dollar-denominated debt, versus an after-tax gain of $239 million in the first quarter of 2003.

Abitibi said it had an operating loss from continuing operations in the first quarter of $17 million - including $7 million of closure costs - better than the $36 million operating loss in the same quarter of 2003. It credited the improvement year-over-year, despite a stronger Canadian dollar, to higher U.S. dollar selling prices and lower operating costs in all segments.

With prices for all of its products continuing to improve, the company statement said, EBITDA before closure costs was up more than 40% from the fourth quarter of 2003.

B/E rises on earnings

Also up on earnings was B/E Aerospace Corp., which earlier in the week reported a first-quarter loss of $7.6 million (21 cents a share), an improvement from $10.8 million (31 cents a share) of red ink a year ago.

A trader called the Wellington, Fla.-based aircraft cabin components maker's 8% notes due 20008 "one of the week's best gainers," pegging the bonds at 97.5 bid, 98.5 offered, a gain of two points on the session and six-and-a-half on the week, "a good performance any way you look at it."

Xerox slips despite profit

But better earnings figures didn't do much for the bonds of Xerox Corp., which reported first-quarter earnings of $248 million (25 cents a share), a sharp turnaround from its loss of $65 million (10 cents per share) for the same period a year ago.

Stamford, Conn.-based copy machine maker Xerox cited strong sales of color systems and office digital products, and the sell-off of its interests in a digital rights management company.

Yet, a trader said, its 8% notes due 2027 dipped to 97 bid, from 98.5 previously.

"I would have thought that they would have gone up, but they went down instead," he said, although he attributed the easing "more as a function of interest rates" than anything else.

Another trader saw Xerox's 7 1/8% notes due 2010 down half a point at 103.5 bid, 104 offered.

He also saw weakness in Unisys Corp.'s 6 7/8% notes, down half a point to 107 bid, 108 offered.

American Tower lifted by refinancing

American Tower Corp. bonds were firmer in the wake of the Boston-based communications antenna tower operator's announcement earlier in the week that it was seeking to refinance its current credit facility.

A trader said that the company's 9 3/8% notes due 2009 had moved up a point to 107.25 bid, 108.25 offered, although he said this was in the context of strength in the whole tower sector. For instance, he saw Crown Castle International Corp.'s 7½% notes due 2013 up a point, at 99 bid, par offered.

At another desk, American Tower's bonds were quoted at 107.5 bid, up a point-and-a-half on the session.

American Tower envisions a new $1.1 billion senior secured credit facility in place sometime in the second quarter, to be guaranteed by the company itself and its subsidiaries and secured by a pledge of substantially all the company's assets. It would be used to repay the company's existing senior secured credit facility, which currently has outstanding borrowings of some $666 million, and for general corporate purposes, including refinancing other existing debt. Standard & Poor's on Friday assigned the planned facility a B ratings and affirmed the company's existing ratings, including the B- corporate credit rating; the outlook remains positive.

Tower operator SBA Communications Inc.'s 10¼% notes due 2009 were meanwhile up a point, at 98.75 bid.

Primary assesses outflow

During the final session of the April 19 week $780 million of junk priced during a relatively quiet day in the primary market.

Meantime two new deals showed up in the pipeline.

However players were definitely inspecting their positions in the wake of news heard late Thursday that high-yield mutual funds had undergone a $425.8 million outflow for the week ending April 21.

While the outflow left inflows and outflows evenly balanced, with eight weeks of each since the start of the year, the overall year-to-date trend is negative.

And sell-siders told Prospect News Friday that the situation is definitely registering an impact.

"You look at the forward calendar and you see maybe $5 billion. And you say 'What's the problem?' one official reasoned.

"But there is no doubt that the primary market right now feels different from the way it felt in January."

Yet another sell-side official confided that the negative funds flow situation year-to-date is making itself felt in new deal execution and wondered - as have others - whether the situation might set in train a sense of urgency among prospective issuers to get deals done at still-attractive rates before the pending interest rate hikes that just about every capital markets observer now seems to accept as an accomplished fact.

However another sell-side official at a different institution invoked a counter-theme which Prospect News has been hearing during recent sessions: the cash flows into and out of the high yield mutual funds may not tell as forceful a story as they once did about liquidity.

"It used to be that the market would hang on the inflow/outflow data," the official recalled. "Now it seems as though they take it more in stride and are more interested in the direction of the flow, in or out, and are not that thrilled or disappointed unless the number has nine zeros behind it."

And sources Friday continued to mention hedge funds as likely sources of what they consider to be the still-ample liquidity of junk.

"But that money is different from the money that gets invested in junk by some guy way out in the Midwest, who is investing for the long term," one banker opined.

"The hedge fund money has been known to move pretty fast."

Invista completes day's biggest deal

Invista and Arteva Specialties Sarl (Luxembourg) priced an upsized $675 million of eight-year senior unsecured notes (B1/B) at par Friday to yield 9¼% - a yield that came at the inside of the 9¼%-9½% price talk.

JP Morgan and Credit Suisse First Boston ran the books for acquisition financing deal from the Wilmington, Del. integrated fiber company.

But although the dollar issue was upsized Invista bailed out on a planned euro tranche.

One buy-sider told Prospect News that the deal was two times oversubscribed with in excess of $1 billion of orders in the book. However not much demand for the euro piece materialized.

This investor's firm bought some of the new Invista notes.

"Our first reaction was that it was pretty bad," commented the buy-sider, who spoke on background.

But he added: "We like Koch. We think they're good management.

"It's going to take them about a year and a half to get them where they want to be, at which point it figures to be a very low leverage, high free cash flow company.

"If they can execute, then that's a cheap bond in a year and a half. We're talking about a company that should be two-plus times leveraged in 2006. So two years from now it will either look like a very cheap price or, well..."

One sell-side source with euro business in the market pointed to the biggest euro junk pipeline in recent memory and seemed to take special note of Invista's abandonment of its euro tranche.

However another sell-sider, also with an interest in euro business presently working its way through the market, noted: "Invista is not a European entity to begin with. It's spun off from DuPont. It's a complex deal with four separate issuers. So you can't easily compare it with the euro deals that are in the market."

When the new Invista 9¼% notes due 2014 were freed for secondary dealings, they were heard to have firmed to around 101 bid, 102 offered from their par issue price earlier in the session.

Another trader saw the Invista bonds at 101.25 bid, 101.75 offered and saw the new iPCS Inc. 11½% senior notes due 2012 having moved up to 101.5 bid, 102.5 offered.

The "I's" have it

Both of Friday's new issues came from companies with names beginning with the letter "I."

In addition to Invista, Inmarsat Finance plc priced a $105 million add-on to its 7 5/8% senior notes due June 30, 2012 (B2/B) at 102.5, resulting in a 7.151% yield to worst.

The Credit Suisse First Boston-led dividend payment deal came spot on the 102.5 price talk.

The London-based global satellite communications services company priced the original $375 million issue at par on Jan. 27, 2004 and so walked away from Friday's transaction with an interest savings of not quite 500 basis points.

Whiting, American Equity jump aboard

An April 26-May 5 roadshow is scheduled for Whiting Petroleum Corp.'s offering of $150 million of eight-year senior subordinated notes (B-) via Merrill Lynch & Co. and Lehman Brothers.

The Denver, Colo.-based oil and natural gas exploration and production company will use the proceeds to refinance bank debt.

Whiting chief financial officer Jim Casperson told Prospect News on Friday shortly after the deal was announced that he was aware of the above-mentioned outflow from the junk funds. Nevertheless, Casperson said, rates at present are extremely attractive (see related story elsewhere in this issue).

And a roadshow will begin Monday and end late in the week of April 26 for American Equity Investment Life Holding Co.'s $150 million of 10-year and 12-year senior notes (BB+), also to be led by Merrill Lynch & Co.

Proceeds from the offering by the West Des Moines, Iowa-based underwriter of annuity and insurance products will be used to refinance bank debt and for general corporate purposes.

Finally on Friday, price talk of 9½%-9¾% emerged on Waste Services Inc.'s upcoming $160 million of 10-year senior subordinated notes (B-), which are expected to price mid-day on Monday via Lehman Brothers.

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