Two Canadian deals keep new deal market busy as secondary stays quiet after holiday

By Paul A. Harris

St. Louis, Feb. 17 - The high-yield market left the light Tuesday after the three-day holiday recess appearing to cruise with no particular destination in mind, according to secondary market sources.

However the new issue market appeared to be another story as two Canadian issuers completed $900 million of drive-by business.

Toronto-based Rogers Wireless Communications Inc. led the way with its sale of $750 million of 10-year senior secured notes (Ba3/BB+/BBB-). The deal, headed by Citigroup with nine other institutions on the syndicate, priced at par to yield 6 3/8%, spot on the 6 3/8% area price talk.

Rogers Wireless was a debt refinancing deal - a species for which, according to one sell-side source, high yield remains largely open.

"It looks like people are doing a lot of redemptions, which is okay," said the official. "If a company has notes that are in the double digits, it's a no-brainer.

"If you have less than a year or two left on your notes and business is good, investors will support deals for longer-dated paper."

In addition to Rogers Wireless, Kelowna, B.C.-based wood products manufacturer Riverside Forest Products Ltd. sold a drive-by issue of $150 million of 10-year senior notes (B2/B+) on Tuesday. The notes priced at par to yield 7 7/8%, in the middle of the 7 ¾%-8% price talk, with Bear Stearns & Co. and Harris Nesbitt running the books.

Roadshows to start for Ainsworth, Fedders

Meanwhile two prospective issuers - one of them another Canadian company - moved off at a more stately pace, both with roadshows that figure to get going Thursday.

On that day Ainsworth Lumber Co. will start marketing $200 million of 10-year senior notes (B2/B+), with pricing expected to take place on Feb. 27.

Goldman Sachs & Co. will run the books on the Vancouver, B.C.-based forest products company's refinancing deal.

And Fedders North America, Inc. will also start a roadshow Thursday for $160 million of 10-year senior subordinated notes (existing ratings Caa1/CCC+). The deal is expected to price during the week of Feb. 23, via Credit Suisse First Boston.

The Liberty Corner, N.J. maker of air treatment products will also use proceeds to refinance debt.

And debt refinancing is also the stated use of proceeds for a couple of deals that were announced Tuesday in tender offers.

Sea Containers Ltd. revealed that it intends to offer $150 million of 10-year senior notes. No syndicate names or timing were disclosed by the Hamilton, Bermuda-based company, which is a marine container lessor, passenger and freight transport operator and leisure industry investor.

And Friendly Ice Cream Corp. will attempt to scoop $165 million of the cash that investors are thought to still be holding, two successive billion-dollar plus outflows notwithstanding - with a senior notes offer.

Goldman, Sachs & Co. is dealer manager for the tender which expires on March 16.

Aftermarket treads water

Sources reported little purposeful movement in existing issues during the week-opening post-holiday session.

"It's been very quiet," said one trader, shortly after the close, giving a report that turned out to be characteristic of those to follow.

"It's like most people just kind of stayed home.

"The Cingular-AT&T Wireless merger activity put a little bit of a bid in some to the wireless names. Nextel and stuff like that had been offered down a couple of points from the recent highs. Today they were a little better bid.

"And cable paper is holding, but it's not really firmer. Adelphia is up on rumors of a [bankruptcy plan] going through. Charter and [Cablevision Systems Corp.] paper is a little firmer, up a couple of points from the lows.

"Charter is still struggling," added the trader, citing the Charter Communications benchmark, its 8 5/8% paper due 2009 at 86.5 bid, 87.5 offered.

"That's right where they were Friday."

Meanwhile the trader had Cablevision's 7¼% notes due 2008 at 106 bid, 107 offered.

"Mediacom is up a little," the trader added: 103 bid, 104 offered.

Another trader had Charter paper slightly weaker from last week's levels.

This source had the 9.92% notes at 85.25 bid, 86.25 offered, "which is maybe half a point weaker from Thursday."

The 8 5/8% notes due 2009, "the benchmark," was 85.25 bid, 86.25 offered, "which is maybe a quarter weaker from Thursday, so they're holding in pretty well."

He quoted Adelphia's 10¼% notes due 2011 at 106.25 bid, 107.25 offered, off about half to three-quarters of a point from Thursday, when they were 107.75.

"So it's a little weaker but not bad."

Another market source had the Charter 8 5/8% notes due 2009 at 86, down from 86.5. Meanwhile this source had the Cablevisision 71/4s due 2008 unchanged at 106.5.

Day of reckoning seen

"Nothing seems to be sticking out," said one trader. "There was a little bit of buying in the Street, early. My sense is that there are some guys trying to put money to work here and there. But basically it's been very quiet."

This source told Prospect News that it has been somewhat challenging to read the impact of the two successive billion dollar-plus outflows from the high yield mutual funds for the two-week period ending Feb. 11.

"It's funny," said the trader. "The day that they were talking about the $1.5 billion, two Wednesdays ago, the rumor was that there was going to be a big outflow and they were crushing the market. Then the outflow was announced and the market traded up a point or so off of the lows.

"A lot of stuff has come back two, three and four points from the absolute lows of that Wednesday.

Hedge funds heard shorting junk

"Then last Wednesday there was another large outflow announced. I think it caught the market a little bit by surprise. But nothing happened and we seem to be kind of just trading around.

"There still seems to be plenty of cash on the sidelines, obviously. And that's what guys are using to handle the flows.

"There is a big calendar and these deals keep coming.

"At some point there is going to be a reckoning, I would assume. The word we heard today is that there are some hedge funds out there selectively shorting high yield, which you haven't seen in a while. That might be a little telling."

Revlon, Trump ease from highs

A trader who spoke 45 minutes after the close of Tuesday's session also reported that it had been "pretty darn slow."

This source had paper of Revlon trading off recent highs it attained when the company announced a deal with Fidelity Management and Research, to help cut the Revlon's $1.9 billion of debt almost in half by swapping bonds for company shares.

"Revlon paper was a little bit weaker," said the trader.

"That's been the name in the paper recently," he noted.

He saw Revlon's 8 5/8% bonds due 2008 at 89 bid, down from as high as 93.5 bid on Thursday.

"So they've settled down a bit," he commented.

He also saw Revlon's 8 1/8% notes at 102 bid. "They were probably as good as 104 bid on Thursday. So they're off a little bit.

Revlon had been helped by its announcement that it plans to essentially cut its $1.9 billion debt load in half, mostly through a massive debt-for-equity exchange next month.

The other name this trader saw on the move was Trump, which had firmed on its announcedment amid mounting losses Donald Trump agreed to hand control of Trump Hotels & Casino Resorts Inc. to an affiliate of Credit Suisse First Boston.

"They're off their highs a little bit," said the trader. "The Trump ACs were 83.25 bid, 84.25 offered. The Trump Holding 11 5/8% due 2010 were 99.75. Those have been over par."

Trump Hotels & Casino Resorts said last week it had entered into an agreement with DLJ Merchant Banking Partners III, a Credit Suisse First Boston affiliate, which will give the debt-laden casino company a sizable equity infusion, allowing it to restructure its debt and substantially deleverage.

This source also said that the impact of the outflows from high yield mutual funds has been a difficult one to read.

"The market had been going in one direction for so long," commented the trader. "So lately it has not been marching up. But other than that it has been pretty muted. It's been treading water.

"I thought it would give up a little bit more. But stocks were strong today, so maybe it was catching a psychological bid from that.

"But there has not been tons of fallout. I think there are still a lot of people with cash out there. People still care about the market. They're not hitting the exits."

IDBI to start roadshow, Odebrecht talked

In Tuesday's emerging markets news, a Thursday roadshow start in Singapore was heard for Industrial Development Bank of India (IDBI)'s offering of $300 million of notes due 2009 (Baa3//BB+).

The roadshow for the Regulation S only deal will stop on Feb. 20 in Hong Kong and on Feb. 23 in London. Pricing is expected mid-week during the week of Feb. 23.

JP Morgan and Citigroup will run the books.

And price talk of 11½%-11¾% emerged Tuesday on Construtora Norberto Odebrecht SA's $150 million of five-year bonds, according to a market source.

The deal is expected to price during the present week.

Credit Suisse First Boston and Unibanco are the underwriters.

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