Upsized Huntsman deal prices; Brookstone up on earnings

By Paul Deckelman and Paul A. Harris

New York, Oct. 31 - Huntsman International LLC priced a solidly upsized offering of dollar- and euro-denominated senior subordinated notes on Tuesday, high yield syndicate sources said.

Besides sufficient interest among bond buyers to justify nearly doubling the deal's size to $710 million equivalent, there was some interest in the new bonds in the aftermarket, where they moved up modestly.

Also pricing, earlier in the session, was an upsized issue of euro-denominated notes from Codere Finance SA, an arm of Spanish gaming operator Codere.

Meantime, Sally Beauty Supply was heard getting ready to hit the road Wednesday with a $710 million two-part offering. And price talk emerged on MediMedia USA Inc.'s planned $150 million eight-year deal, which could price after the books on the deal close on Wednesday afternoon.

Back among the established issues, earnings were the driver for movement in several familiar junk names - and one not-so-familiar name, Brookstone Inc., whose bonds firmed by several points after the Merrimack, N.H.-based specialty retailer reported good third-quarter results.

Also firming on good numbers were Trump Entertainment Resorts Inc. and Eastman Kodak Co. Moving the opposite way were Charter Communications Inc. and Visteon Corp.

Aside from the latter, a Van Buren Township, Mich.-based parts producer, not much was taking place among the automotive sector names like Dura Automotive Systems Inc. and Dana Corp., which had been active with some degree of volatility in Monday's dealings.

A high yield syndicate offical said that the broad market was relatively quiet but a touch better on Tuesday.

The official added that the massive build-up of the new issue calendar - now with slightly less that $13.5 billion of junk bond offerings thought to be in the market - does not seem to be causing a sell off among existing issues.

Rather, the source said, what is beginning to be seen is some investor pushback, evidenced by the executions seen on some of the recent new issues.

Two upsized deals Tuesday

The last session of October 2006 saw two companies price upsized deals.

Huntsman International LLC priced a massively upsized $710 million equivalent two-part offering of senior subordinated notes (B3/B).

The Salt Lake City-based chemical company priced a €400 million tranche of seven-year notes at par to yield 6 7/8%. The seven-year notes, which were issued via Rule 144A for life and Regulation S, priced in the middle of the 6¾% to 7% price talk.

The company also priced a $200 million tranche of eight-year notes at par to yield 7 7/8%. The eight-year notes were issued via Rule 144A with registration rights and also came in the middle of price talk: 7¾% to 8%.

Deutsche Bank Securities and Credit Suisse were joint bookrunners for the two-part debt refinancing deal, which was upsized from $400 million equivalent.

Meanwhile in Europe, Spanish gaming firm Codere Finance SA priced an upsized €160 million add-on to its 8¼% senior notes due June 15, 2015 (B2/B) at 107.25, resulting in a 6.866% yield to worst.

The deal, which was upsized by €10 million from €150 million, priced on top of price talk.

The order book was 3.5-times oversubscribed, according to an informed source, who added that the transaction had gone very well.

Credit Suisse, Barclays Capital and Morgan Stanley were joint bookrunners for the acquisition, license renewal, debt refinancing and general corporate purposes deal.

The original €335 million issue priced at par in June 2005. Subsequently the company priced a €165 million add-on priced at 106.25 in April 2006.

The new add-on takes total issue size to €660 million.

October sees $16.37 billion

Tallying the Huntsman International $200 million dollar-denominated tranche which priced Tuesday, issuance for October 2006 came to $16.37 billion, the biggest month since March 2004, which had $16.68 billion. October was ahead of January 2006 at $15.32 billion - previously the busiest month of this year - and also ahead of 2005's biggest month, June, which saw $12.62 billion.

The current pace is comparable to the busiest recent years in the high yield market, including 2004, which saw $111.53 billion through the end of October, and 2003, which had $114.34 billion.

Talking the deals

With much of the market focued on the mega-deals set to price in the Wednesday-Thursday time-frame, news was also heard Tuesday on some of the less gargantuan deals on the calendar to price during the October-November crossover week.

MediMedia USA Inc. talked its $150 million offering of eight-year senior subordinated notes (Caa1/CCC+) at a yield in the 11½% area.

The Goldman Sachs-led deal is expected to price on Wednesday.

Of course much of the market is tuned into two issuers which, together, are expected to price deals totaling $5 billion during the first two days of November.

Idearc, Inc., a new public company formed by the spin-off of Verizon Communications Inc.'s directories businesses, talked its $2.85 billion offering of 10-year senior notes (B2/B+) at 8% to 8¼%.

The single-tranche mammoth is expected to price on Wednesday via JP Morgan and Bear Stearns.

And Sabine Pass LNG LP, a wholly owned subsidiary of Houston-based Cheniere Energy Inc., put out price talk on its $2.15 billion offering of senior secured first-lien notes in two parts (expected Ba3/confirmed BB).

The company talked its seven-year notes at the 7% area and its 10-year notes at the 7 1/8% area.

The deal is expected to price late Wednesday or early Thursday via Credit Suisse.

Sally Beauty launches $710 million

News of one roadshow start circulated on Tuesday.

Sally Holdings LLC (Sally Beauty Co.) will begin a roadshow on Wednesday for its $710 million two-part offering of notes: $430 million of eight-year senior unsecured notes (B2/CCC+) and $280 million of 10-year senior subordinated notes (Caa1/CCC+).

Merrill Lynch, Banc of America Securities, JP Morgan and Morgan Stanley are joint bookrunners for the deal, proceeds from which will be used to help fund the special cash dividend that Sally Beauty will be paying Alberto-Culver as part of the spinoff of Alberto-Culver's Sally/BSG Distribution business.

Huntsman up in trading

When the new Huntsman International bonds were freed for secondary dealings, a trader saw the company's dollar-denominated 7 7/8% notes due 2014 at 100.375 bid, 100.75 offered, up from their par issue price earlier in the session. A trader at another desk quoted them at 100.5 bid, 101 offered. The 6 7/8% euro-denominated notes due 2013 were not seen trading around.

Also on the new-issue front, Encore Medical Finance LLC's new 11¾% senior subordinated notes due 2014 were seen trading at par bid, 100.5 offered, little changed from their Monday issue price. A trader noted that the Austin, Tex.-based orthopedic implant manufacturer's bonds were generating little interest even though "they have that great, fat coupon."

Brookstone leads earnings parade

Back among the established issues, Brookstone's 12% notes were seen having firmed to 96 bid from 92.5 in apparent response to the favorable earnings numbers the retailer put up. Although the data was actually released publicly last Thursday, it was filed with the Securities and Exchange Commission on Monday.

For the 13-week period ended Sept. 30, Brookstone reported total net sales of $87.8 million, a 14.4% increase over the approximate year-earlier period. Same-store sales, a key retailing industry performance metric, were up 6% from the year-ago levels.

The company's chief executive officer, Lou Mancini, said that the latest quarter marked the second consecutive quarter of rising same-store sales, citing "an appealing product mix and the collective effort of our sales associates. Because of this improvement, the loss from continuing operations, before interest expense, this quarter decreased as compared to the third quarter of last year."

Brookstone ended the third quarter with no cash borrowings under the company's asset-backed lending agreement.

Bonds up as Trump earnings jump

Also reporting positive numbers was Trump Entertainment Resorts, whose 8½% notes due 2015 were seen by one trader up ½ point on the session at 97.5 bid, 98.5 offered. Another trader who saw the bonds at that same level, though, said it was his impression the bonds were little moved.

The Atlantic City, N.J.-based gaming operator said its net income rose to $5.8 million (19 cents per share), an 80% gain from $3.2 million (12 cents per share) a year earlier. The previous year's figures included a loss of $4.5 million (17 cents per share) on discontinued operations.

Trump cited the closings of unprofitable operations as a key driver in the improved results. The latest figures would have been even better but for the three-day shutdown in July as the result of the New Jersey state government budget impasse.

Kodak climbs as loss narrows

A trader saw Eastman Kodak's 7¼% notes due 2013 up ¾ point on the session at 98.75 bid, 99.75 offered, attributing the gain to the company's quarterly numbers.

The Rochester, N.Y.-based photography giant was in the red during the quarter ended Sept. 30, its eighth straight quarterly loss - but its $37 million (13 cents a share) of red ink paled in comparison to its year-ago loss of $914 million ($3.18 a share), which was chiefly due to a $778 million tax charge linked to its massive four-year overhaul.

Excluding one-time items - chiefly $202 million in restructuring costs - the latest results beat Wall Street expectations.

Kodak, the iconic first name in photography, has struggled to adapt to the changing face of the industry, which in recent years has seen traditional cameras and film being largely supplanted by the new film-less digital photography. Kodak has also gone digital, and noted that its earnings from that new segment surged above $100 million for the first time.

Charter gyrates on loss, liquidity warning

Charter Communications bonds initially moved higher, a trader said, even as the St. Louis-based cable company reported that it lost $133 million (41 cents per share) in the third quarter ended Sept. 30 versus a year-earlier profit of $75 million (24 cents per basic share, 9 cents per diluted share).

He saw its 11% notes due 2015 initially jump to 97.25 bid, from 96.25 bid, 96.5 offered.

While the company did post the loss, the third period results represented a sequential improvement over the company's second-quarter red ink of $382 million ($1.20 per share). And in other measures besides net gain or loss, Charter did show year-over-year improvement in the latest period - revenues of $1.388 billion represented a year-over-year increase of 9.7%, while operating income from continuing operations increased by $12 million year-over year to $66 million. Revenue growth exceeded operating costs and expense growth during the period by $26 million.

But those early gains faded, the trader said, amid "concerns over liquidity." While Charter noted that it had cut debt and had extended the maturities on much of its bond obligations during the quarter, and while company officials on the quarterly conference call declared that Charter's liquidity should be sufficient to fund its operations and meet its obligations through 2007, it warned in its filing with the Securities and Exchange Commission that its "cash flows from operating activities and amounts available under the company's credit facilities may not be sufficient to fund the company's operations and satisfy its interest and principal repayment obligations in 2008, and will not be sufficient to fund such needs in 2009 and beyond."

The company did not publicize that warning during the conference call and the analysts on the call apparently had not yet seen it, as there was no discussion of it during the question-and-answer portion of the proceedings (see related story elsewhere in this issue).

After that, the trader said, as people began to realize the potential liquidity problems, the bonds gave back their initial gains to end around the same 96.25 bid, 96.375 offered level at which they had begun.

Visteon hurt by loss

Visteon's bonds, a trader said, were bouncing around at lower levels after the company reported a $177 million ($1.38 per share) loss, which represented something of an improvement from the year-earlier red ink of $207 million ($1.64 per share).

He said that the 7% bonds due 2014 had ended at 88 bid, 89 offered on Monday, and first traded down to 86 bid, 86.75 offered on Tuesday, on news of the loss. Then, he said, they went back up to 87.25 bid, 87.5 offered, buoyed by the realization that the loss had narrowed from a year ago.

However, he said, still hanging over the market was the ominous specter of new output cuts by Visteon's former corporate parent and still single biggest customer, Ford Motor Co., as well as the production cutbacks at the other domestic automakers, to whom it also sells.

"They recovered some," he said, "but net-net," the Visteon bonds were down a point from Monday.

He also saw the Visteon 8¼% notes due 2010 at 95 bid, 95.75 offered, down from 96 bid, 97 offered on Monday.

Other autos quiet

Traders said that Visteon seemed to be the only name really moving in the auto sector, which had been active and volatile on Monday as Dura Automotive filed for Chapter 11 status and Dana announced that its Dana Credit Corp. unit was in forbearance talks with its bondholders, which caused the Dana Credit bonds to rise, but the company's own bonds to retreat several points.

However, on Tuesday, one said, Dura "was just hanging out" around where the troubled Rochester Hills, Mich.-based automotive components supplier's notes had ended on Monday after the bankruptcy filing. Its 8 5/8% notes due 2012 were still at 30 bid, 31 offered, and its 9% notes due 2009 at 6 bid, 7 offered. The company's second-lien bank debt hovered at 85 bid, 86 offered.

As for bankrupt Toledo, Ohio-based Dana, the trader saw the company's 6½% notes due 2008, which fell 3 points Monday, down another ½ point at 72.5 bid, 73.5 offered, while the Dana Credit 8 3/8% notes due 2007 were unchanged at 101.75 bid, 102.75 offered.

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