United Rentals prices two-part mega-deal; Cosipa prices also; Tembec firms

By Paul Deckelman and Paul A. Harris

New York, Jan. 23 - United Rentals, Inc. capped off a busy, though not manic, week in the high yield primary market, pricing a two-part $1.375 billion issue of eight-year and 10-year bonds. Brazilian steelmaker Cosipa - Companhia Siderurgica Paulista - also priced an upsized offering of five year notes.

In the secondary market, Tembec - whose bonds had retreated earlier in the week after a brokerage house put out a bearish recommendation on the Canadian forest products company - were heard having firmed several points off their recent lows.

Only two tranches priced during Friday's reportedly quiet session in the U.S. high yield primary - but both came from United Rentals and together they comprised the biggest junk bond sale of the year so far, totaling $1.375 billion.

The Greenwich, Conn. equipment rental company sold $1 billion of eight-year senior notes (B1/BB-) at par to yield 6½%.

The senior notes came at the wide end of the 6 3/8%-6½% price talk.

The company also sold $375 million of 10-year senior subordinated notes (B2/B+) at par to yield 7%.

The subordinated notes came at the tight end of the 7%-7 1/8% price talk.

A buy-side source told Prospect News shortly after terms emerged that there were $1.5 billion of orders in the book for the combined United Rentals offerings.

Credit Suisse First Boston, Banc of America Securities, Citigroup and JP Morgan were joint bookrunners on 2004's largest issuance to date.

Elsewhere the market seemed quiet on Friday, sources reported.

Price talk of 8½%-8¾% was heard on the €125 million offering from Head NV's HTM Sport/Freizeitgerte AG of 10-year senior notes (B2), expected to price early in the week of Jan. 26 via Citigroup.

And Russel Metals Inc. and RMI USA LLC, its wholly owned subsidiary, announced plans to sell up to $175 million of 10-year senior notes.

The Toronto-based company will use the proceeds to fund the tender for the units made up of Russel Metals' 10% senior notes due 2009 and RMI USA LLC's 10% senior notes due 2009.

Citigroup is the dealer manager for the tender offer. The consent solicitation expires Feb. 5.

In the wake of United Rentals pace-setting sale, Friday, Prospect News learned that Adelphia Communications Corp. is planning to bring high yield bonds as part of its $8 billion bond and bank loan exit financing from Chapter 11, with Deutsche Bank Securities leading the financings for the Greenwood Village, Colo. cable television company (see related report on page one of this issue).

A buy-side source who spoke to Prospect News on background Friday said that despite the low yields that have been printed on new junk bond issues since the beginning of the year there is still value to be had.

"Spreads are narrow but risks are lower because the economy is improving and defaults are down," the investor reasoned. "And the Fed is certainly being accommodating.

"There is still a lot of money chasing bonds, and not enough supply to meet the demand," the source added.

"The reason is that there has been nothing but good news. People are very optimistic, and they are reaching to get those extra basis points in yield."

Brazil's Cosipa upsizes

In emerging markets corporates action Friday, Companhia Siderurgica Paulista (Cosipa) priced an upsized $175 million of 8¼% five-year senior notes (B2/B+) at 99.198, resulting in an 8.45% yield. The deal was increased from $150 million.

Price talk was for a yield in the 8½% area.

UBS Investment Bank ran the books on the Sao Paulo-based integrated steel manufacturer's deal.

And price talk of 11½%-11¾% emerged Friday on Industrias Unidas SA de CV (IUSA)'s $175 million of eight-year senior unsecured notes (Caa1/B+), which are expected to price on Monday.

Deutsche Bank Securities is the bookrunner on the offering from the manufacturer of building and electrical products, which is headquartered in El Salvador, C.A., Mexico.

United Rentals firms slightly in trading

When the new United Rental notes were freed for secondary dealings, the 6½% senior notes due 2012 were seen having firmed only slightly from their par issue price, to 100.25 bid, 100.75 offered, while the 7% senior subordinated notes due 2014 were "a teeny bit" over their par issue price, a trader said.

At another desk, a trader said that "a bunch of [United Rental] bonds traded below par, then above par," before finally settling in around 100.125 bid, 100.375 offered.

"We had some guys coming in late at the end of the day looking for size at 100.125-100.375, that context."

He characterized trading as showing "decent follow-on interest" in the new issue, "but the bonds haven't moved anywhere."

The trader said that the junk market overall was affected by a "pretty dramatic" sell-off in the in the Treasury market, which caught a lot of people by surprise. "So I think there was a real reluctance on the part of a lot of people to get involved. So the market sold off a little bit, particularly the Treasury-sensitive stuff. So you really didn't get the kind of pop that we've been seeing generally in a lot of these new issues."

He also noted the fact that with the deal coming in at over $1 billion, "probably most guys got exactly what they wanted," so there was no scrambling for bonds to bid prices up, as had been the case for some of the recent smaller issues, including Premier Entertainment Biloxi's $160 million offering of 10¾% notes, which shot up beyond 106 bid in initial trading, or Portola Packaging Inc.'s $180 million of 8¼% notes, hovering north of 104.

Tembec active

A trader said that there had been "a lot of activity" in Tembec paper, "especially early in the morning." He saw them "up a little," around 100.75 bid, 101 offered.

The Tembec bonds had slid earlier in the week after Deutsche Bank put out a bearish assessment of the company ahead of its earnings but, a trader said, "the numbers were not as bad as expected," and the company will probably be able to weather its currently weak condition.

He noted that with Tembec's 8-handle bonds, like its 8½% notes due 2011, "trading below par with a BB rating, the buyers came in." Those bonds were lifted to 100.75 bid, 101.25 offered from levels earlier in the week at 97-98.

Movie theater names were quiet despite news, including Cinemark's hiring of a financial advisor and the end of talks between AMC Entertainment and Loews Cineplex;

A trader said he had not seen "a lot of activity in that sector," quoting AMC's bonds in the 105-105.25 area. Cinemark's 9% notes were steady at 113.

Calpine slips, Tenet dips

A trader said that Calpine Corp. bonds - which had been firming earlier in the week after the San Jose, Calif.-based independent power producer announced the completion of a previously reported asset sale - "came off its top a little bit," with its 8½% notes due 2011 finishing at 85.75 bid, 86.75 offered - this after having opened Thursday's trading at 87 bid, 88 offered and then moving down to 86 bid, 87 offered by Thursday's close.

Tenet Healthcare bonds were seen as "weaker," in the words of one trader, after the Santa Barbara, Calif.-based hospital company said that the Inspector General's Office of the Department of Health and Human Services had informed it that it was looking into the activities of two doctors practicing at three Tenet facilities in Texas. Tenet, which had been the subject of a probe into one of its California hospitals in 2003, said it was cooperating fully with the inquest.

Tenet's 5 3/8% notes due 2006 dipped to 99.25 bid. 100.25 offered from prior levels at par bid, 100.25 offered.

At another desk, Tenet's 6 38% notes due 2011 were quoted down nearly a point at 98.5 bid.

A trader characterized secondary dealings overall as "not a very busy day, but there was some activity - there was some movement in the market."

He said there was "a fair amount of activity" in Charter Communications Inc. paper, with the St. Louis-based cable operator's 8 5/8% notes and 9 5/8% notes trading "quite a bit," although he offered no firm levels, and he said Owens Illinois Inc.'s paper was also moving about, as was EchoStar DBS' 5¾% and 6 3/8% notes. Owens Illinois' 8.10% notes due 2007 were a point better at 107.75 bid.

"So it was a decent day, though not very busy - but if you picked your spots," an investor could notch some gains.

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