Celanese, Chiquita, Frontier deals price; Bally up on planned receivables facility takeout

By Paul Deckelman and Paul A. Harris

New York, Sept. 21 - Celaese AG was heard by high-yield syndicate sources to have brought a two-part offering of discount notes to market Tuesday, one of several deals to price, as the primary sector continued to shake off its recent late summer lethargy on the last full day of summer 2004. Also pricing were smaller deals from Chiquita Brands International Inc., Frontier Oil, Coleman Cable Inc. and Culligan Finance Corp. - the last a euro-denominated issue.

In the secondary domain, Bally Total Fitness Holding Corp. bonds were looking to be in better shape on the news that the Chicago-based fitness center chain operator had lined up a term loan and will use the proceeds to take out some of its receivables debt. On the downside, however, Amkor Technology Inc. bonds were seen off about 1½ points, although there did not seem to be fresh negative news out on the West Chester, Pa.-based high-tech manufacturer.

Sources Tuesday reported that the primary market steamed ahead unimpeded by the 25 basis points hike in the short term interest rate - the third this year - bringing the federal funds rate to 1.75%.

"The Fed move was anticipated and I don't even think that people batted an eye at it today," one sell-side source said shortly after the close.

"We easily topped a billion today, with some tight executions," the source added, referring to $1.133 billion and €185 million in six tranches completed during the session.

Of the six tranches that priced, three came at the tight end of price talk and a fourth came on top of downwardly revised talk.

"What we're seeing here is a market where investors have money to put to work and issuers who realize that this is an excellent time to sell bonds.

"I think we're going to have a busy September in the high yield."

What caught the eyes of market observers more than the Federal Reserve's expected rate hike was the continuing decline in the yield of the 10-year Treasury, which the sell-side source spotted at 4.04% at the close.

Celanese prices day's biggest deal

Tuesday's biggest issuer was Crystal US Holdings 3 LLC (Celanese), which raised approximately $513 million of proceeds with the sale of two series of 10-year senior discount notes (Caa1/B-) via Banc of America Securities.

The company priced $163 million of series A notes at 61.275 to yield 10%, generating $99.89 million of proceeds. Price talk was 9¾%-10%.

The company also priced $690 million of series B notes at 59.829 to yield 10 ½%, generating $412.82 million of proceeds. Price talk was 10¼%-10½%.

The series A notes contain a three-year 35% equity clawback at their accreted value plus the coupon. The series B notes contain an identical equity clawback to that of series A, or an optional clawback for the entire tranche only for the first three years at their accreted value plus the coupon.

With both tranches coming at the wide end of price talk Celanese proved to be the exception on Tuesday.

Chiquita, Frontier, Coleman at tight end of talk

Tuesday's remaining three dollar-denominated issuers each brought their deals in at the tight end of price talk.

Chiquita Brand International sold $250 million of 10-year senior notes (B2/B) at par on Tuesday to yield 7½%, at the tight end of the 7½%-7¾% price talk.

Morgan Stanley ran the books for the debt refinancing deal from the Cincinnati, Ohio-based banana and fresh produce company.

One source close to the deal said that Chiquita played to considerable investor demand and saw good execution.

Frontier Oil Corp. sold $150 million of seven-year senior notes (B2/B+) at par to yield 6 5/8%, at the tight end of the 6¾% area price talk.

Bear Stearns & Co. ran the books for the debt refinancing deal from the Houston-based oil refinery operator.

A market source told Prospect News that the Frontier Oil deal was a blowout, with the book nearly seven-times oversubscribed in spite of "aggressive" price talk for a B2/B rated note.

And Coleman Cable Inc. priced an upsized $120 million of eight-year senior notes (B3/B-) at par to yield 9 7/8%, at the tight end of the 10% area price talk. The deal was increased from $110 million.

Wachovia Securities ran the books for the deal from the Waukegan, Ill. manufacturer of electrical wire and cable, proceeds from which will go to refinance debt and to fund a shareholder distribution.

European market remains hot

Tuesday's sole euro-denominated issue came from Northbrook, Ill.-based water products company Culligan Finance Corp.

Culligan sold €185 million of 10-year senior subordinated notes (B3/B-) at par on Tuesday to yield 8%, which was right on top of the revised 8% area price talk. Talk had tightened from 8¼% area.

The acquisition financing, via Citigroup, Banc of America Securities and BNP Paribas, was also said to have played to strong demand.

It was hardly alone among European bond deals to do so, a market source commented, pointing to Grohe Holding GmbH, which sold €335 million of 8 5/8% senior notes due 2014 (B3/B-) at par on Sept. 15.

Prospect News heard that the Grohe deal's allocation ranges were in the 15% to 30% range, "implying," according to one sell-sider in Europe, "that the book was probably 4.5-times to 5-times oversubscribed."

Prospect News also heard on Tuesday that the €500 million seven-year deal (B3/B-) from Corus Group plc, the British steel-maker, is reported to be attracting considerable investor interest.

That deal is expected to price later this week, via Credit Suisse First Boston.

Drive-by from Intrawest

Although no roadshow starts were heard during Tuesday's session, news emerged on a pair of deals that are expected to price on Wednesday.

Intrawest Corp. plans to price a two-part $325 million equivalent offering of notes (B+) on Wednesday, via Deutsche Bank Securities and Scotia Capital.

Included will be a $225 million add-on to the company's 7½% senior notes due Oct. 15, 2013. Price talk is 102-102.5.

The company priced $350 million of those notes in October 2003. They are callable after Oct. 15, 2008 at 103.75, with the call declining annually from that date. The notes also contain an equity clawback until Oct. 15, 2006 for 35% at 107.50.

In addition to the add-on Intrawest is offering C$130 million of new five-year non-call-life senior notes. Price talk is for a yield in the 6 7/8% area.

The Vancouver, B.C.-based resort developer will use the proceeds to refinance debt.

Elsewhere price talk of 102-102.5 emerged Tuesday on Cirsa Finance Luxembourg SA's €60 million add-on to its 8¾% senior notes due May 15, 2014 (existing ratings Ba3/B+), expected to price on Wednesday in London, also via Deutsche Bank Securities.

Finally Prospect News learned that Dresser-Rand plans to sell $420 million of bonds as part of the financing for First Reserve Corp.'s $1.2 billion acquisition of Dresser-Rand from Ingersoll-Rand Co. Ltd.

The deal, via Morgan Stanley, Citigroup and UBS Investment Bank, is expected to come in October.

Frontier up in trading

When the new Frontier Oil 6 5/8% notes due 2011 were freed for secondary dealings, a trader quoted them at 100.5 bid, but "no right-hand [offered] side." Those bonds had priced earlier in the session at par.

Another trader, however, quoted the Frontier notes as solidly improved at 101.25 bid, 102 offered.

He saw the new Celanese zero-coupon/10% notes at 61.25 bid, 61.75 offered, and the zero-coupon/10½% notes at 60 bid, 60.5 offered.

The first trader meantime saw the new Xerox Corp. 6 7/8% add-on notes due 2011 that had priced on Monday at 104.25 bid 104.75 offered, unchanged from their 104.25 issue price, and quoted Echostar DBS Corp.'s new 6 5/8% notes due 2014, which had priced Monday at 99.102, as now trading at 99.25 bid, 99.625 offered.

The new Chiquita bonds were unpeeled too late in the session for aftermarket trading Tuesday.

Bally higher on loan news

Back among the established issues, Bally's bonds were looking pretty fit on the news that the gym operator is taking out a $175 million term loan and using the proceeds to refinance existing debt, including its present $100 million securitization facility. The rest will be used for general corporate purposes.

A trader saw Bally's 10½% notes due 2011 up about a point at 94.5 bid, 96 offered, while its 9 7/8% notes due 2007 pushed up to 81 bid, 82 offered from prior levels around 77.5 bid, 78.5 offered.

At another desk the junior bonds were seen having firmed four points on the session to 82 bid.

"Despite the fact that net-net this will add a little bit of leverage to the balance sheet, I think people like the fact that [Bally] still has a little bit of flexibility and they can tap into all of their receivables and things like that that they have on the balance sheet," the trader said.

"There's some real assets on the balance sheet - the receivables - and [this shows] they can be monetized and people are happy about that. Remember, they have memberships and get their monthly membership fees and all that."

Bally had been looking like a 98-pound weakling for most of the year so far, disappointing investors with its underperformance.

"They've been drifting" for a while, he said, even with a lack of news. "They trade at a discount because of a lack of trust" in the company's management amid past news of accounting problems and the like. "Whenever you have that, it's going to trade at a discount."

The company's shares have also been lagging, causing at least one sizable shareholder - Emanual Pearlman of Liberation Investments - to publicly criticize the company and call for Bally to shape up or for management to ship out.

Amkor down

Elsewhere, Amkor bonds were lower, even with no fresh news seen out on the company.

A trader - who said he did not know why the bonds were easing - quoted its 7¾% notes due 2013 as having fallen back to 81 bid from prior levels at 82.25, while its 7 1/8% notes due 2011 went down to 80 bid from 81.75.

Radiologix off as CEO leaves

Also on the downside, a trader noted that Radiologix's 10½% notes due 2008 had dropped to 103 bid from 107.75; he cited the Dallas-based diagnostic services provider's announcement that Stephen D. Linehan had resigned his chief executive officer's position, to pursue other business and professional interests.

Marvin S. Cadwell, Radiologix's chairman of the board, will serve as interim CEO.

The company's board of directors has begun a search for a successor CEO and has engaged Highland Partners to assist in the search.

Auto names down

Some of the automotive names were quoted trading lower, perhaps in sympathy with Intermet Corp., whose bonds slid sharply on Monday in response to the Troy, Mich.-based automotive components maker's warning that it would show a third-quarter loss and could default on its financial covenants, and then continued to decline Tuesday, finishing around 42 bid, down three points on the session and more than 30 points over the last two days.

Among the losers were Collins & Aikman Products Co., whose 10¾% notes due 2011 were quoted down nearly three points at 99, and Delco Remy, whose 9 3/8% notes due 2012 were another three-point loser at 98 bid.

News of the quarter-point hike in the federal funds target rate by the Federal Open Market Committee did not have much impact, a trader said, noting that among the issues he watches, "you could raise rates 200 basis points and nobody would notice."

Homebuilder KB Homes - which reported strong third-quarter earnings, including a 21% revenue gain to $1.7 billion, and a 17% rise in EBDIT to $200 million, was pretty much unchanged, despite the Fed news - which had been expected - its 9½% notes due 2011 at 111.5 bid and its 8 5/8% notes due 2008 at 112. A market source noted that the company's bonds were already trading "pretty rich," and would be unlikely to head higher.

MCI rises again

MCI Inc. was seen as having firmed for a second straight session following news reports that the Ashburn, Va.-based telecommunications company - the old WorldCom Inc., reincarnated after coming out of bankruptcy earlier this year - was supposedly looking for a buyer for some or all of the company, anticipating proceeds north of $6 billion in the latter case.

MCI's chief executive officer, addressing a Banc of America Securities conference Tuesday, declined specific comment on the reports, indicated that much of what was in those reports was a rehash of old news, and said the company - which had already "been through every distraction known to man" - would remain focused on fulfilling its business plan (see related story elsewhere in this issue).

Nonetheless, the bonds continued to firm, with MCI's 5.908% notes due 2007 quoted half a point better at 99.75; its 6.688% notes due 2009 at 96.625, up 5/8 of a point; and its 7.735% notes due 2014 up nearly a point, at 94.875.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.