AES bonds up as exchange offer nears completion; Brickman, Owens Brockway, two other deals price

By Paul Deckelman and Paul A. Harris

New York, Dec. 11 - AES Corp. bonds firmed smartly on Wednesday, as it appeared that the troubled power company has moved substantially closer to its goal of extending maturities on $500 million of debt coming due this year and next. On the downside, Bally Total Fitness Holding Corp. paper slid on the news that Chief Executive Officer Lee Hillman is retiring - and the company is taking a big charge to cover his severance package.

In the primary sphere, Wednesday's "jammin'" session turned out to be one of the busiest in recent memory, with one sell-side source describing it as "hectic."

Four deals priced - three of them add-ons - with Westport Resources Corp. adding the most at $300 million.

Meanwhile three new deals were added to the calendar Wednesday. Two of them are add-ons that figure to come quickly under the gavel. However Dynegy Inc. subsidiary Illinois Power Co. will start roadshowing $500 million on Thursday.

And price talk was heard on the deals from SKF Foods Inc./Del Monte Corp. as well as from SPX Corp.

"There is no reason to believe this level of activity won't continue for another week," one sell-side source said Wednesday, alluding to the rapidly-marketed deals - many of them drive-bys - that the market has seen since Thanksgiving.

"The market is hot and the investors have cash to put to work. I know there are more drive-bys coming," the official added.

Of the three add-on offerings transacted on Wednesday the biggest came from Denver oil and gas exploration and production company Westport Resources. The Denver oil and gas exploration and production company priced a $300 million add-on to its 8¼% senior subordinated notes due Nov. 1, 2011 (Ba3/B+) at 103 for a 7.68% yield to worst. Bookrunners were Credit Suisse First Boston, JP Morgan and Lehman Brothers while co-managers were Fleet Securities and Wachovia Securities, Inc.

Toledo, Ohio glass container manufacturer Owens-Brockway Glass Container Inc. priced a $175 million add-on to its 8¾% senior secured notes due Nov. 15, 2012 (B2/BB) at 100.549 Wednesday for an 8.65% yield to worst. Running the books on the deal were Salomon Smith Barney, Banc of America Securities and Deutsche Bank Securities Inc.

And Ferrellgas Partners, LP jointly with Ferrellgas Partners Finance Corp. priced a quickly shopped $48 million add-on to its 8¾% senior notes due June 15, 2012 (B2/B) at 103.50, giving an 8.117% yield to worst. Credit Suisse First Boston ran the books on the Liberty, Mo. propane company's deal.

The only deal pricing Wednesday that had been marketed with a roadshow was from Brickman Group Ltd. It priced $150 million of five-year senior subordinated notes (B2/B) at par to yield 11¾%, spot on to the 11¾% area price talk, via CIBC World Markets and Lehman Brothers.

Three new offerings surfaced on Wednesday, the majority of which were, unsurprisingly, add-on deals that figure to price before the end of the week.

The exception was Illinois Power Co. The Dynegy Inc. subsidiary will begin roadshowing its $500 million of eight-year first mortgage notes (B3/B) on Thursday, and figures to price them during the week of Dec. 16 via Merrill Lynch & Co. and Credit Suisse First Boston.

Meanwhile cable TV operator Insight Midwest Capital Corp. - a subsidiary of New York City-based Insight Communications - plans to price a $175 million add-on to its 9¾% senior notes due Oct. 1, 2009 (B2/B+) late Thursday via Credit Suisse First Boston.

And Roundy's Inc. also plans to price a $75 million add-on to its 8 7/8% senior subordinated notes due June 15, 2012 (B2/expected B) on Thursday via Bear Stearns & Co. Price talk on the Pewaukee, Wis.-based food wholesaler and retailer's deal is 99-100, according to a market source.

Price talk of 8½%-8¾% was heard on SKF Foods Inc./Del Monte Corp.'s $300 million of senior subordinated notes due 2012 (B2/B pending closing of the merger). The San Francisco-based processed food company's deal, which also figures to price Thursday via Morgan Stanley, JP Morgan, Banc of America Securities and UBS Warburg, was heard to be already five times oversubscribed.

And finally on Wednesday price talk of 7½%-7¾% was heard on SPX Corp.'s $250 million of 10-year senior notes (Ba3/BB-). That deal, from JP Morgan, Banc of America Securities and Wachovia Securities, is set to price on Friday morning.

When the Brickman deal was freed for secondary activity, it was "well received," a trader said, quoting the new bonds as having moved as high as 104 bid from their par issue price earlier in the day.

"It was a new name, but people were comfortable with it." He also noted that with "a lot of liquidity around" following eight straight weeks of high yield mutual fund inflows - a reliable proxy for overall junk market liquidity trends - "everything is trading up," with lots of new deals moving up several points when they move over into secondary.

Conversely, he noted, if the same deals had been brought, say, a month or two ago, "they wouldn't be doing so well."

The trader also quoted the new Owens Brockway add-on as having moved up, but in a far less dramatic fashion, going home bid at 101, up slightly from their 100.549 issue price

A trader, noting that Owens-Brockaway was one of three quickly emerging drive-by add-on deals, said that "everybody is looking to do add-ons," trying to strike while the iron is hot and market conditions are favorable.

The trader also quoted the new Turning Stone Casino Enterprises 9 1/8% senior notes due 2010, which had priced Tuesday at par, as having firmed to 102.5 bid/103 offered.

Among already established bonds, AES senior debt "was moving up a little bit," a trader said, "since they are relatively close on their tender."

He quoted the company's 9½% notes due 2009 as having risen to 51 bid/52 offered from 48 bid/49 offered on Tuesday.

At another desk, AES' 8 3/8% notes due 2007 were seen at 37.5 bid, up seven points.

The Arlington, Va.-based independent global power producer has been running an offer to exchange a combination of cash and new senior secured securities for up to $500 million of senior notes scheduled to come due in next week and in 2003.

Late Monday, it announced that it had achieved the minimum tender threshold of 80% of its $300 million 8¾% senior notes due Dec. 15; previously it had achieved the same minimum tender condition on the other notes being exchanged for, its $200 million of 7 3/8% remarketable and redeemable securities - ROARS - due 2013 but which are putable back to the company in 2003 (see "Tenders and Redemptions" elsewhere in this issue for full details).

AES had faced the prospect of a default if it were not able to push back the 8¾% notes. If the exchange offer is successful - it is still conditioned upon AES and its lenders agreeing on terms for a new $1.6 billion credit facility - the nearest maturities on its debt would be pushed off until late 2004 and early 2005.

Bonds of another power producer, Calpine Corp., were also firmer Wednesday, possible on sector sympathy with AES; Calpine's 8 5/8% notes due 2010 were at 41.25, up a point.

Elsewhere, Bally Total Fitness "was the disaster of the day - and there will always be one," a trader said, quoting the Chicago-based health club operator's 9 7/8% notes due 2007 as having dropped to 87.5 bid/88.5 offered, from 94 bid/95 offered on Tuesday.

That slide - and a plunge in its New York Stock Exchange-listed of $1.69 (19.86%) to $6.82 on volume of 2.7 million shares, six times the norm - followed the company's announcement of CEO Hillman's abrupt impending retirement at the ripe old age of 47. Hillman, CEO since 1996 is credited with pushing Bally to the top of the sector.

Bally also said that it would take a $5.8 million (17 cents a share) earnings charge related to the departing executive's lush severance package, which includes lump-sum payments totaling $1.3 million, monthly payments in the $109,000 range, a personal assistant and gym memberships through 2005 for Hillman, his immediate family and 25 other people.

Echostar DBS Corp.'s debt, which had moved up on Tuesday on the news that the Littleton, Colo.-based satellite broadcaster was ending its efforts to acquire larger rival Hughes Electronics Corp. "actually came down today," said a market source who quoted its 10 3/8% notes due 2007 down a point at 106.5 bid.

A trader quoted Echostar's 9 3/8% notes due 2009 at 104.5 bid/105 offered. AES' 9 1/8% notes due 2009 were at 103.5 bid/104offered.

Charter Communications Holdings LLC's bonds were seen down, giving up the slight gain they had notched on Tuesday. A market source quoted its benchmark 8 5/8% notes due 2009 as having dipped to 49 bid from 51.5 Tuesday, while its 9.92% notes due 2011 were seen down a deuce at 40 bid.

A trader quoted Charter's 8 5/8s as having fallen as low as 47.5 bid.48.5 offered during the session from the 50-51 bid level they held on Tuesday, attributing the dip to the company's late Tuesday announcement that it wasn't getting the kind of bids it had hoped for for certain underperforming properties. At the end of the day, however, he said that the bonds were essentially unchanged. Activity was brisk, he said, and prices volatile, but "at the end of the day, there was no price movement net-net."

The trader noted news reports saying that Halliburton Corp. was close to a settlement of the billions of dollars of asbestos claims filed against the company. "It'll provide a figure companies can get their hands around when figuring out their asbestos liability exposure."

That in turn, could prove helpful for high yield issuers facing asbestos claims, including Federal-Mogul Corp. and Armstrong World, and such non-bankrupt potential defendants as Owens-Illinois and Crown Cork & Seal.

"The news came really late today," he said, "but there may be some activity in those bonds tomorrow."

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