Tekni-Plex bonds boom on less-onerous results; Dana gains on asset-sale plan

By Paul Deckelman and Paul A. Harris

New York, Sept. 29 - Tekni-Plex Inc.'s bonds shot up solidly on Friday, traders said, after the company released its latest results. While it still lost a ton of money in the most recent quarter, market participants said it could have been worse and the bonds took flight on that thin reed.

Another upsider was Dana Corp., whose bonds were seen up several points across the board as the troubled automotive parts company said in a regulatory filing that its Dana Credit Corp. subsidiary was moving ahead with its plan to sell most of its assets.

And several issues which had been soundly drubbed in Thursday's trading - InSight Health Services Corp., Sea Containers Ltd. and Technical Olympic USA Inc. - appeared to stanch the bleeding Friday and remained around Thursday's levels.

Primaryside activity was meantime very restrained and anticlimactic after Thursday's busy session, which saw new deals price from EchoStar DBS Corp., Georgia Gulf Corp., and Mediacom Broadband LLC.

A source said that the broad market was pretty quiet on Friday, and added that high yield remained more or less in line with stocks, which were slightly weaker, and with Treasuries, which were also off by a couple of basis points on the session.

The source added that the general tone of the market is pretty good.

New bonds near issue

EchoStar's new 7% senior notes due 2013 - which priced too late in the session Thursday for appreciable aftermarket activity - were seen Friday trading around 97.5 bid, 98.5 offered, slightly under their 97.983 issue price. A trader at another desk saw the bonds at 97.25 bid, 97.75 offered.

Mediacom's new 8½% senior notes due 2015 - which priced at 99.25 as an add-on to an existing tranche of the same bonds - were seen by a trader holding steady at 99.25 bid, 99.75 offered.

And Georgia Gulf's 9½% notes due 2014, which priced earlier Thursday at 99.304, were seen on Friday at 99.5 bid, 99.75 offered. Its 10¾% notes due 2016 were at 98.5 bid, 99 offered, little changed from their 98.494 issue price.

Tekni-Plex trades up

Back among the established issues, a trader called Tekni-Plex "the big winner today," seeing its 12¾% notes due 2010 up 8 points on the session at 85 bid, 86 offered. He credited the advance to "better-than-expected results" - which is another way of saying, not-as-unfavorable-as-feared results.

The Somerville, N.J.-based packaging company said that in the fiscal year ended June 30, its net sales increased to $742.7 million from $695.5 million in the same period last year, representing a 6.8% increase.

Gross profit increased to $120.7 million, or 16.3% of net sales, from $95 million (13.7%) in the year-earlier period.

However, due to higher energy, labor and freight costs, among other factors, the company's net loss increased to $84.3 million for fiscal 2006 or 11.4% of net sales, versus a year-earlier loss of $81.5 million for fiscal 2005, or 11.7% of net sales.

Revlon gains on waivers

Another upsider, the trader said, was Revlon Inc., whose bonds rose as the New York-based cosmetics company got covenant waivers from its lenders.

He quoted Revlon's 8 5/8% notes due 2008 up ½ point at 94.5 bid, 95.5 offered, while its 9½% notes due 2011 also gained ½ point on the session to 88.625 bid, 89.625 offered.

Revlon said that its lenders of lenders had agreed to change the terms of its $960 million loan facility to exclude certain restructuring charges from its earnings, making the company more likely to avoid defaulting on its debt.

Revlon's principal operating unit, Revlon Consumer Products, Corp., said at the start of the week that it would record $92 million in charges related to the company's latest restructuring. Absent the waiver from the lenders, that had the potential of raising its ratio of debt-to-earnings past danger levels, by reducing earnings.

Under the terms of the agreement announced Friday, Revlon can exclude up to $75 million of the restructuring charges from EBITDA for the purposes of the loan covenant.

Chiquita firms on waiver move

Also on the waiver front, Chiquita Brands International Inc. announced that it has begun the process of obtaining a temporary waiver from its senior credit-facility lenders.

Its 7½% notes due 2009 moved up to 87 bid, a 1 point gain on the day, although a market source said small trades late in the session pushed the bonds even higher to around 88.375. Chiquita's 8 7/8% notes due 2010 were meantime seen unchanged around 95, although they had fallen to a low print below 93 at one point during the proceedings.

The Cincinnati-based produce company - which earlier in the week warned that the current E. coli scare related to packaged fresh spinach could hurt the results of its Fresh Express salad operation, while European Community tariffs were affecting the earnings of its core banana business - said that while its fiscal third quarter has not yet been completed, it is seeking the waiver now, rather than later, "to provide additional flexibility in light of the current challenging market environment facing the company."

Chiquita said that it would evaluate whether evaluate to seek a more permanent waiver or amendment, as appropriate, during the term of the temporary waiver.

InSight steadies after fall

Several names which had fallen sharply on Thursday seemed to steady themselves at those lower levels Friday.

InSight Health Services - whose 9 7/8% subordinated notes due 2011 had plunged about 10 points on Thursday to close in the lower 30s, were about unchanged, a trader said, at 34.5 bid, 35.5 offered, while its 10.739% senior notes due 2011, which were down about 4 points Thursday to the mid-80s, remained around those levels.

Insight's bonds had fallen on Thursday after the Lake Forest, Calif.-based diagnostic imaging company reported that in the fiscal fourth quarter ended June 30 it lost $186.747 million, versus year-ago red ink of $23.286 million, while its full-year loss widened out to a yawning $210.218 million from a $27.217 million loss the previous year.

In reporting the sobering results, management issued a long laundry list of negative factors and trends which it said "likely will continue" to adversely affect its operations. These included such things as overcapacity in the diagnostic imaging industry, reductions in reimbursement and planned reductions from Medicare, reductions in compensation paid by customers of its mobile imaging units, competition from other mobile providers, and competition from equipment manufacturers, which it said would "caus[e] some of our customers and referral sources to invest in their own diagnostic imaging equipment."

Sea Containers treads water

The trader saw Sea Containers' 10¾% notes slated to come due on Oct. 15 down about ½ point to 77.5 bid, 78.5 offered. Those bonds - and the Bermuda-based maritime and railroad transportation company's other two issues, its 10½% notes due 2012 and its 7 7/8% notes due 2008 - had all fallen into the upper 70s Thursday from prior levels in the low-to-mid 80s. Market participants cited investor worries that, given its well-publicized problems, the troubled company may not be able to pay off the 103/4s when they come due about two weeks from now.

Traders also cited a lack of reassuring guidance on this issue from management, which has a reputation of playing its cards very close to the vest and disclosing little information.

Technical Olympic slide halted

And a trader saw Technical Olympic USA's bonds - which had been battered around the previous two sessions - little changed on Friday, with its 9% notes due 2010 steady at 95 bid, 96 offered, and its 10 3/8% notes due 2012 likewise hanging in at 86.

The Hollywood, Fla.-based homebuilder's bonds had been bludgeoned over the previous two sessions, including a 4 point drop Thursday, after it disclosed Wednesday that its Transeastern joint venture with the Falcone Group was not doing well because of the softening housing market in Florida, its primary area of operation.

On Friday, Technical Olympic released additional information about the joint venture's finances. It said that its total exposure to the joint venture is approximately $141 million. The joint venture's assets totaled $963.8 million as of July 31, and its debt was approximately $600 million.

Technical Olympic said Transeastern and its lenders are currently working together to quantify the joint venture's future prospects, and to determine an action plan. It cautioned that the outcome of these efforts are "currently unknown and will likely remain unknown for some period of time."

It also outlined its worst case scenario, which would result in the loss of Technical Olympic's $92.6 million investment in the joint venture, and which would create "significant doubt" about the eventual recoverability of $48.5 million of loans and receivables which Transeastern owes Technical Olympic.

In the event such a worst-case scenario came to pass, it would require Technical Olympic to take an after-tax charge of $89 million ($1.50 per share).

Dana up on units sale plans

In the automotive arena, Dana Corp.'s bonds were seen up 2 points, a trader said, on "rumblings about settlement conversations," as the bankrupt Toledo, Ohio-based parts maker said that its board of directors had adopted a plan to proceed with the accelerated sale of substantially all of Dana Credit's remaining assets.

He saw Dana's 5.85% notes due 2015 at 66.5 bid, 67.5 offered, while its 6½% notes due 2009 were at 70 bid, 71 offered. However, Dana Credit Corp.'s 8 3/87% notes due 2007 were a point lower at 94.5 bid, 95.5 offered.

At another desk, a trader saw Dana's 6½% notes due 2008 up 2 points at 70.25 bid, 71.5 offered, while its 7% notes due 2028 were 1¼ points higher at 67.25 bid, 68.25 offered.

In a Friday filing with the Securities and Exchange Commission, Dana said that it will carry out its asset-sale plan for Dana Credit whether or not it enters into a forbearance agreement with its ad hoc committee of holders of the majority of the outstanding principal amount on Dana Credit's notes.

Dura drops again

Dura Automotive Systems Inc.'s battered bonds continued to move still lower, with traders saying that the Rochester Hills, Mich.-based automotive parts maker's notes are already trading like a bankrupt company's bonds - which many in the market believe that they will soon become.

Dura's 8 5/8% senior notes due 2012 breached the psychologically significant 40 mark, trading down as low as 38 bid, 39 offered intraday, down 3 points on the day. "But it did come back a little bit to finish at 39 bid, 40 offered," a trader said, pegging the bonds down 2 points at the close.

At the same time, Dura's 9% subordinated notes due 2009 continued to languish around near-worthless levels around 4 bid, 5 offered, although a trader called that up ½ point on the session.

$2.5 billion week

Meanwhile Friday's primary market was dead quiet.

With no issues pricing Friday, the final week of September 2006 came to a close having seen slightly less than $2.5 billion of issuance priced in nine dollar-denominated tranches.

That tops the previous week, which saw just under $1.95 billion.

In total September has seen $9.82 billion price in 28 dollar denominated tranches.

Hence sell-side sources who forecast a more moderate pace than the torrid month of September 2005, said to have created some "indigestion" in the junk market, were correct. September 2006 came in almost a billion shy of September 2005, which saw $10.8 billion price in 40 tranches.

Year-to-date issuance at Friday's close came to $94.64 billion in 274 tranches, as year-on-year 2006 has now seen 17.7% greater dollar volume than 2005 to the Sept. 29 close: $77.79 billion in 303 tranches.

EchoStar: a good sign

As one sell-side official looked over the past week's primary market business, shortly after the Friday close, the source said that Wednesday's "DISH drive-by deal" stood out.

EchoStar DBS Corp. priced a $500 million issue of 7% seven-year senior notes (Ba3/BB-) at 97.983 to yield 7 3/8% on Thursday, on the wide end of the 7¼% area price talk.

The company came with a quick-to-market transaction with the intention of selling either the seven-year bullet notes or else to sell 10-year bullets, based upon demand, an informed source said. Although the 10-year notes were ultimately abandoned they had been talked at a yield in the 7½% area.

JP Morgan and Deutsche Bank Securities were joint bookrunners for the debt refinancing deal from the Englewood, Colo.-based satellite TV company.

On Friday the sell-sider, who was not in the deal, said that it is always a sign of a good market when you have "sophisticated, benchmark issuers," such as EchoStar feeling like the market is good enough to do a large drive-by deal.

The week ahead

No news was heard Friday on the business perched on the forward calendar for the first week in October.

As the week gets underway, the deal that is drawing the crowd, sources say, is the Philips Semiconductor €4.5 billion equivalent in multi-tranche offering, via Morgan Stanley, Deutsche Bank Securities and Merrill Lynch.

The deal, being issued by NXP BV/NXP Funding LLC - NXP being the acquired company's new handle - sports a €3 billion equivalent of seven-year senior secured floating-rate notes due (Ba2/BB+) in dollars and euros, and dollar-denominated eight-year senior secured fixed-rate notes (Ba2/BB+), as well as €1.5 billion equivalent of 10-year senior unsecured fixed-rate notes (B2/B+).

Pricing is expected Thursday.

Also marketing a hefty euro-denominated deal thought to possibly be business for the first week in October is Tokyo-based telecommunications company, Softbank Corp., with a €500 million offering of seven-year senior unsecured notes (expected Ba2/confirmed BB-) via Deutsche Bank Securities.

However the first deal out of the gate is likely to be Semgroup LP's $250 million add-on to its 8¾% senior notes due Nov. 15, 2015 (existing ratings B1//B+), via Banc of America Securities.

No talk was heard before the Friday close on the tap from the Tulsa-based midstream energy company. However market sources expect it to price before the Monday close.

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