Vought Aircraft off as strike nearer; Allied Waste lower; American Seafood plans deal

By Paul Deckelman and Paul A. Harris

New York, Oct. 12 - Bonds of Vought Aircraft Industries Inc. were quoted sharply lower Tuesday on news that the Dallas-based aircraft components maker's employees have approved a strike against the company. Also on the downside, Allied Waste Industries Inc.'s bonds were being quoted down as much as two points after Moody's Investors Service downgraded the Scottsdale, Ariz.-based waste disposal company's debt ratings Friday.

In primaryside action, price talk emerged on American Seafoods Corp.'s planned issue of seven-year notes.

Vought Aircraft Industries' 8% notes due 2011 were being quoted by one market source as having fallen to 88 bid from prior levels at 96, while at another desk, a trader also saw them in the 88 vicinity.

The first source attributed the decline to the worsening labor situation at Vought, which produces wings and fuselage components for military and commercial aircraft as a subcontractor for aerospace producers like Boeing, Gulfstream Aerospace, Lockheed Martin, and Northrop Grumman, and for the U.S. government.

Production workers on Sunday voted overwhelmingly to reject management's latest contract proposal in favor of striking, although their bargaining unit, the United Auto Workers, has not set a date for the walkout. The UAW represents 1,800 of the 3,315 workers.

The key sticking point is a management proposal that would require employees to pay $21 a week for medical coverage - up from zero on their expired contract. The cost of dependant coverage would more than double. Sunday's vote was the second anti-contract, pro-strike vote by the union workers.

Amkor lower

Elsewhere, Amkor Technology Inc.'s announcement early Tuesday that it is the focus of an informal probe by the Securities and Exchange Commission helped to push the bonds of the West Chester, Pa.-based provider of contract semiconductor assembly and test services lower.

Amkor's 9¼% notes due 2008 were seen down more than two points on the session to 93 bid, while its 7¾% notes due 2013 were a point lower at 85 bid. At another desk, however, an observer quoted the latter bonds unchanged at 85.625.

Amkor said that the SEC is conducting an informal inquiry into trading in the company's securities. In an 8-K filing with the Commission, Amkor said it believes that the inquiry "relates to transactions in the company's securities by certain individuals, which may include certain insiders, during 2004." Amkor further said that it had received requests from the SEC to voluntarily produce documents and other information, and is cooperating with the government gumshoes.

Allied Waste drops

Allied Waste Industries bonds were seen as much as two points lower across the board as market participants reacted to Friday's after-the-close edict from Moody's downgrading the company's ratings two notches to B2 from Ba3 previously.

The company's various issues of bonds "all dropped a bit," said a market source. He quoted its 9¼% notes due 2012 at 109.5 bid and its 8½% notes due 2008 at 106.5 bid, both down two points. Allied's 6 3/8% notes due 2011 and 10% notes due 2009 were each down a point, the source said, at 96.5 bid and 104 bid, respectively. He also saw Allied's 7 3/8% notes due 2014 at 93.7 bid, well down from prior levels around 96.25

Besides the two-notch downgrade, Moody's said that it was maintaining a negative outlook on the company's debt.

The ratings agency cited Allied's declining margins, as well as an costly capital spending program through which the company hopes to channel funds into the planned renovation of a fleet of garbage trucks it acquired when it purchased Browning Ferris Industries some months ago.

Another source saw the company's 6½% notes due 2010 down more than a point at 98 bid, and a trader agreed with the assessment that Allied "was softer."

Levi Strauss edges higher

The trader said that overall, the market "seemed firm," with "better sellers at higher levels."

He termed Levi's notes "up marginally" following the release of the San Francisco-based apparel company's third-quarter earnings.

Levi's 7% notes due 2006 were quoted at 100.75 bid, 101.5 offered, either unchanged on the day or up slightly from par, depending on whom you spoke to. Most sources meantime saw the company's other bonds, such as its 11 5/8% notes due 2008 and 12¼% notes due 2012 as little changed, the former at 103.25 bid and the latter at 105.25.

One source did see those two issues at higher levels - but steady on the day, with the 11 5/8s as good as 104.25 bid, 104.75 offered and the 121/4s at 107.5 bid, 108. Closely held Levi reported net income for the quarter of $46.6 million compared with a net loss of $4.3 million for the third quarter of 2003. Levi attributed the improvement primarily to higher gross profit, lower sales, general and administrative expenses and lower tax expense.

On its conference call following the release of the numbers, chief executive officer Phil Marineau declared that "the quarterly results show that we accomplished what we set out to do," and pronounced himself "pleased with the results."

Marineau noted that net income and other financial metrics went up even as overall sales were going down, which the company had planned. Among the reasons given for the sales decline (to $995 million from about $1.08 billion the year before) were the licensing or exiting from unprofitable and underperforming businesses in order to focus on more profitable core-product assortments, resulting in approximately $24 million in reduced sales, and the planned reduction in closeout sales to off-price retail channels in 2004, decreasing sales by approximately $19 million

As of Aug. 29, total debt, less cash, stood at $2 billion, down about $100 million from $2.1 billion at the end of fiscal year 2003 last Dec. 31. As of Oct. 10, Levi had total available liquidity of $562.2 million -$317 million in liquid short-term investments and $245.2 million in net available borrowing capacity under its revolving credit facility.

During the call, Marineau announced to the investors and analysts on board that the company would have no comment on recent market rumors and news reports to the effect that Levi had agreed to sell its Dockers casual clothing unit to Vestar Capital Partners for $800 million.

"We have no comment on that, except that the process [of Levi selling the Dockers unit] continues," said chief financial officer Jim Fogarty.

The trader said that the Levi bonds pretty much "were at the highs where they've been. The numbers didn't make much of a big difference."

Calpine down on selling

He saw Calpine Corp. bonds "just down - there must be a seller out there." The San Jose, Calif.-based independent power producer's 8½% notes due 2008 went from 68 on Friday to 66 Tuesday, while its 8½% notes due 2011 went down to 61 bid from 63. And its recently issued new 9 5/8% notes, which had priced a bit above 99, were seen Tuesday "offered at 97 without a bid. That thing never really traded well at all."

Primary ready for action

"Stand by, stay tuned and don't touch that dial," junk bond sell-siders advised Prospect News as primary market activity got underway in the holiday-abbreviated post-Columbus Day week.

The market is red hot, sources say, with issuers and their underwriters "living like pigs in corn," in a paper-starved market that is now thought to be wide open to dividend-funding deals from issuers with "less-than-perfect" (i.e. low single-B and triple-C) credit ratings.

And the expectation is that junk bond deals are going to continue to price at remarkably tight spreads to Treasuries.

Red hot high yield

"It's awesome," exclaimed one investment banker late on Tuesday.

"It's insane," the source added (allowing that the buy-side might be less elated by present market conditions than are their counterparts on the sell-side).

"Right now the calendar is still light. And with the market where it is you are going to continue to see lower rated issuers take advantage of it."

Dividend deals

There was news in the new deal pipeline during Tuesday's session as American Seafoods Group, which lately pulled its offering of income deposit securities, came back with a $125 million offering of seven-year discount notes.

Price talk is 11¼%-11½% ASG Consolidated/ASG Finance Group's deal, which will be marketed on Wednesday, with pricing expected to take place late on Wednesday or on Thursday.

Banc of America Securities has the books for the deal from the Seattle integrated seafood company. The proceeds will be used to redeem the company's preferred stock and to fund a dividend payment.

Also announcing a dividend payment deal on Tuesday was Cincinnati-based multi-media publisher CBD Media LLC, which disclosed its intentions of selling $75-$100 million of eight-year senior notes, and increasing by $25 million its existing $130 million term loan.

Proceeds, along with cash on hand, will be used to pay fund a dividend payment.

The equity sponsors include Spectrum Equity Investors and Cincinnati Bell.

No timing or bookrunning names were heard with respect to the CBD Media deal.

One source told Prospect News that dividend funding deals were a hot topic among the accounts who gathered last week at the Deutsche Bank Global High Yield Conference in Scottsdale, Ariz.

Two roadshow starts

While American Seafoods will apparently come with two days (or less) of marketing, a pair of prospective issuers showed up on Tuesday with deals that are to undergo more or less full marketing regimes.

The roadshow starts Wednesday for MarkWest Energy Partners LP/Finance Corp.'s $200 million of 10-year senior notes (B1/B+) via JP Morgan and RBC Capital Markets.

The Denver, Colo.-based natural gas company, which will use the proceeds to repay debt, expects the deal to price on Oct. 20.

Also Odyssee Financing SA (Editis) is expected to begin a roadshow late this week for a €150 million offering of 10-year senior notes, which are anticipated to price late in the week of Oct. 18.

BNP Paribas, Credit Suisse First Boston and Lehman Brothers will be joint bookrunners for the Paris-based publisher's acquisition financing.

Editis was formerly Vivendi Universal Publishing.

Teco Energy reprices preferred

Although no new deals priced on Tuesday, Teco Energy repriced $162.7 million of its 5.934% trust preferred shares due Jan. 1, 2007 (Ba3/B).

The Tampa-based energy company's shares, which originally priced at $25.00 par, were repriced at $25.27 per share, resulting in a 5.445% yield, via Merrill Lynch & Co. and JP Morgan.

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