Allied Waste, MailWell, NRG price quickie deals; Calpine bonds better

By Paul Deckelman and Paul A. Harris

New York, Jan. 21 - Allied Waste Industries Inc., Mail-Well, Inc. and NRG Energy Inc. brought quickly shopped deals to market Wednesday - NRG's an add-on to existing bonds, the other two opportunistically timed drive-by offerings, the proceeds of which will be used to take out existing bonds.

In the secondary market Calpine Corp. bonds were seen up at least two to three points on the session, and El Paso Corp. paper was likewise better; each energy company announced plans to sell assets, with proceeds likely slated for debt reduction.

"Seek not enlightenment on the pages of the forward calendar," the soothsayers of the junk bond market counseled Wednesday, as the investment banks popped three surprise deals totaling $1.6 billion.

Drive-bys, not roadshows, are the rule of the day, those sources added. Tomorrow's names likely do not appear on today's forward calendar.

"I think we're going to continue seeing companies doing drive-bys and taking advantage of the continuing liquidity in the market," one senior sell-sider counseled more than halfway through the session.

"Drive-bys are perhaps more likely right now than a calendar built up of deals that will have fully scheduled roadshows.

"But in the end it will be a combination of both, I think."

More from Allied Waste, NRG reopens

Allied Waste's Allied Waste North America, Inc. subsidiary priced $825 million of senior secured notes in two tranches (Ba3/BB-) on Wednesday.

And both tranches of the refinancing deal, led by Citigroup, JP Morgan and UBS Investment Bank, came at the tight end of price talk.

The Scottsdale, Ariz. waste services company sold $400 million of notes due Feb. 15, 2011 at par to yield 5¾%. Price talk was 5 7/8%.

The company also sold $425 million of notes due Feb. 15, 2014 at par to yield 6 1/8%. Price talk was for a yield in the 6¼% area.

Also on Wednesday NRG Energy priced a $475 million add-on to its 8% senior secured second priority notes due Dec. 15, 2013 (B2/B+) at 106, at the tight end of the 105.75-106 price talk.

The pricing resulted in a 6.996% yield to worst and generated $503.5 million of proceeds.

Credit Suisse First Boston ran the books Minneapolis power company's refinancing deal.

The original $1.25 billion issue priced at par on Dec. 17, so NRG walked away with a substantial savings in interest rates.

Finally, Mail-Well I Corp. sold $300 million of senior subordinated notes due Dec. 1, 2013 (B3/B) at par to yield 7 7/8%.

Credit Suisse First Boston ran the book for the Englewood, Colo.-based provider of visual communications services.

The deal came at the tight end of the 8% area price talk.

Affinity trickles new deal news

Affinity Group Holding, Inc. is expected to launch a new senior subordinated notes deal this week via CIBC World Markets, the dealer manager of the tender offer that the Ventura, Calif. recreational goods and services company announced Wednesday.

Proceeds will be used to fund the tender offer for the company's 11% senior notes due 2007. The consent solicitation expires on Feb. 2.

No size, structure or timing were heard on Affinity's deal.

High yield sources concur: watch out for the drive-bys

One sell-side official who spoke to Prospect News after Wednesday's session came to a close reported a tally of new issuance for the two sessions of the Jan. 19 week of $1.9 billion, including Wednesday's four tranches.

This source concurred with the official quoted in the opening paragraphs of this market commentary: the potential for company's to bring quick-to-market deals is at present notably high.

While declining to volunteer any names this source said that the potential exists for that $1.9 billion figure to double by Friday's close.

When the new Allied Waste 5¾% senior notes due 2011 and 6 1/8% seniors due 2014 were freed for secondary dealings, they were seen to have firmed slightly from their par issue price to around 100.25 bid, 100.75 offered. But late in the day, "a par bid got hit," a trader said, and characterized the new bonds as "treading water."

"The market was getting tired," another trader agreed, quoting both issues as having come off their highs to trade into a par bid going home.

He saw Allied's existing 8 7/8% notes having opened at 112 bid, 113 offered, "and that offer got lifted in front of the deal." The Allied 7 7/8% notes due 2009, which are going to be taken out with the proceeds from the new offering, were trading at 104.375, up slightly from their 103.9375 anticipated call price. "There are wide markets on the most recent [Allied Waste] deal," its 6½% notes due 2010. He saw those notes come in slightly, to 104 bid from 104.5 on Tuesday.

Allied was the only one of the day's deals seen having broken into the secondary. Among Tuesday's deals that priced, Portola Packaging Inc.'s 8¼% senior notes due 2012, which had priced at par and then shot up to around the 104 level, were seen holding those gains but not adding to them; the new Portolas were quoted at 104 bid, 104.5 offered.

Calpine gains

Back among the existing issues, "Calpine was the mover of the day," a trader said, with its 8½% notes due 2008 having moved up to 88 bid, 89 offered from prior levels at 85 bid, 86 offered; its 8½% notes due 2011 firmed to 87 bid, 88 offered, up from 84 bid, 85 offered.

At another desk, the San Jose, Calif.-based energy generating company's 8 5/8% notes due 2010 were seen more than three points improved, at 87 bid.

The trader said that "the whole sector" seemed better; he quoted El Paso's 6.95% notes due 2007 at 99.5 bid, 100.25 offered. El Paso's 7 7/8% notes due 2012 were seen nearly two points better around the 100.5 bid level while its 7¾% notes due 2013 climbed a point-and-a-half to 102.5 bid.

El Paso and Calpine both seem to be riding the crest of positive asset sale news announced during Friday's truncated pre-holiday session; Houston-based El Paso said that it would sell 25 power plants to American International Group for $746 million; additionally, the AIG unit buying the plants will assume $174 million of non-recourse debt.

Calpine, meantime, said it had completed the previously announced sale of its one-half interest in the 545-megawatt Lost Pines 1 Power Project in Texas. Calpine is scheduled to get $150 million and it also entered into an agreement with the buyer, the Lower Colorado River Authority, to purchase 250 megawatts of electricity at favorable rates through Dec. 31.

Calpine and El Paso are just two energy/power companies looking to clean up their balance sheets by selling non-core assets and paying down debt.

Reliant up, Tembec down

Reliant Resources Inc. was reportedly seeking bids for its New York state power plants, including two in New York City itself and several others upstate.

Reliant's 9½% notes due 2013 were meantime up a point-and-a-quarter, at 111.5 bid. Also up around the same amount was independent power producer AES Corp.'s 9 3/8% notes due 2010.

Elsewhere, Canadian forest products producer Tembec Industries Inc.'s bonds were lower, after Deutsche Bank put out a bearish report about the company, a trader said. He quoted Tembec's 7¾% notes due 2012 at 98 bid, 99 offered, down a point.

At another desk, Tembec's 8 5/8% notes due 2009 were seen at 104.25, while its 8½% notes due 2011 were seen off as much as three points at 98.25.

Back on the upside, Goodyear Tire & Rubber's bonds were up anywhere from half a point to a point - its 6 5/8% notes due 2006 were at 101 bid, 102 offered. The Akron, Ohio-based tire giant's shares were also stronger on the session.

Korean banks soon

The holiday celebrations in east Asia have put the stopper on financial news from cities including Jakarta, Singapore, Hong Kong and Seoul, an emerging markets source told Prospect News on Wednesday.

"It's Chinese New Year in Asia, Thursday and Friday, the source explained. "Asia in general is shut from a market standpoint this week and will probably pick up next week, after the holiday."

Nevertheless, deals totaling in excess of $1.5 billion are expected to materialize by the close of 2004's first quarter from Korea Development Bank (KDB), Export-Import Bank of Korea (Kexim) and Woori Bank (see related story in this issue).

Sovereigns coming from Chile, Philippines

This official told Prospect News that because of the celebrations in Asia, news would not likely be heard on an anticipated sovereign from the Philippines until next week.

"People expect them to do something at some point," the source said. "Their needs are not huge. The sovereign only needs $500 million or $750 million.

"They do have elections mid-year and I think everybody assumes they will do it before the elections and earlier rather than later - in the first quarter rather than the second quarter.

"They really have not acted as though they are in a rush. They certainly could have done something if they had wanted to."

Meanwhile, Chile is expected to bring a floating rate tranche of sovereigns (A/Baa1), probably on Thursday.

"It will be pretty tight," commented the official. "The secondary levels suggest it will be down in the (Libor plus) 40s or 30s.

"Chile trades pretty tight."

Emerging markets rise to challenge

This official said that emerging markets new issuance volume so far in 2004 has challenged the market. And for the most part the market has risen to the challenge.

"The market is still pretty strong," commented the emerging markets senior sell-side official. "We've had a little bit of retrenchment from the highs. But still we are tighter since year end and tighter on the year.

"We have had a lot of supply - close to $12 billion already. That's a lot of supply and the market has taken it pretty well.

"When I looked at where spreads were at the beginning of the year, I would have thought that we needed more spread retrenchment to get that size absorbed.

"And we have seen more softness from the corporates recently, especially some of the Brazilian corporates that came; we've seen more softness there than on the sovereign side.

"Braskem is a great example. I think a lot of that buying is opportunistic. I don't think people are buying it because they think it's a great credit that they want to own forever; they see an 11¾% coupon and buy it to clip the coupon for a while but hopefully sell it a couple of points up at some point."

Junk buyers lured by high yields

Finally, the emerging markets sell-side source said that the present dearth of deals on the U.S. high yield forward calendar, especially taken in light of the market's reportedly high degree of liquidity, is helping emerging markets deals as a result of crossover play.

"I think that it means that you have people looking more closely at some of the EM names than you typically would," said the official.

"You've seen some pretty difficult names get done and get upsized. Braskem got upsized to $250 million.

"On the other hand they paid 11¾%. When was the last time you saw any high yield issuer pay 11¾%?

"Some of these deals are just getting done because people want to buy the notes and sit on them for a while and clip the coupon, then sell it. I'm not sure how much serious analysis is going on in the names."

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