MGM Mirage, Corning, Amkor lead busy primary; Biovail off as agencies eye downgrade

By Paul Deckelman and Paul A. Harris

New York, March 9 - MGM Mirage - which priced a $225 million issue of 10-year bonds less than three weeks ago, dealt itself back in on Tuesday, bringing a $300 million add-on to that Feb. 20 deal to market. The Las Vegas based gamer was one of several opportunistic issuers taking advantage of the high-yield market's big appetite for new paper to bring quickly cobbled-together deals, among them California Steel Industries Inc., Amkor Technology Inc. and Corning Inc.; the latter deal was a two-part offering. Mrs. Fields Famous Brands LLC meanwhile garnered a little more dough for its cookie jar, with a scheduled calendar offering of seven-year notes.

In the secondary market, Biovail Corp.'s bonds and shares were lower on the session, after both Standard & Poor's and Moody's put the Canadian pharmaceuticals company under scrutiny for a possible downgrade.

Steel industry bonds - which have been on a strong run up over the past several months as increased worldwide steel demand has cut supplies and boosted the prospects for a revamped American steel industry - were being actively traded; interest in the sector has been stoked by, among other factors, new deals by California Steel and upcoming issuer Ispat Inland Inc.

Overall the junk bond market saw $1.215 billion price Tuesday in half a dozen tranches, half of which came as drive-by business.

And market sources reported that three deals underwent restructuring during the session. One sell-side source - cautioning that observers should not jump to any dire conclusions - did allow that Tuesday's trio of restructured offerings might conceivably be taken as further evidence of a changing tide in the high yield primary.

Buy-side concerns continue to be heard

"It's a stretch, but you could always say that it had something do with buy-side discretion over the way the deals end up," said the sell-side official.

"Deals are still getting done," the source added. "No one out there seems to be choking on the supply. But the buy-side seems to be able to structure the final outcome a little more the way they want it."

Recalling the late January, early February primary market, the sell-sider said a transformation seems to be taking hold.

"It's no longer the situation where any deal that you bring just automatically gets whisked out the door."

Primary cranks out $1.215 billion

Six tranches priced during Tuesday's session, with the biggest offering, $400 million, coming in two parts from Corning, N.Y. glass company Corning Inc.

Corning's (Ba2/BB+/BB) issue was comprised of $200 million of 5.9% 10-year notes which priced at 99.85 to yield 5.92% - compared to price talk in the 5.95% area - and $200 million of 12-year notes which priced at par to yield 6.2%, right on the 6.2% area talk.

Banc of America Securities and JP Morgan ran the books for the debt refinancing deal.

Also coming Tuesday with drive-by business was Las Vegas casino operator MGM Mirage. The company priced a $300 million add-on to its 5 7/8% senior notes due Feb. 27, 2014 (Ba1/BB+) at 99.069 to yield 6%.

Deutsche Bank Securities, Citigroup and Bank of America Securities were joint bookrunners. MGM Mirage will also use the proceeds to repay debt.

Elsewhere Amkor Technology priced a restructured $250 million of 7 1/8% seven-year senior notes (B1/B) at 99.321 to yield 7¼%, wide of the was 7% area price talk.

The tenor of the notes was shortened to seven years from 10 years. Also the issuer extended call protection for the life of the bond, with a Treasuries plus 50 basis points make-whole call provision. Previously the notes were expected to come with only five years of call protection.

Citigroup ran the books for the deal from the West Chester, Pa.-based provider of semiconductor assembly and test services. Proceeds will be used to repay debt.

California Steel Industries Inc. sold $150 million of 10-year senior notes (Ba3/BB-) at par to yield 6 1/8%.

The Banc of America Securities and Goldman Sachs & Co.-led deal came at the tight end of the 6 1/8%-6 3/8% price talk. The Fontana, Calif. producer of flat rolled steel will use the proceeds to refinance debt.

Finally, Mrs. Fields Famous Brands, LLC and Mrs. Fields Financing Company, Inc. sold $115 million of seven-year senior secured notes (B3/CCC+) at par to yield 11½%.

The Jefferies & Co.-led deal came at the wide end of the 11¼%-11½% price talk.

The Salt Lake City-based snack food franchiser, like all its counterparts in Tuesday's new issue market, will use the money to repay debt.

Grande, Eschelon also restructure

In addition to Amkor, two other prospective issuers re-jigged their deals during Tuesday's session.

Grande Communications restructured its $125 million 10-year deal (Caa2/CCC). The San Marcos, Tex.-based internet, local and long-distance telephone and cable TV company is now reported to be marketing senior secured notes with warrants. Previously the company had been heard to be in the market with senior unsecured notes with no warrants.

Unofficial price talk has the notes coming with a 14% coupon, pricing at a discount to yield 15%.

A market source told Prospect News that terms had been anticipated on the deal late Tuesday. However no terms had been heard before Prospect News went to press.

Bear Stearns & Co. is running the books.

And price talk of a yield in the 11¾% area was heard Tuesday on a restructured $100 million six-year notes offering from Eschelon Telecom.

The Minneapolis-based voice, data and internet services provider will now sell senior second secured notes, according to an informed source who added that the notes will be secured by a second lien. Previously the company intended to offer senior unsecured notes.

Eschelon Telecom plans to raise $85 million of proceeds with the sale which is expected to be completed at a discount on Wednesday afternoon via Jefferies & Co.

Norske Skog Canada to host investor call

Norske Skog Canada Ltd. will host an investor conference call on Wednesday morning for an offering of $225 million of 10-year senior notes (BB).

Timing, as regards the pricing of the deal, remains to be determined.

Merrill Lynch & Co. and Banc of America Securities are joint bookrunners on the offering from the Vancouver, B.C. paper-maker.

Proceeds will be used to repay debt.

New deals firm a little

When the new California Steel 6 1/8% senior notes due 2014 were freed for secondary dealings, they were quoted as having firmed slightly to 100.5 bid, 100.75 offered from their par issue price earlier in the session.

A trader saw Corning's new 5.90% senior notes due 2014 trading at par bid, 100.5 offered, up a little from their 99.85 issue price, while the Corning. N.Y.-based optical fiber and cable maker's new 6.20% senior notes due 2016 were at 100.25 bid, 100.75 offered after having priced at par.

And he saw Amkor Technology's new 7 1/8% senior notes due 2011 at 99.5 bid., 100.5 offered, up slightly from their 99.321 issue price.

At another desk, a trader, quoting the West Chester, Pa.-based semiconductor packaging and test services provider's new bonds around that same level, said the new issue was "going nowhere."

The apparent lack of aftermarket interest in the day's new issues, combined with a certain heaviness in the existing sector, was a sign, he said that "the calendar is finally catching up. The market is finally starting to suffer from a little indigestion here."

"It was another pain-in-the butt day," the other trader said. "The market just churned around all day. Equities were trading very heavy, so the market was trading heavy."

Treasury gains draw issuers

The trader opined that "I think this move up in Treasuries really threw people for a curve. They're reappraising their whole situation. I don't know what [the Treasury market] is telling us - is it that the economy is weaker than we think it is? I don't know what the deal is"

Treasuries continued their move upward on Tuesday, with the 10-year benchmark up another 12/32 and the yield driven down to 3.721%, the lowest level seen in eight months. The government bellwether's yield is off 0.3% in as many days.

One side effect of the slide in T-bond yields, and the concomitant fall in interest rates in general, has been that it has galvanized issuers into action.

"Companies are refinancing like crazy." the trader declared."

Interest in steel

At another desk, a trader said that the success of the California Steel deal and the upcoming Ispat Inland deal might encourage others in the suddenly revived steel sector to do deals.

"If they saw California Steel coming with a deal" - not exactly a powerhouse in the worldwide steel industry - "then U.S. Steel can certainly come to market."

The Pittsburgh-based steel giant did in fact have news out, although not of the new-deal variety; it said it would redeem $187.25 million principal amount of its 10¾% senior notes due 2008 and $71.5 million of its 9¾% senior notes due 2010, exercising the right to redeem up to 35% of each issue under the equity clawback provision of their respective indentures, using proceeds from the company's recent equity offering.

The late-afternoon announcement came well after trading had wrapped up for the day; whether it will have any impact remains to be seen, since the company had already announced its intentions of using the equity deal proceeds to redeem some of its outstanding bonds (the company has $535 million face amount of the 10¾% notes outstanding and $450 million of the 93/4s). The bonds are already trading at extremely tight levels to which investors took them in anticipation they might be taken out; the 10¾% notes, for instance, were hovering around to 116-117 bid area.

Elsewhere in the steel sector, a trader saw AK Steel Corp. bonds "finally" moved upward, quoting the Middletown, Ohio-based specialty steelmaker's 7 7/8% notes due 2009 as having firmed to 90 bid, 91 offered and its 7¾% notes due 2012 as having improved to 86.75 bid, 87.75 offered.

The asset sales that AK recently announced "should have made them act better before this," he said. AK recently announced the sale of its Douglas Dynamics snow and ice removal unit, as well as the sale of a Houston area-industrial park. Net proceeds from the two sales are expected to total about $340 million, better than initially expected.

However, at another desk, a trader said that steel industry bonds were "down a point," quoting AK's 7 7/8s as having fallen to 88 bid from 89 previously, and seeing Oregon Steel's 10% notes due 2009 dipping to 95.75 bid from 96.5 previously.

Some El Paso issues rise

Elsewhere, the trader did see improved in certain secured issues of El Paso Corp., which has recently been shedding non-core assets and using proceeds to whittle down its debt load.

He said not all of the Houston-based energy operator's bonds were up, but its Tennessee Gas Pipeline 7½% notes due 2011 were a point better at 104.5 bid, and its Southern Natural Gas 6.70% notes due 2007 firmed to 105.25 bid from 104.5.

Tenet up, Biovail down

Tenet Health Care Corp. announced an agreement with its lenders on an amendment to its senior credit facility, which had been widely expected; while the credit facility has been reduced to $800 million from $1.2 billion previously and is now secured with the assets of some of the Santa Barbara, Calif.-based hospital company's operating subsidiaries, its financial covenants were relaxed to keep the troubled company out of technical default of key financial measures.

Tenet's 7 3/8% notes due 2013 were quoted about a point higher at 92.25 bid, while its 6 3/8% notes due 2013 were more than a point better at 89 bid.

Another healthcare company - Biovail Corp. - was on the downside, its 7 7/8% notes due 2010 down a point-and-a-half, at 96.75 bid, and its shares off $1.22 (6.68%) to $17.05 on the NYSE, after both S&P and Moody's warned that they could downgrade the bonds due to lackluster operating performance and deteriorating credit protection measures.

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