Jefferson Smurfit, SpectraSite lead deal deluge; Charter up on asset-sale buzz

By Paul Deckelman and Paul A. Harris

New York, May 16 - Jefferson Smurfit and SpectraSite Inc. led the way Friday as a busy week of wheeling and dealing in the primary market came to a close, with packaging company Smurfit actually coming away from the market with a smaller package of proceeds than originally planned, while SpectraSite upsized its offering. Two somewhat lesser-known companies - Omnova Solutions Inc. and Terra Capital Inc. - were also heard to have priced new offerings during the session.

In the secondary market, Charter Communications Holdings LLC bonds were solidly higher in the early going, fueled by renewed talk of possible asset sales by the problem-plagued St. Louis-based cable TV operator. But traders said that Charter's bonds came off those exalted levels as the asset-sale talk proved to be just that - talk - and ended only moderately higher. On the downside, Collins & Aikman Products Co.'s bonds slid for a second consecutive session, after the auto components maker's disappointing quarterly earnings and forecasts for the near future.

As Friday's session in the high yield primary market wound down observers who spoke with Prospect News were heard to huff and puff.

And they had good cause: the merry month of May 2003 - not yet half-expired, mind you - is already the biggest month for new issuance since June 2001, according to data compiled by Prospect News. The 12 market sessions of May have seen $10.8 billion of new issuance price.

Friday's session saw approximately $1.17 billion of that business transacted in an even handful of deals, some of which exceeded issuers' expectations and one that fell considerably short. Cary N.C. communications tower operator SpectraSite Inc. priced an upsized $200 million (from $150 million) of seven-year paper to yield 8¼%, at the tight end of the 8¼%-8½% price talk. Meanwhile Chicago box-maker Jefferson Smurfit Corp. downsized its offering to $300 million from $350 million, and printed a yield of 7½% on its new 10-year notes, considerably wide of the price talk.

And a handful of new deals climbed aboard the forward calendar Friday, as one sell-side source told Prospect News that at least $5.5 billion equivalent of new issuance is expected to price during the week of May 19.

Among those transactions is El Paso Production Holding Co.'s $1.2 billion of new 10-year senior notes (B+), and a significantly-upsized deal from French specialty chemical manufacturer Rhodia SA, which increased its deal to €1 billion equivalent from €700 million equivalent, spread across four tranches of dollar and euro senior and senior subordinated notes.

With market source reporting experiencing some heaviness in high yield on Friday, the downsized Jefferson Smurfit deal generated notable curiosity among the sources who spoke with Prospect News. The Chicago-based company sold a downsized $300 million of 10-year senior notes (B2/B) at par to yield 7½%, well wide of the 7%-7 1/8% price talk.

One official speculated that the transaction could be a symptom of buy-side weariness at the recent succession of ultra-tight-pricing deals.

In any event, the box company walked away from Friday's transaction, via Deutsche Bank Securities, with a significantly lower interest rate than it had printed on a $700 million issue of 10-year senior notes that it sold at par on Sept. 10, 2002: 8¼%.

Elsewhere Friday, SpectraSite Inc., the N.C.-based communications tower operator, upsized its offering to $200 million from $150 million, selling its new seven-year senior notes (B3) at par to yield 8¼%, at the tight end of the 8¼%-8½% price talk. Lehman Brothers and Citigroup were joint bookrunners.

Also pricing Friday was new paper from Omnova Solutions Inc., a Fairlawn, Ohio specialty chemical company, which sold $165 million of new seven-year senior secured notes (B2/BB) at par, to yield 11¼%. The deal, via Deutsche Bank Securities, came at the wide end of the 11%-11¼% price talk.

Nitrogen and methanol products firm Terra Capital solid $202 million of 11½% seven-year second priority senior secured notes (Caal/B) at 99.402 to yield 11 5/8%, in the middle of the 11½%-11¾% price talk, via Citigroup.

And Indonesian oil exploration and production firm PT Medco Energi Internasional Tbk priced $250 million of 8¾% seven-year putable senior unsecured fixed rate notes (B3/B+) at 99.011 to yield 9%. Credit Suisse First Boston and UBS Warburg were joint bookrunners.

Five new offerings pushed onto a forward calendar that sources characterized Friday as "crowded."

Among the new deals that emerged Friday was Tampa tank truck fleet operator Quality Distribution, LLC. The roadshow began on its new offering of $175 million five-year senior secured notes, expected to price during the week of May 26. Credit Suisse First Boston is the bookrunner.

The roadshow also started Friday for Universal Compression Holdings' $175 million of seven-year senior notes (B1/B+), expected to price in the middle of the May 19 week via joint bookrunners Lehman Brothers, Merrill Lynch and Wachovia Securities.

Salt Holdings, a holding company for Compass Minerals Group, showed up Friday with an offering of $100 million of 10-year senior subordinated discount notes, expected to price Monday via Credit Suisse First Boston.

A two-day roadshow starts Monday for Canadian corrugated packaging and containerboard producer Norampac Inc., which intends to sell $250 million of 10-year senior notes (Ba2), via Deutsche Bank Securities and CIBC World Markets.

And the roadshow will begin during the week of May 19 for New World Restaurant Group, Inc. which will market $160 million of new five-year senior secured notes, with Jefferies & Co. running the books.

Finally on Friday French specialty chemical manufacturer Rhodia upsized its high yield bond deal to €1 billion equivalent, and introduced structural changes and issued price talk on Friday on its deal that is expected to price on Tuesday (see related story on page one of this issue).

Back in the secondary market, Charter bonds were up as much as four or five points during morning dealings, as talk made the rounds of the market that the company might be coming close to agreeing on asset sales - with proceeds expected to go to carving down some of its $18 billion debt burden.

A trader said he had heard that Charter bank debt - which had been "on the rise since last week," - was up another point-and-a-half, even as the bonds initially rose five points. Charter stock meanwhile jumped more than 20%, although equity-watchers noted that fully 30% of Charter's stock float was short interest, and chalked the gains up to investors covering some of those shorts.

The trader said that while there were "rumors" of potential asset sales around, "there was nothing specific."

He saw Charter's benchmark 8 5/8% notes due 2009 - which had finished Thursday quoted at 67.5 bid/68.5 offered - as having "raced up" to 71 bid/72.75 offered, before dropping back by the end of the session to 69.75 bid/70.75 offered, "net-net, up about two points on the day."

Charter "couldn't hold its gains," once the asset-sale rumors proved to be just so much hot air, another trader said, pegging the bonds up as much as four points in the early going before going home a point better. He quoted the 8 5/8s as having dropped from their highs at 72 bid to a closing level around 69 bid/70 offered.

Charter shares, meantime, closed up 48 cents (23.19%) at $2.55 in very busy Nasdaq dealings of 36.1 million shares, almost six times the norm.

Fellow cabler Cablevision's shares meantime rose $1.40 (6.80%) to $22, helped by some late-session New York Stock Exchange buying. But while a junk trader noted that the stock "was up big - it sounds like all of the cables were better," he saw little movement in the Long Island, N.Y.-based cable operator's bonds, theorizing that Charter's advance did not have much in the way of coattails. He likewise saw little or nothing happening Friday in the bonds of bankrupt Adelphia Communications Corp., quoting its 10¼% notes due 2011 still offered at 49, the same level they held on Thursday.

"It doesn't look like there was any strength in Adelphia."

One communications name which was moving up on Friday - and managing to hold its gains all the way through - was US Unwired Inc.'s 13 3/8% senior subordinated discount notes due 2009. They jumped from levels Thursday in the high 20s to around 32.5 bid/35 offered, propelled by the news that the Lake Charles, La.-based owner of several Sprint PCS affiliates had begun an offer to exchange a package of cash and new debt for its outstanding bonds (see "Tenders and Redemptions" elsewhere in this newsletter for full exchange offer details).

And Alamosa Delaware Inc.'s bonds rose after the Lubbock, Tex.-based Sprint PCS affiliate reported positive quarterly numbers after the market close Thursday.

Alamosa's 12½% notes due 2011 were quoted as high as 72 bid, a six point gain on the session, while its 13 5/8% notes due 2011 rose to about 73 bid and its zero-coupon/12 7/8% discount notes due 2010 were at 51 bid, also up about five points.

The over-the-counter bulletin board-traded shares of corporate parent Alamosa Holdings zoomed 34 cents (34.69%) to $1.32 on volume of 2.5 million, six times more than usual.

Alamosa said its net loss for the first quarter was $30.5 million (33 cents per share), widening out from a $25.6 million loss (27 cents per share) in the fourth quarter of 2002 and a loss of $28.1 million (30 cents per share) for the first quarter of 2002.

But the company said that total revenue for the first quarter was approximately $141.1 million, including subscriber revenue of $104 million, roaming revenue of $31.8 million, and product sales of $5.3 million. EBITDA was $17.1 million for the first quarter of 2003, up substantially from $12.1 million for the fourth quarter of 2002 and $3.1 million for the first quarter of 2002. Alamosa said that it had available funding of approximately $115.1 million at the end of the first quarter.

On the operational front, Alamosa's total subscribers increased by approximately 31,000 in the quarter, to about 653,000. Customer churn - customers leaving the company to jump to a competitor's service - decreased to approximately 3%.

A trader said he also saw the bonds of another Sprint PCS affiliate, AirGate PCS Inc.'s 13 ½% notes due 2009, quoted in the 40 bid/45 offered area, which he said was up about five points.

On the downside, Collins & Aikman Products Co. - whose bonds had fallen about five to six points across the board Thursday, after the auto components supplier reported unfavorable first-quarter numbers - continued to skid on Friday

Its 11½% notes due 2006 dropped nearly eight points, to 73 bid, on top of Thursday's retreat, while its 10¾% notes due 2011 were quoted as low as 86.5 bid, another five points down from Thursday's losing session.

The company said that it had "mixed results" for its first quarter - with record sales more than offset by weakness in operating income, net loss and EBITDA.

Also on the downside - some profit-taking was seen in the bonds of AES Corp., which had run up solidly when the Arlington, Va.-based power generator had tendered for a portion of its outstanding senior and senior subordinated notes. With that tender now history, bonds which had firmed to anticipated takeout levels but which were not tendered (or, more likely, not accepted for purchase - AES said the senior note portions of the offer were oversubscribed) were seen dropping back, with its 8¾% notes due 2013 down about half a point at 97, while its 8 7/8% notes due 2011 were at 88.5 bid and its 10¼% notes due 2006 seen at 93 bid, each down several points.

Among the newly priced issues, SpectraSite's new issue moved up to 101 bid from its pricing at par, while Terra's bonds went home at 99 bid/par offered. The Jefferson Smurfit notes closed at 100.5 bid/101 offered. But the "big winner of the day." a trader said, was Omnova Solutions' seven-years, which jumped from their par issue price to levels 103.25 bid/103.75 offered. Said another trader of the issue: "That was OK."

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