E*Trade upsized, prices, Encore, Greenbriar also price; Primedia off on planned acquisition

By Paul Deckelman and Paul A. Harris

New York, Nov. 16 - E*Trade Financial Corp. successfully priced an upsized offering of 10-year notes Wednesday, high yield primaryside sources said. Also heard to have come to market with new deals were Encore Acquisition Co. and Greenbriar Cos., the latter deal an add-on offering to the company's existing bonds. Price talk was meantime heard on upcoming deals from prospective issuers Accellent Inc. and SS&C Technologies Inc.

In the secondary market, Primedia Inc.'s bonds were heard to have retreated on the news that the New York-based diversified communications company will acquire a majority stake in automotive-oriented web site Automotive.com for $72.5 million.

On the upside, Mirant Corp.'s bonds were seen to have firmed smartly on the news that the bankrupt Atlanta-based power generating company's second amended Chapter 11 reorganization plan has been widely accepted by key classes of creditors and shareholders.

Overall, sources marked the broad high-yield market down on Wednesday, with one source spotting it a quarter of a point lower on the session.

However another source specified that higher quality paper continues to be well bid, evidence supporting an investor's color, earlier in the week, that although the accounts have cash to put to work the buy-side is presently in a risk-avoidance mode.

Meanwhile the theme in the primary market was "Not bad, considering..," as issuance for the day topped $500 million.

Two tranches came as quick-to-market deals. And one sell-side official pointed out that two of Wednesday's three priced deals came with B1 ratings from Moody's and B+ ratings from Standard & Poor's - in other words the highest possible single-B ratings from both agencies.

The source, from a high yield syndicate desk closely involved with one of Wednesday's transactions, asserted that in a market in which high-yield bond buyers are avoiding risk, those comparatively high ratings unmistakably factored into investors' thinking.

E*Trade "well received," trades up

Wednesday's biggest deal came from New York online brokerage E*Trade Financial Corp.

The only one of the session's three completed transactions to have run an investor roadshow, E*Trade priced an upsized $300 million issue of 10-year senior notes (B1/B+) at par to yield 7 7/8%, on top of the price talk. The deal was increased from $250 million.

Morgan Stanley and JP Morgan were joint bookrunners for the acquisition financing.

A source close to the deal commented that in the present environment, in which transactions are being postponed and restructured, and in which bond covenants are being tailored to suit risk-avoidant investors, upsizing a deal and pricing it on top of talk is significant.

The source commented that the book for E*Trade was almost three-times oversubscribed, and added that in the limited time in which the paper had to trade before Wednesday's close the par-pricing notes were seen at 101.0 bid, 101.50 offered in the secondary market.

A.M.-to-P.M. drive-by's

Wednesday's remaining two transactions came in the form of drive-by deals that were shopped to the accounts Wednesday morning and priced before the close.

The biggest of the two was Encore Acquisition Co.'s off-the-shelf $150 million issue of 7¼% 12-year senior subordinated notes (B2/B) which priced at 98.039 to yield 7½%, on the wide end of the 7 3/8% to 7 ½% price talk.

Citigroup ran the books for the books for the debt refinancing deal from the Fort Worth, Tex., independent energy company.

A source close to the deal characterized it as "an A.M.-to-P.M. drive-by," and added that a recent trend among quick-to-market issuers has been to shop the deal one day and price it the next.

As with the E*Trade syndicate source, this official commented that in a risk-avoidant market getting an "A.M.-to-P.M. drive-by" completed is no small thing.

Greenbrier upsizes add-on

Finally on Wednesday, The Greenbrier Cos., Inc., a Lake Oswego, Ore., supplier of transportation equipment and services to the railroad industry, priced an upsized $60 million add-on to its 8 3/8% senior notes due May 15, 2015 (B1/B+) at par to yield 8 3/8%.

Banc of America Securities and Bear Stearns & Co. were joint bookrunners for the deal which was also an A.M. to P.M. drive-by.

A source close to the transaction specified that although no official talk had been circulated the add-on notes were marketed at par, where they priced.

The original $175 million issue priced at par on May 5, 2005 bringing the total issue size to $235 million following Wednesday's add-on, which had been upsized from $50 million.

Thursday's deals

No new roadshow starts were heard during the Wednesday session.

At least two deals are parked on the calendar as business expected to be completed by the Thursday close.

Accellent Inc. talked its $325 million offering of eight-year senior subordinated notes (Caa1/B-) at 10½% to 10¾%.

Credit Suisse First Boston and JP Morgan are joint bookrunners.

And talk of 11½% to 11¾% was heard Wednesday on SS&C Technologies Inc.'s $205 million offering of eight-year senior subordinated notes (Caa1/CCC+).

Wachovia Securities, JP Morgan and Banc of America Securities are joint books.

Compton up in trading

Secondary traders said that the new E*Trade, Encore and Greenbriar deals all hit the tape too late for any kind of aftermarket activity.

They did see Compton Petroleum Corp. Finance Co.'s new 7 5/8% senior notes due 2015 trading at 100.25 bid, 100.375 offered, up from the 99.26 issue price seen Tuesday for the Calgary, Alta.-based oil and gas exploration and production company's new bonds, which had traded up to par bid, 100.5 offered in Tuesday's initial aftermarket dealings in the credit.

Primedia lower on acquisition

Back among the established issues, Primedia seemed to be a pronounced mover, with its 8 7/8% notes due 2011 down two points to 96.75 bid, 97.75 offered, while its 8% notes due 2013 were likewise down a deuce at 88.5 bid.

That retreat followed news of Primedia's plans to buy 80% of Automotive.com now and the rest by 2010. The price for the other 20% will be determined by Automotive.com's earnings.

Even though an automotive-oriented website would seem to be a good fit for Primedia - whose portfolios of specialty magazines include such titles as "Motor Trend" and "Hot Rod," "Truckin'" and "Car Craft" - the trader said that it appears that "people think this acquisition is not a good move, because I don't believe that Automotive.com is a profitable area to get into."

On top of that, Primedia recently said that it was considering a tax-free spin-off its businesses into two separately traded companies to "unlock" shareholder value, a plan that would split the consumer guides division, which publishes "Apartment Guide," "Auto Guide" and "New Home Guide," off from its enthusiast media and education segment, which includes the automotive magazines.

"There's just a lot of uncertainty as to what's going on, so [the drop in bond prices] was just negative feedback from the market."

Video stores off on Blockbuster amendment

The trader also saw the video chain store operators lower, in the wake of Blockbuster Inc.'s $150 million convertible debt financing, which allowed a new amendment to its credit agreement to take effect. That amendment suspends the requirement that it meet leverage ratios until 2008 and focuses on profit targets.

"The sentiment was that with Blockbuster getting covenants like its EBITDA requirements lowered, the consensus is that this points to weaker numbers in the future and lackluster performance," the trader said.

Blockbuster's 9½% notes due 2012, which had eased 1¼ points on Tuesday, were down an additional 1½ points Wednesday to 81.5 bid, 82.5 offered.

But while that was bad, Dallas-based industry leader Blockbuster's principal rival, The Movie Gallery Inc., was down even further in apparent sector sympathy with its larger competitor. The Dothan, Ala.-based video store operator - which also operates the Hollywood Entertainment chain, in addition to its Movie Gallery stores - is smaller, presumably financially weaker, especially as it integrates the recently acquired Hollywood operation, and is therefore seen as more likely to be affected more than Blockbuster by negative industry dynamics.

Its 11% notes due 2012, which on Tuesday had dropped to 76 bid from 79.5, on Wednesday continued their slide to 71.5 bid, 72.5 offered.

Tekni-Plex plunges

At that same desk, TekniPlex Inc.'s 12¾% notes due 2010 were seen having fallen six points to 54 bid, 55 offered, in the wake of the Somerville, N.J. -based packaging company's conference call, which traders said was negative.

Apart from such specific negatives, a trader opined that he "definitely saw a firmness to the whole market, across the board. I'm sure that Treasuries helped."

In that market, the 10-year government notes closed up 19/32, with the yield falling back to 4.48%. It was the second consecutive rise in Treasuries, helped by not too terribly bad inflation data and a big positive foreign holdings report.

The trader noted that "over the last month or so, or two months, I think the market has come to the bottom. There are a lot of accounts starting to put money down here - not that they're just lifting any offering, but things definitely seem firmer."

Mirant gains on voting

One name that he saw pushing upward was Mirant, which he characterized as "a lot firmer," quoting the company's 2½% convertible notes due 2021 as high as 99.875, before going out at 99.75 bid, 100.75 offered, up 1¼% from Tuesday's finish. He also saw the 5¾% converts at 109.5 bid, 110 offered.

At another desk, a trader saw Mirant's bonds up by one to two points across the board, with the 21/2s a point higher at 99.5 bid, 100.5 offered, the 53/4s up 1½ points to 110 bid, 111 offered, and the company's 7.40% straight bonds that were to have matured last year up two points at 116 bid, 117 offered. Mirant's 7.9% notes due 2009 were a point better at 116.5 bid, 117 offered.

The Mirant rise follows the company's announcement that key classes of creditors and shareholders have approved Mirant's second amended Chapter 11 reorganization plan.

More than 97% percent of its unsecured creditors and shareholders who voted on the plan approved it. The unsecured creditors voting in favor of the plan hold more than 80% of the company's unsecured debt.

Next up for Mirant is the Dec. 1 confirmation hearing on the plan before the U.S. Bankruptcy Court for the Northern District of Texas. That could get ugly, since some creditor classes of Mirant's subsidiaries voted against the plan, and some other parties also filed objections to the plan's confirmation. At the Dec. 1 hearing, Mirant will ask the court to overrule any opposition that has not been resolved before or at the hearing.

Besides Mirant, he saw Polypore International Inc.'s paper as "a lot better," in an apparent delayed response to positive recently released earnings data.

He saw the company's 8¾% notes up half a point at 90 bid, 91 offered, while its zero-coupon/10½% notes were a point better at 54.5 bid, 55.5 offered.

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