Kansas City Southern deal prices; Primedia climbs on asset-sale news; Massey gets mauled

By Paul Deckelman and Paul A. Harris

New York, May 14 - Kansas City Southern de Mexico SA de CV, the Mexican arm of the U.S.-based railroad operator, priced a quickly-shopped offering of seven-year notes on Monday, high yield syndicate sources said, with the new bonds trading at firmer levels once they were freed for secondary market activity.

The only other pricing to take place involved another dollar issue for an emerging market borrower - China-based CITC Resources Holdings Ltd., which brought a $1 billion mega-deal to market at a slight discount to par.

Roadshow details emerged on Dynegy Holdings Inc.'s upcoming 10-year mega-deal, the marketing of which is expected to begin Wednesday. Also hitting the road to pitch deals to potential investors were such issuers as Claire's Stores Inc. and Hayes Lammerz, while Rite-Aid Corp. will attempt to persuade investors to take part in its upcoming offering via a mid-week conference call.

In the secondary market, Primedia Inc.'s 8% notes moved solidly higher on the news that the New York-based communications company will sell its enthusiast magazine division to a company controlled by billionaire investor Ron Burkle for about $1.2 billion in cash and then apply much of the proceedings to redeeming or tendering for bond debt.

Stone Energy Corp.'s bonds were better on the news that it will sell assets to Newfield Exploration Co.

On the downside, Massey Energy Co., facing a potentially massive fine for alleged violations of environmental laws, fell back along with the company's shares.

The high-yield primary market saw two issuers raise $1.16 billion of proceeds as each priced a single tranche notes on Monday.

CITIC Resources Holdings priced $1 billion of seven-year senior unsecured notes (Ba2/BB) at 99.726 to yield 6.8%

Bear Stearns and Morgan Stanley ran the books for the Hong Kong-listed company which is using the proceeds to fund the purchase of Kazakhstan oil and gas assets from its parent Citic Group and for working capital purposes.

The issuer has recently signed agreements to buy oil assets in Kazakhstan and northeastern China in attempts to become an oil producer as well.

Elsewhere Kansas City Southern de Mexico priced a $165 million issue of seven-year senior notes (B2/B-) at par to yield 7 3/8% in a quick-to-market debt refinancing transaction.

The yield was printed at the tight end of the 7 3/8% to 7½% price talk.

Banc of America Securities was the left bookrunner and Morgan Stanley was the joint bookrunner.

Deal calendar fattens

Three prospective issuers stepped up Monday with a combined total that topped $3.0 billion - much of it expected to price before Friday's close.

Rite-Aid will host an investor call tranche on Wednesday for its $1.22 billion two-part offering of senior unsecured notes (Caa1/CCC+).

The Camp Hill, Pa., drugstore chain company is in the market with a tranche of 8.5-year notes and a tranche of 10-year notes, with the size of each piece to be determined.

Citigroup is the bookrunner for the acquisition deal.

Also on Wednesday, Houston-based Dynegy Holdings Inc. will make an investor presentation for its $1.1 billion offering of 10-year senior bullet notes (B2/B-).

JP Morgan, Citigroup and Credit Suisse are joint bookrunners for the deal, which will be used to refinance debt related to an acquisition.

The notes will have the same covenants as those of the 8 3/8% notes due 2016.

Meanwhile Claire's Stores began a roadshow on Monday for its $935 million two-part notes offering, which is expected to price on May 22.

The Pembroke Pines, Fla., specialty retailer is in the market with a $535 million tranche of eight-year senior unsecured toggle notes (Caa1/CCC+) and a $400 million tranche of 10-year senior subordinated notes (Caa2/CCC+).

Bear Stearns, Credit Suisse and Lehman Brothers are leading the LBO deal.

Hayes Lemmerz' working on €115 million

Monday also saw the launch of a euro-denominated deal.

Hayes Lemmerz Finance Luxembourg SA will start a roadshow on Tuesday in London for its €115 million offering of eight-year senior unsecured notes (Caa2/CCC+).

Deutsche Bank Securities, Citigroup and UBS Investment Bank are joint bookrunners for the debt refinancing deal from the European subsidiary of Northville, Mich.-based auto parts supplier Hayes Lemmerz International, Inc.

Energy XXI plans private sale

Finally, Houston-based Energy XXI Gulf Coast, Inc. began a roadshow on Monday for its $700 million offering of six-year senior notes which it is marketing as a private placement.

Jefferies & Co., BNP Paribas and RBS Greenwich Capital are joint lead placement agents for the notes, to be sold via Regulation D and Regulation S.

Proceeds, in addition to a draw upon the company's first lien revolver, will be used to fund the previously announced acquisition of oil and natural gas properties in the Gulf of Mexico from Pogo Producing Co. and to repay its second lien revolver in full.

KCS bonds break higher

When the new Kansas City Southern de Mexico 7 3/8% notes due 2014 were freed for secondary dealings, a trader saw the bonds move up to 100.75 bid, 101.25 offered from their par issue price earlier in the session.

He also saw the VeraSun Energy Corp. 9 3/8% notes due 2027, which priced Friday at 99.5, quoted at 100.75 bid, 101 offered on Monday.

Primedia a prime mover

Much attention was devoted to Primedia's upside movement on the asset-sale news. A trader quoted the 8% notes due 2013 up 2 points on the session at 105.5 bid, 106.5 offered, while a source at another desk quoted them up 1½ points at 105.75. Yet another source, who saw those bonds move as high as 106 during the session, termed that a 3 point pick up.

While the 8s were firming smartly in fairly busy trade, the company's two other issues - its 8 7/8% notes due 2011 and its floating-rate notes due 2010, pretty much stayed where they had been last week, the former around 102.75 and the latter around 103.375.

The company's New York Stock Exchange-traded shares rose 33 cents (13%), to $2.82.

Primedia's 8% bonds and its shares pushed higher on the news that the company will sell its enthusiast magazine division, which includes about 75 titles, to California supermarket billionaire Ron Burkle for nearly $1.179 billion, which will let the company realize net proceeds after expenses of $1.15 billion. It plans to use that big windfall to redeem the floaters and the 8 7/8% notes, and to tender for the 8s.

When those transactions have been completed, Primedia, controlled by private-equity firm Kohlberg Kravis Roberts & Co., will be left debt free, the culmination of a five-year campaign by management to sell assets to pay down debt and allow the company to focus on its free auto and real estate guides.

Among the titles being sold to Source Interlink Co., controlled by Burkle's Yucaipa Cos., and believed to be the biggest magazine distributor in the United States, are such well-known publications as Hot Rod, Motor Trend and Soap Opera Digest.

Burkle recently made an unsuccessful effort to purchase the parent company of the Chicago Tribune and the Los Angeles Times, and also figured in market speculation as a supposed potential purchaser of American Media Inc., the publisher of the National Enquirer and other supermarket tabloids.

Asset sale energizes Stone Energy

Asset-sale news was also seen as the catalyst for a rise in the bonds of Stone Energy, whose 6¾% notes due 2014 were seen about 2 points higher at 96 bid, 96.5 offered.

The Lafayette, La.-based independent oil and gas exploration and production operator agreed to sell its assets in the Rocky Mountain region for $575 million.

A trader meantime saw buyer Newfield Exploration's 6 5/8% notes due 2014 down ¼ point to 101.25 bid, 102.25 offered.

Newfield said that it would finance the acquisition initially through its existing credit agreement and after that from asset sales, with the Houston-based energy company looking to shop such non-core holdings as its assets in Bohai Bay, China, its properties in the North Sea and some smaller parcels of drilling rights along the onshore Texas Gulf Coast and the Gulf of Mexico.

Stone said that it would use the deal proceeds to cut debt.

Massey falls on environment accusations

Also out of the energy sphere - although the coal-mining segment rather than the petroleum drillers - came the news that West Virginia-based coaler Massey Energy was being accused of literally thousands of separate violations of the federal Clean Water Act, and could be on the hook for as much as $2.4 billion of fines.

Massey on Monday sought to downplay the extent of the alleged environmental damage caused by its operations in its home base of West Virginia and in Kentucky, and also said that the problems would have little concrete impact on its bottom line.

But traders said that investors weren't buying it, with one of them quoting its 6 7/8% notes due 2013 down 4 points at 93 bid, 94 offered, and its 6 5/8% notes due 2010 one point lower at 99 bid, par offered.

"It was kind of a rough day for them," he said with no small degree of understatement. "Investors see significant environmental risk."

Another trader saw the 6 5/8s off 2½ points at 98.5 bid, 99 offered.

Massey's NYSE-traded shares fell $2.73 (9%) to $27.60.

Chiquita bonds get peeled

A trader said Chiquita Brands International's 7½% notes and its 8 7/8% notes each down ½ point to 92 bid, 93 offered and 96.75 bid, 97.75 offered, respectively.

He cited Moody's Investors Service and Standard & Poor's putting the Cincinnati-based fruit and vegetable importer's ratings under scrutiny for possible downgrades.

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