Telemundo up on GE tender; Kmart heads roll, but bonds don't; Coast Hotels drive-by prices

By Paul Deckelman and Paul A. Harris

New York, March 11 - Spanish broadcaster Telemundo Holdings was the big show in an otherwise fairly quiet high yield secondary market Monday, its 11½% senior discount notes due 2008 jumping to par bid on news that General Electric will tender for the bonds as part of its acquisition of the company.

In the primary market, Coast Hotels & Casino floated in with a $100 million drive-by offering, while Huntsman International and Penton Media were both heard to be gearing up for roadshow marketing campaigns to begin Wednesday for their respective upcoming new issues.

With business in full swing, on Monday the forward calendar of the high yield primary market approached the $3 billion mark, with 15 dollar-denominated deals amounting to $2.915 billion headed for pricing before the end of March.

Deutsche Banc Alex. Brown will handle Salt Lake City, Utah-based specialty chemical producer Huntsman International's new $250 million of seven-year senior notes, announced Monday. Ratings on Huntsman's new notes are pending. The deal is expected to price March 18.

Penton Media, a Cleveland-based business-to-business media company, will bring the houselights up Wednesday when it starts roadshowing its $150 million of new 5.5 year senior secured notes, via Credit Suisse First Boston. That roadshow, according to market sources, will last until March 20.

One deal was transacted as the week of March 11 got underway. Coast Hotels and Casinos, Inc., of Las Vegas, decided to give the handle a quick pull on Monday, bringing a drive-by $100 million add-on to its 9½% senior subordinated notes due April 1, 2009. The deal sold Monday morning, pricing at 105.00 to yield 8.266% via joint bookrunners Banc of America Securities and Morgan Stanley.

Finally on Monday, sources from around the sell-side advised Prospect News of price talk that emerged on five separate deals.

--United Auto Group's $225 million 10-year senior subordinated notes via joint bookrunners Banc of America Securities and J.P. Morgan are talked at 9 5/8%-9 7/8% with pricing expected Tuesday or Wednesday.

--Entravision Communications Corp.'s $200 million of eight-year senior subordinated notes via UBS Warburg are talked at 8 1/8%-8 3/8% with pricing Tuesday afternoon.

--Resorts International Hotel & Casino's $175 million first mortgage notes due 2009 via Merrill Lynch & Co. are talked at 11½%-11¾% with pricing Wednesday.

--Joy Global, Inc.'s $200 million 10-year senior notes via joint bookrunners Credit Suisse First Boston and Deutsche Banc Alex. Brown are talked in the 8¾% area and pricing Wednesday afternoon, and

--Magnum Hunter Resources, Inc.'s $250 million 10-year senior notes, via Deutsche Banc Alex. Brown are talked at 9 5/8%-9 7/8%. That deal, according to a syndicate source, is expected to price late in the week of March 11.

In the secondary, GE announced that it would tender for the nearly $294 million of outstanding Telemundo 11½% notes, an offer which will be open through April 8 (see "Tenders and Redemptions" for full details).

The bonds, which had been quoted around 96 bid, in anticipation that some sort of buyout was in the offing, jumped to par when it became official.

Trading was otherwise fairly quiet, a trader noted, "with people just getting back from conferences" - several major investment houses recently held conferences - "and they're trying to get their hands around what they own and what's going on, and, at the tail end of the earnings season, how are they going to attack their portfolio and avoid the next hand grenade."

He said that there seemed to be a focus on the fallen angel credits and on recently priced bonds, with "people doing a little bit of flipping" in the latter, trying to reap a premium over and above where the bonds traded on the break. "It's good to see deals get bought and held, and not trade off the issue price, because that's not a good sign in our market."

What trading there was, he said, seemed to be mostly name-specific - i.e., players buying or selling specific credits based on positive or negative news, rather than just buying a whole sector or market - particularly since, he said, "the stock market is trying to find reasons to show bullishness, but it seems like any positive momentum is met late in the day with overwhelming selling pressure and you get a sort of flat to down scene (while the Dow Industrials ended higher on the day Monday, Nasdaq finished on the downside).

Among specific names, he said, the market had "pretty much accepted with positive sentiment " Kmart Corp.'s announcement that James Adamson - who recently was brought aboard as chairman - would also now assume the chief executive officer duties of the departing Charles Conway.

Kmart watchers had speculated that Conway's days at the helm of the troubled Troy, Mich.-based discount retailing giant were numbered when Adamson - a veteran of turnaround situations such as that of Advantica Restaurants and the Revco drugstore chain - was hired as chairman shortly before Kmart's Jan. 22 Chapter 11 filing with the U.S. Bankruptcy Court in Chicago. At that time, Conway was stripped of his chairman's role by the board of directors and Mark Schwartz, widely seen as a Conway loyalist, left the company presidency. It was widely speculated at the time that the decision was the board's way of signaling that Conway's efforts to turn the chain's sagging fortunes around had not borne fruit.

Adamson moved quickly to consolidate his authority and put his own team in at Kmart; Monday's announcement of Conway's departure also said that Julian Day, a former executive vice president and chief operating officer at Sears, Roebuck and Co., would move into the posts of president and chief operating officer, which had been vacant since Schwartz's exit; Albert Koch, chairman of the restructuring firm Jay Alix & Associates, will be Kmart's chief financial officer, succeeding John McDonald, who is leaving along with Conway, while another Alix executive, Ted Stenger, takes over as treasurer. Stenger will report to Koch, who in turn, along with Day, will report to Adamson.

Kmart's bonds were heard on Friday to have traded up to around the 43-44 bid level, a gain of several points, after the company announced plans to close 284 of its 2,114 nationwide stores and to lay off 22,000 of its 250,000 workforce, reductions of about 13% and 9%, respectively.

After having made that move, a market source said Monday that the bonds had dropped back slightly from their peaks, but only to around 43 bid, still up several points from where they had been before Friday's announcement.

"The bonds traded up a bit Friday because Kmart finally put out some information on where they're headed," an analyst said. "They finally gave out some information, something they hadn't done for a while."

"As the news breaks because of the new (SEC) disclosure rules, these developments give rise to additional information, which in our world seems to be embraced, even if it on the face of it appears negative," the trader agreed. "There's more information in these releases now on what they're doing and how they're doing it, and if people get more information, they're generally more comfortable, even with these dicey situations."

He saw Kmart showing "better strength overall in the structured paper, with the collateral behind it," than in the unsecured bonds. He said investors would be evaluating the long list of 284 stores to be closed, trying to evaluate "which of the remaining stores (the revenue of whose leases secure some of the structured bonds) should be better off net of the closings of the others." In some areas, Kmart finds itself with more than one store in a given area, and may be able to realize certain savings by closing and consolidating redundant outlets.

Closely tied to Kmart's fortunes are those of Fleming Companies, the Dallas-based wholesale grocery distributor which has a lucrative long-term contract to stock Kmart's shelves with food items and other consumables; Fleming on Monday said Kmart's troubles would likely lead to a 20-cent per share reduction in its own earnings in 2002 - and that could grow if, as is widely expected, Kmart slates additional store closings (some analysts have said it must close between 500 and 700 stores to have a fighting chance of turning itself around).

However, Fleming raised its overall 2002 earnings forecast, saying the effect of new accounting rules will more than offset lost sales from Kmart, its biggest customer.

Fleming bonds were essentially unchanged on the news, its 10½% notes remaining at 100.25 bid, and its 10 5/8% paper down half a point at 99.

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