Exco, MediaNews Group, Braskem price deals; Tropical Sportswear slides on earnings

By Paul Deckelman and Paul A. Harris

New York, Jan. 14 - The high-yield primary market continued to crank out new deals Wednesday, as Exco Resources Inc. upsized its seven-year note offering - something that emerging markets issuer Braskem SA also did. There was a suddenly appearing deal from MediaNews Group and a pair of split-rated offerings for Reckson and for XTO Energy.

In the secondary market, the major mover of the day was Tropical Sportswear International Inc., which bondholders found extremely unfashionable after the apparel maker swung into the red from a year-ago profit; its bonds tumbled some 30 points, into the upper 40s.

Two new issues totaling half a billion blew out the doors of the investment banks during the mid-week session, providing sources around the market with further news (if any were needed) that the present high yield remains white hot.

Exhibit A, commented one source, is the acquisition deal-execution that Exco Resources received.

The Dallas oil and gas exploration and production company priced an upsized $350 million of seven-year senior notes (B2/B) at par to yield 7¼%.

The Credit Suisse First Boston-led deal, upsized from $300 million, came at a yield lower than the 7½%-7¾% price talk.

"I think we're at the peak right now," said one sell-side official commenting well after the New York City skies became dark Wednesday evening.

"I don't know how much further it can go and I don't know exactly what stops it. But people are starting to say that maybe this rally can't run much further, given how aggressive the investment banks are getting."

Asked for an event that might trigger a reversal, this sell-side source reached into the animal kingdom for a metaphor.

"Some people around here think that what is likely to happen is that somebody will show up with a huge, very shaky deal - a real pig - that could not get done in any other circumstances.

"Those kinds of deals tend to irritate the accounts and when they see one they tend to draw the line.

"It won't be a dramatic reversal, we don't think," the official clarified. "What will likely happen is that yields, which have been coming in now for a while, will start to go out a little bit. But it will likely have an impact on other deals that are in the market."

Aside from Exco one other straight-out junk deal priced on Wednesday.

MediaNews Group, Inc. sold $150 million of 6 3/8% 10-year senior subordinated notes (B2/B+) at 99.092 to yield 6½%.

Price talk on the Deutsche Banc Securities and Banc of America Securities-led deal was 6 3/8%-6½%.

Split-rated deals price

Two split-rated offerings priced on Wednesday.

Recently upgraded XTO Energy Inc. priced an upsized $500 million of 4.90% 10-year senior notes (Ba1/BBB-) at 99.342, Wednesday, to yield 4.984%, via Lehman Brother and JP Morgan. The deal was increased from $400 million.

One source told Prospect News that the majority of play in XTO was among high grade accounts.

Also Reckson Operating Partnership sold $150 million of 5.15% seven-year registered notes (Ba1/BBB-) at 99.735 to yield 5.196%, via Citigroup and JP Morgan.

Nalco shows up with drive-by

Price talk of 8¾%-9% was heard Wednesday on a quick-to-market offering from Nalco Finance Holdings LLC of $450 million senior discount notes due 2014 (Caa2/B-), which is expected to price mid-day Thursday via Goldman Sachs & Co.

The Naperville, Ill.-based water and chemical treatment services company will use the proceeds to make a dividend payment.

A two-day European roadshow is expected to begin Thursday for Inmarsat Group Ltd.'s offering of $375 million of eight-year senior notes (B2/B), with a U.S. roadshow to follow beginning Jan. 20 and pricing expected on Jan. 30.

Credit Suisse First Boston, Barclays Capital and RBS Capital Markets are joint bookrunners on the offering from the London-based global satellite communications services company.

Also Carmike Cinemas, Inc. will launch its offering of $150 million of 10-year senior subordinated notes on Tuesday, with pricing expected on Jan. 29.

Goldman Sachs & Co. will run the books for the Columbus, Ga.-based company's deal.

And in a press release Wednesday, Las Vegas gaming firm Station Casinos, Inc. announced that its tender for $199.9 million of 8 7/8% senior subordinated notes due 2008 hinges on "senior subordinated financing...in an amount sufficient to consummate the offer," which would seem to suggest that the company wants to sell bonds.

Banc of America Securities and Deutsche Bank Securities are dealer managers of the tender. The consent solicitation expires on Jan. 28.

Talk on Communications & Power

Price talk of 8%-8¼% emerged Wednesday on Communications & Power Industries' $125 million of eight-year senior subordinated notes (B-), expected to price late Thursday via UBS Investment Bank and Bear Stearns.

And price talk is 9¼% on Concordia Bus Nordic AB's €125 million of 5.5-year senior secured notes (confirmed B2/expected B-), expected to price on Friday morning via Goldman Sachs and JP Morgan.

When the new Exco Resources 7¼% senior notes due 2011 were freed for secondary dealings, they were quoted as high as 102.25 bid, 102.75 offered, well up from their par issue price earlier in the session.

XTO's (Ba1/BBB-) 4.90% notes due 2014, which priced at a spread over Treasuries of 100 basis points, ended bid at 100-98 bps over.

Also on the new-deal front, Primus Telecommunications Holding Inc.'s 8% senior notes due 2014, which priced at par on Tuesday, were seen at 101 bid, 101.5 offered.

Alamosa Delaware Inc.'s 8½% senior notes due 2012, which priced at par Tuesday, had firmed to 101.375 bid, 101.625 offered.

Tropical Sportswear slides to 48

Back among the existing issues, Tropical Sportswear's 11% notes due 2008 were heard to have slid to as low as 48 bid from prior levels in the mid-to-upper 70s, after the Tampa, Fla.-based clothing company reported that in the fiscal fourth quarter ended Sept. 27, it lost $96.5 million ($ 8.73 a share) - a sharp turnaround from a year earlier when it earned a profit of $1.33 million (12 cents a share).

Sales for the quarter fell 33% to $78.2 million from $117 million a year ago.

Otherwise, few real movements were seen in the secondary sphere, even when news would seem to justify one.

Traders said there was little or no movement in the bonds of Delta Airlines, even after the third-largest U.S. carrier reported a fourth-quarter loss and said that it had lost more than $1 billion for a third straight year. (See separate report elsewhere in this issue)

That impelled Standard & Poor's to cut the Atlanta-based airline's corporate credit rating to BB- to B+.

But bondholders were apparently unfazed; a trader said that while "everyone thought they would be weaker on the big loss and the downgrade, it wasn't that bad a downgrade."

If anything, he said, Delta's bonds actually firmed a little, perhaps because the quarterly loss was narrower than last year, and the airline seemed cautiously hopeful about its future prospects by indicating that it plans to raise capacity 8% this year, after two years of service cutbacks.

He saw "the long Delta bonds up a point and everyone else up half a point," with Delta's 7.70% notes due 2005 at 97.25 bid, 98 offered.

Another trader saw Delta's 10% notes due 2008 90.5 bid, 91.5 offered and its 6.65% notes maturing later this year at par.

Braskem prices, Brazil widens

Braskem SA priced an upsized issue of $250 million of 10-year senior notes (B+) at par to yield 11¾%, during Wednesday's session. The deal was increased from $150 million.

Price guidance on the Sao Paolo Brazil-based petrochemical company's deal, led by Credit Suisse First Boston and UBS Investment Bank, was for a yield of 11¾%.

In other emerging markets news, EON Bank Berhad, a Malaysian commercial bank, was heard to be offering $150 million of lower tier II 10-year subordinated notes (Baa3/BB+/BB+), expected to price next week via ING. Talk is 270-275 basis points over Treasuries.

One emerging markets buy-side source told Prospect News Wednesday that a report from Fitch Ratings, which assigned a B+ to Brazil's $1.5 billion of sovereign bonds due in 2034, seemed to have received as a negative, with those notes trending lower during the session.

In the report Fitch commented that its sovereign rating on Brazil balances improving economic performance and the government's commitment to appropriate fiscal policy settings with comparatively high government indebtedness and external financing needs.

"General government debt, which stood at just under 80% of GDP at year-end, compares unfavorably with other speculative-grade sovereigns," Fitch commented. "Second-stage reforms in revenue earmarking, central bank autonomy, social security, taxation, privatization and regulation would be important for sovereign credit improvements."

The investor, who spoke on background with Prospect News on Wednesday, said that the Fitch report seemed to be impacting a Brazilian corporate now in the market: conglomerate Voto-Votorantim Overseas Trading Operations III Ltd.'s $300 million (B1/B+), via ABN Amro and UBS Investment.

"Votorantim is a real good credit," said the investor. "It should be pricing higher than the sovereign.

"Brazil has taken it on the nose today because Fitch made some comments that are being taken negatively by the market, so everything is off one or two points, depending on the duration.

"I think Votorantim was looking to get done around 7½%, but given that we have backed up somewhat it's probably going to be more in the range of 8%.

"It will probably price at the end of the week."

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