Equinox terms surface, Unum remarkets notes; Navistar higher on financing news

By Paul Deckelman and Paul A. Harris

New York, Feb. 10 - Terms emerged on a new issue of seven-year notes from Equinox Holdings Inc. Friday, high yield syndicate sources said, bringing to a close a week which saw deals price for such names as Linens 'n Things Inc., Drummond Co. Inc., Stratos Global Corp. and the Little Traverse Bay Bands of Odawa Indians. UnumProvident Corp. meantime priced the remarketing of $575 million of the senior notes component of its Adjustable Conversion-Rate Equity Security Units - ACES - originally issued in May 2003.

In the secondary arena, the bonds of Navistar International Inc. were heard to have firmed smartly, on the news that the Warrenville, Ill.-based maker of buses, trucks and heavy engines had lined up commitments for new financing.

In that same automotive sphere, Visteon Corp. bonds were seen higher, after the Van Buren Township, Mich.-based automotive components maker reported that it had swung back into the black in the fourth quarter, thanks to a nearly $2 billion gain it booked following the sale of 23 of its uneconomical plants to former corporate parent Ford Motor Co. last year.

Ford's bonds, and those of arch-rival General Motors Corp., were meantime all seen trading in a lower range.

Outside of the sector, Primus Telecommunications Group Inc. and Boyd Gaming Corp.'s bonds were seen higher on better-than-expected fourth-quarter numbers.

A high-yield syndicate official marked the broad market slightly higher at the close of Friday's session.

Meanwhile the session produced a slight amount of primary market news.

Although no issues priced Friday, Thursday night saw New York health club operator Equinox Holdings Inc. price a $290 million offering in a drive-by that was said to have been taken out by a very select set of investors.

And Friday ended with something that was missing after both of the preceding two sessions: a calendar. Steinway Musical Instruments Inc. lifted the lid on a $175 million offering, which was the only deal in the market as the week came to an end.

A quiet month

As had been the case from mid-week on, sources continued to remark how quiet the primary market is and forecasted that it could remain comparatively quiet right through until March.

Bear Stearns high yield strategist Mike Taylor, in a Friday email message, commented: "February issuance has declined from strong January issuance totals for the past two years. So I think that it is not surprising that this year the pattern has been repeated, given January's relatively large amount of issuance."

An exclusive deal from Equinox?

Although no issues priced Friday, the market did hear terms from a deal completed Thursday night by Equinox Holdings Inc.

The New York City fitness club operator priced a $290 million issue of six-year senior unsecured notes (B3/B-) at par to yield 9¼%, in an LBO deal via Merrill Lynch.

One high-yield investor, speaking on background, told Prospect News: "Equinox just got sucked out of the market."

This investor, who would have wanted some of the new Equinox bonds, said that the company sold the bonds to three non-high yield investors, and added that the Rule 144A for life bonds are not expected to trade.

The buy-sider professed the expectation that Equinox will "grow its brand," and added that "for real estate investors it's a great diversifier."

Traders did not see the notes in secondary action.

UnumProvident remarkets $575 million

Also on Friday, UnumProvident Corp. remarketed $575 million of 5.997% senior unsecured notes underlying its 8¼% convertibles due May 15, 2008 (Ba1/BB+/BB+).

The notes priced at 100.666 to yield 5.682%. That represents a 105 basis points spread to Treasuries, which is on the tight end of the Treasuries plus 105 to 110 basis points price talk.

JP Morgan was the remarketing agent.

Steinway to roadshow $175 million

Steinway Musical Instruments will begin a four-day roadshow on Monday for its $175 million offering of eight-year senior notes.

UBS Investment Bank will have the baton for the debt refinancing deal from the Waltham, Mass.-based manufacturer of musical instruments.

Going into the week of Feb. 13 Steinway is the only deal in the market, various sources said late Friday.

February issuance continues thin

Tallying the Equinox deal the week of Feb. 6 came to a close having seen $1.76 billion of issuance in seven dollar-denominated tranches, far below the previous week's $4.1 billion in nine tranches.

At Friday's close 2006 year-to-date issuance stood at slightly more than $19.6 billion, just a hair in front of the slightly more than $19.3 billion of year-to-date issuance that had priced by the Feb. 10, 2005 close.

In terms of deal volume 2006 is in a dead heat with 2005: 43 deals thus far in the new year versus the 42 deals that had been done by the Feb. 10, 2005 close.

A generally quiet forecast

Sources on both the buy-side and sell-side say that it could be March before any meaningful primary market volume materializes.

Three portfolio managers surveyed Thursday and Friday said that they had not been contacted by high-yield salesmen about potential drive-by deals.

However a portfolio manager who spoke Friday added that such a lull is exactly when drive-by deals can be expected to happen.

Drummond higher

Among other recently priced issues, Drummond Co. Inc.'s 7 3/8% senior notes due 2016 were seen around 100.5 bid, versus their par issue price Wednesday, with a trader commenting that the Birmingham, Ala.-based coal industry services provider's bonds had seen "a fair amount of trading" over the previous two days.

Linens 'n Things Inc.'s new floating-rate senior secured notes due 2014, which also priced at par on Wednesday, were quoted Friday at 100.125 bid, 100.5 offered.

Navistar firms on financing

Back among the established issues, Navistar International's bonds were solidly higher, a trader said, on news that the company had received commitments for $1.5 billion of new bank financing which could be used to refinance any or all of the company's $220 million of outstanding 4¾% senior exchangeable notes, which are the subject of a dispute between the company and the trustee of those notes. The trustee says the securities are in default due to a delay in filing the fiscal 2005 annual report. Navistar said it "disputes the notices of default contained in the notification letters."

The prospect of debt refinancing helped push Navistar's 6¼% notes due 2012 up four points on the session to 99 bid, 99.5 offered, he said, while its 7½% notes due 2011 were two points better at par bid, 101 offered. Another trader saw those notes at that same level and pegged the 61/4s at 98.5 bid, 99.5 offered, also up four points.

Visteon up on earnings

Another automotive name seen on the move was Visteon, after it reported net income for the 2005 fourth quarter ended Dec. 31 of $1.338 billion ($10.25 per share) - a sharp turnaround from the $138 million loss ($1.10 per share) it showed in the year-earlier period. The company did acknowledge that the hefty paper profit was due to a whopping $1.8 billion gain it booked in connection with last year's transfer of 23 high-cost North American factories to Visteon's former corporate parent, Ford; excluding that gain and other special items, it still lost $102 million for the quarter.

However, Visteon executives told analysts on a conference call following the release of the financial results that with the Ford transaction now out of the way and the higher-cost facilities jettisoned, the way was now clear for Visteon to build its business and ultimately return to profitability, and they predicted that the company, which was free cash flow-negative in 2005, would generate at least $50 million of free cash flow in 2006 (see related story elsewhere in this issue).

Visteon's bonds "were very active today [Friday]," a trader said, seeing its 8¼% notes due 2010 as having "traded higher in the morning, right off the bat," up two points to 84.5 bid, 85 offered, before backing off that high. He saw the bonds going home still ¾ point higher at 83.25 bid, 84.25 offered.

Another trader said the bonds "popped in the morning" and saw "a fair amount of trading" throughout the day before ending at those levels.

Ford, GM dip

While Visteon was up, former parent Ford's 7.45% notes due 2031 were seen ¼ point lower at 71.5 bid, 72 offered, while General Motors Corp.'s 8 3/8% notes due 2033 were off ¾ point at 71 bid, 71.25 offered.

Primus jumps after results

Apart from the auto names, a trader saw Primus Telecom's bonds "up significantly," even though the company posted a fourth-quarter net loss of $24.9 million (24 cents a share), considerably worse than its year-ago net loss of $1.8 million (two cents a share). He said that the numbers released Thursday night "were not as bad as in the past," which helped push its 8% notes due 2014 up as much as seven points in intraday trading to 71 bid, before those bonds came off that peak and gave up half of their gains to still end up 3½ points at 67.5 bid, 68.5 offered.

He also saw the Primus 12¾% notes due 2009 also hit an intraday high of 71 before pulling back a little to close at 67 bid, 68 offered, up six points on the session and a whopping ten points on the week.

On an adjusted basis, Primus showed a $15.8 million loss (15 cents a share) Revenue fell 14.9% to $287.2 million from $336.9 million last year.

Cincinnati Bell trades

Also among the telecommers, a trader at another shop saw "a lot of activity" in Cincinnati Bell Inc. after the Ohio-based telecommunications company released what he termed "decent" numbers, although its fourth-quarter earnings were off 45% from a year earlier, weighed down by one-time items as well as higher income taxes and cost of services and products sold.

While he saw the company's 7¼% notes due 2013 down a point at 103.5 bid, 104.5 offered as the bonds "sold off in the afternoon," he said its other issue, the 8 3/8% notes due 2014, managed a 1¼ point gain to 99 bid, par offered.

Boyd rises

A trader saw Boyd Gaming's recently issued 7 1/8% notes due 2016 at par bid, 100.5 offered, up from Thursday's levels around 99.5 bid, par offered, and citing the impact of the earnings data it released after the close on Thursday.

Boyd earned $22.9 million (25 cents per share), slightly less than half of what it earned a year earlier when the Las Vegas-based gaming company showed a profit of $46.9 million (53 cents per share).

However, excluding one-time charges totaling some $45.8 million related to costs the company incurred in rebuilding its Louisiana and Mississippi casinos damaged by Hurricanes Katrina and Rita, Boyd earned $68.8 million (69 cents per share), topping its year-earlier earnings ex-items of $45.1 million (51 cents per share) and beating Wall Street's estimates of 61 cents per share in earnings.

Overall though, outside of names which had a particular story attached to them, such as Navistar or any of the companies that reported earnings, things were seen a pretty dull, with many market participants who attended the J.P. Morgan high yield conference earlier in the week in Florida deciding to kill the whole week and not go back to the office for just one lackluster day of trading.

One trader quipped that things closed up fairly early because "people wanted to get home ahead of the snow," referring to forecasts of blizzard-like snow heading for New York and other Northeastern business centers. Reminded that the snow was not supposed to frost the Big Apple until Saturday night, he remarked "yeah, but you know bond traders - any excuse to cut out early!"

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