Telcordia prices downsized deal; Collins & Aikman continues to fall

By Paul Deckelman and Paul A. Harris

New York, Feb. 25 - Telcordia Technologies Inc. was heard by high-yield syndicate sources Friday to have successfully priced an offering of new eight-year notes after that deal had been previously downsized from its originally shopped $350 million. Focus (Finance) plc meantime brought a sterling-denominated 10-year issue to market.

In the secondary arena, it was another trying day for holders of Collins & Aikman Corp.'s notes, which gyrated around at lower levels before coming off their lows for the day to end only moderately lower. On the upside, MCI Inc. bonds were seen better, as the market digested the news of Qwest Communications International Inc.'s sweetened bid for the Number-Two U.S. long-distance provider.

Friday's primary market session came to a close having seen two deals price, Telcordia Technologies Inc.'s downsized $300 million and Focus (Finance) plc's £100 million.

Both priced on the tight end of price talk.

That brought the holiday-shortened four-day week of Feb. 21 to a close with less than $1.65 billion pricing in six dollar-denominated tranches, which nevertheless topped the previous week's $824 million in five dollar-denominated tranches.

The market closed Friday having seen $21.7 billion of new issuance price across 81 high yield tranches year-to-date. That trails the pace to Feb. 25, 2004, by which time that market had seen just shy of $24.4 billion price in 95 tranches.

Measuring the market?

There was very little new deal news Friday, aside from a Tuesday roadshow start announced for a $120 million five-year floater deal from Activant Solutions Inc.

The forward calendar ended the week to Feb. 25 the way it began, with less than $1 billion of dollar-denominated high-yield bonds thought to be in the market.

"It's not a very impressive forward calendar," a sell-side source commented late Friday.

"Several factors could be slowing people down," the official added. "You have the Sarbanes-Oxley disclosure requirements. Some companies are facing a March 15 deadline for filing their signed documents.

"And with the volatility in Treasuries that we saw earlier in the week issuers may be measuring the market a little and waiting for the right time to launch their deals.

"It's interesting that Allied Waste announced a deal earlier in the week and except for ratings no further news seems to have come out on it."

The source was referring to the Scottsdale, Ariz.-based solid waste disposal company's announcement in a Feb. 22 press release that it plans to sell $600 million of senior notes that were subsequently heard to be coming with a 10-year maturity.

Standard & Poor's assigned its BB- rating to the proposed issue. Later in the week Moody's Investors Service rated the notes B2 and Fitch Ratings gave them a B+.

Allied Waste is concurrently in the market with an off-the-shelf offering of three-year mandatory convertible preferred shares via bookrunners JP Morgan, Citigroup and Deutsche Bank Securities and $100 million of common shares, with Banc of America Securities, Citigroup and UBS Investment Bank arranging the stock offering.

In addition the company plans to obtain a $3.45 billion credit facility to be led by JP Morgan and Citigroup. The credit facility is expected to launch on Thursday.

Although no other information emerged through the remainder of the week, according to market sources, one informed source suggested that news on the deal would be heard during the week of Feb. 28.

Downsized Telcordia tight to talk

The only dollar-denominated issue to price during the Friday session came from Piscataway, N.J. telecommunications software company Telcordia Technologies Inc., which completed a downsized $300 million issue of eight-year senior subordinated notes (B3/B-), pricing them at par on Friday to yield 8 7/8%.

The JP Morgan, Bear Stearns & Co., Deutsche Bank Securities and Lehman Brothers-led acquisition deal came on the tight end of the 9% area price talk.

The transaction was moved up to Friday afternoon, having originally been in the market as business expected to price on Monday, Feb. 28.

The company downsized the issue from $350 million and shifted $50 million to its term loan B. Sources told Prospect News that the shift was done in order to reduce the company's interest expense.

Focus Wickes also tight to talk

Elsewhere during the quiet session Focus (Finance) plc (Focus Wickes Group) priced £100 million of 10-year mezzanine notes (B3/B/B) at par 9 3/8%, again on the tight end of price talk, which for this deal was 9 3/8% to 9 5/8%.

ING ran the books for the debt refinancing deal from the Crewe, England-based do-it-yourself home improvement store owner and operator.

Activant Solutions to start Tuesday

One roadshow start was heard during the final session of the Feb. 21 week.

Activant Solutions Inc. will begin a roadshow Tuesday for a $120 million offering of five-year non-call-one senior floating-rate notes (B2/B+), with JP Morgan and Deutsche Bank Securities running the books.

The Austin, Tex.-based technology provider to distribution-intensive industries will use the proceeds, together with cash on hand, to fund its previously announced purchase of Speedware Corp. Inc.

Farther out in the pipeline the news was dominated by European issuers.

German upscale women's apparel designer and marketer Escada AG is heard to be coming with a €150-200 million offering of high-yield notes to refinance debt. Deutsche Bank Securities and Morgan Stanley will be the bookrunners.

And Paris, France-based electrical equipment supplier Rexel SA is headed to the high-yield market with a €600 million offering of 10-year notes in an acquisition financing to be led by JP Morgan, HSBC, Merrill Lynch & Co., Morgan Stanley and The Royal Bank of Scotland.

Both deals are expected to be early March business.

Telcordia soars in trading

When the new Telcordia Technologies 8 7/8% senior subordinated notes due 2013 were freed for secondary dealings, they had what one trader called, with some degree of understatement, "a pretty good break," jumping to 102.75 bid, 103.25 offered from their par issue price earlier in the session.

He said that he had "heard decent interest" in the new bonds on the part of aftermarket investors.

Another trader, who also described the bonds' debut as "a pretty good break," saw them even higher, at 103 bid.

"Bring a new deal in this market," he opined, "and it will probably go up."

As if to illustrate his point, the new Penn National Gaming Corp. 6¾% notes due 2015, which priced Thursday at par and then moved up to 101.25 bid in initial aftermarket dealings, were being quoted Friday having firmed further to 102 bid, 102.5 offered.

A trader saw Buhrmann NV's new 7 7/8% notes due 2015 "moving around" at 101.5 bid, 102 offered. That's up a little from the 101.375 bid, 101.625 offered level at which the Dutch-based business services company's bonds were seen trading on Thursday, and well up from their issue price of 99.151.

Collins & Aikman down again

Back among the established issues, Collins & Aikman was "the only real mover" that one market source saw, quoting the automotive components maker's 12 7/8% notes due 2012 as having traded down as low as 68.25 bid, down from 74 on Thursday - when they fell about three points - and the company's 10¾% notes due 2011 as having lost ¾ point, down to 96 bid.

Another trader "saw the notes really drop," to as low as 69 bid for the subordinated bonds and 94.75 for the seniors, before "they came back" later in the day, to end around 96.5 bid for the one and 72.5 for the other.

The trader cited a bearish story in the Detroit Free Press, which noted the recent slide in the company's New York Stock Exchange traded shares and attributed the retreat to financial market fears that rising plastic prices "will make it even harder for the financially challenged Troy [Mich.]-based auto parts company to make money."

The paper noted the odd fact that Collins & Aikman, which has not yet reported its fourth-quarter and year-end financial results, "is being hurt by the dismal earnings and bleak outlook others have reported."

Specifically, the story said another supplier, Dearborn, Mich.-based Meridian Automotive Systems - which, like Collins & Aikman, makes automotive components out of plastic - held a conference call warning investors that high resin prices were hurting them and the entire industry.

And another automotive supplier, Visteon Corp., sounded the same warning in its Jan. 31 conference call, the Free Press said, which has had a ripple effect on companies such as Collins & Aikman.

While Collins & Aikman's CEO, former Reagan budget director David Stockman, "has said that his company has had better success than most at passing along higher resin costs to customers, ... It appears Wall Street doubts that," the paper said.

It further quoted a high-yield automotive analyst for UBS Securities, Jeff Skoglund, as saying that although Collins & Aikman "has said before that they expect any hit from higher plastics to be very modest. The market is clearly saying they disagree."

As if that weren't bad enough, bearish sentiment was further stroked by negative commentary released Thursday by Egan-Jones Ratings Co., which forecast dim prospects for the company.

The ratings service's lead analyst, Sean Egan, said that having only $3.5 million in cash, "the company is hard pressed," adding that "unless conditions dramatically improve in the next quarter, we expect a restructuring."

The analyst noted that Collins & Aikman has recorded losses in seven of the past eight quarters, and he sees no reason to expect anything different when Collins & Aikman reports on March 15.

Egan said that buffeted by rising raw material, energy and personnel costs, the company "is not earning enough to pay its obligations."

Published reports quote Collins & Aikman's spokesmen as characterizing Egan's assertions that a restructuring is coming as "unsubstantiated rumors."

MCI rises

On the upside, MCI's bonds were seen around half a point better after would-be acquirer Qwest Communications tinkered around with its previously announced $8 billion takeover bid for the Ashburn, Va.-based long-distance company, offering shareholders more up-front cash and adding a collar to the stock portion of the offer that would keep the dollar value of the stock component constant, by increasing the amount of its own shares it will give to MCI holders should its shares decline in value - something that rival suitor Verizon Communications Inc., chosen by MCI to acquire the company, has not done on its considerably smaller ($6.6 billion) cash and stock offer.

MCI, holding its fourth-quarter earnings conference call Friday, indicated that it still believes the Verizon bid is the better one for the company to accept, despite the obvious disparities in the amount being offered, but it said that it would obey its fiduciary duties to its shareholders and would seriously consider the Qwest bid (see related story elsewhere in this issue).

MCI's 8.735% notes due 2014 were seen up a point at 112.75 bid. Those bonds - the most volatile of the company's three issues - have firmed smartly into the lower teens from prior levels around 103 bid ever since MCI was seen "in play" as a possible acquisition target, since late last month.

Qwest's bonds, meantime, were mixed, with its 7¾% notes due 2031 at 92 bid, up ¾ point, while its 7 3/8% notes due 2030 were down ¼ point at 96.25.

Calpine higher

Calpine Corp. bonds were seen up anywhere from a point to two points on the session, a day after the San Jose, Calif.-based electric power generating company declared on a conference call that it was proceeding with its plans to cut its current debt load of just under $18 billion by some $3 billion over the next three years, including $1 billion of debt repurchases slated for this year over and above scheduled maturing issues.

A trader saw Calpine's 8½% notes due 2008 up two points at 74.5 bid, 75.5 offered.

At another desk, a market observer saw its benchmark 8½% notes due 2011 up 1 ¼ points, and its 8½% notes due 2010 up three points, at 82.25.

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