Imaging, packaging names move up; Amkor 10-year deal expected

By Paul Deckelman and Paul A. Harris

New York, May 5 - Medical imaging names were diagnosed as having moved up on Friday, spurred by good numbers reported first by Radiologix Inc. and then by Alliance Imaging Inc. The former's bonds had risen solidly on Thursday and pretty much stayed at those levels Friday, while the latter's bonds were up on the last session of the week.

Also up were some of the packaging names, helped by the rise Thursday in Graphic Packaging Corp. and Consolidated Container Co. LLC, with Constar International Inc. notably higher Friday.

In the primary market, Amkor Technology Inc. was heard by high-yield syndicate sources to be preparing to bring an issue of 10-year notes - size to be determined - to market sometime in the coming week.

Meanwhile, there was some new-deal activity coming out of Europe, as Friday's primary market session started with news that Fiat Finance & Trade Ltd. SA had priced its €1 billion issue of 5 5/8% 5.5-year senior notes (Ba3/BB-).

The notes came at a spread to mid-swaps of 175 basis points, at the tight end of the mid-swaps plus 175 to 180 basis points price talk.

The reoffer price was 99.565 resulting in a 5.718% yield.

Credit Suisse and Goldman Sachs & Co. had the physical books for the notes which were sold by the Turin, Italy-based automobile manufacturer to fund general corporate purposes.

An informed source told Prospect News that the order book for the €1 billion issue was three-times oversubscribed, and contained 300 accounts. The participants included both high-yield and high-grade accounts, the source added.

Europe remains the focus

High-yield syndicate workers speaking from New York late on Friday said that as the first week in May was coming to a close little if any dollar-denominated business was scheduled to price during the May 8 week.

Instead the focus will be on Europe.

Three issuers are in the market with €1.425 billion of prospective issuance in four euro-denominated tranches that are expected to price before the end of the week.

The biggest offering is Italian lottery operator Lottomatica SpA's €750 million offering of 60-year non-call-10 hybrid capital securities (Ba3/BB) via Credit Suisse, backing the acquisition of Gtech Holdings.

The Lottomatica roadshow featured a London stop on Friday, and a source told Prospect News that it was packed. The roadshow moves on to Germany on Monday and to Paris on Tuesday.

Also expected to price before the end of the week is Europcar Amag Services AG's €500 million transaction in two parts.

The Deutsche Bank-led acquisition deal from the car rental arm of Volkswagen AG is comprised of seven-year senior subordinated secured floating-rate notes and eight-year senior subordinated unsecured fixed-rate notes.

Finally, Montreal-based precision-engineered industrial components-manufacturer, Mecachrome International Inc., plans to sell €175 million of eight-year senior subordinated notes (Caa1) during the May 8 week.

Merrill Lynch & Co. has the books for the debt refinancing deal.

A $2 billion week

With no dollar-denominated deals pricing Friday, the first week of May 2006 came to a close having seen $2.178 billion price in six dollar-denominated tranches.

That edges, ever-so-slightly, the $2.14 billion that priced during the last week of April, although 10 tranches were priced during that five-day period.

At Friday's close, year-to-date dollar-denominated issuance barely topped $47 billion, now nearly $10 billion ahead of 2005 on a year-over-year basis. At the May 5, 2005 close the primary market had seen $37.2 billion.

However in terms of deal-volume 2006, with 135 dollar-denominated tranches, continues to lag 2005 which had seen 148 tranches price by the May 5 close.

Amkor coming with up to $300 million

Chandler, Ariz., provider of semiconductor packaging and test services Amkor is expected to bring a $200 million to $300 million offering of 10-year notes to the market during the week of May 8, according to a buy-side source who spoke Friday on background.

Citigroup, which is serving as dealer manager for Amkor's tender offering for up to $200 million of its 9 ¼% senior notes due 2008, is expected to be involved in the sale of the new notes, the source added.

The pro forma yield on the new notes is 8¾% to 9%, the source said.

In addition to Amkor, MTR Gaming Group Inc. remains in the market with a $125 million offering of six-year fixed-rate senior subordinated notes via Jefferies & Co., which could also price during the May 8 week.

Finally, a preponderance of high-yield syndicate sources in the U.S. seem to be watching a Rule 144A/Regulation S deal from Russian Federation-based billboard advertiser Gallery Group. The company plans to sell $150 million seven-year senior secured notes (B-) via Citigroup - an offering that is also expected to price by Friday's close.

Houghton Mifflin PIK notes up

A secondary market trader quoted Houghton Mifflin Co.'s new PIK floating-rate notes due 2013 at 100.25 bid, 101 offered, up from their late-Thursday issue price at 99.

Another trader said that he had not seen the new bonds - but that Standard & Poor's downgrade of the company's existing ratings during the day helped to push its existing issues, such as the 8¼% notes due 2011, down a point. Those bonds fell to 102 bid, 103 offered.

While assigning a CCC+ rating to the new bonds, the agency also downgraded Houghton Mifflin and its holding company, HM Publishing Corp., "reflecting the increase in financial risk resulting from the transaction." S&P further said that the ratings for the Boston-based educational publisher "reflect the financial risk resulting from its $1.66 billion leveraged acquisition and somewhat cyclical profitability."

The trader meantime saw Allied Waste North America Inc.'s new 7 1/8% notes due 2016 at 98.875 bid, 99.125 offered, off slightly from their late-Thursday issue price at 99.123. There was, he said, "nothing exciting" going on with the Scottsdale, Ariz.-based waste collection, recycling and disposal company's new bonds.

Radiologix steady at higher levels

Back among the established issues, traders said not too much was going on, in contrast to the sizable gains notched Thursday by Radiologix and Graphic Packaging on the former's blowout first-quarter numbers and the latter's better-than feared results.

Dallas-based Radiologix's 10½% notes due 2008, which on Thursday had jumped six or seven points to around the 89-90 bid area from previous levels around 83, were seen generally unchanged Friday, with one trader quoting the bonds at 90 bid, 91 offered and another at 89.5 bid, 90.5 offered. A market source at yet another desk saw the bonds firm slightly to 90.75 bid, from prior levels at 90.375.

Radiologix's American Stock Exchange-traded shares, which had jumped over 19% on heavy volume on Thursday, ended unchanged on Friday at $2.40.

Alliance Imaging gains

The big gainer in the diagnostic imaging sector on Friday they said was Radiologix competitor Alliance Imaging - even as the Anaheim, Calif.-based company reported a slippage in first quarter profits to $5.1 million (10 cents per share) from $6.1 million (12 cents per share) a year ago.

"The whole sector was better and Alliance was the winner," said a trader who saw the company's 7¼% notes due 2012 up two points to end trading at 92.5 bid, 93.5 offered. A source at another shop pegged the bonds even higher, at 92.875, up from 89.5 on Thursday, and additionally saw the company's 10 3/8% notes due 2011 rising to 100.25 bid from 99.5.

While net earnings were off slightly, Alliance announced that adjusted EBITDA was $43.6 million in the first quarter, a 6% increase from $41.1 million in the same quarter a year ago.

Due to what he termed "strong" quarterly results, the company's chairman and chief executive officer, Paul S. Viviano, announced that Alliance was upping its full-year guidance for 2006. It now expects revenues of between $445 million and $453 million, up from a range of $428 million to $438 million previously, and it projects adjusted EBITDA of between $157 million and $163 million, up from prior forecasts of a $138 million to $146 million range. The company also expects its long-term debt, net of the change in cash and cash equivalents to decrease by $25 million to $30 million.

Besides Radiologix and Alliance Imaging, the first trader also saw a rise in other sector names, such as Alpharetta, Ga.-based diagnostic center operator MedQuest Inc., whose 11 7/8% notes due 2012 were up two or three points at 87.5 bid, 88.5 offered.

However, another trader - who had seen both the Radiologix and Alliance Imaging bonds essentially unchanged on the day - estimated that the MedQuest notes were down a point at 86.5 bid, 87.5 offered. And he saw Lake Forest, Calif.-based imaging provider InSight Health Corp.'s floating-rate notes due 2011 unchanged at 92.875 bid, 93.625 offered, while its 9 7/8% subordinated notes due 2011 were a point lower, at 48.5 bid, 50.5 offered.

Rotech weak

Also in the healthcare sector, a market source saw Rotech Healthcare Inc.'s 9½% notes due 2012 retreat to 83.75 bid from prior levels at 85.5. A second source saw the bonds unchanged on Friday but said that they had fallen 1½ points Thursday to around 83-84.

However, another trader saw those bonds hanging in around the 83- 84 context "all this [past] week." The bonds, he said, had been "sloppy" during the final week in April and "got trashed," falling into the low to mid 80s, but seemed to have stabilized after that, unchanged to down perhaps a point on the week ended Friday.

Rotech's Nasdaq-traded shares meantime fell almost 34 cents on Friday (7.82%) to $3.97. On Thursday Rotech reported a slightly narrower net loss in the first quarter ended March 31 versus a year earlier. The Orlando, Fla.-based provider of home respiratory care and medical equipment to patients with breathing disorders lost $2.9 million in the quarter versus a $3 million year-earlier loss, each equivalent to 12 cents per share. Revenues rose to $132.5 million in the latest quarter, versus $123.3 million a year earlier.

Rotech said it had been negatively impacted by Medicare reimbursement reductions for respiratory medications.

The company also said that it was in talks with its credit facility lenders, seeking a waiver or amendment to the facility's fixed-charge ratio covenant, since Rotech was not in compliance with the covenant at the quarter's end.

Rotech further said that as of Tuesday it had $19 million of borrowings outstanding under its revolving credit facility, $12.7 million committed under letters of credit and $43.3 million available, as well as $42.1 million outstanding under its term loan facilities.

Constar higher

Outside of the medical names, another sector where things were going on Friday was packaging. Constar International's 11% notes due 2012 were seen by a trader up two points at 82 bid, 83 offered, on "no news - just better numbers out of [sector peer] Consolidated Container".

He saw the latter's 10 1/8% senior subordinated notes due 2009 at 96.5 bid, 97.5 offered, unchanged on the day, but up as much as five points on the week. "They took a big jump yesterday [Thursday]," when the Atlanta, Ga.-based maker of rigid plastic containers for consumer products and beverages' bonds were seen up about three points.,

The company filed its 10-Q report with the Securities and Exchange Commission on Wednesday; it showed operating income for the quarter ended March 31 jumping to $17 million from $1.6 million a year earlier, mostly on an 81% year-over-year improvement - more than $13 million - in gross profit, driven by higher sales volumes, a more favorable pricing environment for resin, a key plastics raw material, insurance proceeds related to the 2005 hurricanes totaling $2 million, lower lease expenses and improved operating trends as a result of capital programs and strategic initiatives.

Even with about $1.9 million more of interest expense in the latest quarter, primarily due to an approximate two percentage point increase in weighted-average interest rates on floating-rate debt and higher average revolver borrowings, the company showed net earnings of $2.18 million in the latest period, versus a year-ago loss of $11.126 million.

Out of that same sector, Graphic Packaging's 9½% notes due 2013 were seen pretty much unchanged at the same 100.5 bid, 101.5 offered level to which they had climbed on Thursday, a gain of three points during that session, while the Marietta, Ga.-based cardboard packaging company's NYSE-traded shares zoomed nearly 32%, in response to numbers that were not as bad as some in the market had expected.

Chiquita down after 'poor' results

Also on the numbers front, a trader Friday said that Chiquita Brands International Inc. "had poor numbers," and its bonds fell two points "right out of the box," only to come back in the end to only end down half a point in "volatile" dealings. Its 7½% notes due 2014 dipped as low as 83.5 bid, 84.5 offered, a two-point loss, before ending off half a point at 85 bid, 86 offered.

The Cincinnati-based fruit importing giant suffered a 77% plunge in first-quarter profits as storm damage in banana-growing regions limited supply and the company faced higher fuel costs and import tariffs in Europe.

Net income for the quarter ended March 31 was $20 million (46 cents per share) - well down from $87 million ($1.94 per share a share) a year earlier.

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