Telemig prices upsized deal; Goodyear, Exide seen better

By Paul Deckelman and Paul A. Harris

New York, Jan. 12 - Telemig Cellular Participacoes SA was heard by syndicate sources Monday to have priced an upsized offering of new five-year notes. It was the only new deal seen to have come to market in a generally sleepy session, although several other issuers were heard gearing up for roadshows scheduled to start Tuesday.

In the secondary market, activity was generally seen as deadly dull, although Goodyear Tire & Rubber Co. bonds were seen having firmed on speculation that the Akron, Ohio-based tire-making giant might be preparing to announce a new financing deal - something it originally was scheduled to have done before the end of 2003.

In the primary, only Lubbock, Tex.-based wireless provider Alamosa (Delaware) Inc. broke the silence in the U.S. new issue market Monday, when it announced price talk of 8 5/8%-8 7/8% on its $225 million of eight-year senior notes (Caa1/CCC), which are expected to price on Tuesday afternoon.

UBS Investment Bank is the bookrunner for the debt refinancing issue.

Throughout Monday's session sources who spoke to the Prospect News primary market desk reported seeing a touch of softness in the secondary market, in addition to the slowness of the primary.

"Today was pretty quiet," said one sell-side source. "And I think that has to do with what we heard Friday on the employment picture."

The official was referring to reports that while the U.S. unemployment rate fell to 5.7%, the lowest level in over a year, and down from 5.9% in November, the number of workers on U.S. payrolls outside the farm sector in December increased by just 1,000, according to the Labor Department - far below the 148,000 job economists had been forecasting.

"Those were very, very weak numbers," said the sell side official.

On the plus side, Deutsche Bank high yield researchers David Bitterman and Andrew W. Van Houten, writing in that institution's research organ, the One-Stop Weekly, noted on Jan. 9 that the $506 million inflow to the high yield mutual funds for the week ending Jan. 7, as reported by AMG Data Services, was "the best inflow in 12 weeks and the 10th consecutive positive figure."

Traders saw little or no activity Monday in recently issued bonds; for instance, one said that Elizabeth Arden Inc.'s new 7¾% notes due 2014, which priced last Thursday at par and which then firmed up smartly in initial trading that session and Friday, "was dead in the Street" Monday, heard offered at 104, but with no bids seen.

Back among the established issues, a trader said that about the only feature he had seen all day was Goodyear, whose bonds "started flyin' today."

He quoted Goodyear's 6 5/8% notes due 2006 as having opened the day at 100.75 bid, 102.75 offered, while its 8½% notes due 2007 started at 102 bid, 104 offered, its 6 3/8% notes due 2008 started at 96.75 bid, 98.75 offered; its 7.87% notes due 2011 began at 94.5 bid, 95.5 offered; and its 7% notes due 2028 opened at 82 bid, 84 offered.

The Goodyear paper "moved up pretty good throughout the day," he said, so that by the time the session wrapped up, he said, the Goodyear paper was at least a point better across the board.

"I don't know if they have a [financing] deal in the works or what, but they were up pretty strongly," he said.

The trader noted that Goodyear had been expected to complete new equity and debt financing before the end of 2003, under the terms of its union contract.

However, that was delayed after the company was forced to postpone reporting results due to accounting problems at its European operation.

With talk that an announcement of some kind of funding might now be forthcoming, "there were some pretty big buyers of long Goodyear paper throughout the day," he said, "and the shorter stuff was up also."

Apart from Goodyear, bankrupt battery maker Exide Technologies Inc.'s bonds were seen stronger, its 10% notes at 26 bid, well up from offered levels at around 21 at which they had ended trading last week.

"They continued to run," a trader said, noting that a week and a half ago, the bonds were seen at a wide 15 bid, 21 offered level, so "they're really moving."

Exide - whose bonds have been steadily climbing since the bankruptcy judge handling its reorganization case rejected the Princeton, N.J.-based company's reorganization plan and directed it to instead work with its bondholders to come up with an alternative that puts a better valuation on the company - said on Monday that it had obtained a big contract to sell automotive batteries and battery maintenance systems to SAS Scandinavian Airways. It did not publicly estimate the value of the contract.

Back among the non-distressed names, Oregon Steel Mills Inc.'s 10% notes due 2009 were being quoted up about two or three points on the session at about the 95 level, but there was no fresh positive news out on the Portland, Ore.-based steelmaker.

A trader said that news that Level 3 Communications Inc. was expanding its Voice-over-Internet-Protocol service failed to move the Broomfield, Colo.-based fiber-optic telecommunications network operator's bonds, its benchmark 9 1/8% notes due 2008 hanging in at 97 bid, 97.5 offered, its 12 7/8% notes at 92 bid. 93 offered, and its 10½% notes "straddling par. It didn't move."

Overall, he said, "the market is still firm, but volume was light. Nothing is changed - but everything is well bid for."

Another trader said that people had told him that this was "one of the slowest post-New Year's sessions in recent memory."

Investors, he said, "just don't want to invest money at this level," with valuations on many bonds so rich. "They're getting forced in [by the need to put excess cash to work] and they don't like it, so they're really kind of draggin' it."

He projected that "if yields drop a little bit more, then they'll be forced to step up. But right now they're just staying on the sidelines and not doing much."

Telemig prices upsized deal

The Jan. 12 week's opening session in the emerging markets produced news of one new corporate issue.

Telemig Celular SA and Amazonia Celular SA, both Brazilian wireless operators, combined to price an upsized $120 million issue of 8 ¾% five-year bonds at 99.504 to yield 8.78%. The deal was increased from $100 million.

Bear Stearns & Co. ran the books on the deal that came inside of the 8 7/8%-9 1/8%.

Meanwhile a roadshow start date was heard for a $300 million offering from another Brazilian company, conglomerate Voto-Votorantim Overseas Trading Operations III Ltd.

The roadshow is set to begin Tuesday in New York City for the senior notes (B+) that are expected to come with an intermediate maturity.

ABN Amro and UBS Investment Bank will run the books for the refinancing deal.

"They are a big industrial group in Brazil," a market source commented, "cement, pulp and paper, metal, chemicals.

"It's a privately held group and it is pretty highly regarded in Brazil, but probably not as well known outside of Brazil as some other companies. But it's big: $3.5 billion a year in sales."

Also on the Latin American corporates front, the roadshow starts Tuesday for Industrias Unidas SA de CV, which is selling $175 million of 10-year senior unsecured notes (B+).

The refinancing deal, via Deutsche Bank Securities, is expected to price late in the Jan. 19 week.

The company, headquartered in El Salvador, C.A., Mexico, manufactures building and electrical products.

Focus on Brazil's $1.5 billion sovereign

Aside from Monday's news on emerging markets corporates one source told Prospect News that the market was keenly focused on Brazil's $1.5 billion (B2/B+) of 30-year sovereign notes.

The deal, via Deutsche Bank Securities and Citigroup, was expected to price on Monday, however late in the session no terms were available.

One emerging markets sell-side official told Prospect News that the Brazilian sovereign bonds were being talked at a spread of 380-385 basis points.

"That's pretty amazing for a 30-year piece of paper," the official commented.

"Brazil has not issued dollars in a while. People thought that they would be in the market before Thanksgiving, and then after Thanksgiving. And they didn't come for various reasons. They could have come if they wanted to.

"In the meantime, however, their spreads have continued to really collapse - I think that's the only way to put it."

This source also noted that in recent sovereign activity Turkey and Venezuela also did 30-year deals.

"We have seen very good demand in emerging markets for 30-year bonds, which you would not expect to be the case," said the official. "But in general these deals have just been massively oversubscribed. And Brazil isn't any different.

"We continue to have big spread-compression in our market. We are getting close to $7 billion in supply already done. And there is still maybe a couple of billion more that gets done before the end of the month.

"And yet spreads are tighter, still. People expected spreads to widen out to accommodate that supply. But we have not seen that.

"So the tone seems extremely healthy."

Prospect News followed by inquiring of this senior emerging markets sell-side source as to who is buying this new paper.

"Everybody," answered the official, with regard to both corporates and sovereigns.

"High yield doesn't cross over as much into emerging markets, but they should," added the official.

"A lot of high yield buyers will buy the corporate names in emerging markets. But they won't buy the sovereign names. That makes zero sense, because you are taking the sovereign risk anyway when you buy a corporate name. But you have massively more liquidity in a sovereign bond. Imagine the liquidity in having a $1.5 billion bond from Brazil or a $1 billion bond from Venezuela. That's much more liquidity that you'll get with a corporate bond, with the exception of the most liquid corporate bonds.

"The sovereign Brazil curve has huge amounts of liquidity in it. So I think that high yield buyers really miss something when they don't look at sovereign debt."

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