Gaylord Container jumps on acquisition and tender offer news

By Paul Deckelman

New York, Sept. 28 - Gaylord Container Corp. bonds were quoted sharply higher amid otherwise generally quiet trading Friday on news the company is to be bought by Temple-Inland Inc., which will tender for all Gaylord's outstanding junk bonds as part of the deal.

The Deerfield, Ill.-based packaging products maker's 9.375% and 9.75% senior notes due 2007 were heard late in the day at the 76 bid level, a handsome gain from their prior levels around 58 bid. Gaylord's 9.875% senior subordinated notes due 2008 were meanwhile quoted around 25 bid, up five points on the session.

Temple-Inland, an Austin, Texas-based maker of packaging products, said that under terms of a merger accord agreed to by the two companies, Temple-Inland will pay about $786 million to acquire Gaylord - $100 million for its outstanding stock, or $1.80 per share, and about $686 million for the junk bonds, bank debt and other senior secured debt obligations.

The Temple-Inland tender offer, which calls for the acquirer to pay $755 per $1,000 principal amount for the senior paper and $260 per $1,000 for the subordinated notes (both prices including a $20 per $1,000 consent payment) is scheduled to run through Oct. 26, with a consent deadline of Oct. 12.

Elsewhere, a trader said, "there was not very much going on. It was a very slow day. The morning was a little active, but then things trailed off."

Market liquidity, he said, "has dried up, between the lingering effects of the World Trade Center tragedy and people being just out of the office."

Just how much liquidity has fallen off of late could be seen by the mammoth high yield mutual fund outflow number reported by AMG Data Services; according to traders and analysts who follow the weekly figures - considered a reliable barometer of overall liquidity trends - some $661.3 million more left the junk bond funds in the week ended Sept. 26 than came into them. It was the second straight week in which the funds bled nearly $700 million, following the $685 million outflow seen in the week ended Sept. 18.

Typical light activity on an Indian-summer Friday was made even more so by the effects of the end of the calendar third quarter, which caused some players to cut their losses and hug the sidelines until the new quarter gets under way on Monday. There was also the after-effects of this past Thursday's Yom Kippur holiday for many market participants; although the market was open, absence of many players prevented the buildup of anything in the way of momentum - this despite a rise in stocks on Friday.

With stocks having gotten creamed for most of the sessions leading up to Friday and junk bonds more or less following along downward, "this is a difficult environment," the trader said. "Liquid paper used to be quoted at a one to one-and-a-half point bid/offered spread; now, the spreads are usually more than two points for starters - and nobody even flinches."

The trader saw some degree of interest, particularly among retail (i.e., non-institutional) accounts the recently downgraded paper of newly fallen angels Delta Airlines and UAL Corp., cut to junk status by the major ratings services amid investor angst over the effects war or recession might have on the air carrier.

He saw UAL's 9% notes due 2003 ending at a wide 82 bid/86 offered, although some quotes on the day were as high as 87-88 bid; Delta's 7.90% notes due 2009 started out about for to five points wide before narrowing in to end arfound 84 bid/85.

Another trader saw some limited activity among tech issues on Friday, although the market was otherwise "very quiet," he said. He heard Unisys 8.125% and 8.875% paper down about three to four points or so to around the 93 bid level.

Another tech name moving around, he said, was Ingram Micro Inc.'s 9.875% notes due 2008, which had been around the 96 bid/97 offered area recently, but which "kinda slid off" over several sessions to finish Friday at 90.5 bid/91.5 offered.

Polaroid Corp.'s 11.5% notes due 2006 formerly around 20 bid, languished around 14, another trader said. "There's no real news" on the Cambridge, Mass.-based instant photo and imaging technology company - "but no good news either."

Nobody saw much activity Friday in the battered telecom names in the wake of Exodus Communications Inc.'s totally expected bankruptcy filing earlier this week, which caused some of the other names in the group to ease.

Exodus's bonds were all trading water around the 11.5 bid mark, trading flat, or without accrued interest. McLeodUSA's 11.375% notes were quietly easier at 29 bid, down a pair, while Global Crossing Holdings, which has a 20% stake in Exodus, was also slightly easier, its 9.125% notes off a point at 44. Earlier in the week, Global Crossing had been above 50. XO Communications, in retreat Thursday, was back up about two points across the board Friday, although on small volume, its 12.5% notes closing out at 22 bid.

Meanwhile there was no news from the primary side of the high-yield world Friday. Sweetheart Cup Co. was scheduled to wrap up a roadshow for $275 million of senior notes due 2007 (B3/B-) Friday. The offering is expected to price via Jefferies & Co. soon after the end of the marketing presentations.

End

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.