Snoqualmie bonds price; Salton jumps on Applica news; airlines nosedive

By Paul Deckelman, Paul A. Harris and Stephanie N. Rotondo

New York, Jan. 23 - Snoqualmie Entertainment Authority was heard to have successfully priced a slightly upsized two-part offering of senior notes on Tuesday. The Washington State-based tribal gaming company's new bonds were then seen to have firmed smartly when they were freed for aftermarket activity.

Elsewhere in the new-deal arena, price talk emerged on upcoming offerings for Sbarro Inc. and Allis Chalmers Energy Inc., with the latter deal seen set for pricing possibly as early as Wednesday.

In the secondary market, besides the well-received new Snoqualmie bonds, the big mover, price-wise, seemed to be Salton Inc., whose 12¼% notes due 2008 were trading up some 8 points from prior levels, given a big boost by the news that shareholders of rival small-appliance maker Applica Inc. had given their okay to Harbinger Capital Partners' effort to acquire the company - which could clear the way for Harbinger to next attempt to acquire Salton, in which it also has a sizable stake, and combine the two companies.

Elsewhere, airline bonds were rapidly losing altitude, particularly those of twin bankrupts Northwest Airlines Corp. and Delta Air Lines Inc., pushed down by a combination of higher oil prices, Northwest's announcement that unsecured claims in its reorganization case could total as much as $9.5 billion, and a big loss for the quarter reported by sector peer United Airlines - which itself underwent a lengthy Chapter 11 restructuring not so very long ago.

Also on the downside were the bonds of Technical Olympic USA Inc., after the Florida-based homebuilder announced that it was in settlement talks with some of the lenders for its troubled Transeastern joint venture - talks which envision Technical Olympic pumping additional money into the flagging company.

Secondary market activity, outside of news-specific names, was seen continuing on the light side Tuesday, with many market decision-makers away at the three-day JP Morgan bond conference, which began Monday in South Florida.

A sell-side source saw the broad high yield market slightly firmer on Tuesday, while a buy-sider said that it was very strongly bid for.

Two issuers priced three junk tranches totaling $330 million and €170 million.

One of the three tranches was upsized, while all three priced at the tight end of price talk.

Snoqualmie upsizes

Snoqualmie Entertainment Authority, a western Washington state-based tribal gaming enterprise, priced an upsized $330 million two-part offering of senior notes (B3/B) on Tuesday.

Snoqualmie priced a $200 million tranche of eight-year fixed-rate notes at par to yield 9 1/8%, on the tight end of the 9¼% area price talk.

The company also priced an upsized $130 million tranche of seven-year floating-rate notes at par to yield six-month Libor plus 375 basis points, on the tight end of the Libor plus 375-400 basis points price talk. The floating-rate tranche was upsized from $120 million.

The overall transaction was upsized from $320 million.

Bear Stearns & Co. ran the books for the project-funding deal. Guggenheim Capital Markets was the co-manager.

Also completing a junk-rated Rule 144A deal was Polish steel producer Zlomrex International Finance SA.

The company priced a €170 million issue of seven-year senior secured notes (Caa1/B) at par to yield 8½%, at the tight end of the 8½% to 8¾% price talk.

Deutsche Bank Securities ran the books for the acquisition financing.

Talking the deals

Elsewhere on Tuesday, Allis-Chalmers Energy Inc. talked its $225 million offering of 10-year senior notes (B3/B) at 8 5/8% area.

The RBC Capital Markets-led deal is expected to price on Wednesday afternoon.

And Sbarro, Inc. talked its $150 million offering of eight-year senior notes (Caa1/CCC) at 10½% to 10¾%.

A source told Prospect News that the Sbarro deal is also possible Wednesday afternoon business.

Credit Suisse and Banc of America Securities are joint bookrunners.

Baldor multiple-times oversubscribed

On Tuesday a buy-side source told Prospect News that Baldor Electric Co.'s $550 million offering of 10-year senior notes (B3/B) is going very well.

The investor said that the company's $1.2 billion bank loan is three-times oversubscribed, while the bond deal is multiple-times oversubscribed.

The source said that the books for the bond offering are going to close Wednesday night, and the deal will price Thursday.

The source added that the whisper on the 10-year senior notes is 8 5/8% to 8¾%-ish, "which probably means it will be priced closer to 8½%."

The original talk was 9%, the investor added.

Prospect News followed by asking the buy-sider whether Baldor would be attractive at 8½%.

"It's a great company," the buy-sider said, and added that Baldor is buying a division out of Rockwell which is primarily Reliance Electric.

"That was one of the old original high-class high-yield bonds," the buy-side source said.

"They've totally round-tripped from a high-yield company that had gotten up to investment grade, and were bought by Rockwell. Now they're back in high yield.

"It's a beautiful acquisition because Baldor has bigger motors and Rockwell has more smaller motors.

"So there is synergy," the source said.

"It's a great deal."

Snoqualmie bonds a winning bet

When the new Snoqualmie bonds were freed for secondary dealings, a trader said they shot right up to levels around 102 bid, 102.5 offered on both the seven-year floating-rate notes and the eight-year fixed notes, versus their respective par issue prices earlier in the session.

The new deal kept the gaming sector investors hopping and popping, coming as it did just a day after the bonds of Las Vegas-based casino operator 155 East Tropicana LLC jumped some 10 points into the mid-90s, propelled by the news that the operator of the "Hooters"-themed casino resort had agreed to be acquired for $95 million, with the acquirers to also be responsible for expenses connected with any buyback of the $130 million of outstanding 155/Hooters bonds.

With the sector continuing to ferment, bonds of Harrah's Entertainment Inc. - itself in the middle of being acquired via a private equity-led buyout - were seen better Tuesday, with the Las Vegas-based gaming giant's Harrah's Operating Co. Inc. 6½% notes due 2016 up ¾ point at 91.5 bid. However, Trump Entertainment Resorts Inc.'s 8½% notes due 2015, up 2 points on Monday, were seen having given a point of it back to end at 98.75.

M&A news spurs Salton

Elsewhere, Salton's 12¼% notes due 2008 were smartly higher, along with the company's stock, helped by the news that Applica's shareholders had okayed a merger into Harbinger Capital Partners, which could clear the way for a combination of the two small appliance makers, since Harbinger already owns a sizable stake in Salton, the Lake Forest, Ill.-based producer of the popular "George Foreman" brand of electric hot dog and hamburger grills.

The Salton notes jumped to 93 bid, up from opening levels around 90 and well up from 85 on Monday. Salton's New York Stock Exchange-traded shares meantime zoomed 38 cents (16.38%) to close at $2.69. Volume of 320,000 shares was more than triple the norm.

Harbinger has talked up the possibility of a combination of the two small-appliance makers, contending that significant savings and synergies could be realized.

Before it could make such a combination happen, Harbinger, which already had a 39% stake in Applica, had to outduel another potential buyer for the Florida-based company, Nacco Industries Inc. Since mid-summer, Harbinger and Nacco engaged in a bidding war, which finally concluded with the Applica shareholders approving Harbinger's sweetened bid of $8.25 per share, which values the company at about $206.3 million. Nacco threw in the towel on Tuesday and dropped its effort.

Nacco had planned to spin off its well-known Hamilton Beach/Proctor-Silex small appliance brands into a new company and merge it with Applica, a plan that was foiled by Harbinger. One long-shot scenario could see the Cleveland-based company instead now eye Salton as a potential takeover target, although it appears more likely that Salton would eventually combine with Applica, given Harbinger's big stake in each.

With Harbinger's having won the bidding war for Applica and the likelihood that it may soon seek to acquire Salton in the same fashion, its representative on Salton's board of directors, David Maura tendered his resignation from the board so as to avoid the appearance of any conflict of interest between his duties as a Salton director and his position as vice president and director of investments at Harbinger and its affiliates.

Airlines take a dive

On the downside, airline issues, "especially Northwest, got crushed," a trader said, seeing the latter's 10% notes due 2009 fall 6 points on the day to par bid, 102 offered, while its 8 7/8% notes that were to have come due last year fell to 98 bid, par offered from 103 bid, 105 offered previously. He saw Delta Airlines' 8.30% notes due 2029 down about 4 points on the session at 63.5 bid, 64.5 offered.

"What a difference a day makes," another trader said, in describing the fall of the bankrupt Atlanta-based Number-Three U.S. airline parent's 8.30s to 63.75 bid, 64.75 offered from Monday's levels around 67.75 bid, 68.75 offered.

"Wow!" was his reaction when he checked the closing price levels on bankrupt Eagan, Minn.-based Number-Five airline operator Northwest's 10s and saw them 100.75 bid, 101.75 offered, well down from 106.5 bid, 107.25 offered.

Even the bonds of industry leader American Airlines' parent, Fort Worth, Tex.-based AMR Corp., were easier, although much less dramatically than Northwest and Delta, with the AMR 9% notes due 2012 "marginally" lower, the trader said, at 105.5, about ¼ to ½ point lower on the day.

Various factors were cited for the drop in the air carrier sector, including Northwest's statement that unsecured claims could total as much as $9.5 billion, bad numbers reported by sector peer United Airlines, and a higher price for oil, potentially a bad sign for investors hoping for lower jet fuel prices down the line.

Crude oil - which last week had pushed all the way down to intraday trading levels just below $50 per barrel in New York Mercantile Exchange dealings, have just as quickly pushed back up, as the suddenly seasonally cold winter weather in the Northeast has made recent balmy conditions a memory, sparking demand for distillates like heating oil. A barrel of light, sweet crude rose $2.47, or 4.7% on Tuesday, to settle at $55.04. The already rising energy prices spiked after U.S. Energy Secretary Samuel Bodman said the government will double the size of the nation's Strategic Petroleum Reserve.

In more airline specific news, Northwest said on Tuesday in a filing with the Securities and Exchange Commission that said its creditors are likely to win court approval of unsecured claims of as much as $9.5 billion, about 7% of the $129 billion of unsecured claims that have been so far been filed with the U.S. Bankruptcy Court in Manhattan, which is overseeing both Northwest's restructuring and Delta's, in separate cases. The company said some of the claims included in that amount were overstated or duplicative.

The figures in the filing don't include any claims secured by the company's assets, such as equipment trust certificate bonds backed by liens on aircraft. Northwest didn't say in the filing, or in its incomplete reorganization plan filed Jan. 12, what percentage of their claims unsecured creditors can expect to recover.

Meanwhile, The Wall Street Journal was reporting Tuesday that Delta's official creditors committee is increasingly skeptical that a takeover effort against Delta by U.S. Airways Group Inc. will ever come to pass. US Air has set a take-it-or-leave-it deadline of Feb. 1 on its sweetened $10.2 billion acquisition offer. The paper indicated that the prospect of the hostile offer could be spurring on what it called "detailed" discussions which it said Delta has been holding over the past few months with Northwest, aimed at a combination of the two restructuring carriers.

A bond trader said there were renewed market rumors of a post-bankruptcy merger between Delta and Northwest. He also said it is widely expected that even if the two carriers ink a merger it will be after each has completed the bankruptcy process. Delta and Northwest both target exiting bankruptcy around mid-year.

However, Delta chief executive Gerald Grinstein denied Tuesday that the company is discussing a merger with Northwest, but he did say that Delta had hired an investment banker to "obtain information" from the airline.

Delta's labor unions and Georgia state officials have come out against the proposed US Airways merger, citing concerns about flight reductions and fare increases. Delta has also steadfastly maintained its desire to remain independent.

A Feb. 7 date is scheduled in bankruptcy court to discuss the company's disclosure statement of its recently filed reorganization plan.

Technical Olympic on the slide

Also on the downside, Technical Olympic's bonds gyrated around at mostly lower levels in fairly active trading on the news the homebuilder was in settlement talks with some of the lenders for the troubled Transeastern joint venture.

Its 10 3/8% notes due 2012 fell to 91.5 late in the day after having opened around 95; its 9% notes due 2010 opened sharply lower at 98.25, versus prior levels around 101.5, before ending down a point on the session at 100.5. Its 7½% notes due 2015 were down 2 points on the session early on, but finished a point lower at 79. One issue was seen having actually edged up, with the 7½% notes due 2011 up around a point at 84.25, although that was still well off its peak levels for the session in the 86-87 area.

Hollywood, Fla.-based Technical Olympic provided an update on the settlement discussions that are taking place with lenders in the senior and mezzanine Transeastern credit facilities.

The company said the proposal currently being discussed with Transeastern's lenders involves 50% owner Technical Olympic making a significant asset and cash investment in the struggling joint venture or in a separate entity that will purchase some or all of the joint venture's assets.

The proposal contemplates that either the joint venture or the successor to some or all of its assets will become a wholly or majority owned subsidiary of Technical Olympic.

The joint venture or successor entity would then dedicate a portion of its cash flow to service the mezzanine debt.

Furthermore, the proposal contemplates paying amounts due under Transeastern's current senior credit facilities in full via a refinancing at the joint venture or the entity that would continue the joint venture's business.

Technical Olympic went on to say that the settlement discussions are only in preliminary stages - meaning that there is still the possibility that it may be unable to agree to a settlement with the lenders or other parties including obtaining necessary consents and financings.

Technical Olympic and its partner, The Falcone Group, purchased Transeastern, which builds mostly attached housing at communities in Florida, in mid-2005 - which it later admitted was "about at the top of the market," funding the company with over $600 million of borrowings. When the previously hot Florida housing market began to cool down precipitously shortly after the joint venture's launch, sales fell sharply from projected levels. Technical Olympic last September met with Transeastern's bankers to reveal to them that it would not be able to service its $60 million of annual interest costs without a debt restructuring. Technical Olympic also said at that time that it did not envision increasing its stake in the project, and said it could only be held liable for Transeastern's debts in the event of a voluntary bankruptcy filing.

WCI bonds "all over the place"

In that same housing sector, a trader said that the bonds of WCI Communities Inc. were "all over the place," after the Bonita Springs, Fla.-based builder said it expects to post a fourth-quarter loss.

He said "they were up, and they were down."

He said that the company's 6 5/8% notes traded in a context of 97.25 bid, 97.75 offered, down from 99 bid, 99.5 offered previously. Its 6 5/8% notes fell to 90.5 bid, 91.5 offered from 92 bid, 93 offered.

The builder of tower residences and communities said it expects its fourth-quarter results will be "below prior expectations due to a higher level of defaults than expected in both ... traditional home-building and tower home-building operations, longer tower construction cycles, and the recording of significant impairments and write-offs."

The company expects to record a loss for the fourth quarter, while booking impairment charges of $75 million to $90 million and write-offs of land options of $25 million to $30 million.

Level 3 mixed on converts buyback

Level 3 Communications Inc.'s bonds were mixed on the news that it had swapped new stock for $115 million of convertible bonds. While its 11½% notes due 2010 were down ¾ point at 107.625, and its 6% notes due 2009 were more than 2 points lower at 91.5, its 11% notes due 2008 were seen up 2 points at 104.

Level 3 announced that it had last week exchanged some 36.7 million shares of its common stock for approximately $115 million principal amount of its 10% convertible senior notes due 2011, a step which will cut its 2007 cash interest expense by $11 million.

The Broomfield, Colo.-based telecommunications company, which provides internet connections for other service providers through its extensive backbone network, also said that it had completed its acquisition of Savvis Inc.'s content delivery network services business for $132.5 million in cash, acquiring certain assets, including network elements, customer contracts and intellectual property.

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