Nortek, Imax, Millicom, ABB price deals as primary stays hot; Qwest up on tender plan, Levi lower

By Paul Deckelman and Paul A. Harris

New York, Nov. 19 - The high-yield primary market continued to roar Wednesday as it wended its way through the final full week of business before the Thanksgiving Holiday.

Issuers included Nortek Holdings, Millicom International Cellular SA, IMAX Corp., ABB Ltd. and Georgia Gulf Corp.

On the secondary side, Qwest Communications International Inc. bonds were heard to have firmed smartly after the Denver-based telecommunications company released generally upbeat third-quarter results and announced plans to tender for $2.25 billion of its outstanding bonds. Land O'Lakes Inc. improved on what one source said was market talk the company might be close to making some kind of financing deal. On the downside, Levi Strauss & Co. bonds bounced around but ended the day continuing their recent slide.

One sell side official told Prospect News well after the session ended that over $2 billion of high yield bonds had sold on Wednesday.

The biggest piece of it came from Europe, said the source. Swiss technology firm ABB Ltd., issuing via ABB International Finance Ltd., sold €650 million of eight-year senior notes (B1/BB-) at par to yield 6½%, at the tight end of the 6½%-6¾% price talk, via Barclays Capital, Deutsche Bank Securities and HVB.

The sell-side source calculated the exchange rate on the ABB deal - noting that "the dollar is really getting beaten up" - and said that it came out to approximately $775.7 million.

Also ringing in Wednesday with over half a billion was global cellular telecommunications investor Millicom International Cellular, which sold $550 million of 10-year senior notes (B3/B-) at par to yield 10%.

Price talk was 10%-10¼% on the Morgan Stanley-led refinancing deal.

Pax World High Yield Fund portfolio manager Diane Keefe told Prospect News that she played Millicom.

"I bought the deal," said Keefe. "The company did a lot of restructuring and the markets that they are in are going to continue to grow in terms of cellular penetration.

"Also management is committed to never going back to a high-leverage situation," added Keefe, whose fund submits the credits it considers to a series of social issues screens.

"I liked the story first time," she added. "I told a guy at my table that I although I liked the story the first time, I'm really glad I skipped it the first time, because giving cellular service to people in places like Vietnam is a tough business. But they're doing it.

"It's growing gangbusters now."

However another buy-sider, communicating Wednesday on background, commented that Millicom does business in some pretty scary zip codes.

"These guys are operating in some bad countries," the investor said. "A big chunk of revenue comes from Pakistan which is one step away from a nuclear jihad.

"They had a good year bouncing back from Bolivia last year.

"If I'm going to invest in emerging markets telecom, I want to pick the countries and I wouldn't pick the ones they did."

Meanwhile in the new issue market, Nortek Holdings sold $515 million of four-year zero-coupon senior discount notes due May 1, 2011 (Caa1/B-) at 67.849 to yield 10%, at the tight end of the 10%-10¼% price talk.

Deutsche Bank Securities ran the deal for the Providence, R.I.-based manufacturer of building, remodeling and indoor environmental control products.

The $349.4 million of proceeds that the Nortek deal generated are slated to pay a distribution to Nortek Holdings' equity holders.

And Pax World's Keefe told Prospect News that the idea of bond investors handing money across the table to the equity folks to put into their pockets is not very gratifying.

"It's especially not very gratifying for people who own the outstanding bonds," she said. "Besides, I wouldn't buy a zero."

Also during Wednesday's primary market session Imax sold $160 million of seven-year senior notes (B3/B-) at par to yield 9 5/8%.

Credit Suisse First Boston ran the books for the Mississauga, Ont.-based movie theater operator's deal that came in the middle of the 9¾% area price talk.

And what would a session in the pre-Thanksgiving market be without at least one drive-by deal?

Georgia Gulf Corp. provided the quick-to-market action Wednesday, pricing $100 million of 10-year senior notes (B1/BB-) at par to yield 7 1/8%. The deal, which was led by JP Morgan and Banc of America Securities, came at the inside end of the 7¼% area price talk.

Regarding deals that have come to the market via investor roadshows, price talk of 6¾%-6 7/8% was heard Wednesday on MediaNews Group, Inc.'s upcoming $300 million of 10-year senior subordinated notes (B+), which are expected to price on Thursday, via Deutsche Bank Securities and Banc of America Securities.

Price talk is 8¾%-9% on North American Energy Partners' $175 million of eight-year senior notes, which are also expected to price Thursday, via BNP Paribas and RBC Capital Markets.

The price talk is 7 5/8%-7 7/8% on OMI Corp.'s $150 million of 10-year non-call-five senior notes (B1/B+), expected to price Friday morning, via Goldman Sachs.

And price talk of 8¼%-8½% emerged Wednesday on Pinnacle Foods Corp.'s planned $150 million of 10-year senior subordinated notes, expected to price Thursday via bookrunners JP Morgan and Deutsche Bank Securities.

Proceeds are slated to help fund the $485 million acquisition by JPMorgan Partners and C. Dean Metropoulos, from Hicks, Muse, Tate & Furst Inc., which is why Pax World portfolio manager Keefe likes the Pinnacle deal.

"We like it because of Dean Metropoulis," said Keefe. "He has made a lot of money for us in the past.

"We owned International Home Foods. We owned Premiere Foods. He's a good manager. He knows how to reposition brands.

Although no roadshow starts were reported by market sources on Wednesday, news of offerings on the horizon was heard.

Carmike Cinenas, Inc. is reported to be measuring the market with the plan to bring $250 million of bonds to help retire its $155 million of public bonds and the $197 million term loan.

And more details emerged on a deal in the offing from Atlanta mattress-maker, Simmons Co. Prospect News heard from a capital markets source that Simmons would bring approximately $340 million of high yield bonds in a transaction likely to be completed before the end of the year, via Goldman Sachs & Co., UBS Investment Bank and Deutsche Bank Securities.

When Prospect News asked investor Keefe whether junk bonds were pricing "rich" in the present high yield market, in which a buy-side heavy with cash from record-breaking inflows is said to have created an imbalance with the low supply of new issuance, Keefe maintained that high yield is holding its own in terms of relative value.

"The same argument continues to apply," she said. "If interest rates go up, what are people going to do with their fixed income allocation?"

That said, Keefe professed an aversion toward longer-maturity junk bonds that have lately been coming with low coupons.

"I think that stuff in the junk bond market that is trading below 7% for a 10-year maturity is going to be below par a year from now."

In emerging markets action on Wednesday Enersis SA priced an upsized $350 million of 7 3/8% 10-year senior notes (Ba2/BB+) at 99.505 to yield 7.442% or 325 basis points over Treasuries.

The Chilean energy company's deal, led by Deutsche Bank Securities, BDVA and Santander, was launched at 325 basis points area.

And Brazilian petrochemical company Braskem SA priced a $75 million add-on to its 12½% senior notes due Nov. 5, 2008 (B+) at 101.5 to yield 12.083%. Credit Suisse First Boston was the bookrunner.

When the new Georgia Gulf 7 1/8% notes due 2011 were freed for secondary trading, they moved up to 101 bid from their par issue price, "but there was no trading," a trader said.

"Some of the new deals traded just so-and-so," another trader said, quoting the company's new bonds at 100.5 bid. However, he saw the new IMAX 9 5/8% senior notes due 2010 as having moved up to 102 bid, 103.25, up from their par issue price.

But the clear winner among the recent new deals was General Cable Corp.'s new 9½% senior notes due 2010, which a trader said were "hot, hot, hot!", quoting them as having jumped to 104 bid, 104.5 offered from their par issue price on Tuesday.

Another trader saw the new General Cables even higher, at 104.75 bid, 105.75 offered. "These have really moved up," he exclaimed. "It all moves up."

Royal Caribbean Cruises Ltd.'s new 6 7/8% notes due 2013 were quoted at 99.75 bid, 100.25 offered, off from their par issue price on Tuesday.

Back among the existing issues, Qwest "absolutely" was better, a trader said, in the wake of the earnings data and the tender offer announcement (see separate story on page one of this issue for full details).

He quoted the company's 6 7/8% notes as having moved up to 90 bid, 92 offered from 88 bid, 90 offered, but said "the big ones [in terms of price movement ] are the ones being tendered for" at the top of the priority list the company has set for the bonds it is tendering for. The unusually structured tender offer divides the bonds into three groups by maturity and establishes a hierarchy within each group as to which bonds have a higher priority in the event the offer is over-subscribed.

He saw the company's 7¼% notes due 2008 as having jumped to 101 bid, 102 offered, their likely takeout level under terms of the offer, from prior levels around 96.5 bid, 97.5 offered, and said its 7½% notes due 2008 zoomed to 102 bid, 103 offered from 97.75 bid, 98.75 offered. He also quoted Qwest's 13½% notes due 2010 at 118 bid, up from 116.5 bid, 117 offered, and saw its 13% notes due 2007 at 115 bid, 116 offered, up from 113 bid, 114 offered.

Another trader saw the 13% notes "up big" at around those same levels, calling a three-point gain.

Outside of Qwest, the same trader said that Land O'Lakes 8¾% notes "gapping up" to 91 bid from 86 bid, 88 offered earlier in the week, with the Arden Hills, Minn.-based maker of butter better on what he called "rumors of a deal - but I'm not sure what kind of deal it would be, or they could make." There was no immediate hard news out on the credit.

Another trader saw Land O'Lakes higher but said that the "real move" had come on Tuesday, when the bonds pushed up to 89 bid, 91 offered from 86 bid, 88 offered, on the possibility it might line up some longer-term financing; he did not see the bonds moving on Wednesday.

One name which he did see moving on Wednesday was Solutia Inc. - the St. Louis-based chemical maker whose bonds had fallen around three points Tuesday, probably in response to its Monday filing with the Securities and Exchange Commission in which the company said that it expects to take a fourth-quarter charge of $25 million to $30 million on the closure of a joint venture plant in West Virginia.

But on Wednesday, the bonds were bouncing back, with its 6.72% notes due 2037 - but which are putable next year - recovering to 79.75 bid, 81.75 offered from 76 bid, 78 offered on Tuesday. Solutia's 7 3/8% bonds due 2027 moved up to 59.5 bid, 61.5 offered from 56 bid, 58 offered, while its 11¼% notes were pegged at 89.5 bid, 91.5 offered from 87 bid., 88.5 offered.

Another trader agreed that the Solutias "have been active," quoting the 111/4s up "a point or two, with the stock," at 90 bid, 91.5 offered.

He meantime saw Collins & Aikman Products Co. "gapping up again," on the Troy, Mich.-based automotive components maker's recent relatively positive third-quarter results and the firm tone in the automotive sector produced by the recent impressive rally in investment-grade sector bellwether Ford's debt.

He saw Collins & Aikman's 10¾% senior notes due 2011 "up two or three points" at 90.5 bid, 91 offered, while its more volatile 11½% subordinated notes due 2006 rising to 84.5 bid, 85.5 offered.

And he saw Goodyear Tire and Rubber Co.'s bonds bouncing, its 7.857% notes due 2011 improving to 85.75 bid from 84 offered, while its 6 3/8% notes due 2008 went to 88.75 bid from 88.

News that October housing starts jumped to a 17-year high and building permits - a reliable leading indicator of future housing industry trends - moved up to a 19-year level, surprising a Wall Street that had been looking for both figures to show a decline.

But it did not translate to any kind of gains for the bonds of the sector; a market source said "one of the problems" is that the housing sector bonds are mostly already trading at such a large premium over par, with Toll Brothers' 8¼% notes due 2011 unchanged 110.5 and Beazer Homes 8 3/8% notes due 2012 at 110. Ryland's 5 3/8% notes due 2008 were unchanged at 103, although D.R. Horton's 7 7/8% notes due 2011 did gain half a point to 113.

Levi's bonds were "down and then up and then down and then up and then down," a trader said. "They were crazy to watch."

He said that San Francisco-based blue jeans maker's 7% notes due 2006 opened at 66 bid, 67 offered, dipped to 64.5 bid, 66.5 offered and then continued to erode, ending at 63.5 bid, 66.5 offered. Its 11 5/8% notes due 2008 opened at 72 bid, 74 offered, fell to 68 bid, 69 offered, and ended at 69 bid, 72 offered, down several points on the session. Levi's 12¼% notes due 2012 eased to 67 bid from 68.5.

Revlon bonds continued to fade, their recent strength gone; a trader, noting the 8 1/8% notes due 2006's fall to 68 bid from 71 previously, suggested that "there were one or two big buyers" propping up the notes after billionaire chairman and principal owner Ronald Perelman agreed to give the cash-hungry cosmetics company another $125 million, suggesting tongue in cheek that maybe "they and Ronnie are friends."

"Once that dies," he declared, "this name trades like the crap it ought to be."

© 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.