New deals pass 2003 total as Offshore Logistics, Iron Mountain price; power producer bonds firmer

By Paul Deckelman and Paul A. Harris

New York, June 17 - Offshore Logistics Inc. and Iron Mountain Inc. priced new high-yield deals on Tuesday - the former issue upsized - pushing the year's new-deal volume past 2002's. Meantime, several prospective new deals joined the forward calendar, including Lucite International Finance plc, Bally Total Fitness and Reliant Resources Inc.

Meanwhile, existing bonds of a number Reliant's peers in the energy generation sector were heard by traders to have firmed, in the wake of positive news announced by several of them, including AES Corp., Calpine Corp. and Williams Companies.

Prior to the midpoint of Tuesday's session, when terms emerged on an upsized $230 million transaction from Offshore Logistics, Inc., the primary market marched across a significant milestone. With more than half of the present year left to run, the high-yield market surpassed the entire 2002 new issuance volume. By the end of the session, new deals so far in 2003 totaled $59.82 billion in 216 tranches compared to 2002's full-year total of $59.65 billion in 252 tranches.

"Right now you get the sense that the market is about as hot as it can get," commented one sell-side source who expressed no amazement whatsoever that 2003's new issuance year to date has already surpassed that which priced during all of 2002.

And sources have told Prospect News there appears to be some room for the rallying high-yield primary market to run.

"Money is still coming into the sector," commented one buy-side source who spoke Tuesday on background. "You see that from the AMG numbers. We're in the kind of market where if you can't raise it now you can't raise it, period."

Prospect News mentioned to this source that a preponderance of market color in the mid-spring held that the present high yield rally is based on "technicals," that is, based upon the large amount of money reported to be coming into the asset class, driving up prices, as opposed to "fundamentals," i.e. an improving economy and stronger earnings reports.

Has that picture now changed? we asked the buy-sider. Are we now seeing a fundamentals-driven rally in high yield?

"You're seeing the equity market rally in front of real strong fundamental improvement too," was the source's response. "So maybe it's feeding on itself.

"To a certain extent it's kind of ironic that as companies can refinance at lower rates they do improve their balance sheets and get better."

As to the above-mentioned deal from Lafayette, La. helicopter services company Offshore Logistics, its $230 million of new 10-year bonds (Ba2/BB+) priced at par. The deal was upsized by $30 million and came with a yield of 6 1/8%, at the tight end of the 6 1/8%-6 3/8% price talk.

Credit Suisse First Boston was the bookrunner.

In addition, Iron Mountain Inc. priced an offering of $150 million of senior subordinated notes due Jan. 1, 2016 (B2/B), also at par, to yield 6 5/8%. The Boston-headquartered outsourced records and information management services company's new notes came in the middle of the 6½%-6¾% price talk via Bear Stearns.

Three new deals came into view during Tuesday's session.

The roadshow is set to begin Wednesday for Bally Total Fitness Holding Corp.'s offering of $200 million eight-year senior notes (B1/B), expected to price on June 26 via Deutsche Bank Securities.

The market also heard Tuesday that Reliant Resources, Inc. is expected to price $350 million of seven-year senior secured notes (B1/B) sometime during the week of June 23. Banc of America Securities, Goldman Sachs & Co., Deutsche Bank Securities and Barclays Capital will be joint bookrunners on the Houston energy company's new deal.

Price talk of 104.5 area was heard Tuesday on a quick-to-market offering from Lucite International Finance plc of a €50 million mirror notes add-on to its 10¼% senior notes due 2010 (B3). The Regulation S notes will only be marketed to European investors, according to a source. Investor conference calls were to have taken place on Tuesday, with the deal expected to price on Wednesday. Merrill Lynch is the bookrunner.

Also, price talk of the 8½% area emerged Tuesday on a downsized offering from Domino's, Inc. The $400 million of eight-year senior subordinated notes (B3/B-) is expected to price on Wednesday morning, via JP Morgan.

A market source told Prospect News that the $50 million amount by which the bond deal was downsized was added to the company's credit facility.

Finally on Tuesday, from the eurobond market, in what is reported to be the largest LBO deal is European history, BC Partners, CVC, Investitori Associati and Permira will acquire the Seat Pagine Gialle yellow pages operation from Telecom Italia for approximately €6 billion. And the financing figures to include €1.2 billion of high yield bonds.

A source from the eurobond market commented that it is probably the biggest and most anticipated deal of the year, and that the equity sponsors are rumored to have "paid absolute top dollar for this asset."

When the new Offshore Logistics 6 1/8% senior notes due 2013 moved into the secondary market, the notes were heard to have quickly shot up to around the 102 bid level from their par issue price, and hovered above that point for the rest of the session.

Iron Mountain's 6 5/8% senior subordinated notes due 2016 priced late in the session, and were heard to have edged up to bid levels around 100.25-100.5 by the close.

Nextel Partners Corp.'s new 8 1/8% senior notes due 2011, which priced at par on Monday, were initially seen hanging around the 101.5 bid level, although they had pushed above 102 later in the session. Also seen hovering a point or two over par were Rogers Cable's 6¼% second priority notes due 2013 and Centennial Communications Inc.'s 10 1/8% senior notes due 2013, both of which had also priced at par on Monday.

Back among the existing bonds, Nextel Partners' 12½% notes due 2009 were a point and a half better on the session, at 115.5 bid.

But corporate parent Nextel Communications Inc.'s bonds were seen little moved despite a rise in its stock price in busy Nasdaq trading, spurred by market talk that the Reston, Va.-based wireless operator is well ahead of plan when it comes to signing up new subscribers.

Equity investors liked what they heard and took the company's shares up 75.5 cents (4.76%) to just over $16.60, on volume of 35 million shares, versus the usual 21.9 million turnover.

But on the bond side, Nextel's benchmark 9 3/8% notes due 2009 were unchanged at 109.

Positive news, however, helped push up bonds in the merchant energy sector though. One such gainer was AES Corp., which had reaffirmed its 2003 guidance of 50 cents per share earnings from continuous operations - even though it plans to boost its float of outstanding shares by 40 million.

At current prices, that could translate to more than $320 million of proceeds, which the Arlington, Va.-based independent power producer indicated that it would use to pay down debt.

Shareholders, dismayed at the potential dilution of their holdings, took the stock lower, but bondholders voted with their wallets and took the company's debt higher.

AES' bonds "were all up today," said a market source, who quoted its 9½% notes due 2009 at 101.25 bid and its 9 3/8% notes due 2010 at 101, both a point better.

A trader said he had seen the AES bonds all "better bid, but with no sellers."

Another quoted the 91/2s at 101.5 and saw the company's 8 3/8% notes due 2007 a point ahead at 96.25 bid, 96.75 offered.

AES sector peer Calpine meanwhile announced that its lenders had agreed to extend two imminently due credit facilities totaling $950 million to June 24, giving the San Jose, Calif.-based power producer additional time to dicker with the lenders over a new $1 billion facility that would replace them. The extension also carried a commitment to automatically extend the existing facilities further, to mid-July, as soon as the parties agree to the new facility.

A trader quoted Calpine's 7 7/8% notes due 2008 at 75 bid, up from prior levels at 72, while its 7½% notes due 2011 were offered at 57, also a better level.

At another desk, Calpine's 8½% notes due 2011 were heard to have improved to 74.5 bid from 73.

Reliant Resources' 12% notes due 2010, which had moved up a point to 110 on Monday, were up another point to 111 Tuesday in the wake of the company's announcement about its upcoming junk debt and convertible offerings.

And Williams Companies said that it had closed on its $1.1 billion sale of its 54.6% stake in Williams Energy Partners, and would use the proceeds to reduce debt.

That sent the Tulsa, Okla.-based pipeline operator and merchant energy operator's bonds up at least a point across the board in brisk trading.

A trader quoted the Williams 9¼% notes due 2004 at 102.75 bid, 103.75 offered; its 6¾% notes due 2006 were at 99.75 bid, 100.75 offered; and its long-dated 7¾% bonds due 2031 firmed to 99.5 bid, 100.5 offered.

Energy operator Mirant Corp.'s 7 5/8% notes due 2006 ended at 75 bid, 76 offered, also a point better on the session.

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