Monitronics prices $160 million seven-year deal; new Dex West firms smartly

By Paul Deckelman

New York, Aug. 18 - Monitronics International Inc. priced a $160 million offering of seven-year notes Monday, the only deal to have been brought to market during the session. DRS Technologies Inc. was meanwhile heard to be preparing a high-yield bond deal, along with a bank financing, for a total of $350 million.

In secondary dealings, the new Dex Media West LLC bonds were heard to have jumped when they began trading in the after-market. Also on the upside was Qwest Communications International LLC's debt, after the Denver-based telecommunications operator reiterated its previously announced full-year guidance for 2003, confidently declaring that it is "pleased" with its financial performance as it tries to turn its situation around.

Monitronics, a Dallas-based provider of monitored security alarm systems, priced $160 million of new 11¾% senior subordinated notes due 2010 via bookrunner Banc of America Securities. The notes priced at 99.4104 to yield 11 7/8%, at the wide end of revised pre-deal market price talk of 11¾% and well outside of original price talk of 10¾%-to-11%.

The Rule 144A issue was originally planned as a $200 million placement, but then was downsized to $155 million, before being slightly upsized at pricing to $160 million.

The company plans to use the deal proceeds to repay debt.

Apart from that small deal primary-side sources said little was happening in the market.

While acknowledging the possibility that a relatively small deal might price here and there, a sell-side source flatly declared that "no, nobody is bringing anything [of size] in this market - not till at least September," when presumably players will have returned from vacation and gotten over their current funk, which has seen a several prospective deals pulled off the table in recent weeks - most notably Charter Communications Holdings LLC's $1.7 billion mega-deal, which was scrubbed last Thursday, just before the blackout.

That feeling of market malaise - which has also included three straight weeks of billion-dollar plus outflows from high-yield mutual funds, a key liquidity barometer, has also caused a number of deals that do get done to back up to levels that deliver a fatter yield to investors to compensate them for their perception of increased risk. The big jump from the low-end of price talk in the Monitronics deal (10¾%) to the actual yield when the bonds priced (11.875%) is an example of that phenomenon.

Elsewhere, DRS Technologies Inc. was heard by market players to be looking to obtain a total of approximately $350 million through the issuance of high yield notes and an increase in size of the company's existing term loan. However, a syndicate source said the financing was "still in the planning stages, with nothing decided, and added that it was "too early to say" what the ratio of bond debt to bank debt would be, or the timing of the deal and likely underwriters.

DRS, a Parsippany, N.J. -based defense electronics manufacturer, plans to use the proceeds of the bank and bond financing to help fund its pending acquisition Integrated Defense Technologies Inc. (See separate story on page one of this issue).

In the secondary market, traders said they did not see the new Monitronics 11¾% senior subordinated notes due 2010.

"This was such a small deal that it's the kind that rarely gets away from the underwriters," one trader said.

But if there was nothing doing in the new Monitronics bonds, the same could not be said for the new Dex Media West bonds which priced last week.

The Denver-based telephone company directory company's new 8½% senior notes due 2010 were being quoted at 103.5 bid, while its new 9 7/8% senior subordinated notes due 2013 were likewise at 105 bid, the trader said.

Another trader quoted those bonds around those same levels, and also saw the established Dex Media East LLC 9 7/8% notes due 2009 trading at 109 bid, 109.5 offered. Its 12 1/8% notes due 2012 were hovering above 115.

Both of the Dexes were spun off from Qwest Communcations LLC - but Qwest probably doesn't miss the directory units. On Monday, its bonds were up anywhere from one to two points after the company said it was "pleased" with its second-quarter financial results and added that it expects to meet its full-year 2003 financial forecasts.

Qwest's 7.90% notes due 2010 were seen having risen to 80 bid from prior levels around 78. Its 7¾% notes due 2006 gained a point to 90.5 bid.

At another desk, the 7.90s were heard to have firmed to 80 bid, 81.75 offered, from last week's levels in the 77.5 -79.5 context. Its 8 7/8% notes were half a point better at 102.5 bid, 104.5 offered.

Qwest said it expects its revenues to decline, but only in the mid-single digit percentage range, while analysts expect it to post a full-year loss of 27 cents a share on revenues of $14.4 billion.

A trader saw EchoStar Communications bonds "up of course," after the Littleton, Colo.-based satellite broadcast operator said it would buy back up to $1 billion of its outstanding bond debt "from time to time." He quoted the company's 9 3/8% notes due 2009 half a point better at 106 bid, 106.75 offered.

Outside of the communications sphere, a trader saw AK Steel Corp. bonds better after the Middletown, Ohio-based steelmaker announced that it had completed its acquisition of a metal tubing unit that is supposed to help its bottom line.

He saw its 7 7/8% notes at least a point higher at 76 bid, 77 offered, while its 7¾% notes firmed to 74 bid, 75 offered, up from 73 bid, 74 offered previously.

He also saw Xerox Corp. bonds as having gotten "a little lift," although he attributed the gain to concerted buying by "a couple of people'" rather than to changed economic fundamentals.

Xerox's 7 5/8% notes due 2013 firmed more than a point, to 92.5 bid, 93.5 offered. Its 8% long notes due 2027 gained around half a point, at 78 bid, 80 offered.

But overall, the trader said, "it was kind of a nothing day. Trading was thin. A lot of people are taking their vacations right now. There's not a lot of liquidity around."

However, he saw that the market had "a better tone to it."

But that having been said, another trader said of the day's lack of activity: "To call this dead would represent an uptick."

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