Asbury Auto, Nexstar, Suburban Propane deals price; funds see $167 million inflow

By Paul Deckelman and Paul A. Harris

New York, Dec. 18 - Asbury Automotive Group, Nexstar Finance inc. and Suburban Propane Partners LP were all heard by high yield syndicate sources to have brought new deals to market Thursday, as primary-side players continue to try emptying the deal pipeline before the impending holiday break brings down the curtain on activity for the year. General Nutrition Centers was also heard to have sold $100 million of exchangeable preferred stock.

Ample liquidity continued to encourage issuers to bring their deals to market or, in many cases, to upsize them once they had gotten there (on Thursday, for instance, both the Asbury Automotive and Suburban Propane deals were upsized, as were both of Wednesday's billion-dollar-plus mega deals from NRG Energy Inc. and Telenet Communications).

The liquidity shows no sign of drying up; late in the session, market participants familiar with the weekly mutual fund flow statistics compiled by AMG Data Services of Arcata, Calif. told Prospect News that in the week ended Wednesday, $167.0 million more came into the funds than left them. That follows the nearly $384.5 million of inflows seen in the previous week (ended Dec. 10).

It was the seventh straight week in which more money entered the funds than left them, according to a Prospect News analysis of the AMG figures, the 12th week out of the last 13 in a stretch that dates back through the week ended Sept. 24 - interrupted only by a tiny $1.1 million outflow in the week ended Oct. 29 - and the 34th week out of 50 since the beginning of the year.

The latest week's inflow - which includes only those funds that report on a weekly basis and which excludes distributions - brings the year's cumulative inflow total to a stunning $19.828 billion, according to the Prospect News analysis. By way of contrast, the cumulative inflow total just a year ago was some $7.77 billion. Over the past seven weeks alone, inflows have totaled $2.306 billion, and in that stretch since Sept. 24, $3.585 billion, according to the analysis.

Although mutual fund money represents a relatively small portion of the high yield universe, it is considered by market watchers to be a stable and reliable barometer of overall junk market liquidity trends.

The strong surge of money coming into the funds has been directly linked to the resurgent new-deal market, which year-to-date stands at $138.5 billion in total issuance, far more than double the anemic $59 billion level seen in 2002.

Half a billion in bonds plus a $100 million exchangeable preferred stock offering priced during Thursday's calendar-clearing session in the high-yield primary market. And sources wondered aloud whether, with less than four full sessions remaining before the holiday break, it perhaps represented the final burst of new issue business for 2003.

Before news of the latest fund inflows, session Prospect News caught up with Mike Difley, vice president and portfolio manager of the American Century High Yield Fund. Difley said that given the present circumstances there is no reason to anticipate that the flows will reverse.

"From what we've seen recently money continues to come in," he said. "The one thing that can change that, perhaps, is if interest rates start to rise rapidly. Maybe then you will see people pull out of all bond classes.

"But until that happens you are probably going to continue to see people reach for yield in this kind of environment."

Sources around the high-yield market have noted those allocations to high yield are creating a high demand for new paper. And in the face of that demand, supply is tight, resulting in deals that are pricing at notably aggressive yields. However Difley seemed to be taking present pricing levels in stride.

"It depends on the deals," he said "Some of these six-handle deals are pretty tight.

"Right now the high yield indexes are basically at all-time lows, in terms of yields, if not on a spread basis," he added. "I think that makes the market somewhat vulnerable to a back-up in interest rates that would push even high yield lower.

"But there is no indication that we're going to get that anytime soon from the Fed."

There was evidence of deal-tightening going on during Thursday's primary market session. The morning's first nugget of news held that Whippany, N.J. propane supplier Suburban Propane Partners, LP along with subsidiary Suburban Energy Finance Corp. had tightened price talk on their its offering of 10-year senior subordinated notes (B1/B) to the 6 7/8% area from 7%-7¼%.

Later the news out of bookrunners Wachovia Securities and Goldman Sachs & Co. had the issue upsizing to $175 million from $150 million and pricing at par to yield 6 7/8%, spot on the revised talk.

Also pricing an upsized deal was Asbury Automotive Group. The Stamford, Conn.-based automotive company priced an upsized $200 million of senior subordinated notes due March 15, 2014 (B3/B) at par to yield 8%. The deal was increased from $150 million.

The deal, led by Goldman Sachs & Co. and JP Morgan, came at the wide end of the 7¾%-8% price talk.

The session also saw Nexstar Finance Inc. price $125 million of senior subordinated notes due Jan. 15, 2014 (B3/B-) at par to yield 7%.

Banc of America Securities and Bear Stearns & Co. ran the books for the Irving, Tex. broadcaster's acquisition deal, which came at the tight end of the 7%-7¼% price talk.

Finally General Nutrition Centers Holding Co. priced $100 million of series A exchangeable preferred stock with a dividend rate of 12%.

Lehman Brothers ran the books on the Rule 144A issue.

The stock is exchangeable into notes with terms similar to those of the company's 8½% senior subordinated notes due Dec. 1, 2010. The Pittsburgh, Pa.-based vitamin company priced those notes slightly more than three weeks ago, on Nov. 25.

When the new Asbury Automotive 8% senior subordinated notes due 2013 were freed for secondary market trading, "they didn't go very far," a trader said, remaining at par bid, 100.25 offered. The bonds had come at par.

Another new issue which proved to be lackluster in aftermarket activity, even though a trader said it had been 15 times oversubscribed before its upsized pricing was Suburban Propane Partners' 6 7/8% senior notes due 2013, which priced at par, freed at 100.25, but then got no better than 100.5 bid, 101.5 offered.

On the other hand, the new NRG Energy 8% notes due 2013, which had priced Wednesday at par and then immediately firmed up to 102.5 bid, 103 offered, continued to climb on Thursday, going to levels at 103.25 bid, 103.75 offered.

Nexstar's new 7% senior subordinated notes due 2013, which priced on par Thursday, finished out at 100.75 bid, 101 offered.

Back among the established issues, Adelphia Communications Corp.'s debt rose a good five to six points on the day, traders said, as investors began positioning themselves for the bankrupt Denver-based cable company's future emergence from Chapter 11. A trader said that the workout might yield a par value for its bonds or even above par.

Adelphia entered bankruptcy in June 2002 after having disclosed serious accounting irregularities.

Adelphia's 9 7/8% notes due 2007 were up as much as six points on the session, at 91 bid. Its wholly owned Arahova Communications Corp.'s 8 7/8% notes due 2007 was up better than 4 points, to 96.

Elsewhere, Rite Aid Corp. reported third-quarter earnings of $22.5 million, versus year-earlier gains of $16.4 million, and posted adjusted EBITDA of $177.5 million, up from $161.1 million. The Camp Hill, Pa.-based drugstore chain operator also released positive guidance for 2004. However, its bonds were seen little changed, with the 7 1/8% notes due 2007 steady at 101.5 bid.

Qwest Communications International Inc. announced that it had agreed to purchase substantially all of the assets of Allegiance Telecom Inc. Qwest's 9 1/8% notes due 2011 were off half a point at 114, while its 7¾% notes due 2013 were also half a point lower at 92 bid.

Meantime, Allegiance debt was all over the lot, traders said, with its 12 7/8% notes due 2008 and 11¾% notes pushing up to as 44 bid from prior levels around 40, then falling to 33.5 bid and recovering later in the session to go out at 36.5 bid, 38.5 offered.

Denver-based regional Bell operating company Qwest is buying telecom network assets in 36 metropolitan area markets, 31 of which are outside the Qwest local service region.

Qwest said that the purchase will increase its points of presence - POPs in the jargon of the telephone industry, meaning locations where a carrier has installed transmission equipment to service a given area - by nearly 700 and will provide additional network facilities to support the delivery of end-to-end voice and data communications to business customers across the U.S.

Qwest will pay $300 million in cash for the Allegiance assets, plus $90 million of newly issued 1.5% convertible debt having a conversion price of $6.10 per share.

Dallas-based Allegiance, which filed for Chapter 11 in May with the U.S. Bankruptcy Court for the Southern District of New York, in Manhattan, asked the court to certify Qwest as the "stalking horse" bidder for the assets - meaning that Qwest may ultimately buy them or some other buyer willing to offer a better price could also emerge.

Troubled St. Louis-based chemical company Solutia Inc.'s bonds, which fell sharply Wednesday after its Chapter 11 filing, were ricocheting higher Thursday, "bouncing back a little," one market-watcher said. He quoted its 7.38% bonds due 2027 up two points at 40 bid and its 6.72% bonds due 2037 also up a deuce at 41. Its more senior 11 1.4% notes due 2009 improved to 87.5 bid from 86 on Wednesday.

Although news concerning emerging markets corporates was thin on Thursday, one source saw firming in the 9¾% notes due 2013 (B1/B+/B+), which CSN Islands VIII Corp. - a unit of Companhia Siderurgica National - priced at par on Tuesday. The source spotted CSN's new paper at 101 bid, 101.5 offered.

However the same source reported that the new 10-year 8% notes (Baa3) of Telemar (Tele Norte Leste Participacoes SA) were languishing. The company priced $300 million at 98.32 on Dec. 10 to yield 8 ¼%.

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