Celestica, US Unwired, Abitibi price deals; Calpine short debt firmer; funds see $60 million outflow

By Paul Deckelman and Paul A. Harris

New York, June 10 - The high-yield primary market was the focus of investor activity Thursday, traders said, as a slew of new deals totaling nearly $2 billion priced, including Celestica Inc.'s upsized offering of seven-year notes, a two-part offering of fixed- and floating-rate notes from Abitibi Consolidated Inc. and a similarly structured upsized issue from US Unwired Inc.

The secondary market was heard to have taken a backseat to the primary, with some market players marking time until the close, anticipating the unexpected three-day weekend they were given as a result of Friday's financial market close in honor of former President Ronald Reagan. Calpine Corp.'s bonds - or at least its shorter issues - were heard to have firmed smartly, although longer dated issues were seen easing.

And after trading had rolled up for the day, market participants familiar with the weekly high yield mutual fund flow numbers compiled by AMG Data Services of Arcata, Calif. told Prospect News that the funds - a key barometer of overall junk bond market liquidity trends - had a net outflow of $59.8 million in the week ended Wednesday.

While that is a reversal from the $565 million inflow seen in the previous week, ended Wednesday June 2, as outflows go, it isn't very much, certainly not when compared with some of the mammoth money bleeds seen in recent weeks, including one for more than $2 billion.

Overall for the year, the junk funds have seen 14 outflows this year against just nine inflows, and with some of those outflows absolutely huge, such as the $2.145 billion hemorrhage seen in the week ended May 12, the net year-to-date outflow $5.202 billion, according to a Prospect News analysis of the AMG figures. Throwing out the first four weeks of 2004, which showed strong inflows continuing the record-setting pace of the last quarter of 2003, net outflows in the 19 weeks since then have totaled $6.573 billion, the analysis said, counting only those funds reporting on a weekly basis and excluding distributions.

But the relatively small size of the latest week's outflow - as well as the reduced volume of market activity all the past week, leading up to the Friday closure, will likely keep analysts from declaring that a new outflow trend has begun.

"It's insignificant," one investment banker commented late Thursday. "Anything inside of $250 million either way is so small that it's not worth commenting on.

"Last week we had an inflow of over $500 million. That was good because it broke the streak of outflows.

"So this week it's basically flat."

Celestica ascends to $500 million

Meanwhile the primary market made its way toward the three-day weekend with an even handful of deals pricing, four of them upsized.

The biggest of Thursday's seven completed tranches came from Celestica, which priced a massively upsized $500 million issue of seven-year senior subordinated notes (Ba3/B+) at par to yield 7 7/8%. The offering was increased from $350 million.

Citigroup, Banc of America Securities and Deutsche Bank Securities ran the books on the debt refinancing deal that came in the middle of the 7¾%-8% price talk.

The only one among Thursday's five issuing companies which did not upsize its deal was Iasis Healthcare LLC.

The Franklin, Tenn. owner/operator of medium-sized acute care hospitals sold $475 million of 10-year senior subordinated notes (B3/B-) at par to yield 8¾%, wide of the 8½%-8 5/8% price talk.

Banc of America Securities, Citigroup, Goldman Sachs & Co., Lehman Brothers and Merrill Lynch & Co. were joint bookrunners for the acquisition financing deal.

Elsewhere Abitibi-Consolidated Inc. upsized its two-tranche offering (Ba2/BB) to $400 million from $350 million.

The Montreal-based manufacturer of newsprint, paper and other forest products priced $200 million of 7¾% seven-year fixed-rate notes at 99.205 to yield 7.9%, toward the wide end of the 7¾%-8% price talk.

The company also sold $200 million of seven-year floating-rate notes at par to yield three-month Libor plus 350 basis points, spot on the 350 basis points area talk.

Citigroup and Banc of America Securities ran the books for the debt refinancing deal.

Meanwhile US Unwired Inc. upsized its two-tranche high-yield deal to $360 million from $285 million.

The Lake Charles, La.-based Sprint PCS affiliate sold $125 million of six-year first lien floating-rate notes (B2/CCC+) at par to yield three-month Libor plus 425 basis points, at the tight end of the 425-450 basis points price talk.

The company also priced an upsized $235 million of 10% eight-year second lien fixed-rate notes (Caa1/CCC-) at 99.326 to yield 10 1/8%, in the middle of the 10%-10¼% talk.

Lehman Brothers and Banc of America Securities ran the books on the debt refinancing issue.

Finally, Pacific Energy Finance Corp. priced an upsized issue of $250 million of 7 1/8% 10-year senior notes (Ba2/BB) at 98.254 to yield 7 3/8%, in the middle of the 7¼%-7½% talk. The deal was increased from $240 million.

Lehman Brothers ran the books for the debt refinancing deal from the Long Beach, Calif. crude oil distribution company.

Two to roll out Tuesday

News of a pair of Tuesday roadshow starts circulated the market on the fourth and final market-business day of the June 7 week.

A June 15-23 roadshow is set to run for Seitel, Inc.'s $190 million offering of eight-year senior notes (B3 expected/B-), which is expected to price on June 23.

UBS Investment Bank will run the books for the deal, proceeds from which will be used to fund the Houston seismic information and technology company's reorganization and exit from Chapter 11.

And June 15-23 are also the roadshow dates for Ames True Temper's $150 million of eight-year senior subordinated notes.

Banc of America Securities will run the books for the acquisition financing from the Camp Hill, Pa.-based lawn and garden equipment manufacturer.

Skating out

One sell-side source who spoke to Prospect News after Thursday's close said that despite the outflow news the session generally came and went with a positive tone.

"Everybody was skating out early for the holiday but things held up pretty well," said the official.

"I think some of these deals were stuffed in before the three-day weekend. They would have either priced on Friday or next week. But people were rushing to get them done.

"But having said that, Celesticas have been par and a half bid the whole time since they priced. Abitibi was trading above par.

"All the deals that priced today, except Iasis, were upsized to some extent.

"You can consider those to be bullish signs."

Celestica firm in trading

When the new Celestica 7 7/8% senior subordinated notes due 2011 were freed for secondary dealings, a trader saw them move to a high print of 100.5 bid before coming off that peak to end at 100.25, up slightly from their par issue price earlier in the session.

He saw the US Unwired 10% senior secured notes due 2012 at 99.5 bid, 100.5 offered, up slightly from their 99.326 issue price, while the company's new senior secured floating-rate notes due 2012 were at par bid, 100.5 offered, unchanged from their issue level. He observed that he "didn't see any real trading" in the new floaters.

Also on the new-issue front, he was Abitibi-Consolidated's new 7¾% notes due 2011 trade as high as 99.75 bid before settling in at 99.5 bid, 99.75 offered, up from their 99.205 issue price.

He quoted Pacific Energy Finance Corp.'s new bonds at 99.5 bid, par offered, while Iasis Healthcare LLC's new 10-year bonds were at 100.25 bid, 100.5 offered.

Everybody, he said "just snuck their deals in" under the wire before the three-day break.

And Stater Bros. Holding's new 8 1/8% senior notes due 2012 held on to the 99.625 bid, 99.875 offered level they had closed at on Thursday, after having priced earlier at 99.5.

Calpine short bonds rise

Back among the established issues, Calpine "was up a little on the short end and down a little on the longer end," a market source said.

He quoted the San Jose, Calif.-based independent power producer's shorter issues, like its 8¼% notes due 2005, as having firmed, in this case, to 93.5 bid, up two points. Calpine's 7 5/8% notes due 2006 were up even more at 85 bid, up from 81, while its 8¾% notes due 2007 were three points ahead at 68 bid.

"Calpine was up, more specifically the short paper," a trader agreed, seeing the 81/4s a point and a half higher at 93 bid, 94 offered, while its 10½% notes due 2006 powered up to 87 bid, 88 offered from previous levels at 84.5 bid, 85.5 offered.

On the other hand, longer issues, such as Calpine's 9 7/8% notes due 2019 were lower. That bond dipped to 82 bid from 83.25. The company's 9 7/8% notes due 2011 went down to 85.5 bid from prior levels around 88. The 8½% notes due 2010 retreated to 83.5 bid from 86.

The trader said the Calpine 8¾% notes due 2013 "actually fell" to 84 bid, 85 offered from 85.5 bid, 86.5 offered.

All told, he characterized the day's trading in the California power company's issues as "a mixed bag there."

On Thursday, Calpine announced that it might sell natural gas reserves in Canada and the United States to raise cash and pay down debt.

Calpine said it was studying the possible sale of its gas reserves in the Canadian province of Alberta. Those reserves represent about 230 billion cubic feet equivalent of proved reserves and produce about 70 million cfe of gas per day.

The company is also considering the sale of Calpine's 25% stake in about 80 bcfe of proved reserves owned by the Calpine Natural Gas Trust as well as certain unidentified U.S. natural gas reserves.

Calpine has retained Waterous & Co. to advise on the sale of the Canadian gas reserves.

It did not put a price tag on the amount it might expect to sell the reserves for, if it decides to go that route.

The sale of the gas reserves, if it happens, would be the latest move by Calpine to shore up its liquidity as it grapples with a difficult merchant energy market environment.

Delta Air falls

Elsewhere, Delta Air Lines Inc. notes were flying lower Thursday, as the Atlanta-based air carrier, like its sector peers, continued to be bedeviled by the still too-high price of world crude oil and, by extension, jet fuel. And Delta and its pilots are seen still far apart on the size of the concessions the captains will have to make in order to allow the airline to reduce its cost structure. This past week, pilot's union head John Malone scolded Delta chief executive officer Gerald Grinstein for his continually blaming the airline's woes on its pilot costs, which are the highest in the industry.

Delta's 7.70% notes due 2005 dipped to 58.5 bid, 59.5 offered from 61 bid, 62 offered, while its 8.30% bonds due 2029 retreated to 37.5 bid, 38.5 offered, from 39.5 bid, 40.5 offered before.

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