Crompton, Innophos, United Refining price; Tenet off on numbers, sub poena news

By Paul Deckelman and Paul A. Harris

New York, Aug. 3 - Crompton Corp., Innophos Inc. and United Refining Co. were heard by high-yield syndicate sources Tuesday to have brought new bond deals to market, with Compton's a two-part offering of fixed-rate and floating-rate notes.

In the secondary market, Tenet Heathcare Corp.'s bonds were seen down anywhere from two to three points across the board after the Santa Barbara, Calif.-based hospital operator reported a wider second-quarter loss versus year-ago levels and disclosed that federal prosecutors in New Orleans are looking into the finances of its three area hospitals there.

Also on the downside were Revlon Consumer Products Corp.'s bonds, after parent Revlon Inc. reported a slightly wider second quarter loss and reduced sales. On the upside, Collins & Aikman Products Co. paper got a boost on the news that the Troy, Mich.-based auto components maker will bring a new $00 million bond issue - and use the proceeds to take out the company's existing 11½% senior subordinated notes due 2006.

The primary market finished the Tuesday session with just shy of $1 billion pricing in four tranches.

Of the four, one came inside of price talk, two within talk and the other wide of talk.

Also the notable buildup of the new issue calendar continued during the Tuesday session with Collins & Aikman Products Co. announcing a $400 million debt refinancing deal.

"Things are getting done, and done at talk," one sell-side official commented as terms on Tuesday's deals were being tallied and compared.

"Not too many deals are getting upsized," the source added

"And what we are seeing right now are straight refinancing deals and buyouts.

"We're not seeing any funky structures."

Crompton completes two-parter

The session's largest transaction was completed by Middlebury, Conn.-based specialty chemicals and polymer products manufacturer Crompton Corp.

The company sold $600 million of high-yield bonds (B1/B) in two tranches.

In the fixed-rate tranche, the company sold $375 million of 9 7/8% eight-year senior notes at 99.333 to yield 10%, in the middle of the 9 7/8%-10 -1/8% price talk.

The company also sold $225 million of six-year senior floating rate notes at par to yield six-month Libor plus 575 basis points, right on top of the Libor plus 575 basis points price talk.

Deutsche Bank Securities, Banc of America Securities, Citigroup and Credit Suisse First Boston ran the books.

United Refining wide of talk

Meanwhile Warren, Pa. refiner and convenience store operator United Refining Co. sold $200 million of 10½% eight-year senior notes (B3/B-) at 98.671 to yield 10¾% via Citigroup.

The debt refinancing/dividend payment deal came wide of the 10%-10¼% price talk.

Innophos inside talk

Cranbury, N.J.-based producer of phosphoric acid and phosphates Innophos Inc. got its $190 million of 10-year senior subordinated notes (B3/B-) done inside of the price talk.

Innophos priced the deal at par to yield 8 7/8%, 25 basis points inside of the 9%-9¼% talk.

Bear Stearns & Co. and UBS Investment Bank ran the books for the acquisition financing deal.

Collins & Aikman plans $400 million

One roadshow start was heard during the session.

Marketing starts Wednesday and runs through Wednesday Aug. 11 for Collins & Aikman Products Co.'s planned $400 million of eight-year senior subordinated notes (B3/B-).

Deutsche Bank Securities, Credit Suisse First Boston and JP Morgan are the underwriters.

Proceeds will be used to redeem the Troy, Mich. automotive trim-maker's 11 5/8% senior subordinated notes.

Meanwhile late in the session Dallas-based Blockbuster Inc. announced that it intends to sell up to $300 million of eight-year senior subordinated notes.

The company is also in the bank loan market with a $1.15 billion credit facility via JP Morgan, Citigroup and Credit Suisse First Boston.

Proceeds will be used to pay part of an anticipated special cash distribution to holders of the company's common stock, which is expected to be paid prior to the proposed divestiture by Viacom of its approximate 80% interest in Blockbuster.

The divestiture is expected to be completed in the third quarter of 2004.

Talk on Blount, Borden

The upcoming Wednesday session continued to take shape with price talk of 8¾%-8 7/8% emerging Tuesday on Blount, Inc.'s $175 million offering of eight-year senior subordinated notes (Caa1/B-), expected on Wednesday via Lehman Brothers.

And price talk and estimated tranche sizes were announced Tuesday on Borden U.S. Finance Corp./Borden Nova Scotia's $475 million two-tranche bond offering (B3/B-), also expected to price Wednesday afternoon.

Price talk is 9%-9¼% on an estimated $325 million of 10-year non-call-five second priority senior secured notes.

Meanwhile price talk is three-month Libor plus 475-500 basis points on an estimated $150 million of six-year second priority senior secured floating-rate notes.

Credit Suisse First Boston and JP Morgan are running the books for the deal from the Columbus, Ohio producer of resins, adhesives and coatings.

Floaters seen cheap

One sell-side source, eyeing the talk on the Borden floaters versus the fixed-rate debt, expected to price Wednesday, and the Crompton floaters versus the fixed, which priced Tuesday, said that floating-rate deals are presently "cheap" for investors.

Noting that Crompton's fixed-rate notes came at 576 basis points over the eight-year Treasury, the company might be perceived to have paid a premium to price its floater, which yielded six-month Libor plus 575 basis points.

The sell-sider pointed out that interest rate swaps are priced around 50 basis points for those tenors - indicating that the spread above Libor on the floater ought to be 50 basis points smaller than the spread over Treasuries on the fixed-rate side.

However with Crompton, as well as with the talk on the Borden deal that is expected to price on Wednesday, investors are getting considerably more yield on the floater relative to the fixed-rate tranche than the swap formula would dictate they might ordinarily expect.

The source also said that investors are perceived by and large to be swapping out of the floating-rate debt they are buying in the high-yield new issue market and getting into fixed rates.

Innophos jumps in trading

When the new Innophos 8 7/8% senior subordinated notes due 2014 were freed for secondary dealings, they were heard to have moved right up to around the 101.75 bid, 102.25 offered level from their part issue price earlier in the session.

A trader saw the new notes going home at a slightly wider 101.5 bid, 102.5 offered.

And he saw Crompton's new 9 7/8% senior notes due 2011 finishing the day at 100.5 bid, 191 offered, up from their 99.333 issue price, while the company's floating-rate senior notes due 2010 inched up to 100.25 bid, 100.75 offered from their par issue price.

The United Refining 10½% senior notes due 2014 appeared too late in the day for any aftermarket activity.

Collins & Aikman higher

And new-deal market news gave a bid to Collins & Aikman's existing notes, notably the 111/2s which are to be taken out with the new-deal proceeds. A trader quoted the bonds as having pushed up to 99.5 bid, par offered from prior levels around 97.5 bid, 98 offered.

A still, he said he detected "some skepticism" in the market over the refinancing scenario, noting that back in May the company was bringing a new deal, intending to redeem the 111/2s with the proceeds, only to pull the deal off the table due to deteriorating market conditions."

"They pulled it once before," he said, with the unspoken proviso that they might pull it once more, although market conditions for new deals are vastly better this time around.

Another trader is optimistic that the new deal will come to market and be "well received" - although he noted that there is some concern in the financial markets over recent weakness shown by the Big 3 in Detroit, Collins & Aikman's major customers, with Ford and General Motors reporting weaker July sales, a trend that could conceivably affect supplier companies like Collins & Aikman down the line.

Still, the junk market apparently feels Collins & Aikman will bring the deal. The trader said that it took the company's other outstanding bond issue, the 10¾% senior notes due 2011, higher, on the theory that the new deal is going to be subordinated to the seniors, providing a cushion under them and making them "safer than before the deal." Those bonds opened at 100.5 bid, 102.5 offered, and moved up to 102.l5 bid, 103.5 offered.

Tenet down on earnings

Elsewhere, Tenet posted what a trader called "disappointing earnings," as its second-quarter net loss widened to $426 million (91 cents per share), from $195 million (42 cents a share) a year earlier - the sixth consecutive quarterly loss, with earnings impacted by a high level of unpaid patient bills and special charges, many connected to discontinued operations as the company tries to slim down and shed core assets.

The main albatross around the company's neck is the proliferation of what hospital administrators euphemistically call "doubtful accounts" - i.e. patient bills unlikely to be collected. Tenet's results included a $499 million provision for this, including $204 million for patients' account balances after insurance payments. By way of contrast, in the second quarter of 2003, the provision was $236 million.

Tenet had other negative news as well. The company said that CFO Stephen Farber - who had negotiated the company's credit agreements and launched the plan to divest nearly a third of its hospitals earlier this year - was resigning, at least partly due to the company's plan to move its headquarters to Dallas from California early next year.

And the company - some of whose operations in California and elsewhere have already been the subject of regulatory scrutiny - said in a filing with the Securities and Exchange Commission that the U.S. Attorney's office in New Orleans issued a sub poena on July 30 requesting documents regarding physician relationships and financial arrangements at three hospitals. Tenet said it will cooperate with the probe.

All of that, on top of Tenet's earnings data "really hurt the bonds, with the longer paper really off," said a trader, who for instance quoted its recently issued 9 7/8% notes due 2014 opening at 100.5 bid, 101.5 offered, down about two points from Monday's levels and down still further from recent highs as good as 104 bid, 105 offered.

"The middle of the curve type , the 7 3/8% notes due 2013, which had reached a high of 95.5 [recently] opened today and traded in a 90.5-91.5 range - off three points or so from its high, but still stronger than where they were a couple of months ago, when they began creeping up from the mid-80s.

"But still," he acknowledged, "not good numbers - they took a charge on selling some hospitals, doubled up their loss, so we're not too positive on that one."

He also saw the 6 3/8% notes due 2011 and 6½% notes due 2012 at around 87 bid, 88 offered, down from 91 bid, 93 offered previously.

Revlon loses on results

Another issue on the downside was Revlon, with the market apparently not pleased with the New York-based cosmetics maker's second quarter results, which saw Revlon still wallowing in red ink. The company had a net loss for the quarter of $38.9 million (11 cents per diluted share) on net sales of $316 million versus a year-earlier net loss of $37.8 million (68 cents per diluted share) on sales of $322 million.

Revlon retreated even though the company expressed optimism on its conference call about the prospects for its 2005 product line and touted the benefits it has reaped - and will continue to reap - from debt reduction and refinancing transactions that it has undertaken so far this year (see related story elsewhere in this issue).

Revlon's 8 5/8% notes due 2008 were seen at 84 bid, down about two or three points from prior levels.

The trader said that the bonds had actually opened in the morning as low as 79.5 bid, "which proved to be too low," before tightening up to close at 83 bid, 85 offered. Even though they had firmed off their lows, "they were probably four or five points off their highs" recently around 87.5-88.5 bid, he said.

"They opened up with a crazy bid, a stupid bid, that put them down about nine [points] from their recent lows, but that didn't hold any water."

Qwest declines

The same trader also saw Qwest Communications International Inc. paper quoted lower after the Denver-based telecommunications company reported a wider than expected net loss of $776 million (43 cents per share) - sharply wider than the loss of $64 million (four cents a share) a year ago. The company cited lower local telephone service sales and costs associated with ongoing litigation and job cuts.

While the paper was quoted lower, the trader didn't see much actual activity in the bonds. The operating company 7½% notes due 2010 were seen down three points at 87.5 bid, 88.5 offered while its holding company 6.70% notes due 2028 dipped two points to 71 bid, 73 offered.

A trader saw some lift in Sea Containers Ltd.'s release of quarterly earnings Friday. He quoted the Hamilton, Bermuda based transportation and lodging company's 10½% notes moving up to 101.5 bid from 100.75 previously and said its 7 7/8% notes also "did well," firming to 98.5 bid from 97.75 earlier.

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