Triton PCS bonds bounce at lower levels following downgrade; Fairfax prices upsized add-on

By Paul Deckelman and Paul A. Harris

New York, Aug. 24 - Triton PCS Inc. bonds were heard to be bouncing around at lower levels Tuesday, a day after Standard & Poor's laid a multiple-notch ratings downgrade on the Berwyn, Pa.-based wireless service provider. Elsewhere, Delta Air Lines bonds were seen several points higher, as bondholders sought more time to consider Delta's request for indenture changes and as crude oil prices - a leading indicator of jet fuel costs - dropped for a third consecutive session.

In the primary market the dog days of August dragged on.

"No deals in the market and no deals on the road," droned the diminished ranks of market sources as the second session of the Aug. 23 week came and went.

In the face of this color, however, the market did see terms emerge Tuesday on one deal: Fairfax Financial Holdings Ltd. nearly doubled the size of a quick to market add-on, news of which began circulating on Monday afternoon.

The financial services company priced a $95 million add-on to its 7¾% senior notes due April 26, 2012 (Ba3/BB) at 97.25 to yield 8.238%, via Banc of America Securities. The deal was increased from $50 million.

An informed source told Prospect News that no price talk had been given.

On April 29, Fairfax issued $204.6 million of the notes as part of a debt exchange offer.

Proceeds from the new deal are earmarked for debt repayment and general corporate purposes.

On Monday the Toronto-based property, casualty and life insurer (subsidiaries include Odyssey Re, Crum & Forster and Northbridge) reported that it expects to take a $35 million to $40 million loss as a result of damage inflicted by Hurricane Charley

The hurricane, which hit the southwest cost of Florida last week, demolished trailer parks, damaged tens of thousands of structures and killed at least 23 people.

See you in September

The Fairfax terms notwithstanding, sources on high-yield syndicate desks continue to insist Tuesday that the regular tendency of market players to skip town during late August will only be magnified by the upcoming Republican National Convention, scheduled to be held in New York City New York between Aug. 30 and Sept. 2.

The result, they say, is an unusually deep torpor in the junk bond market, even gauged in late-summer terms.

"It seems unlikely that we are going to see anything until September," said one sell-side official on Tuesday.

"Secondary market activity seems to be down by 30% to 50%. The buy-side is just not out there."

This source added that when the market does resume in September, new deal volume is expected to be slightly lower than that which was seen during the first half of 2004.

"There doesn't seem to be any sign that new issue activity is going to fall off the cliff," said the source. "I think we will see less volume altogether in the second have than we did in the first half of the year. And the trend we are seeing, of deals funding M&A activity, will carry on.

"I don't see any sign out there that liquidity is going to be an issue either," the official added, alluding to continued reports of outflows from the high yield mutual funds.

Donkeys and elephants

The source added that in addition to the Thanksgiving and Christmas disruptions, the U.S. capital markets in 2004 are apt to see one further interlude.

The presidential election, said the investment banker, could provide an interval of significantly decreased activity in the high yield primary.

"The general impression is that there might be a one-week or 10-day window around the election where new issue activity might come to some sort of standstill.

"People are definitely going to try to market and price deals before and after election time."

As a result, said the source, 2004 is unlikely to top the record breaking issuance that the market saw in 2003.

"I don't see us breaking a record this year because you have the combined effects of the market cooling off and a possible break for the election."

Fairfax firms in trading

When the new Fairfax notes were freed for secondary dealings, a trader said, they inched up to 97.5 bid, 98.5 offered, from their 97.25 issue price earlier in the session.

The trader also saw the recently priced Collins & Aikman Products Co. 12 7/8% senior subordinated notes due 2012 at 99.5 bid, 100.5 offered, unchanged on the session but well up from the 96.416 level at which those bonds priced back on Aug. 12. He also saw the Troy, Mich.-based auto components maker's outstanding 11½% senior subordinated notes due 2006 at par bid, 101 offered and its 10¾% senior notes due 2011 at 102.5 bid, 103.5 offered, both unchanged on the session.

Triton rebounds slightly

Back among existing issues without a new-deal connection, Triton's bonds were seen having crept up slightly from the lows that they hit after the S&P downgrade - but were still well below where they had been trading before S&P expressed concerns about the company's finances.

A market observer saw Triton's 9 3/8% senior subordinated notes due 2011 as having fallen to 75.25 bid from pre-downgrade levels at 77.75, although by the end of Tuesday's session, they had "bounced back up a quarter" from the post-downgrade lows to 75.5.

Likewise, Triton's 8½% senior notes due 2013, which had tumbled to 90.25 bid following the downgrade from 91.75 before, finished at 90.5 bid. Its 8¾% senior subs due 2011, knocked down to 72.25 bid from 74.5 before the downgrade, went home at 72.5, he said.

At another desk, a trader only saw Triton paper being offered, with the 83/4s at 73.5 and the 9 3/8s at 76.75.

Standard & Poor's lowered Triton's corporate credit rating to B- from B+, dumped its senior unsecured debt rating a full three notches to CCC+ from B+ previously, cut the company's subordinated debt rating two notches, to CCC from B- and kept the outlook negative.

S&P said the ratings downgrade "reflects the company's weak second-quarter 2004 results, lowered EBITDA and net customer additions guidance for 2004, and continued high debt leverage."

It also said that Triton PCS's business risk will be heightened with the termination of its exclusivity agreement with AT&T Wireless, upon the latter company's merger with Cingular Wireless LLC.

Triton entered into a nonbinding letter of intent to exchange some properties with Cingular when the merger goes through.

Delta higher

Elsewhere, Delta Air Lines bonds were again bouncing to the upside, as fuel prices - a gigantic headache for the troubled Atlanta-based air carrier - seemed to be moderating somewhat. Crude oil, which had pushed up to near the $50 a barrel mark last week, backed off for a third straight day, actually dipping below $45 a barrel for a while before ending at $45.21 on the Nymex, still down 84 cents on the day.

In company specific news, Delta's secured bondholders are not so readily going along with the company's plans for a possible debt restructuring, as a committee representing holders of about $1.3 billion of the $1.7 billion of secured bonds for which Delta is seeking noteholder approval of indenture changes said it needed more time to study the company's just unveiled business turnaround plan, its finances and its restructuring plans. Delta had been seeking that noteholder OK by Aug, 31, but the bondholders said that is not going to happen, and they want more information before signing on.

Delta seeks changes in the indentures of the secured notes, which are backed by liens against the carrier's aircraft. Analysts believe that once it gets the desired changes, it will mount an exchange offer for those notes, although S&P, in downgrading Delta's ratings last week, warned that such an exchange might be "coercive" and unfavorable to the noteholders and thus tantamount to a default.

Delta's unsecured bonds, meanwhile, which have been bouncing around in tandem with the ups and downs of the company's fortunes, were back on the upside Tuesday.

A trader saw the benchmark 7.70% notes due 2005 as having firmed to 45 bid, 46 offered from 41 bid, 42 offered on Monday. He also saw Delta's 10% notes due 2008 rise to 35 bid, 37 offered from 31 bid, 33 offered, while its 8.30% bonds due 2029 were unchanged at 27 bid, 29 offered.

Another trader saw the 8.30s "maybe up a point" at 28 bid, 29 offered and saw the 7.70s at 45 bid, 46 offered.

Hovnanian gains on guidance

Hovnanian Enterprises Inc.'s bonds were seen a bit better Tuesday, after the Red Bank, N.J.-based homebuilder re-affirmed its previously announced 2004 fiscal year earnings guidance, which called for growth in excess of 27%, which equates to earnings per share of over $5, around what analysts are looking for. Hovnanian plans to report fiscal third quarter (ended July 31) earnings on Sept. 7.

A market observer saw Hovnanian's 8% notes due 2012 half a point better at 109 bid, while its 8 7/8% notes due 2012 were a quarter point ahead at 109.75. The source also saw Hovnanian's 10½% notes due 2007 at 116.5, unchanged on the session.

Calpine better on asset sale

Calpine Corp.'s bonds were seen higher over the past two sessions, in the wake of the San Jose, Calif.-based independent power producer's Friday announcement of an asset sale - the second such deal Calpine announced that week, as it attempts to unload non-core assets and slate proceeds for debt paydown.

A source saw Calpine's 8¼% notes due 2013, which had been at 75.5 bid last Thursday, before the asset sale announcement, as having risen to 76 by Monday and improved further still to 76.25 by Tuesday's close. He saw Calpine's 8 5/8% notes due 2010 as having firmed from 60.5 on Friday to 61 Monday and again to 61.5 Tuesday.

Another trader, however, said he'd seen "not a lot of movement" in Calpine amid generally sleepy market dealings, and quoted its 8¼% notes due 2005 at 96 bid, 97.5 offered and its 8½% notes due 2011 at 60.5 bid, 61.5 offered, both essentially unchanged.

Calpine said Friday that it had signed two agreements to sell its Rocky Mountain natural gas reserves in the Colorado Piceance and New Mexico San Juan basins for about $223 million. It said that the buyers - two U.S. gas companies - would acquire the assets for about $140 million and $83 million, respectively.

Net proceeds will be used to reduce the amount outstanding under Calpine's $500 million first lien debt.

The Rocky Mountain deal was the second in the space of a week for Calpine, which announced on Aug. 16 that it would sell all of its Canadian natural gas reserves and petroleum assets to PrimeWest Energy Trust for $625 million.

All the deals share a July 1 effective date, and are expected to close in early September pending regulatory approval and other conditions.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.