Jostens, Riddell Bell, US LEC deals price; Trump gyrates as CSFB deal dies; funds see $101 million inflow

By Paul Deckelman and Paul A. Harris

New York, Sept. 23 - Jostens IH Corp., Riddell Bell Corp. and US LEC Corp. successfully brought new deals to market Thursday, while British issuer Corus Group plc was likewise able to get its euro-denominated issue done.

In secondary market dealings, the debt of Trump Hotels & Casino Resorts Inc. was heard by traders to have bounced around at lower levels before finally firming off its day's-lows to end only moderately lower, following the Atlantic City, N.J.-based gaming operator's announcement that it would not be doing a planned $400 million equity infusion deal with a unit of Credit Suisse First Boston.

Also on the downside, battered auto parts maker Intermet Corp.'s bonds continued to spin their wheels, but some of the automotive names that had fallen along with it Tuesday and Wednesday seemed to either stabilize or actually bounced back a bit.

And after trading had finished up for the session, market participants familiar with the weekly high yield mutual fund-flow numbers distributed by AMG Data Services of Arcata, Calif. said that in the week ended Wednesday, $101 million more had come into the funds than had left them - the fifth straight week in which a net inflow had been seen.

The fund flows are considered by many in the market to be a reliable barometer of overall market liquidity trends, even though the aggregate amount of money in the junk funds represents only a relatively small percentage of funds in the broader high yield universe.

The fifth straight weekly gain follows the $258 million inflow seen in the previous week (ended Sept. 15). Although the year-to-date funds flow picture remains decidedly negative, with outflows seen in 20 of the 38 weeks since the start of 2004, for a cumulative net loss from the funds of $3.905 billion, momentum seems to have shifted to the upside of late. In the past five weeks, a total of about $1.02 billion more has come into the funds than left them in that time.

$1 billion-plus again

On a dollar basis the high-yield new issue market topped the $1 billion mark for the third of the four sessions so far in the Sept. 20 week.

Corus Group plc led the way Thursday with an upsized €600 million issue that played to strong investor demand, sources said.

However San Jose, Calif., power generator Calpine Corp. stole the spotlight with the announcement of a $785 million 10-year deal that it will shop to investors via a Friday conference call, with pricing set for Monday.

Calpine will price the senior secured notes (B+) via Merrill Lynch & Co.

Calpine is also in the market with $600 million of convertible securities, and also is selling 89 million shares of common stock.

Playing to strong demand

Sources reported that three of the four deals that priced during the Thursday session took place amid notably strong demand from investors.

Such was the case with the day's biggest deal, an upsized €600 million from London-based steel and aluminum products maker Corus Group.

The company priced its seven-year senior notes (B3/B-) at par to yield 7½%, spot on the 7½% area price talk.

Credit Suisse First Boston ran the books for the debt refinancing deal, which was upsized from €500 million.

The largest dollar-denominated offering came from Jostens IH Corp., which completed its transaction for $500 million of eight-year senior subordinated notes (B3/B-) at par on Thursday to yield 7 5/8%, inside the 7¾%-8% price talk.

Credit Suisse First Boston and Deutsche Bank Securities ran the books for the deal, proceeds from which will pay off a bridge loan incurred to fund the acquisitions, merger and recapitalization of Jostens, Von Hoffman Corp. and AKI.

Also reported to have played to high demand was Riddell Bell Holdings Inc.'s sale of $140 million of eight-year senior secured notes (B3/B-).

The notes priced at par to yield 8 3/8%, on the tight end of the 8 3/8%-8 5/8% price talk.

Goldman Sachs & Co. and Wachovia Securities ran the books on the acquisition financing for the Irving, Tex.-based helmet and sporting good company.

The only deal reported to have engendered any pushback among the four that priced Thursday was US LEC Corp.'s $150 million of five-year senior second lien floating-rate notes (B3/B-).

The Charlotte, N.C. telecommunications carrier's notes priced at 99.50 and will pay a six-month Libor plus 850 basis points coupon.

The Deutsche Bank Securities-led deal came wider than the six-month Libor plus 825-850 basis points price talk.

Testing the market?

One sell-side official told Prospect News late Thursday that the floodgates appear to have opened with regard to prospective high-yield issuers.

"People are still demanding bonds," the investment banker observed.

"I think we're going to start seeing some funky stuff, deals where there is double-dipping on the dividend, as well as all different types of securities and security packages, coming in different denominations.

"People are going to start testing everything now," the source added.

"The market was a little weaker today and a little weaker on Wednesday in terms of secondary levels. But all of the signals are basically still strong."

Asked if falling stock prices might be exacting a toll on high yield, the sell-sider responded: "apparently not.

"It has an impact on market sentiment," the source added.

"The high yield is closer to the equity market than to corporate bonds or Treasuries. And right now people are selling stocks and buying 10-year Treasuries; the 10-year is down around 4.02%.

"People are obviously pulling money out of the stock market and a little money out of high yield, but nothing to be concerned about at this point."

Friday business

What remains on the forward calendar for the week of Sept. 20 are two deals from companies outside the U.S.

Price talk of three-month Euribor plus 725-750 basis points emerged Thursday on the A.T.U. REI (Auto-Teile-Unger) €150 million offering of 10-year senior floating-rate notes (B3/B-), expected to price on Friday via Morgan Stanley and HVB.

Also expected to price Friday is Grupo Posadas SA de CV's $150 million of seven-year notes (Ba3/BB-), via Citigroup. However an informed source told Prospect News that price talk was yet to emerge on the deal from the Mexico City-based hotel company.

The source added that the deal has gotten attention from U.S. high yield investors.

"It's a kind of crossover between emerging markets and U.S. high yield," the source commented. "It's a high yield-rated deal from an investment grade-rated country. They have hotels in Mexico as well as in Texas.

"We're seeing interest from both sides."

Jostens, Riddell up in trading

When the new Jostens 7 5/8% senior subordinated notes due 2012 were freed for secondary dealings, the bonds were seen having firmed to 101.5 bid, 102 offered from their par issue price earlier in the session. A trader saw the new Riddell Bell 8 3/8% senior subs due 2012 at 102 bid, 103 offered, also up from par.

Trump dives, bounces

Back among the existing notes, Trump paper "was on a roller-coaster," a trader said, quoting the company's benchmark Trump Atlantic City Associates 11¼% second mortgage notes due 2006 as having fallen as low as 80 bid from pre-news levels at 86 bid, 87 offered, before firming off their lows to close at 85 bid, 86 offered, down only a point on the session when all the dust had settled.

The Trump Casino Holdings LLC 11 5/8% notes due 2010 dropped as low as 96 bid from prior levels around 104, before firming off the low to end at 101 bid, 103 offered.

At another desk, the A.C. bonds were seen having ended at 83.75 and the 11 5/8s at "101 and change," while yet another trader pegged the Trump A.C.s at 84.75 bid, 85.25. "They were lower," he said, "but then they came back."

Trump said late Wednesday that along with DLJ Merchant Banking Partners - a CSFB unit which was to give the company the $400 million cash infusion in support of restructuring the company's $1.8 billion in debt in a prepackaged bankruptcy - it had decided to scrap the deal.

With his typical bravado, company chairman Donald J. Trump said Thursday that he was optimistic about working out some alternative restructuring arrangement with the company's bondholders, and suggested that he might take the company private or sell assets, possibly including one or more of this three Atlantic City casinos.

But The Donald may have his work cut out for him in trying to get the bondholders to go along with a revised restructuring scheme following the withdrawal of CSFB/DLJ, whose involvement in the bailout was seen as a reassuring presence by bondholders and shareholders uneasy - or even annoyed - at the way the flamboyant billionaire has run his eponymous company. Most recently, the company announced that it would invoke the 30-day grace period rather than make a scheduled coupon payment.

The scrapped deal would have cut Trump's ownership to 25% from the current 56%, and he would have been forced to hand over operational control of the company to CSFB, while remaining as its public front man. The deal would have also reduced THCR's total debt load to about $1.25 billion from $1.8 billion while cutting the company's average interest rates on the debt to 7.875% from 12%.

Intermet down again

Elsewhere, Intermet Corp.'s bonds were once again lower, the fourth straight day on the downside for the Troy, Mich.-based automotive steering and suspension assembly maker's 9¾% notes due 2009.

Those bonds skidded out of control on Monday, falling some 30 points into the mid-40s, after the company projected a quarterly loss of between $19 million and $24 million and said that the loss would put it in violation of its credit facility financial covenants.

After that, the bonds continued to erode, reaching the upper 30s during Wednesday's session. In Thursday's dealings, they were lower still, a trader quoting them as having fallen to 34 bid, 36 offered.

Auto names rebound

But some of the automotive names which had been weakening along with Intermet over the past two sessions, particularly on Wednesday, appeared to be getting back into gear on Thursday.

Dura Operating Corp.'s 9% notes due 2009 - which had fallen about four points Wednesday - were being quoted as high as 91.5 bid, up around a point, in Thursday's dealings. At another desk, a trader saw the Rochester Hills, Mich.-based components maker's bonds "kind of finding their level" in a 90-91 context.

"It seems there was a little rebound in the name," he said, "although they were not significantly higher."

At another desk, the company's 8 5/8% notes were seen a point better, at 99.

Collins & Aikman Products Co.'s 10¾% notes due 2011, which had lost two points Wednesday, were up about a quarter to a half point at 100.75 bid after having "bottomed out," he said, while the Troy, Mich.-based auto interior and body components maker's 12 7/8% notes due 2012 were up a point at 92 bid, 93 offered. Tower Automotive's bonds were offered around 83-84, he said.

Other automotive winners Thursday included Tenneco Automotive Inc., whose 10¼% notes due 2013 were seen a point better at 114, while TRW Automotive Inc.'s 9 3/8% notes were also a point better at 115.

Calpine rises

Calpine Corp. bonds were better, possibly helped by the news that the San Jose, Calif.-based power generating company will be doing nearly $1.4 billion of new financing - $600 million of convertible notes and $785 million of new 10-year junk debt.

A market source quoted Calpine's 7 5/8% notes due 2006 at 93 bid, and its 8 5/8% notes due 2010 at 66, both half a point better, while Calpine's 7 7/8% notes due 2008 gained a point to 69.

Rite Aid better on earnings

Rite Aid Corp. bonds firmed after the Camp Hill, Pa.-based drugstore chain operator reported strong earnings in its fiscal second quarter, including a swing to a nearly $10 million profit from a year earlier loss, and also announced that it had completed a big refinancing transaction that sliced $634 million off its debt load and will save $27 million of annual interest expense going forward (see related story elsewhere in this issue.)

Rite Aid's 6% notes due 2005 firmed to 104.375 from 104 previously, while its 7 5/8% 2005 notes rose to 101.5, up half a point. Its 7.70% notes rose to 85.5 bid from 83.75, and its 6½% notes got all the way up to 90.25 bid from 88.75.

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