Wynn prices upsized mega-deal; Rogers keeps climbing; Toys 'R" Us firms on not-so-bad numbers

By Paul Deckelman and Paul A. Harris

New York, Nov. 22 - Wynn Las Vegas LLC decided to raise the ante a little Monday as it upsized its billion-dollar-plus issue of new 10-year bonds. Wynn was the highlight of Monday's primary market activity, which also saw deals join the forward calendar for Owens-Illinois Inc. unit Owens-Brockway Glass Container Inc. and Texas Genco Holdings Inc. - the latter another billion-dollar-plus offering.

In the secondary market, Rogers Wireless Inc., which completely dominated the junk market Friday, continued to show strength Monday. Among established issues, Toys "R" Us bonds seemed to hold their own even as the Wayne, N.J-based toy and children's merchandise retailer posted a fiscal third-quarter loss - one which wasn't as bad as expected. And while Steve Wynn's eponymous casino company was entering the winner's circle, the equally eponymous gamer helmed by long-time Wynn enemy Donald Trump - never invite Wynn and Trump to the same party - was entering Chapter 11, although with every expectation of shedding much of its debt and coming out more competitive, and with The Donald still very much in command.

Following on the heels of last Friday's $3 billion session, Monday's primary market saw slightly less than half of that amount of bonds sold, led by Wynn Las Vegas LLC, which completed an upsized $1.3 billion "blowout" at the tight end of price talk.

And although the new issue market appears to be winding down heading into the four-day Thanksgiving weekend, Owens-Brockway Glass Container Inc. announced its plans to sell $650 million equivalent in two tranches on Tuesday.

Wynn upsizes by $200 million

Wynn Las Vegas led a comparatively quiet new issue market on Monday with an upsized $1.3 billion issue of 10-year first mortgage notes (B2/B) at par on Monday to yield 6 5/8%, at the tight end of the 6¾% area price talk

Deutsche Bank Securities, Banc of America Securities, Bear Stearns & Co., JP Morgan and SG Corporate & Investment Banking ran the debt refinancing and construction funding issue that was upsized from $1.1 billion.

One market source told Prospect News that the Las Vegas-based entertainment, gaming and lodging company's deal was a blowout.

Also pricing on Monday was a restructured $165 million issue from Quincy, Mass. industrial power products-maker Altra Industrial Motion, Inc.

The acquisition financing deal, comprised of $165 million of seven-year senior secured fixed-rate notes (B3/CCC+), priced at par on to yield 9%, on the tight end of the 9% to 9¼% price talk.

The company withdrew a planned floating-rate tranche but the size of the issue remained unchanged.

Jefferies & Co. ran the books.

The run-up to Thanksgiving

Although the primary market wound down considerably on Monday, compared to last Friday's $3 billion session, Tuesday's session figures to see at least $750 million price in three tranches.

Price talk is 6¾% to 7% on Owens-Brockway Glass Container Inc.'s $650 million equivalent of 10-year non-call-five senior notes (B2/B), expected to price Tuesday via Goldman Sachs & Co.

The offering is being sold in both dollar-denominated and euro-denominated tranches, the sizes of which remain to be determined.

Also expected to price Tuesday is Cascades Inc.'s $100 million add-on to its 7¼% senior notes due Feb. 15, 2013 (Ba3/BB+).

Price talk is 106.50 to 107 on the Kingsey Falls, Quebec packaging company' debt refinancing deal, which is being led by CIBC World Markets and Scotia Capital.

The original $450 million issue priced at par on Jan. 31, 2003, and a $100 million add-on priced at 104.5 on June 30, 2003.

Life after Thanksgiving

More news of the post-Thanksgiving primary market emerged on Monday.

Texas Genco is expected to sell $1.375 billion of second lien notes (Ba3/B+) in fixed-rate and floating-rate tranches, as the Yuletide approaches.

Goldman Sachs & Co. will lead the deal from the Houston-based wholesale electric power generator

The acquisition financing is also expected to obtain a $1.375 billion term loans and $325 million revolver.

And Orlando, Fla. theme park owner-operator Universal City Development Partners, Ltd. was heard to be bringing a $450 million two-tranche bond offering, also after Thanksgiving, with JP Morgan and Banc of America Securities running the books.

Still plenty of cash says Citi's Fenn

In the Nov. 19 edition of Citigroup's Bond Market Roundup, high yield strategist John Fenn writes that despite the massive scale of new issuance for the week of Nov. 15 ($7.273 billion in 28 tranches according to an analysis of data gathered by Prospect News) the junk bond market continues to grind tighter.

"Anyone who was concerned that there might be a lack of cash in the marketplace during [Nov. 8] week's softness was quickly corrected this past week as even more supply hit the market, came at tighter levels (with a greater degree of oversubscription), and yet somehow managed to tighten the buyer-dominated market," writes Fenn.

"Over the last several weeks the supporting (driving?) bid in the market has been the Street, but we have clearly been seeing retail activity in the face of one of the largest new issue calendars of all time. The fact is that there is still plenty of cash in the market and the selling that we saw in the prior week was nothing more than those investors who were fully invested clearing room for the calendar."

Fenn currently sees the capital markets as being open to high-yield issuers, a condition to which he attributes the market's present strength.

"The strength of the market is underscored by the strength of the capital markets as we saw a handful of financial engineering transactions that were used to provide more of a bid for high-yield paper, particularly shorter maturities. In the current environment investors in short paper, or 'next maturity' notes can almost expect to be taken out by some kind of capital markets transaction," he wrote.

"The ability of companies to access the capital markets further reduces the apparent default risk in the market and to some extent will serve to defer some future default risk even further out. Combine financial flexibility with strong fundamental performance and the market has the makings of something very strong from a default risk perspective (despite the fact that Moody's reported a slight uptick in the default rate for October)."

As to the data that provides indication of the liquidity of the asset class, Fenn sees the arrows continuing to point in the positive direction.

"Even in the face of a virtual deluge of supply, the technicals in the market remain firm," he writes. "If there was little evidence of an inflow of $601 million in the prior week, it was certainly on display this past week."

He noted that investors in Nextel 9 3/8% notes received $860 million plus a coupon at the beginning of the week.

Wynn up as trading starts

When the new Wynn Las Vegas 6 5/8% notes due 2014 were freed for secondary dealings, a trader said, they broke quickly out of the chute to 101 bid, up from their par issue price.

However, another trader said, "they sold off late in the day," and the bonds ended up around par bid, 100.25 offered.

Rogers Wireless up again

Players in newly priced issues, however, still were fascinated with the new Rogers Wireless bonds, which a trader called "better bid across the board" and up from Friday's closing levels - which themselves were a sizable jump from the par issue price on the gigantic $2.35 billion equivalent five-part issue. The three U.S. dollar-denominated fixed-coupon issues pushed as high as 104 after pricing and then backed a little off those lofty levels to still end Friday's trading just a little below 104.

The trader saw the bonds up anywhere from an additional quarter to a half a point Monday, quoting the Rogers 7¼% senior secured notes due 2012, 7½% senior secureds due 2014 and 8% senior subordinated notes due 2012 all at 104 bid, "or maybe even a little better," while the floating-rate notes due 2010 ended at 103.5 and the Canadian dollar-denominated 7 5/8% senior secured notes due 2011 closed at 102.5 bid, 103 offered.

The new Rogers bonds "certainly did appreciate," another trader said, pegging the U.S.-dollar denominated fixed-coupon notes all having pushed up to 104.625 bid, 105.125 offered from levels just below 104.

Toys "R" Us reports smaller loss

Back among the more established issues, the trader said that Toys "R" Us only lost 12 cents a share in the fiscal third quarter ended Oct. 30, versus a year-earlier deficit of 22 cents a share. In dollar terms, that works out to $25 million of red ink this time around, versus $46 million a year ago. Analysts were looking for a loss of at least 15 cents a share.

Sales were "a little better than expected," he said, down 1.4% to $2.21 billion, while same-store sales - a key retailing industry metric - were off 1.7% - actually a pretty big improvement from the 7.7% slide seen in the fiscal second quarter.

Perhaps of more interest from a debtsider's perspective, the company saw a 37.1% increase in its second-quarter EBDIT to $48 million, excluding $26 million in non-recurring gains. Cash on the balance sheet was $748 million as of the end of the quarter, and there were no borrowings outstanding under its $685 million revolving credit agreement.

Total debt fell to $2.3 billion from $3.3 billion a year ago and net debt declined to $1.6 billion from $2.3 billion.

Even with the not-so-bad numbers the trader didn't see much movement in the name.

However, at another shop, a market source saw Toys "R" Us' 6 7/8% notes due 2006 up 1/8 point at 103.875 bid, He saw its 7 5/8% notes due 2011 and 7 3/8% notes due 2018 each up 7/8 point, at 101.375 bid and 94.125 bid, respectively, while the 8¾% notes due 2021 jumped 1 ¼ points to 101.125.

Trump higher

The not-unexpected news that Trump Hotels and Casino Resorts had filed for Chapter 11, in order to implement previously reported recapitalization transactions was seen giving the Atlantic City, N.J.-based gaming operator's bonds a small boost, with the benchmark Trump Atlantic City Associates 11¼% second market notes due 2006 at 90.75 bid, up half a point, and the THCR 12 5/8% notes at 108.5 bid, up ¾ point.

Another trader saw the A.C.s up at least two points to 90 bid, 91 offered.

Under the terms of the company's bankruptcy filing, the holders of roughly $1.8 billion of Trump notes, including the $1.3 billion of the A.C.s, would exchange them for $74 million in cash, along with $1.25 billion of new 10-year notes and about $395 million worth of common stock.

On the merger front, the news that Steel Partners II had withdrawn its $17 per share offer to buy the roughly 90% of GenCorp. Inc. stock it didn't already own had little impact on the California-based diversified manufacturer's bonds, with the 9½% notes due 2013 seen unchanged at 111. GenCorp had opposed number-two shareholder Steel Partners' offer as "inadequate."

AirGate up on Alamosa bid

AirGate PCS Inc., meanwhile, is not dismissing out of hand a proposal put forward by fellow Sprint PCS affiliate Alamosa Holdings Inc., that would have Lubbock, Tex.-based Alamosa acquire its smaller, Atlanta-based peer in an all-stock deal valued at $355 million.

Alamosa told analysts and investors on a mid-morning conference call that the combination of the two companies - which each provide Sprint wireless phone service to customers in small and medium-sized markets where Sprint itself does not sell the service - would create the largest and financially strongest Sprint PCS affiliate, and would $10 million of operating synergies annually.

Alamosa chief executive officer David Sharbutt told those on the call that besides realizing the operating synergies and efficiencies of scale, the combination would also likely have a lower cost of capital.

Alamosa chief financial officer Kendall Cowan noted that his more financially sound company's cost of capital is lower that AirGate's. "We think that we can spread that lower cost across to them, and with efficiencies of scale, drive [capital costs] still lower."

Sharbutt, noting that the Alamosa offer would expire on Dec. 6, explained that Alamosa had made its acquisition proposal to AirGate a month ago and had heard nothing back. He denied that the deadline was a means to threaten or pressure AirGate, saying instead that all Alamosa was doing was making AirGate shareholders - "who, after all, are the owners of the company" - aware of the offer, so they can then communicate with their management, pro or con.

He implied that if no positive answer were forthcoming by Dec. 6, Alamosa would conclude that the combination wasn't going to happen and would withdraw it, rather than pursue it any further.

AirGate, for its part, said that it would seriously consider the Alamosa offer.

The news gave AirGate's bonds a modest boost in otherwise fairly quiet dealings, with its 9 3/8% notes due 2009 ¾ point better at 106.5 and its 13½% notes due 2009 were half a point better at 106.75. Alamosa's zero-coupon notes due 2009 were a quarter-point lower at 107 while its 8½% notes due 2012 and 11% notes due 2010 were each unchanged at 107.5 bid and 117, respectively.

AirGate's Nasdaq-traded shares jumped $6.34 (23%) to $33.95 and Alamosa's stock likewise rose 65 cents (6%) to $11.40, also on the Nasdaq.

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