Service Corp plans $400 million deal; Sterling prices; Visteon off on Moody's warning

By Paul Deckelman and Michelle Anderson

New York, March 26 - Service Corp. International announced plans for a $400 million two-part bond deal Monday - an offering expected to market on Wednesday, according to high yield syndicate sources.

The sources also heard Dallas-based hotel technology provider Pegasus Solutions Inc. offering $120 million of eight-year senior notes.

There was one pricing during the session, as Sterling Chemicals Inc. brought an upsized offering of eight-year senior secured notes to market. Those bonds were seen having firmed nicely once they were freed for aftermarket trading.

Overall, the secondary market was "very, very, very, very, very quiet," said one trader who saw only slight movements in most issues.

But, here and there, there were sizable moves. Probably the biggest gainer of the day, a trader said, was Chicago-based artificial sweetener manufacturer Merisant Co., whose bonds moved up about 3 points on better-than-expected numbers.

The big loser on the day was Technical Olympic USA Inc., whose already sagging bonds were beaten down further on market rumors that the debt of its troubled Florida homebuilding joint venture may rank senior to the company's own unsecured debt, including its junk bonds, in the event of a bankruptcy scenario.

And Visteon Corp. bonds retreated after Moody's Investors Service lowered its ratings outlook on the Van Buren Township, Mich.-based automotive parts supplier, citing its recently increased leverage as well as its continued reliance on troubled Ford Motor Co., its main customer and former corporate parent.

Sterling prices upsized offering

There was one pricing in the market, with Sterling Chemicals bringing to fruition its offering of eight-year senior secured notes (B2/B-), which was upsized to $150 million from the $125 million originally proposed due to brisk investor demand.

The bonds priced at par to yield 10¼%, at the tight end of price talk of 10¼% to 10½%. They came at a spread of 569 bps over comparable Treasuries.

The Rule 144A/Regulation S offering, sold with registration rights, was brought to market via bookrunner Jefferies & Co.

The bonds are subject to a make-whole call at 50 bps over Treasuries for the first four years after issue, with a standard call schedule after that.

Proceeds from the offering will be used to repay the Houston-based chemical manufacturer's existing senior secured notes coming due this year, and for general corporate purposes.

Service Corp. shops quickie

Service Corp. - the Houston-based deathcare giant - unveiled plans to sell $200 million of senior notes due 2015 and $200 million of 20-year notes, with plans to use the proceeds of the Rule 144A deal, along with available cash, to retire its outstanding 6½% notes due 2008 and 7.70% notes due 2009.

Sources in the market said that Service Corp. will pitch the notes (B1/BB-) to prospective purchasers via a conference call on Tuesday afternoon, with pricing anticipated on Wednesday via joint bookrunners Banc of America Securities LLC and Merrill Lynch & Co., with BofA on the left for the 20-year tranche and Merrill on the left side for the eight-year issue.

Pegasus deal takes flight

Another Texas issuer in the market, junk primary sources said, is Pegasus Solutions, which hit the road Monday to sell its $120 million offering of eight-year notes (Caa1/CCC+), non-callable for the first four years after issue. The bonds are being sold under Rule 144A with registration rights via bookrunner Jefferies.

The roadshow, which opened in Stamford, Conn., is slated to run through April 4.

Proceeds from the deal are to be used to repay existing debt, fund a dividend, and for general corporate purposes.

Talk emerges on Advanced Medical

Also on the primary market, participants reported that Advanced Medical Optics Inc. set price talk on its $200 million offering of 10-year senior subordinated notes (B2/B) at 7½% to 7¾%.

Books are slated to close on Tuesday morning ET on the deal, which is being brought to market via joint bookrunners UBS Investment Bank and Goldman Sachs & Co.

Proceeds from the Rule 144A/Regulation S deal, which is being sold with registration rights, will be used to partially fund the acquisition of Intralase Corp. by Advanced Medical Optics, a Santa Ana, Calif.-based ophthalmic medical devices provider.

Sterling up on the break

When the new Sterling Chemical 10¼% senior secured notes due 2015 were freed for secondary dealings, a trader saw the bonds quoted at 101 bid, 101.5 offered, but he noted that it was "a small deal, and was probably put away" fairly quickly. There was "not a lot of trading in it," he added.

Another trader saw those bonds at 101 bid, 102 offered.

Millennium America bonds move up

Out of that same chemical sector, Millennium America Inc.'s 9¼% notes due 2008 were seen having moved up nearly 3 points in very active trading to end at 104.25.

The company's corporate parent, Houston-based Lyondell Chemical Co., recently announced plans to sell its Millennium Chemicals unit's inorganic chemicals unit for $1.2 billion, which would yield about $975 million of cash proceeds.

Lyondell has said that it plans to use the proceeds for debt paydown, with some in the market believing that the 9¼% notes may be taken out once the deal closes.

Goodyear up on asset-sale news

Asset-sale/debt repayment news was also pushing up Goodyear Tire & Rubber Co. Inc.'s bonds, with the Akron, Ohio-based tiremaker's bonds up about half a point, a trader said, as he quoted its 7.857% notes due 2011 at 104.25 bid, 104.75 offered.

Another trader said that Goodyear paper was about 20 bps tighter on the day, with the 7.857s at 104.5 bid, 105 offered, which he saw as up a point on the day.

At another desk, a market source pegged those bonds up 1½ point at 105.5 bid.

After the market closed on Friday, Goodyear announced an agreement to sell its engineered products unit to Carlyle Group, Inc., for $1.175 billion. Goodyear is unloading the unit so it can focus on its core tire-making business, and will use the deal proceeds to pay down debt.

Visteon retreats on Moody's move

In that same automotive arena, Visteon's bonds were spinning their wheels, after Moody's lowered its ratings outlook on the company to negative from stable previously, citing Visteon's recently announced decision to seek an enlargement of its $1 billion term loan facility by as much as $500 million.

The ratings agency said that while such an increase would improve Visteon's liquidity and lessen chances for a near-term default on any obligation, in the long run, it "elevates the company's leverage and fixed charges at a time when the North American Automotive industry faces significant challenges."

One of the players in the industry facing the stiffest challenges is Ford - and the Number-Two carmaker, Moody's notes, remains former Ford subsidiary Visteon's biggest customer, thus leaving Visteon exposed and vulnerable to problems at its money-losing former corporate parent.

Visteon's 7% subordinated notes due 2014 were seen down as much as 2 points on the session, at 85.75, although its more actively traded 8¼% senior notes due 2010 were off only slightly, just below 102.

Technical Olympic tumble continues

Elsewhere on the downside, a trader said Technical Olympic USA was "getting hammered," quoting the company's 10 3/8% notes due 2012 as low as 66.5 bid, 67.5 offered, which he said was down 4 or 5 points. He said he didn't know what was up with them but noted its stock was at a 52-week low.

Another trader said the bond "got mooshed," adding that people "want to get out of the way." He cited rumors that the debt of the company's faltering Transeastern joint venture will be considered senior to the parent's unsecured bonds in a workout scenario. He saw the 10 3/8s down 5 points at 68 bid, 70 offered.

The Hollywood, Fla.-based homebuilder's bonds have been on the slide since last fall, when it first disclosed to its bankers the precarious financial health of the Transeastern joint venture - which Technical Olympic later admitted that it entered into just at the top of the Florida real estate boom in the summer of 2005, paying top dollar to buy in - only to see the unit's results slide after that. Last year, Transeastern - which was supposed to have sold 4,000 housing units statewide - was only able to sell about 1,500.

Technical Olympic has claimed that it is only liable for a relatively modest portion of Transeastern's debt in the event of a bankruptcy or other restructuring scenario.

Fedders little changed on conference call

Also out of the distressed precincts, a trader saw the 9 7/8% notes due 2014 of Fedders Corp. actually down a point at 58 bid, 60 offered, even after the Liberty Corner, N.J.-based air-quality products company held a morning conference call to reassure bondholders about its stability, now that it has closed on new financing and made an overdue bond interest payment.

Another saw them unchanged around 59.5-60.5, although he said "small pieces" had traded up at around 62-63 during the day. He remarked that it is a good thing that Fedders - which said on the conference call it is not selling its air-quality products division, its "crown jewel," because none of the buyers came up with the price it wanted - will not be pushed into selling the unit at a "distressed, fire-sale" price.

Another trader saw the bonds unchanged at 59 bid, 60 offered, but noted they are now trading with accrued interest since the coupon payment has been made, meaning they are in reality up a couple of points from where they were a few days ago.

Sweeter results for Merisant

A trader said Merisant Co. was "up a couple" of points on better-than-expected numbers for the Chicago-based artificial sweetener company; he saw its 9½% notes at 76.5 bid, 77.5 offered, and its zero-coupon/12¼% discount notes due 2014 at 28.75 bid, 29.75 offered, both up 3 points on the day.

Spectrum bounces back

The trader also Spectrum Brands "bounce back a little" after getting whacked last week on investor concerns over a planned refinancing deal announced by the Atlanta-based consumer products company.

He saw its Rayovac Corp. 7 3/8% notes due 2015 at 79 bid, 80 offered, up 3 points, and the 8½% notes due 2013 at 94 bid, 95 offered, up 2 points.

Another trader noted that Spectrum had filed an 8-K with the SEC, saw the 7 3/8s trade as low as 77 before coming back to 79-79.5 at the end of the day, unchanged, but said there had been "a lot of trading" in the credit.

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