Freeport-McMoRan bonds trade up in generally softer market; Southern Star prices add-on deal

By Paul Deckelman and Paul A. Harris

New York, April 9 - Freeport-McMoRan Copper & Gold Inc.'s bonds were seen higher in busy dealings on Wednesday, helped by continued gains in metals prices as well as Tuesday's action by Fitch Ratings upgrading its debt.

Univision Communications Inc.'s bonds were bouncing back from the losses they suffered on Tuesday, when the company's paper fell on the news that it had drawn down most of its revolving credit line.

Freescale Semiconductor Inc.'s bonds remained under pressure as investors shunned the high-tech sector.

Drive-by action continued in the primary arena on Wednesday, much as market sources - pointing to pockets of liquidity among high yield accounts - warned that it would.

Southern Star Central Corp. priced a $50 million add-on to its 6¾% senior notes due March 1, 2016 (expected ratings Ba2/BB+) at 92.128 to yield 8 1/8%.

An informed source said that the quick-to-market deal went well, and added that the additional notes basically went to investors who were in the existing issue.

Lehman Brothers ran the books for the capital expenditures-funding deal from the Kentucky-based natural gas transmission company.

MarkWest sets price talk

Elsewhere MarkWest Energy Partners, LP set price talk for its $250 million offering of 10-year senior notes (B2/B) at 9% area.

Books close at 11 a.m. ET Thursday. The notes are expected to price early Thursday afternoon.

JP Morgan, RBC Capital Markets and Wachovia Securities are joint bookrunners for the capital expenditures and debt refinancing issue from the Denver-based natural gas gathering and transmission company.

Market indicators move lower

A trader saw the widely followed CDX index of junk bond performance down ½ point Wednesday at 93 7/8 bid, 94 3/8 offered. The KDP High Yield Daily Index meanwhile fell by 0.14 to end at 74.41, while its yield widened by 3 basis points to 9.56%.

In the broader market, advancing issues trailed decliners by a small margin. Overall activity, reflected in dollar volumes, rose 27% from Tuesday's levels.

A trader said that "things softened up a little today," although he said that the recent rash of new deals, combined with the expectations for the MarkWest deal and, possibly, First Data Corp. "finally coming to fruition" are a sign that "people are getting comfortable with certain risks now, as opposed to several weeks or months ago when people were more risk averse. People are a little more content and aren't as quick to pull the trigger and sell."

On the other hand, "people aren't really stepping up to buy stuff," which "leaves us in a kind of middle ground."

From where he sat - the overall reported higher volume numbers not withstanding - "I'd say the lack of volume is why we softened up this morning, but it was nothing drastic - maybe off a ¼ to ½ point on lighter volume."

Another trader decried the lack of "consistent follow-through on anything. Everything is fragmented or situational."

He said that "accounts are on the sidelines with cash, looking for stellar credits to come wide of where they would have priced in a better environment, and that's where accounts are sort of looking right now."

He also ventured that "people are waiting to see the result of the Citicorp loan sale - how much of a haircut, how much of a hit, is Citi going to take on that."

Freeport-McMoRan up

The trader saw Freeport-McMoRan's bonds "very active today," adding "holy cow!" when he actually looked at the volume figures, which saw over $68 million of the company's 8 3/8% notes due 2017 changing hands.

He saw those bonds get as good as 111 bid during the session before closing somewhere between 110 and 111, up from Tuesday's close at 109.75, and up even further from the107ish level those bonds held before Tuesday's news of the ratings upgrade which puts Freeport in investment-grade territory at BBB-.

In raising the ratings, the agency said the company should have positive cash flow this year, and metals prices will likely continue to rise throughout the year to drive earnings.

He also saw the company's floating-rate notes due 2015 push as high as 102 on Wednesday, before closing at 101.5 bid, 101.75 offered. That is still up from their post-news level Tuesday around 101, and their pre-news level of 99.75 bid, par offered.

Besides the ratings boost from Fitch, the bonds were seen having firmed, along with the company's stock, on economist's estimates that copper prices will continue to climb, while gold prices should at least hang on to the gains they have made over the past several years.

Univision bounceback seen

Elsewhere, Univision Communications' 7.85% notes due 2011 were seen up more than a point in busy dealings - a far cry from Tuesday, when the bonds were seen down as much as 5 points on the day as investors reacted - some might say over-reacted - to the news that the Spanish-language TV network operator - had drawn $700 million of its $750 million revolver.

Univision will use $250 million to pay off maturing bank debt next year, and will use the rest for general corporate purposes.

No bounceback for high tech

But there was no rebound seen for high-tech names like Freescale Semiconductor or Advanced Micro Devices Inc., whose bonds had fallen Tuesday on the news that AMD is estimating that first-quarter sales fell short of company and analyst expectations.

A trader said that AMD's 7¾% notes due 2012 were down about a point at 79 bid, 81 offered, though "not a ton traded."

A market source saw Freescale's 8 7/8% notes due 2014 off nearly 2 points at 80 bid. Another trader called the notes down 1½ points at that level.

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