Forest Oil prices; Chrysler contract drives Collins & Aikman upward

By Paul Deckelman

New York, July 7 - Forest Oil Corp. was heard by high-yield syndicate sources Wednesday to have sold an upsized, quickly shopped add-on deal to its existing 8% senior notes due 2011. Terms were meantime heard on D.R. Horton Inc.'s late-Tuesday pricing of a new issue of 10-year notes and price talk emerged on Horizon PCS Escrow Co.'s upcoming issue of eight-year notes.

In the secondary market, news that Daimler Chrysler Corp. had given Collins & Aikman Corp. several potentially lucrative contracts to supply the carmaker with exterior components gave the Troy, Mich.-based auto components maker's bonds a jump start, pushing them up a point or more on brisk trading.

A trader said that move also towed some of the other automotive names higher - although not everyone was along for the ride.

Denver-based energy exploration and production operator Forest Oil sold a $125 million add-on offering to its existing 8% senior notes due Dec. 15, 2011, which had been issued back in December 2001. The quickly shopped Rule 144A deal was increased from the $100 million originally announced late Tuesday.

It was brought to market by joint bookrunning managers JP Morgan Chase Securities and Bank of America Securities, and priced at 107.75, toward the rich end of pre-deal market price talk anticipating a level between 107 and 108, for a yield of 6.658%.

Proceeds will be used to help fund Forest's recent acquisition of Dallas-based energy operator Wiser Oil Co.

Also in the energy patch, Foundation PA Coal Co. was heard to be planning to sell $335 million of 10-year senior notes via joint bookrunning managers Citigroup and Credit Suisse First Boston.

The Rule 144A offering will roadshow from July 13 through July 21 and price shortly afterwards.

Proceeds of the deal will be used to help fund the purchase of the U.S. coal assets of Germany's RAG Coal International AG by First Reserve Corp., The Blackstone Group and American Metals & Coal International Inc. in a $1 billion deal announced in late May. The acquisition is expected to close sometime later in the quarter. When completed, the transaction will form the fourth-largest coal company in the U.S., with 13 mines in Pennsylvania, West Virginia, Wyoming and Illinois that collectively produce 65 million tons of coal per year.

Terms were heard Wednesday on D.R. Horton's quickly shopped and opportunistically priced $200 million offering of new notes maturing on Jan. 15, 2014, which came to market via sole bookrunning manager Citigroup Global Markets. The 6 1/8% notes priced at 98.593 to yield 6.324%.

The Arlington, Tex.-based homebuilder plans to use the proceeds of the offering to repay short-term debt.

And price talk of 11½% was heard on Horizon PCS Escrow's planned $125 million offering of eight-year senior notes, which are expected to price on Friday via joint book-running managers Credit Suisse First Boston and Lehman Bros.

Horizon, a Chillicothe, Ohio-based Sprint PCS affiliate, will use the proceeds from the deal to repay bank debt, as part of its reorganization plan.

Collins & Aikman active

In the secondary sphere, a trader said that "most of my day" was spent trading Collins & Aikman Products Co. bonds, following the news of the Chrysler contract.

He saw the C&A 11½% subordinated notes due 2006 gain a point to 99 bid, while the company's 10¾% senior notes due 2011 gained about a point and a half to end at 102.5.

Trading after news of the Chrysler contracts hit the tape was "very brisk," he said. "There were people that were short "who had to buy the bonds to cover."

At another desk, a trader saw the 111/2s at 99.125 bid, 99.375 offered, while the 103/4s got as good as 103 bid, 103.75 bid, which he called up a point and a half.

Collins & Aikman announced that it had recently secured the manufacturing, assembly & sequencing business for the front and rear painted assemblies of a future high-volume DaimlerChrysler vehicle platform. Terms of the multi-year award were not disclosed.

C&A also said that additional DaimlerChrysler business awarded during the most recent quarter included several multi-million dollar contracts to supply various exterior and interior trim components for future truck and sport utility vehicles. Terms of those awards were not disclosed either.

Other auto names better

The first trader said that Collins & Aikman's news give a boost to a number of other automotive names, including parts maker Mark IV, whose 7½% notes due 2007 were a point better at 93.5 "on the heels'" of the Collins & Aikman news.

"And Goodyear [Tire& Rubber Co.] had another good session based upon that," with the Akron, Ohio-based tiremaking giant's 7.857% notes due 2011 pushing up to 91.25 bid from 90.5, while its 8½% notes due 2007 "continue to chug along," forming to 102 bid from 101.5.

But Navistar, Dura down

But the rise in automotive-connected bonds was by no means universal. The trader said that the main name that he saw "going the other way" was Navistar International Corp., despite a lack of any fresh negative news on the Warrenville, Ill.-based maker of heavy trucks and automotive engines.

"That's why I'm a little confused" about their movement he added.

The company's 7½% notes due 2007 were down half a point, he said, to 103 bid.

He also saw Dura Operating Corp.'s 9% notes due 2009 going from 98.5 bid to 97.75 on "a lot of trading."

The Rochester Hills, Mich.-based components maker's stock, he added, "has been getting hammered lately," falling to present levels around $8.60 from springtime levels as high as $14-plus.

At another desk, Dura's 9s were quoted at 98.25 - but that was said to be down a full point from recent levels. Sector peer Dana Corp.'s 9% notes due 2011 were quoted down half a point at 117 bid.

AK Steel continues upwards

Back on the upside, the trader saw AK Steel Corp.'s bonds "continuing to hum along," extending the rise seen in the Middletown, Ohio-based steelmaker's bonds on Wednesday when they were up two to three points as the company put out optimistic second-quarter guidance.

He saw the AK 7 7/8% notes due 2009 up half to three-quarters of a point at 96.5 bid, while its 9% notes due 2007 were back at par bid, a gain of nearly a point on the session.

"They're holding their gains," the trader said. "Normally, you'd get some profit-taking - but sometimes people will cover a short."

AK said on Tuesday that it expects to report an operating profit of about $55 million for the second quarter - a sharp turnaround from its year-ago operating profit of just a million.

In forecasting its expected income levels, AK said it expects to announce an as-yet undetermined amount of net income - its first, after eight straight quarterly net losses. And that expected profit would not even include an anticipated gain on the sale of the company's Houston industrial park, which was completed in April. Wall Street has been looking for the company to lose about 10 cents per share in the quarter.

AK said that the earnings data, to be released on July 20, reflects stronger than expected shipments, improved spot market pricing, including alloy and scrap surcharges, and continued operating and administrative cost reductions, which AK said had enabled it to overcome a portion of the impact of higher raw material and energy prices. AK also said it had been making progress in getting its unions to agree to cuts in the company's labor costs.

Another steelmaker seen catching a bid in the wake of AK's advance was Ispat Inland, whose 9¾% notes due 2014 were seen up a 1 5/8 point at 105.

Level 3 weaker again

A trader said that Level 3 Communications Inc.'s bonds continued to soften even though there has been no fresh negative news seen out on the Broomfield, Colo.-based fiber optic telecommunications network operator. He saw the company's benchmark 9 1/8% notes due 2008 at 75.5 bid, 76.5 offered, off a point and a half from Tuesday's levels, "definitely in a little bit."

Another trader saw the bonds down even further at 75 bid, 77 offered, a three-point retreat from recent levels.

And at another desk, the bonds were seen at 76.5 bid - but that was considered to be down from prior levels around 78.

Apart from the auto sector and the steelmakers, a trader said, "the rest of the market kind of just muddled through."

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