Horizon PCS, Star Gas price deals; Collins & Aikman continues climb; funds see $440 million inflow

By Paul Deckelman

New York, July 8 - Horizon PCS Escrow Co. was heard by high yield syndicate sources to have priced a $125 million offering of eight-year notes Thursday - perhaps a little earlier than some market participants had been suggesting. Also heard to have priced on an otherwise dreadfully dull day was Star Gas Partners LP, which had a small add-on offering of its existing 10¼% notes.

In secondary activity, the new Horizon PCS bonds were seen firming smartly after they were freed for aftermarket dealings. In that same wireless sector, Nextel Communications Inc. notes were better, after the Reston, Va.-based telecommunications company's debt ratings were upgraded by Moody's Investors Service, and then the Federal Communications Commission endorsed Nextel's idea for a potentially lucrative swap of radio frequencies - although the company could end up paying a lot more than it had originally envisioned.

Elsewhere, Collins & Aikman Products Co.'s bonds - which had firmed solidly on Wednesday after the Troy, Mich.-based automotive components maker announced that it had been awarded several potentially lucrative supply contracts by Daimler Chrysler - continued to gain traction on Thursday.

And after trading had rolled up for the day, market participants familiar with the weekly AMG high yield mutual fund flow numbers told Prospect News that the funds had a net inflow of $439.7 million in the week ended Wednesday.

The inflow was real this week, as opposed to the minuscule $2.15 million gain reported for the previous week ended June 30, which had barely made a dent in the $255.77 million net outflow recorded in the three weeks before that, according to a Prospect News analysis of the AMG figures.

Even though mutual funds account for a relatively small percentage of the total capital in the high yield universe, market-watchers consider their movements a generally reliable barometer of overall junk bond market liquidity trends.

For the year so far, outflows have been seen in 16 weeks, against just 11 inflows, and the cumulative net outflow is about $4.957 billion - down from $5.397 billion the week before, according to the Prospect News analysis.

And discarding the inflows seen in the first four week of the year, which were essentially a continuation of the unusually strong tide of liquidity seen throughout the 2003 fourth quarter, the depth of the liquidity drain since then becomes even more pronounced. Since the week ended Feb. 4 - which saw the first of two consecutive billion-dollar-plus outflows that abruptly shifted the momentum in both the high yield primary and secondary markets - inflows have been seen in only seven of the 23 weeks and outflows in the other 16, and the net capital hemorrhage from the funds since then has totaled some $6.328 billion (versus the prior week's $6.768 billion), according to the Prospect News analysis.

After a red-hot start for both the primary and secondary spheres, fueled by more-than ample liquidity seen in the first four weeks of the year, the junk secondary market has settled into a relatively modest advance for the year to date, as measured by indexes published by the major investment banks and brokerage house, while the primaryside slowed from its early breakneck pace into a more sustainable gait.

Horizon PCS prices

Thursday's pace was absolutely leisurely, with only the Horizon PCS deal seen by the time the market closed. Horizon, a Chillicothe, Ohio-based Sprint PCS affiliate, priced a $125 million offering of eight-year senior notes via joint bookrunning managers Credit Suisse First Boston and Lehman Bros.

Timing of the deal surprised a few participants, who had been expecting it to appear on Friday.

The bonds priced at par to yield 11 3/8%, at the tight end of pre-deal market price talk that called for a yield of 11½%.

The company will use the proceeds from the deal to repay bank debt as part of its reorganization plan.

After trading had ended for the day, Star Gas Partners LP announced that it had priced a $30 million addition of its already existing 10¼% senior notes due 2013.

The Stamford, Conn.-based energy operator's announcement was sketchy, noting only that the deal had "priced at a premium to par, for total gross proceeds of $31.9 million." The yield to worst was 8.97%.

Proceeds will be used to repay debt.

Apart from those two deals, the primaryside seemed to settle into its usual summertime lassitude.

When the new Horizon PCS 11 3/8% notes due 2012 priced, they were seen having climbed to 101.75 bid, 102.75 offered.

Triton PCS falls on Cingular deal

The bonds of another affiliate of one of the established wireless giants, Triton PCS Holdings Inc., were quoted at sharply lower levels on apparent investor dislike of a big deal which the Berwyn, Pa.-based AT&T Wireless affiliate announced Thursday.

Under terms of the deal, Cingular Wireless - which is in the process of acquiring AT&T Wireless - will give Triton certain wireless assets in North Carolina and Puerto Rico in exchange for Triton's wireless assets in Virginia. Cingular will also pay Triton $175 million in cash.

Investors were underwhelmed. The company's 8½% notes due 2013 were seen quoted at 91 bid, 93 offered, well down from prior levels around 94.5 bid, 95.5 offered. A trader also saw the company's 8¾% notes due 2011 dropping back to 78 bid, 80 offered from 83 bid, 85 offered on Wednesday.

Triton's shares fared no better, swooning $1.74 (40.75%) to $2.53 in very busy New York Stock Exchange dealings, with 7.4 million shares changing hands - some 40 times the usual turnover in that name.

Nextel gains on Moody's upgrade

Also in the telecom sphere, Nextel Communications bonds firmed, helped by Moody's announcement late Wednesday that it had upped the company's ratings a notch, with the senior implied rating bumped up to Ba2 from Ba3; Moody's cited Nextel's strong operating results in the face of stiff competition.

The company got some potentially even more significant good news, when the FCC approved a radio-frequency spectrum swap that Nextel had been hoping for. Under terms of the plan, Nextel would move off some frequencies it now occupies in order not to interfere with emergency services communications. In return, the Commission will give Nextel space in a less congested part of the spectrum, providing it with the room it needs to expand its next-generation data services.

The only downside from Nextel's perspective is that it might have to pay as much as $2.5 billion to make the deal happen - about three times more than Nextel had envisioned originally.

Even so, Nextel rivals are grousing that the swap amounts to an unfair giveaway of valuable spectrum space to Nextel. One, Verizon Wireless, is expected to fight the agency's ruling in court.

Level 3 down again

Back on the downside, Level 3 Communications Inc.'s notes continues to retreat, despite a lack of fresh news about the Broomfield, Colo.-based fiber optic telecom network operator.

Its 9 1/8% notes due 2008 were seen retreating to 73.5 bid, 74.5 offered from 75.25 bid, 76.25 offered on Wednesday.

Collins & Aikman continues rising

Collins & Aikman bonds - which had jumped three points on Wednesday after the auto components maker reported that it had won new and potentially lucrative contracts from Chrysler - were doing anything but retreating, as they continued to push upwards on Thursday.

C&A "was a little stronger," a trader said, quoting its 10¾% notes up a point at 103 bid, 104 offered, while its 11½% subordinated notes due 2006 were half a point better, at 99.25 bid, 99.75 offered (see related story elsewhere in this issue).

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