Ryerson jumps on tender offer; market tone better; Ryerson, Waterford Gaming seen bringing deals

By Paul Deckelman and Paul A. Harris

New York, Sept. 21 - Steel processor Ryerson Inc.'s 8¼% notes due 2011 were seen up sharply on the session Friday, after the Chicago-based company - in the midst of a going-private transaction - announced plans to tender for those bonds.

Elsewhere, junk generally had a firm tone to it - in contrast to Thursday's soggy market - as the Fed-fueled advance which had dominated the mid-week, only to take a pause on Thursday, resumed.

Volume was somewhat muted, however, with many participants taking an early exit to enjoy the good weather seen in New York and other Northeastern business centers on the official last Friday of the summer. Some also left early ahead of the Yom Kippur holiday, which began at sundown.

Among the advancing names was Hovnanian Enterprises, which was on the rise virtually the whole week on the strength of its successful nationwide home-sales promotion last weekend. Other gainers included merging satellite broadcasting rivals Sirius Satellite Radio Inc. and XM Satellite Radio Holdings Inc. A downsider was Cott Corp., whose paper followed the Canadian soft-drink manufacturer's shares lower a day after it announced that it likely would be unable to meet previous forecasts.

In the primary market, no additional deals were seen having priced, leaving the week's total at four - R.H. Donnelly Corp.'s upsized and well-received $1 billion offering of 10-year notes, Leucadia National Corp.'s upsized eight-year offering, which priced a bit below par, and smaller deals from CompuCom Systems Inc. and Baseline Oil &Gas Corp., both of which came a big discounts to par in order to entice wary would-be investors with sufficient yield to get the deal done. Looking ahead, market participants heard Ryerson getting ready to take to the road to market a planned two-part offering of secured paper. They also had reason to believe that Waterford Gaming could sell an issue of seven-year secured notes in the upcoming week.

Market quietly firmer

A trader noted the relative lack of activity, characterizing the market as very quiet and observing that "it has been firm all day with buyers looking - but little trading."

Another trader said that "it's been slow."

Among market performance indexes, the Banc of America Securities High Yield Broad Market Index was up 0.26% , boosting its year-to-date return to 2.81%. The KDP High Yield Daily Index was up 0.22 on the day, to 79.66, while the yield tightened by 6 basis points to 7.94%

A high yield syndicate official marked the junk-tracking CDX index closing at 97 5/8 bid on Friday, up 3/8 on the day.

Earlier Friday an investment banker said that the broad market had been higher in the morning on good volume, but slowed in the early afternoon.

Tenders buoys Ryerson

A trader called the Ryerson 8¼% notes due 2011 "the big mover on the day," seeing the bonds up 7 points to the 107 bid, 108 offered level, versus their previous price around par.

He cited the mid-day announcement that Rhombus Merger Corp., whose parent is in the process of acquiring Ryerson, would tender for the notes as part of that takeover operation.

The consent deadline is Oct. 4, and the offer is scheduled to expire on Oct. 22, both subject to possible extension. The price to be paid for the notes will be determined based on a formula based on a reference Treasury security.

Hovnanian hike continues

Elsewhere, Hovnanian's paper continued to move up, as it had pretty much all week, even including the small gains posted in Thursday's lackluster dealings.

A trader saw the Red Bank, N.J.-based homebuilder's 8 7/8% notes due 2012 up a point on the day at 80 bid, 82 offered, while its 6 3/8% notes due 2014 were also a point better, at 81.5 bid. Both issues had begun the week mired in the 70s. The company's bonds got a positive jolt after this past Monday' announcement that its "Deal of the Century" nationwide sales promotion the preceding weekend had been what Hovnanian called "a huge success."

With the company slashing prices on unsold homes and condo units in 19 states by as much as 25% in some cases, homebuyers got discounts worth well into the six figures. All told, Hovnanian either took deposits or actually signed contracts with some 2,100 prospective buyers in a whirlwind 60-hour sales blitz that ended the previous Sunday night.

Other housing names gain

With Hovnanian back on track, other housing names - which had been going up all week, based on Hovnanian's success and the Fed rate cut - also resumed their gains.

A trader saw Beazer Homes USA Inc.'s 8 5/8% notes due 2011 move up to 82 bid, 84 offered from prior levels around 80.5 bid, 83 offered.

Tousa Inc's 9% notes due 2010 were up 1 point at 80 bid, 82 offered, while Standard Pacific Corp.'s 6½% notes due 2010 were up 1 point at 80 bid, 82 offered.

Sirius, XM gain

A trader saw Sirius Satellite's 9 5/8% notes due 2013 at 99 bid, par offered, and XM's 9¾% notes due 2014 at par bid, 101 offered, both a point higher on the day.

Those bonds have lately been continually reaching for the skies, helped by analysts' forecasts that the government will likely allow Washington-based XM and New York-based Sirius to merge, despite potential anti-trust concerns.

Stifel Nicolaus analyst Kit Spring on Friday became the latest analyst to concur with that assessment, pegging a 55% chance that the regulators will allow the merger.

Noting also that retail sales of the two companies' special radios have been on the decline lately, Spring said in a research note that the increasing availability of the radios in new cars is probably making retail channels less important.

He said in the note that satellite radio - currently a money-loser - will ultimately "be successful because of high penetration into vehicles." For instance, Chrysler recently said it would install Sirius radios in 70% of its 2008 models. All of the major car makers, domestic or otherwise, have a similar original-equipment factory installation deal with one or the other of the two satellite radio operators.

"It is our opinion that at this level of penetration, satellite radio will be a viable, highly profitable business," Spring said.

Cott bonds, shares fizzle

On the downside, Cott's 8% notes due 2011 were seen at 99 bid, down from prior levels in a par-101 context. That went hand-in-hand with the 20% slide in the company's shares Thursday; those shares edged down another 2.5% on Friday, reacting to Cott's warning Thursday that it was revising its outlook.

The private-label soda maker cited lower demand for carbonated soft drinks in the United States and rising commodity costs in explaining its lowered outlook. It said that it expects year-over-year revenue growth to be flat with operating income "substantially lower" than 2006.

James River gains

Out of the distressed precincts came word that James River Coal Co.'s 9 3 /8% notes due 2012 "continue to trade higher" at around 82.25-82.5, a market source said. He called the Richmond, Va.-based coal producer's bonds "a decent asset play."

A trader said that while the bonds had moved up to 82.5 after trading at 77.5 on Thursday, most of the gains came during Thursday's session, with the bonds moving up to 81 bid, 82 offered from 77.5, and then moving further up to 82.5 on Friday.

$2 billion week

No junk was issued during the Friday session.

Nevertheless, for the first time in two months the week's issuance total came ever-so-close to the $2 billion mark.

According to Prospect News data the final week of summer 2007 saw five issuers combine to raise a total of $1.976 billion of proceeds.

The last time weekly issuance neared the $2 billion mark was the July 23 through July 27 week, which saw $1.939 billion in four tranches.

The last time weekly dollar-denominated issuance topped the $2 billion mark was the June 25 week, which saw $9.75 billion of issuance in 16 tranches.

At Friday's close, the new issue market had generated $115.36 billion of year-to-date issuance in 298 dollar-denominated tranches.

Hence, in spite of the summer crisis in the credit markets, 2007 junk issuance remains nearly $24 billion ahead, on a year-over-year basis, of that seen in the record-setting issuance year of 2006.

At the Sept. 21, 2006 close that year's issuance stood at $91.38 billion in 264 tranches.

The week ahead

In the face of dire warnings that the junk market could face a lockdown through much of the fall, fall 2007 gets underway with at least $1 billion of deals believed to be in the market.

Sources expect three deals to price during the Sept. 24 to Sept. 29 week.

MCBC Holdings Inc. (MasterCraft) is in the market with a $105 million offering of seven-year senior secured floating-rate notes via Jefferies.

The roadshow for the acquisition financing is scheduled to wrap up on Thursday.

Elsewhere Waterford Gaming LLC is thought to be in the market with a $128.5 million offering of seven-year senior unsecured notes (BB-) which could price before the end of the week.

Merrill Lynch is leading the debt refinancing and dividend-funding deal.

And the Downstream Development Authority's downsized $197 million offering of eight-year senior notes (expected B3/confirmed B-) via Banc of America Securities, could also price before the Friday close, sources said.

The deal had been taken on an investor roadshow from mid-July through early August.

Earlier this week an investor call took place.

Ryerson hits the road

Ryerson Inc. will begin a roadshow on Tuesday for its $575 million two-part offering of senior secured notes - a deal expected to price during the first week of October via Banc of America Securities.

The offering is comprised of a $425 million tranche of eight-year notes, which come with four years of call protection, and a $150 million tranche of seven-year notes which become callable at 106.0 in two years.

Credit ratings remain to be determined

Proceeds will be used to partially finance the acquisition of the company by Platinum Equity, LLC.

The financing also includes a $1.35 billion asset-based revolver.

Harman LBO sponsors walk

Finally, late Friday Harman International Industries Inc. sent out a press release specifying that sponsors Kohlberg Kravis Roberts & Co. LP and GS Capital Partners no longer intend to complete the acquisition, citing a material adverse change in Harman's business.

The sponsors assert that they are no longer on the hook to complete the deal because the adverse change breaches the merger agreement.

"Harman disagrees that a material adverse change has occurred or that it has breached the merger agreement," the press release stated.

The financing, via Bank of America, Credit Suisse, Goldman Sachs and Lehman Brothers, had included $1.74 billion of notes.

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