Donnelley, General Nutrition, Ames deals price; Unisys off on earnings warning

By Paul Deckelman and Paul A. Harris

New York, Jan. 11 - R.H. Donnelley Corp. wad heard by high-yield syndicate sources to have successfully brought a quickly shopped offering of eight-year notes to market Tuesday, the biggest deal of the day in the junk primary sector. Also pricing were scheduled calendar deals from General Nutrition Centers Inc. and Ames True Temper, the latter offering a floating-rate security.

Also in the new-deal arena, prospective issuer Warner Chilcott Corp. was heard to have downsized its planned 10-year offering.

In the secondary sphere, Unisys Corp. bonds were seen lower after the Blue Bell, Pa.-based information technology solutions company unexpectedly warned that it will not only not meet its previously announced fourth-quarter earnings targets, but it actually expects to post a loss for the period.

Elsewhere, little movement was seen in the notes of Nortel Corp., which released its long-awaited restatement of 2001-2003 earnings as well as the results of its independent investigation of the accounting problems which rocked the Canadian-based telecommunications equipment manufacturer last year.

The weakness in high yield persisted into and throughout Tuesday's session, according to sources in both the U.S. and European markets.

One source in Europe commented that high yield is now seen as underperforming the other credit markets, while investment-grade bonds seem to have gotten off to a strong start in 2005.

The source added that high yield finished off 2004 trading at all-time tight levels and that the European buy-side ended the year appearing to be fully invested.

In the U.S. primary market on Tuesday $600 million priced across three deals - the biggest one a $300 million drive-by issued at the holding company level by Cary, N.C. yellow pages publisher R.H. Donnelley.

$600 million in three deals

Issuing at the holding company level, R.H. Donnelley priced $300 million of eight-year senior notes (B3) at par on Tuesday to yield 6 7/8%, at the wide end of the 6¾% to 6 7/8% price talk.

Bear Stearns & Co. and JP Morgan were the bookrunners for the issue, proceeds from which will be used to repurchase preferred stock.

Elsewhere in the primary market two companies from Pennsylvania priced $150 million bank debt refinancing deals Tuesday morning.

Both were seen to weaken slightly when released for trading in the secondary market.

General Nutrition Centers, Inc. of Pittsburgh issued $150 million of six-year non-call-three senior fixed-rate notes (B3/B-) at par to yield 8 5/8%, on the wide end of the 8½% area price talk.

Lehman Brothers ran the books for the nutritional supplements retail chain.

And Camp Hill, Pa.-based Ames True Temper priced $150 million of seven-year senior floating-rate notes (B3/B) at 99.50, with a coupon of three-month Libor plus 400 basis points.

Price talk was three-month Libor plus 400-425 basis points.

Banc of America Securities and Credit Suisse First Boston ran the books lawn and garden tool company.

Junk weakens in face of improving Treasuries

A market source in the United States said Tuesday that in spite of the 10-year Treasury rising nearly a quarter-point the funk in junk continued during Tuesday's session.

The two $150 million offerings that priced during the morning session, General Nutrition Centers and Ames True Temper, did nothing to stem the negative tide, the source added.

In the face of the news that the two deals that priced Tuesday morning had traded off, one investment banker from a high-yield syndicate desk did not seem alarmed.

"I don't think it's that bad yet," the official said. "I think the new issues over the past couple of days have been trading down a little. But they're not trading down around 97 - they're hovering right around par. So I don't think it's going to destroy the primary market.

"It will put a little more pressure on issuers to be a somewhat more conservative with their pricing.

"If we have another two weeks of new deals trading off in the secondary market, that could be a different story. But right now it's not a major concern.

"What underwriters try to avoid is having a string of deals that trade down, because it's something that issuers notice."

News on deals in the market

One sell-side source conceded to Prospect News on Tuesday that the forward calendar appears a little on the thin side, with just $710 million and €120 million scheduled at Tuesday's close to price during the final three sessions of the Jan. 10 week.

Price talk of 8¾% area emerged Tuesday on City Telecom (H.K.) Ltd.'s $110 million of 10-year non-call-five senior notes (Ba3/BB-).

Although ostensibly an emerging markets deal, the notes are being marketed to investors in the United States, and are expected to price late Wednesday or early Thursday via Citigroup.

And Warner Chilcott Corp. downsized its bond offering to $600 million from $750 million on Tuesday, upsizing its bank loan by $150 million to $1.79 billion.

The 10-year senior subordinated notes (Caa1/CCC+) are expected to price during the present week via bookrunners Credit Suisse First Boston, Deutsche Bank Securities and JP Morgan.

New deals mixed in trading

When the new General Nutrition Centers 8 5/8% senior notes due 2011 were freed for secondary dealings, a trader said that he had heard the new bonds offered in the street as high as 101, but said that from where he sat, "they never did trade." He added that he had not seen the new Ames True Temper seven-year floaters.

Another trader quoted the GNC bonds at 99.57 bid, par offered, off slightly from their par issue price earlier in the session, and pegged the Ames notes at 98.875 bid, 99.625 offered, versus the bonds' 99.5 issue price.

"Neither deal was particularly a barn-burner," he dryly observed. He also saw the new R.H. Donnelley 6 7/8% notes due 2013 being freed for trading 100.5 bid, 101 offered.

Donnelley's outstanding 10 7/8% notes due 2012 were being quoted at 118, down a point on the session.

At another desk, however, those bonds were seen having only fallen a quarter-point to get to that 118 mark, while the Cary, N.C.-based directory publishing company's 8 7/8% notes due 2010 were likewise seen down a quarter at 111.25

Unisys drops

Back among the well established issues, Unisys' 6 7/8% notes due 2010 were seen down as much as three points in the early going, although those bonds firmed off their lows to only end down not quite two points at 104.5 bid. A market source meantime saw the company's 7 7/8% notes half a point lower at 101.75.

Unisys' New York Stock Exchange-traded shares dipped to as low as $8.43 before closing at $8.75 - still a new 52-week low close, down 56 cents (6.02%) on volume of 6.13 million, more than triple the usual turnover.

Unisys - which had previously predicted fourth-quarter earnings of 27 cents to 31 cents a share, said Monday that it would report a loss of 7 cents to 10 cents a share for the three months ended Dec. 31.

Unisys cited problems with some of its outsourcing deals. It said that it will write off contract-related capitalized assets associated with what it termed a "challenging outsourcing operation" and will thus report a pretax, non-cash impairment charge of about $120 million, or 25 cents a share.

The company also projected revenues for the quarter of $1.52 billion to $1.53 billion, down 7% from a year ago, when it earned 33 cents a share.

Amkor lower

Also in the technology area, Amkor Technology's 9 ¼% notes due 2008 were retreating to 98.75 bid from 100.5 earlier, while its 7 1/8% notes due 2011 dipped a point to 89.25. Its 7¾% notes due 2013 were seen having fallen to 89 bid from 90.25. The West Chester, Pa.-based provider of semiconductor packaging and testing services was seen having reacted to a negative financial forecast from computer chip maker Advanced Micro Devices Inc.

Nortel steady

There was little movement seen in the bonds of Nortel, following the release by the Brampton, Ont.-based telecom equipment maker of its restated results for 2001, 2002 and 2003. Nortel also released the findings and recommendations of an independent investigation that scrutinized the accounting scandal that led to the ouster of then chief executive officer Frank Dun and nine other company executives who were accused of having improperly inflated 2003 results, possibly in order to trigger awarding of a "return to profitability" bonus. Nortel said that it would take steps to force the fired executives to give back any such bonus money they got; 12 current senior executives said that even though they were not involved in the alleged book-cooking, they would still pay back $8.6 million in bonuses they received, as a gesture to show the company's employees, suppliers and customers that they will not tolerate the lax ethical climate that made the accounting scandal possible (see related story elsewhere in this issue).

Nortel's bonds "pretty much ended where they [already] were, a trader said. "Those bonds are heavily secured anyway," he said. "I don't think there much that can happen to them, good or bad."

He quoted the benchmark 6 1/8% notes due 2006 at 101.5 bid, 102.5 offered, while its 7 7/8% notes "didn't go down," instead staying at 98.5 bid.

Bally easier on profit taking

A trader saw Bally's Total Fitness Holding Corp.'s bonds easing due to profit taking from the strong recent run up in the Chicago-based fitness club operator's bonds.

"There were definitely some sellers emerging." he said, in noting the retreat of its 9 7/8% notes due 2007 to 89.5 bid, 90.5 offered, down from an offered level of 91 in early trading and well down from 92 bid, 93 offered last week, when the bonds rose on speculation - still unconfirmed - that the health club chain might sell a stake of as much as 40% to three private equity companies for $125 million.

He also saw Bally's 10½ % notes due 2011 at 101 bid, 102 offered.

The sellers "definitely emerged" to take some profits, "after they saw the bonds jump six or seven points last week."

He pointed out that back in the early spring, some eight or nine months ago, the 9 7/8% notes had fallen to levels around 75-76.

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