Qwest gains slightly in quiet, pre-holiday trading

By Paul Deckelman and Paul A. Harris

New York, July 1 - Qwest Communications International Inc. bonds were quoted about a point or so higher Friday - though in extremely light pre-holiday trading - following the Denver-based telecommunications company's late-Thursday announcement that it would sell its wireless assets to Verizon Wirless.

Beyond that, not much of anything was going on, traders said, as the junk market officially closed up shop at 2 p.m. ET Friday ahead of the three-day Fourth of July holiday break (with a full-day market close scheduled for Monday). In reality, they said, there were just a few trades in the morning - and then people started heading for the exits to get an early start on the holiday weekend.

The primary market was equally quiet, save for GulfMark Offshore, Inc.'s announcement that it would bring a new bond offering to market. The Houston-based provider of maritime services to the offshore energy industry will use the proceeds to fund a tender offer for its 8¾% senior notes due 2008 (see Tenders and Redemptions elsewhere in this issue for further details).

Qwest was heard to be "moving around" on "asset sale news," one market source, while at another desk, a trader characterized its bonds as "up one or two points." The only issue he had seen actual trades on was the Qwest Communications 7.90% notes due 2010, which he saw up 1¾ points at 91.25 bid from 90 even previously.

Qwest "seemed to be a little bit firmer, maybe up a point or so," another trader said, but "it was more with the market than anything else."

Qwest he said had been "lower [Thursday before the sale announcement], but they were up [Friday] with the market." Bonds in general were seen up in sympathy with Treasuries, which jumped 30/32 on the 10-year, after Washington reported an unexpectedly small June non-farm payrolls number. Jobs increased by just 112,000 last month, well below the 250,000 Wall Street had been looking for. May's revised figure had been 235,000.

A trader called Qwest "a little better on the day, up half a point, with good bids in the market on the paper, but another said that while he had been "sure it would be up, and should be up" on the news, "there was just no one around."

Qwest announced as the markets were closing Thursday that it was selling its PCS licenses and other wireless assets in the 14 states in which it operates to Verizon Wireless, the top U.S. wireless provider.

Verizon Wireless - a joint venture between Verizon Communications, the dominant local phone company in the eastern United States, and Britain's Vodafone Group - will pay $418 million to Denver-based Qwest for the wireless assets in a deal expected to close in the fourth quarter of this year or early 2005.

While the transaction includes Qwest's wireless spectrum licenses in 62 markets in 14 Western and Midwestern states, and Qwest Wireless' network switching centers, cell sites and related network equipment, it does not include Qwest's wireless subscriber base.

According to published reports, Wall Street analysts consider the deal a bargain for the expansion-hungry Verizon, with Qwest selling the assets at about half of their market value in order to get some quick cash in for further efforts to try to improve its balance sheet, which had an estimated $25 million of debt and other obligations at the end of the first quarter.

Goodyear still firm

Elsewhere Friday, a trader said that Goodyear Tire & Rubber Co. "continues to trade well," with the Akron, Ohio-based tiremaking giant's 6 5/8% notes due 2006 at 101 bid.

Goodyear on Friday announced that it had closed its offering of $350 million of new 4% convertible senior notes due 2034. The deal, which priced on June 28, was upsized to $300 million from the original $150 million, and the underwriters subsequently exercised their option to purchase an additional $50 million. Proceeds of the offering will be used for general corporate purposes, which may include the temporary repayment of one of the company's revolving credit facilities.

Tenet still rising

A trader observed Tenet Healthcare Corp.'s bonds "still grinding a little stronger after that sale, which was viewed pretty positively for them" - a reference to the sale of a hospital in Brownsville, Tex., announced Wednesday, for gross proceeds of $82 million.

He saw the company's 7 3/8% notes due 2013, which began the week at 88.5 bid, 89.5 offered, closing Friday at 92.5 bid, 93.5 offered, up four points on the week and more than a point on the session, albeit in very light trading.

Tenet's new 9 7/8% notes due 2014, sold last month as part of the Santa Barbara, Calif.-based hospital operator's drive to improve its balance sheet, "really rocketed," he said, pushing up to a Friday close of 102.5 bid, 103.5 offered, about a five-point gain from recent levels, he said.

A trader said he had seen some trades in Tenet's 7 3/8s at 92.5, up from around 90 previously, while the company's 6 3/8% notes due 2011 moved up to 90 bid from 89.25. He saw the new 9 7/8s get as good as 104 bid, versus recent levels at 103.

Homebuilders stronger

The rise in Treasuries following the non-farm payrolls - and the accompanying fall in yields - was seen as potentially good news for interest-rate sensitive sectors of the economy such as homebuilding, which has been strongly rallying over the last two years as interest rates have fallen to historic low levels. Even the 25-basis point bump up in the federal funds target rate announced by the Federal Reserve Board on Wednesday failed to do much to hurt the sector, since it was widely expected and taken by the financial markets as a sign that any rate tightening would be done very gradually so as not to derail the nascent economic recovery.

On Friday, a trader saw the builders "a little stronger," with "nobody surprised that Treasuries really took off" after the payrolls data. However, he added the caveat that things were very quiet, with "nobody around who really cares. There was no real participation."

He quoted D.R. Horton's 6 7/8% notes at 102 bid, 103 offered, up from their recent low levels around par. "They've kind of spurred back [from the lows] a little bit."

He also saw KB Home's 8 5/8% notes at 109 bid and its 5¾% notes at 93 bid, both "a little stronger," while Beazer Homes "was out there" Friday, the builder's 8 5/8% notes at 107 bid, 108.

The trader also quoted Playtex Products Inc.'s 9 3/8% notes due 2011 "grinding a little higher, a little stronger," at 99 bid, par offered, up two points from the levels at which the Westport, Conn.-based consumer products company's bonds began the week.

And he saw Levi Strauss & Co.'s notes "opening up a little stronger - but these were just wide market" with so few people around to trade in the San Francisco-based blue jeans maker's bonds.

He saw Levi's 7% notes due 2006 "hanging tough" at 93 bid, 95 offered, while its 12 ¼% notes due 2012 were at 98 bid, par offered and its 11 5/8% notes due 2008 were 97.25 bid, 99.25 offered, both of the latter two issues "grinding a little stronger."

Amkor drops again

On the downside, he saw Amkor Technology Inc.'s notes - which had lost between four and five points across the board in busy trading Thursday, after the West Chester, Pa.-based semiconductor company issued bearish second-quarter guidance - getting "beat down" Friday morning, though in very light dealings. He quoted the company's 9¼% senior notes due 2008 and 10½% senior subordinated notes due 2009 offered around 101, down a bit from Thursday's close at 100.5 bid, 101.5 offered.

"They're coming off a little, offered down half to three-quarters of a point from where they were offered [Thursday], but there was really no activity for anyone to sell or buy anything."

And that was pretty much the way it went for the whole market, another trader lamented.

"You had a couple of small trades, but basically, it was like pulling teeth," he said." However, he noted that "everything was up half a point to three-quarters of a point and seems to be bid for, but we'll see what [the] next week brings.

"My guess is things kind of grind a little tighter but at higher levels you'll find sellers of stuff. We're getting back to pretty full levels in terms of spread, and whatever else, at the right dollar price."

But for now, another trader opined, "I've never seen it slower. Enjoy the fireworks."

Primary quiet

The high-yield primary market stood stock still, or practically so, during the abbreviated Friday session which gave way to the U.S. Independence Day break.

The session's sole nugget of primary market news came via a press release from GulfMark Offshore, Inc. which announced that it intends to sell new senior notes in order to fund a tender for $130 million of its 8¾% senior notes due 2008.

Lehman Brothers is the dealer manager for the tender which expires on July 30.

No timing or syndicate names were included in the press release from the Houston-based provider of marine transportation services to the energy industry. The company did not immediately return a telephone call from Prospect News.

Hungry for oil & gas

Meanwhile on Friday, Diane Keefe, portfolio manager of the Pax World High Yield Fund, told Prospect News on Friday that the Belden & Blake Corp. $192.5 million deal, which priced on Thursday, attracted considerable interest on the buy-side.

The eight-year senior secured notes (B3/B-) priced at par to yield 8¾% via Goldman Sachs & Co.

"It was nine times oversubscribed," Keefe said.

"The price talk was 8¾%-9% and they brought it at 8¾%," she added. "And it still traded up.

"People are really hungry for yield in the oil and gas sector."

Calendar expected to build

Only two deals are now positioned on the forward calendar as business that is expected to be completed during the July 5 week.

Horizon PCS Escrow Co., the Chillicothe, Ohio-based Sprint PCS affiliate, is in the market with $125 million of eight-year senior notes (B3/CCC).

The deal, which the company is bringing in order to repay debt as part of its reorganization plan, is being led by Credit Suisse First Boston and Lehman Brothers, and is expected to price late in the week.

A late-week pricing is also possible for Frankfurt, Germany specialty chemical company Almatic Holding BV, which is looking to sell €150 million of eight-year senior notes via JP Morgan, ING.

"Things will pick up after the holiday but not immediately on Tuesday," a sell-side official said late in Friday's session.

"Late next week you'll start to see the forward calendar start to build. Right now it's too low, especially with the Treasury yield coming down a little bit.

"Everything looks right," the source added. "We had a tiny inflow [$2 million] this week. Rates are low. The market is open. People are buying euros again.

"The calendar will build."

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