Enron bonds bounce after Chapter 11; Conseco moves lower; two new deals slated

By Paul Deckelman and Paul A. Harris

New York, Nov. 30 - Enron Corp. bonds bounced off their lows Monday, following the battered energy company's weekend Chapter 11 filing; bonds of its Azurix water subsidiary were likewise higher as well. Conseco Inc. bonds were quoted lower in sizable trading, although no new news was heard about the company.

In the primary, two more deals were added to the calendar and terms emerged on the late-Friday pricing of an offering from Majestic Investor Holdings LLC.

Majestic sold $152.632 million of six-year notes via Jefferies & Co. at a discounted price of 95, giving a yield of 12 7/8%. Factoring in the discount, Majestic's proceeds are $145 million.

The company also decreased the announced maturity by one year, in keeping with what one sell-side observer deems a trend among investors.

"I just think investors want shorter-term paper," the official said.

The official, who was not in on the Majestic deal, said that factoring in the price, the yield, and the coupon of 11.653%, Majestic did well.

"I believe they had about $30 million of EBITDA," the observer said. "For a company that small, normally their only place to access capital is the mezzanine market. And that normally costs you 18-20%, including warrants and all the other stuff.

"I think this is a helluva deal at 12 7/8%."

Two deals surfaced Monday: United Surgical Partners, Inc. launched $150 million of 10-year notes via Credit Suisse First Boston and Lehman Brothers and Collins & Aikman Products Co. announced an offering of $325 million of 10-year notes seniors (B2/B existing) which will hit the road Wednesday via joint bookrunners J.P. Morgan, Credit Suisse First Boston, Deutsche Banc Alex. Brown and Merrill Lynch & Co.

One syndicate official, noting the two announcements, and the seven deals to be priced this week, said he expects $4.5 to $5 billion altogether to price in December. He concurred that the high yield market is currently very hot and noted a couple of its more novel attributes.

"If you look at the new issue calendar, right now, you have a lot of first time issuers (Radiologix and OM Group), and you have a lot of guys out there that are smaller-sized, doing smaller transactions. And almost all of them are single-Bs.

"We haven't seen anything like this in two years, the official continued. "The last two years the only stuff that can get done is double-B type paper, and the occasional single-B, in a favorite sector."

Also Monday, price talk of 13½%-13¾% emerged on Horizon PCS, Inc.'s offering and 10¼%-10½% for Findexa's planned euro deal. And in a deal one official described as a highly-subscribed blowout, talk tightened on Ingles Markets' sale to the 9% area. That deal is set to price Tuesday.

Enron's bonds, which last week had crashed as low as the upper teens by the week's end after would-be acquirer Dynegy Inc. pulled out of its prospective merger and the major ratings services cut its bonds down to weak junk levels, "were up a couple of points in morning trading and then eased a couple of points as we went into afternoon," a trader said.

"There was a little bit of a rally, and then there must have been profit-taking. Net on the day, they were up about a point." At another desk, the bonds were quoted up two points to around the 21 bid level. The bonds were trading flat, or without accrued interest, an effective loss of several additional points from previous falls in their nominal prices.

Activity in the credit was limited; someone at another desk said "it seemed people were waiting on the sidelines for the next move on Enron."

Over the weekend, Enron sought protection from the holders of its billions of dollars of newly downgraded junk bonds and other creditors. Following the filing of its petitions with the U.S. Bankruptcy Court for the Southern District of New York - believed to be the biggest corporate bankruptcy in U.S. history - the company was reported to have lined up $1.5 billion of debtor-in-possession financing from a group of banks, including major creditors J.P. Morgan Chase and Citigroup. The funds are intended to

allow Enron to continue operating while it restructures.

But the company's future is far from certain. On Monday, it announced the layoff of 4,000 employees - or 20% of its workforce - and it sent the rest of the staff at its Houston headquarters home for the day to await the dropping of the next shoe. On the legal front, Enron and Dynegy filed countersuits against one another, Enron contending that Dynegy had caused its current crisis by wrongfully terminating the merger deal, Dynegy trying to protect what it said is its right to acquire one of Enron's few valuable physical assets, its Northern Natural Gas pipeline unit.

On the financial front, a suitor for Enron emerged - sort of - as TheDeal.com reported that Standard Power & Light Inc., a privately held Oak Brook, Ill., company that buys and develops power plants, said in a filing with the Securities and Exchange Commission that it planned to mount an equity tender offer to acquire at least a majority stake in Enron, anticipating paying less than $1 a share. That's a pittance compared with Enron's 12-month peak share price of almost $90, but its well above its recent levels, which have been beaten down into penny-stock territory (it closed up 14 cents, or at 40 cents per share, Monday on the NYSE, on very heavy volume of 167 million shares).

The financial news website reported that while some posters on investment-oriented Internet bulletin boards were cheered by the prospect that the offer could touch off a bidding war for Enron and its assets. Other posters were dismissive, one calling it a case of a "mom-and-pop" power company offering to purchase one of the largest U.S. companies "for pennies."

Skeptics also noted that Standard Power & Light said it will divest Enron of all but its energy assets - essentially the same course Enron intends to follow in its bankruptcy reorganization.

One of those non-energy assets which may end up sold is Enron's water-supply unit, Azurix; which now exists chiefly as a European operation, having sold off its North American businesses recently.

Azurix's 10 3/8% and 10 ¾% bonds last week fell from levels in the mid-80s to around 57 bid by late Friday; they were heard Monday to have rebounded somewhat to 61 bid, on the prospect that the company might be sold and thus sever its connection to the Enron debacle.

Elsewhere, there was considerable activity reported in Conseco Inc.'s 9% notes due 2006; the bonds, which traded in a bid range between 53 and 47, were gyrating around between 45 and 38 Monday. There was no fresh news out on the troubled Carmel, Ind.-based insurance company, whose bonds have recently been trending downward amid growing investor angst about the company's liquidity and its long-term prospects, as the turnover momentum initially built up under CEO Gary Wendt seems to have dissipated and Wendt is now taking potshots from disgruntled shareholders. The company's 10¾% notes

due 2008, which had traded in the 47-49 bid area Friday, languished between 40 and 43 bid Monday.

Williams Communications Inc.'s 10 7/8% notes initially dipped about a point or so to around the 46 bid level, before coming off that low to close essentially unchanged at 47-48.

Sea Containers Ltd.'s bonds were up three points on the session, it 10¾% notes closing at 58 bid and its 7 7/8% paper at 48 bid, despite a lack of positive news on the Bermuda-based transportation and hotel concern. Indeed Standard & Poor's downgraded the company during the session.

There was no movement seen in the 9 3/8% senior subordinated notes due 2003 of KB Homes, even after the Los Angeles-based homebuilder said Friday that it would redeem the notes at par plus accrued interest on Dec. 31. A market observer said the planned redemption was not unexpected, and the bonds had been at that level for some time.

By the same token, there was no reported movement in Aviation Sales Co.'s 8 5/8% notes due 2008, unchanged at 26; the Greensboro, N.C.-based provider of aviation maintenance, repair and overhaul services for major commercial airlines said Friday that its bank lenders had approved a debt restructuring plan under which the holders of the $165 million of outstanding notes will exchange them for $10 million in cash, $100 million in new 8% five-year payment-in-kind notes and 15% of the equity in the reorganized company. Holders of 73.02% of the outstanding notes agreed in August to support the plan.

Among recently issued bonds, Lyondell Chemicals' new 9½% senior secured notes due 2011 were quoted offered at 100.25 with no bid; the notes priced on Friday bid at par.

End

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