MTR Gaming deal prices; market heavy; Stone Container up on tender news; Chiquita lower

By Paul Deckelman and Paul A. Harris

New York, May 22 - MTR Gaming Group Inc. kicked off what is expected to be a fairly quiet pre-holiday week on Monday by successfully pricing an issue of six-year bonds, which were well received when they were freed for secondary trading.

The new-deal arena was otherwise restrained, although high yield syndicate sources heard that Hanger Orthopedic Group Inc. had downsized its planned issue of seven-year senior notes. Meanwhile, Perini Corp. was seen hitting the road to market its planned offering of seven-year notes.

In the secondary sphere, traders said the market was generally heavy, with many more issues trending to the downside and upward, but activity was limited.

"It almost felt people were starting their vacation a week early," one said - even while acknowledging that in theory, at least, the week has four ostensibly full sessions before we get to Friday, when the market will close early in advance of next Monday's Memorial Day holiday, which will see a full close for all financial markets in the United States.

Among the issues which were actually seen milling about on Monday, Smurfit Stone Container Corp.'s bonds were firmer on the news that a unit of the Chicago-based packaging company will tender for up to $400 million of outstanding notes.

Several traders mentioned Chiquita Brands International Inc. as a particularly weak name on a day when many things were in retreat, citing the Cincinnati-based banana giant's recent poor numbers and fears that an active hurricane season - which officially begins June 1 - could play havoc with banana exports from Central America and the Caribbean.

From the distressed market came word that the bonds of such asbestos-challenged names as Owens Corning, Armstrong World Industries Inc. and Federal-Mogul Corp. were several points lower, as the sector continues to retreat from recent highs on apparent profit-taking off those gains.

Overall a sell-side source marked the broad high yield market an eighth of a point to a quarter of a point lower on Monday.

Another sell-sider said that the junk market was fairly quiet in light trading, and added that the macroeconomic themes that were in play last week have definitely carried over to this week.

High-yield secondary market trading is correlated with the equity market, the source added, noting that stock prices were off again on Monday.

"We saw weakness at the onset of the day, and a little bit of strength toward the close," the source said.

"The market rallied a bit but overall we were still slightly down on the day.

"It doesn't feel too good out there with the volatility in the broader market."

A high yield investor, meanwhile, commented that although the secondary market seems softer the new deals keep coming, and they are all oversubscribed.

MTR Gaming on top of talk

One issue priced in Monday's primary market.

MTR Gaming Group, Inc. priced a $125 million issue of six-year senior subordinated notes (B3/B-) at par to yield 9%, with the issue price and yield coming on top of the price talk.

Jefferies & Co. ran the books.

The Chester, W.Va.-based owner, operator, and developer of gaming, horse racing, and hotel properties will use the proceeds to complete construction of the Presque Isle Downs facility, to pay a $50 million slots license fee, to repay debt and for general corporate purposes.

Hanger Orthopedic downsizes

Also in primary market news on Monday, Hanger Orthopedic Group Inc. downsized to $175 million from $190 million its offering of eight-year senior unsecured notes (B3/CCC+).

The company talked the notes at 10% to 10¼%, and expects to price the deal on Tuesday via Lehman Brothers and Citigroup.

The Bethesda, Md., provider of prosthetics and orthotics will replace the amount by which the bond deal was downsized with excess cash on hand.

An informed source attributed the downsizing to market conditions.

A buy-side source, meanwhile, reported hearing that the Hanger Orthopedic book was already over the original $190 million deal size, even though this source's fund had not yet placed its order.

"It's not going to be a blowout," the buy-sider said, pointing to the triple-C rating from Standard & Poor's and the relatively small deal size.

Nevertheless, the buy-sider said, the company appears to be "in okay shape," and added that while the official price talk is 10% to 10¼%, before the sell-off in the junk bond market the company had been talking the notes at 9½%.

Shortly later a sell-side source, hearing this color, said that similar circumstances had come to bear upon last Friday's massive Edison Mission Energy $1 billion sale of senior notes (B1/B) in two $500 million tranches.

Both tranches came at par, and both came on top of the price talk.

The company priced a tranche of seven-year notes to yield 7½% and a tranche of 10-year notes to yield 7¾%.

That deal was also heard to have been oversubscribed.

Nevertheless, when the company launched the bonds it had been eyeing lower rates than the ones that were eventually set, sources said.

Perini starts roadshow

News of one new roadshow start circulated on Monday as Perini Corp. hit the investor trail with its $100 million offering of seven-year senior notes (B2/BB-).

Jefferies & Co. has the books for the debt refinancing and general corporate purposes deal from the Framingham, Mass., construction services company, which is expected to price during the post-Memorial Day week.

Indeed, as the Monday session wore on, sources roundabout the market were mentioning the upcoming three-day holiday weekend.

Sell-side sources suggested that barring significant improvement in junk during the interim, it will be the post-Memorial Day week before the primary market gets back up to speed.

At Monday's close the forward calendar contained only $675 million of business thought to be in the market.

A sell-side official said that the high-yield syndicates are watching the market day by day.

"There are definitely issuers on the sidelines, but no one is likely to bring a deal in the near term unless there is some improvement," the source said.

"Memorial Day weekend is coming. I think everyone is looking forward to a little bit of a break."

MTR up in trading

When the new MTR Gaming 9% notes due 2012 were freed for secondary dealings, a trader saw the bonds firm to 101 bid, 102 offered, up from their par issue price seen earlier in the session, while another trader saw the new issue a little tighter, at 101.25 bid, 101.75 offered.

Among other recently priced bonds, the first trader saw Education Management Corp.'s 10¼% senior subordinated notes due 2016 at 100.75 bid, 101.25 offered, pretty much unchanged from the levels to which they had firmed after pricing Friday at par, while the Pittsburgh-based post-secondary education provider's new 8¾% notes due 2014, which also priced at par on Friday, came off their initial aftermarket levels around 100.5 bid, 101 offered to finish Monday at par bid, 100.5 offered.

He saw Edison Mission Energy's new 7½% senior notes due 2013 at par bid, 100.25 offered, and its new 7¾% seniors due 2016 at 99.875 bid, 100.5 offered, both off from the slight gains they noted in initial trading Friday after each pricing at par.

American Greetings Corp.'s new 7 3/8% senior notes due 2016 settled in around 100.625 bid, 101 offered. The Cleveland-based greeting card company's issue had priced at par on Friday, but saw little immediate aftermarket trading subsequently.

Reynolds wider

The trader also saw Reynolds American Inc.'s new three-part issue trading at slightly wider levels than they had on Friday, quoted on a spread basis, with its 7 ¼% senior secured notes due 2013 at a bid level equivalent to 239 basis points over Treasuries and an offered level at 234 bps over, versus Thursday's issue spread at 237.5 bps and Friday's trading level at 236 bps bid, 234 bps offered. He saw the Winston-Salem, N.C.-based tobacco products giant's 7 5/8% senior secureds due 2016 at 268 bps bid, 263 bps offered, versus 262.5 at issue and 260 bps bid, 258 bps offered on Friday, while its 7¾% secured notes due 2018 were at 278 bps bid, 273 bps offered, "a touch weaker" than 277 bps bid, 272 bps offered on Friday. The bonds had priced at a spread of 275 bps over.

He saw Range Resources Corp.'s 7½% notes due 2016, which had priced Thursday at par, at par bid, 101 offered, easier than their Friday levels at 100.5 bid, 101.5 offered, while Unifi Inc.'s 11½% notes due 2014, which priced Thursday at par and then were seen on Friday straddling that issue level at 99.75 bid, 100.25 offered, remained at those levels on Monday.

Smurfit-Stone higher on tender news

Back among the established issues, a trader described the day's activity as "uneventful." He did see Smurfit-Stone Container Enterprises, Inc.'s two issues that are subject to the company's tender offer, disclosed in a Securities and Exchange Commission filing, as trading better, with its 9¼% notes due 2008 up about two points from its prior levels at 103.5 bid, 104 offered on the news, while its 9¾% notes due 2011 half a point better, at 103 bid, 104 offered.

The latter issue "didn't really move much," even though the company will tender for those bonds at 105, he explained, because the tender offer is structured to take out all $300 million of the 91/4s, at a level around 106, but only $100 million of the $750 million of outstanding 93/4s, rising to a maximum of $150 million if not all the 91/4s are tendered.

Chiquita sinks

A trader said that Chiquita's bonds "were getting rocked," quoting its 8 7/8% notes due 2015 at 89.25 bid, 90.5 offered. "The stock goes down almost every day, and the bonds are down in the last week maybe four or five points."

He said those bonds had been seen at 92.5 bid on Friday before retreating Monday, while its 7½% notes due 2014 went down to 83.5 bid, 84.5 offered from the 87.5 area previously.

"I think there's a lot of concern about supplies of bananas," he said, and they're not diversified much into other produce areas "like Dole [Foods Corp.]," a major rival to Chiquita.

"The only thing that could help the company a little bit is that some of it is attached to the euro, so if the euro gets stronger versus the dollar, it could help them a little. But the bonds are really getting rapped."

Another trader also saw the Chiquitas struggling, with its 71/2s down 1½ points at 84.5 bid, 85.5 offered, citing news reports about anticipated hurricane activity this year - forecasters see a busy season ahead, though not quite as busy as last year's disastrous string of storms, which included Katrina.

"Who knows?" what impact a busy hurricane season might have on banana crops in Latin America, he said, adding that the company's most recent quarterly numbers "sort of stunk," and the weather news "didn't help things."

"They came out with their earnings a couple of weeks ago," the first trader observed, "and I think the strength of the market helped them up, so with the weakness in the market [now], coupled with banana pricing, people are taking a real look at the company - and I don't know that they like what they see."

ArvinMeritor lower

In the automotive area, the second trader saw ArvinMeritor Inc.'s bonds down a point, on news that the Troy, Mich.-based automotive components manufacturer will refinance its existing revolving credit facility, which prompted Standard & Poor's to put the company's senior unsecured debt ratings on CreditWatch with negative implications. The agency said that whether it decided to downgrade the BB rating would depend on its analysis of "the effect of contractual subordination on the unsecured debt, and ... the level of security granted" for the new financing. He quoted its 8¾% notes due 2012 a point lower at 99 bid, par offered.

At another desk, a market source quoted the company's 8 1/8% notes due 2015 down 1¼ points at 95.25 bid.

Radiologix firm as stock drops

Elsewhere, there seemed to be little real downside movement in Radiologix Inc.'s 10½% notes due 2008, even though the Dallas-based medical diagnostic imaging company's American Stock Exchange-traded shares slid 26 cents (12.09%) to $1.89 on heavy volume of 229,000, about three times the normal activity level. Traders were unaware of any fresh news out about the company, whose bonds and shares had risen earlier in the month after it posted strong quarterly results.

A trader saw the 101/2s down half a point at 88.75 bid, 89.75 offered, although another trader pegged the bonds at 89 bid, 91 offered, which he called up 1¼ points.

Elsewhere, the trader saw Dillard's Inc.'s 7 3/8% notes due 2023 up 3/8 point at 95.5 bid, 97.5 offered, after the Little Rock, Ark.-based retailer reported better-than-expected first-quarter results.

Asbestos down once more

In the distressed market, "the asbestos guys got hit again," a trader said, quoting Owens Corning's 7½% notes due 2018 at 108 bid, 109 offered, down about four points from Friday's closing levels. He saw Armstrong's 6½% notes that were to have come due last year at 78 bid, 79 offered, while Federal-Mogul's 7½% notes that were to have matured in 2004 were two points lower at 58.5 bid, 59.5 offered.

The bonds of bankrupt Toledo, Ohio-based insulation maker Owens Corning had jumped earlier in the month to bid levels above 122 after the company announced that it had reached an agreement with its asbestos claimants and various other creditor groups on a reorganization plan that would bring Owens Corning out of bankruptcy this year, six years after it went in.

The bonds of Lancaster, Pa.-based floorcovering maker Armstrong and Southfield, Mich.-based automotive brake systems manufacturer Federal-Mogul - each, like Owens Corning, driven into Chapter 11 by a deluge of asbestos-related lawsuits - had risen solidly in line with the latter company's notes. But the bonds of all three began retreating last week, with traders chalking the movement up to profit-taking from the recent gains.

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