Steel Dynamics sells $100 million add-on; Levi bounces around after slide, Revlon up on cash injection

By Paul Deckelman and Paul A. Harris

New York, Nov. 14- Steel Dynamics Inc. was heard by high yield syndicate sources to have come to market Friday with a quickly poured $100 million add-on offering to its existing 9½% senior notes due 2009.

In the secondary market, Levi Strauss & Co. bonds were seen having bounced around , after having slid badly Thursday when the company warned of likely lower sales for the full-year - a warning which had prompted a Standard & Poor's outlook revision and an actual downgrade by Fitch Ratings.

Meantime, Revlon Consumer products Corp. jumped, with some its bonds quoted up as much as eight points on the session on the news that the cash-strapped cosmetics company will be getting $125 million of new capital from its chairman and controlling stockholder, billionaire financier Ronald O. Perelman.

San Francisco-based jeans maker Levi's investors had certainly been singing the blues Thursday, after the company issued bearish updated guidance, causing its bonds to slide as much as 12 points or more in intra-day trading before closing down anywhere from eight to 10 points.

But on Friday, Levi "bounced around a little and ended up about three points from yesterday," one market observer said. At another desk, however, a trader characterized activity in the credit as "so crazy - the bonds were just all over the place."

At day's end, he saw Levi's 7% notes due 2006 closing at 68.5 bid, 70 offered - about equal to Thursday's lows, but down from Thursday's closing levels at 71 bid, 72 offered.

He saw Levi's 12½% notes due 2012 at 71.5 bid, 73.5 offered - up from its session low at 70 bid, 71 offered, but little changed from Thursday's finish.

However, Levi's 11 5/8% notes due 2008 opened at 74.5 bid, 76.5 offered - up half a point from Thursday - and then saw them tighten up to 75.5 bid, 76.5 offered.

"They were off their lows, but it was not a dramatic bounce from yesterday's slide," the trader said.

One name which did see some dramatic movement was Revlon, which got prettied up on the news that company sugar daddy Ron Perelman is kicking in $125 million to the cosmetics maker's depleted coffers.

While a market source did not see Revlon's 8¼% notes due 2006 "go to the moon," as they rose two points to 68 on the news, another issue - the holding company 12 % notes due 2004 - zoomed to a wide 69 bid, 74 offered - up smartly from 61 bid, 64 offered previously.

At another desk, the Revlon 8 5/8% notes due 2008 were seen up nearly three points at 55.5.

Revlon - which has already pretty much burned through most of its available credit - will get $25 million in unsecured loans for immediate use from MacAndrews & Forbes Holdings Inc., Perelman's investment vehicle, and will be able to tap another $100 million next year, subject to approval by the company's bank lenders. Revlon said that it expects to receive such approval in connection with a waiver of the company's credit agreement, which Revlon expects to obtain before Jan. 31

Elsewhere, Collins & Aikman Products Co.'s bonds continued to coast for a second consecutive session on positive quarterly earnings data from the Troy, Mich.-based automotive components supplier.

Its 11½ % notes due 2006, which had firmed three points Thursday to around the 78 level, continued to move up, to 79.5 bid. However, its 10¾% notes due 2006, which had firmed solidly to around 88.5, hovered around that level Friday.

Collins & Aikman reported a loss of $32.1 million (38 cents a share), narrower than the loss of $45.2 million (54 cents a share) a year ago. EBITDA almost doubled to $41.9 million from $21.8 million a year earlier. It meantime reaffirmed its August forecast for a loss of 40 cents to 50 cents a share before items for all of 2003.

A trader saw Pegasus Communications Corp.'s taking flight after court ruled that the Bala Cynwyd, Pa.-based satellite TV programming company need not abide by the terms a proposed settlement of a long-standing legal dispute between satellite broadcasting giant DirecTV and a coalition of rural TV service distributors. That settlement would have let DirecTV buy subscribers from Pegasus and other companies in the National Rural Telecommunications Cooperative for $150 a piece in 2011 - far less than they would be likely to fetch on the open market. When the settlement was announced in August, Pegasus - which re-sells DirecTV service in rural markets - declared that it would not be bound by the agreement and would not give up its subscribers.

The ruling Friday by a federal judge in Los Angeles, essentially endorsing Pegasus' legal arguments, pushed its 9 5/8% notes to 86 bid, 89 offered from recent levels in the low 80s. Its 12 3/8% notes due 2006 moved up to 87 bid, after having been offered at 86.5 late Thursday.

The drive-by activity that seemed to drive the market throughout the Nov. 10 week continued rolling on Friday as Butler, Ind. rolled steel-maker Steel Dynamics, Inc. blasted in with a $100 million add-on.

Aside from steel, the market seemed focused on liquidity, as sources mulled Thursday's news that AMG Data Services had reported a $258 million inflow to the high yield mutual funds for the week ending Nov. 12.

One sell-side official told Prospect News that a tally of AMG's "week's only" funds flow numbers turned up the following year-to-date numbers: 29 of the last 45 weeks have seen inflows totaling $18.24 billion.

"That's a record," added the sell-sider. "The previous high was 1997, when we had $14.3 billion of net inflows.

"And it doesn't seem as though it is going to taper off anytime."

Friday's new issue market offered little in the way of opportunities for high yield investors, who are roundly reported to have cash to put to work.

Steel Dynamics priced a $100 million add-on to its 9½% senior notes due March 15, 2009 (B2/B+) at 109, resulting in a 7.034% yield to worst.

Morgan Stanley ran the books.

The company priced its original $200 million offering at par on March 14, 2002. So Steel Dynamics walked off Monday with a notably better interest rate.

News of new deals coming into the pipeline came in decidedly international flavors Friday.

The roadshow kicks off Monday in Hong Kong for Hyundai Motor Co.'s offering of $400 million seven-year notes. Citigroup and UBS Investment Bank will run the books on the deal, proceeds from which will be used to fund new plant construction in Alabama.

Also beginning during the Nov. 17 week will be a roadshow for Waterford Wedgwood plc's €165 million of seven-year mezzanine notes (B3/B-). Barclays Capital will do the place settings for the offering from the Irish luxury table- and dinner-ware manufacturer.

Meanwhile, price talk of 9¾% area emerged Friday on an offer from General Cable Corp. that was heard to be winding up its roadshow. Merrill Lynch & CO. and UBS Investment Bank are running the books on the Highland Heights, Ky. cable manufacturer's $275 million seven-year senior notes deal (B2/B), which is expected to price late Tuesday afternoon.

Also on Friday, capital market sources told Prospect News that Kraton Polymers Group is expected to bring a new offering of high yield bonds in addition to a new credit facility, with the sizes of each remaining to be determined. UBS Securities and Goldman Sachs & Co. will be leading both the bond and bank deals for the Houston specialty chemicals company, according to the source.

And Arden Hills, Minn., farmer-owned food and agricultural cooperative, which stated Friday that it is working to renew its $250 million revolving credit facility, also said: "In light of recent improvements in the high-yield markets, we are simultaneously exploring alternatives to prepay a portion of our existing term debt with the proceeds of new term debt, which will defer most of our near term amortization payments."

On the emerging markets front the roadshow starts Tuesday in London for Empresa Brasileira de Telecommunicacoes SA (Embratel)'s $200 million of guaranteed notes due 2008, with stops in Boston on Nov. 19 and in New York City on Nov. 20.

Morgan Stanley and Deutsche Bank Securities are joint bookrunners on the Brazilian long-distance telecom's deal.

One emerging markets source noted in an email to Prospect News that Embratel's stock surged in Friday trading on the news that MCI, which is close to emerging from bankruptcy, intends to relinquish its controlling stake in the Brazilian company.

However, the source added, given that MCI stated in its filings with the Securities and Exchange Commission as early as 2001 that it intended to distance itself from Embratel, the news should not have taken the Brazilian markets by surprise.

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