Pennzoil debt firmer on Shell acquisition bid; Crown Cork holds gains; Hockey Co. scores

By Paul Deckelman and Paul A. Harris

New York, March 26 - Pennzoil-Quaker State Co. bonds were up about five points Tuesday after Royal Dutch /Shell Group announced plans to buy the Houston petroleum company for $1.8 billion. Crown Cork & Seal Co., which had risen on Monday on buyout speculation - which later proved to be unfounded - held its gains.

In the primary market, The Hockey Co. sold $125 million of new debt. But except for that deal, the high yield market seemed substantially iced down on Tuesday, according to market sources.

"It's pretty slow this week because of the holiday," a sell-sider said. "But next week's going to ramp up huge."

This official went on to say that as many as 15 deals, four or five from his institution alone, figure to emerge during the first two weeks of April.

Although the source declined to specify the names of credits, deals from "a smaller diversified media company, an apparel/textile company and a REIT" would likely surface on April 1 or April 2.

This official also added his voice to the chorus that has been prophesying substantial new issuance from New York City-based defense communications company, L-3 Communications Corp.

Various buy- and sell-side sources have forecast that L-3 will bring $500 million (or perhaps more) sometime in April via Lehman Brothers. Lehman declined to comment Tuesday when contacted by Prospect News.

Montreal-based hockey equipment manufacturer The Hockey Co. priced $125 million of seven-year senior secured notes (B2/B) at 98.806 to yield 11½%. Jefferies & Co. was the bookrunner.

The only other stirring in the primary market was the emergence of price talk in the 8¾% area on Boyd Gaming, Inc.'s $200 million of 10-year senior subordinated notes (B1/B+/B) via joint bookrunners Deutsche Banc Alex. Brown, Banc of America Securities and CIBC World Markets.

That deal is expected to price Wednesday.

In addition to Boyd, the market anticipates hearing terms Wednesday on Globe Telecom's $175 million senior notes (Ba3/BB) via Salomon Smith Barney. The Philippine wireless telecom service-provider's 10-year notes are being talked at a yield of 9¾%-10%.

Also expected to price Wednesday is aaiPHARMA, Inc.'s $175 million eight-year senior subordinated notes (Caa1/B-), from bookrunner Banc of America Securities. Price talk on that offering is for a yield in the 11% area.

Meanwhile Pennzoil-Quaker State - the nation's largest motor oil maker and parent company of more than 2,000 Jiffy Lube oil change service stations across the country - jointly announced with Shell that it will become part of the Anglo-Dutch oil giant in a deal worth $1.8 billion.

Pennzoil's 10% notes due 2006 pushed up to 113.375 bid from prior levels around 108. Its stock rose $6.01 (38.80%) to $21.50 in New York Stock Exchange trading. Volume of 11 million shares was 44 times the normal 242,000-share turnover.

Crown Cork, whose bonds surged about four points Monday on news report that the world's largest maker of beverage cans, Rexam plc., managed to hold those gins, even after Rexam said it was not interested in buying the debt-laden Philadelphia-based packaging company .

Crown Cork's 2002 notes, for instance, hung in at 92 bid/93 offered, "pretty much unchanged," a trader said. To complete such a deal, Rexam would have to issue $1 billion of stock and assume $5 billion of Crown Cork debt, including $750 million slated to come due this year.

Elsewhere, Calpine Corp. - whose bond ratings were dropped three notches to B+ Monday by Standard & Poor's - was heard trading down three points across the board, its senior notes quoted at 79 bid. S&P had expressed concern over the San Jose, Calif.-based independent power producer's decision to secure new bank debt facility with additional collateral, effectively further subordinating its junk bonds.

In the newly priced issues, a trader said, Wolverine Tube Inc.'s new 10½% senior secured notes due 2009 "held up pretty well," trading at 99.75 bid/100.5 offered, better than its 98.788 issue price.

But he saw Avaya Inc.'s new 11 1/8% notes at 97.5 bid/98.25 offered, down slightly from 98.82 at issue, while Biovail Corp.'s new 7 7/8% senior subordinated notes due 200 "didn't trade very well." He quoted the issue at 99.25 bid/99.625 offered, little moved from their 99.270 issue price.

Overall market activity remained light, and promised to get even lighter as the week wears on, with the Passover holiday beginning tonight, and an early close (2 p.m. ET) slated for Thursday, ahead of the Good Friday market shutdown.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.