Qwest plans $1.25 billion deal; Tekni-Plex, Ventas deals price; GM gains on cost cuts

By Paul Deckelman

New York, June 7 - Qwest Communications International Inc. announced its intentions of selling $1.25 billion of new bonds in a three-part offering that will include fixed- and floating-rate debt, as well as an add-on offering to an existing tranche of the Denver-based telecommunications company's bonds.

Elsewhere in the new-deal arena, Tekni-Plex Inc. was heard to have successfully sold a $150 million offering of seven-year notes - and those bonds were extremely well received when they were freed for secondary dealings. Other deals pricing included a smallish drive-by add-on for Ventas Realty, as well as a dollar-denominated issue from Mexico-based Corporacion Americana de Entretenimiento SA de CV.

In the secondary arena, news of the Qwest deal was seen having little impact on how the company's bonds were traded. As mentioned, Tekni-Plex's new issue did well, but Chesapeake Energy Corp.'s Monday offering was heard to be treading water.

Automotive names were seen somewhat improved as General Motors Corp. announced plans to close factories over the next several years and dispense with 25,000 jobs, as the world's largest carmaker tries to bring its expenses more into line with its revenues, surely no easy task.

While GM's intentions made front-page news everywhere else, the junk primary market was riveted on Qwest's twin announcements, that it would bring the $1.25 billion mega-deal, with pricing anticipated later Wednesday via book-running managers Merrill Lynch and Deutsche Banc Securities, assisted by co-managers Banc of America Securities and UBS Investment Bank, and that it would use the new-deal proceeds to, among other things, take out a total of $904 million or outstanding bonds - the 6 1/8% and 6 5/8% notes coming due later this year issued by its Qwest Corp. subsidiary, and the 13% notes due 2007 issued by another subsidiary, Qwest Services Corp. (see related story elsewhere in this issue).

Qwest's existing bonds were seen pretty much unchanged to slightly higher, with the bonds that are slated to be taken out especially steady - a sign that junk marketers had already figured that they were likely to be tendered for.

A trader saw the 6 1/8% notes and the 6 5/8% notes, which are slated to mature on Nov. 15 and Sept. 15, respectively, both trading around the par level. The 13% notes due 2007 were at 110.25.

Among other existing Qwest issues, the trader said, the 7.90% notes due 2010 "pretty much opened and closed" at 97 bid, 98 offered.

Another trader saw the 13% notes 110.25 bid, 111.25 offered. "maybe up just a little, which the two issues of 2005 notes being taken out were at 100.25, which he called "not that big a deal."

One trader did see some upside movement in Qwest, quoting its Qwest Communications Corp. 7¼% notes due 2007 - the old LCI Communications Inc. bonds - at 96 bid, up from 93, while, its 13½% notes due 2010 were up 2½ points at 116.

However, at another desk, a source saw Qwest paper headed the other way, with its 7½% notes due 2023 and 6 7/8% notes due 2008 both down nearly three points on the day, at 90 bid and 76 bid, respectively.

GM gains on job cuts

Elsewhere, GM was the big newsmaker, with its announcement of the planned plant closings and job cuts, which the troubled automaker said could save it as much as $2.5 billion annually. GM outlined its plans at its annual shareholders meeting, held Tuesday in Wilmington, Del.

A trader saw the carmaker's benchmark 8 3/8% notes due 2033 up 1½ points on the day to 80.25 bid, 81.25 offered. Yet another trader saw those bonds push as high as 82 bid near the close of the day, and quoted the company's GMAC financial unit's 6¾% notes due 2014 at 88.75 bid.

That second trader, while seeing the GM bonds higher, observed no corresponding rise in the bonds of the automotive supplier sector whose fortunes are intimately tied to those of GM and of the Ford Motor Co. "Surprisingly," he said, "they didn't go up, not today."

However, another trader disagreed, pegging former GM unit Delphi Corp.'s 6.55% notes due 2006 at 97.5 bid, 98.5 offered, up a point on the session, while Visteon Corp.'s 8¼% notes due 2010 were a point better, at 93.5 bid, 94.5 offered.

Visteon's former corporate parent, Ford Motor Co., was also firmer, its benchmark 7.45% notes due 2031 at 87.5 bid, 88.5 offered. Ford's financing arm, Ford Motor Credit, successfully sold an upsized $1.5 billion offering of three-year notes off the investment-grade desks.

Tekni-Plex sells $150 million, up in trading

Back in junk bond land, Tekni-Plex sold $150 million of senior 10 7/8% senior secured notes due 2012 via Citigroup and Lehman Brothers.

The Somerville, N.J.-based packaging maker's bonds came inside of pre-deal market price talk of 11% to 11¼% - and then "closed up nicely" after having been freed for secondary dealings. The trader saw those bonds jump to 104.25 bid, 105.5 offered - well up from their par issue price - and said that they "also pulled its other bonds up, with Tekni's 12¾% notes seen up two points to 68 bid, 69 offered.

Chesapeake's new bonds edge up

However, a new deal seen doing nowhere as well was Chesapeake Energy, which priced $600 million of new 6¼% notes due 2018 on Monday at 98.923. By Tuesday afternoon, a trader said, those new bonds had inched up slightly - but only to 99 bid, barely above issue.

A source at another investment bank said that the deal seemed to be struggling, and thought it odd that the placement only had one underwriter - Wachovia Securities - when in the past, most deals for the Oklahoma City-based independent oil and gas exploration and production company had anywhere from three to five banks as joint bookrunners of lead managers, with still more banks on board as co-managers. Wachovia apparently beat out several former underwriters and other investment banks to get the potentially lucrative placement.

But after pricing - at a discount - the new deal went nowhere. He said that as far as he knew, there had been no investor conference call on the deal and, in his estimation, "it hadn't been fully distributed," and wondered whether the underwriter had gotten stuck with more bonds than it anticipated due to the lackluster demand.

On the other hand, the behavior of Chesapeake's existing bonds would seem to indicate that the market likes the name, and it would be only a matter of time before the new bonds join their more established peers in moving higher. Those existing Chesapeake notes had initially backtracked on Monday on news that the company was bringing the drive-by deal - but by Tuesday they were back on the upside, with a trader quoting Chesapeake's 7½% notes due 2014 up two points at 108.25, while its 6 3/8% notes due 2015 were a point better at 102.75. He saw the 9% notes due 2012 up as much as four points on the day at 113.875.

Another source also saw the 6 3/8s in the 102 area, up 1½ points.

Ventas brings add-on

In other new deal-related activity, Ventas Realty/Ventas Capital Corp. was heard to have sold $50 million of new senior notes as an add-on to its existing 6 5/8% notes due 2014. The notes were heard to have priced at 99 to yield 6.79%. The deal was brought to market via bookrunning manager Banc of America Securities.

Ventas, a Louisville, Ky.-based healthcare real estate investment trust, plans to use the proceeds of the quickly-shopped add-on to repay bank debt.

Another pricing came from south of the border, as Corporacion Americana Entretimiento, a Mexico City-based producer of live events, sold $200 million of new 10-year bonds via Citigroup, emerging debt market sources said. The bonds priced at 99.187 to yield 9%, in line with pre-deal price talk.

The company plans to use the deal proceeds to prepay existing debt.

Tenaska announces deal

One deal was heard to have joined the forward calendar - Tenaska Alabama Partners LP, which is selling $360 million of senior secured notes due 2021 via joint bookrunning managers Credit Suisse First Boston and Lehman Brothers.

Primaryside sources said that the deal is to be marketed to potential investors via a full roadshow, and is expected to price in the early to middle part of next week.

The company - a unit of Omaha-based power generator Tenaska Inc. - plans to use the deal proceeds to refinance existing debt, fund a six-month debt service reserve, and pay transaction costs.

Back among existing issues, Chiquita Brands International Inc.'s 7½% notes due 2014 were seen a point better, around the 95 level. The Cincinnati-based importer of bananas and other fruits and vegetables is expected to re-launch a $600 million credit facility, following a meeting with its lenders Wednesday.

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