Conseco up as emergence nears; Dobson plans $600 million deal; JohnsonDiversey prices

By Paul Deckelman and Paul A. Harris

New York, Sept. 8 - Conseco Inc. bonds continued to firm on Monday, as the Carmel, Ind.-based insurer and financial services company approached its bankruptcy confirmation hearing, which could produce an emergence from Chapter 11 soon. Qwest Communications International debt was quoted at better levels as it surmounted a key challenge in its two-part sale of its directory business.

In the primary market, Dobson Communications Corp. announced plans to sell $600 million of 10-year notes, part of a series of financial maneuvers which will include taking out the company's existing 12¼% senior notes due 2008 and 12¼% senior exchangeable preferred stock (see Tenders and Redemptions elsewhere in this issue for full details).

And amid a somewhat listless new issue market, Unilever NV, as anticipated, mopped up $267.5 million in proceeds with the sale of its JohnsonDiversey Holdings Inc. discount notes.

However sell-side sources told Prospect News that the opening session of the Sept. 8 week proved to be unexpectedly quiet, especially in light of recent record-setting inflows that have been reported coming into high-yield mutual funds.

"It's still pretty quiet," said one sell side official. "I don't really know what's going on as far as the pipeline is concerned. It's hard to say what's possible.

"Conditions are favorable but there have to be deals for people to do: bonds to take out or things to buy.

"The investors want to see deals come. It's not as easy to shove things out the door as it was several months ago but there is so much money in the market that they have to do something with it.

"We certainly have investors' attention."

JohnsonDiversey Holdings was uncontested, in terms of investor attention on Monday. Bookrunner Citigroup priced a $406 million face amount offering of its 11.67% senior discount notes due May 15, 2013 (B3/B) at 65.842 for a yield to worst of 11 1/8%. Price talk was for a yield in the 11%.

Unilever NV, which sold the notes, raised $267.52 million in proceeds. They were issued to Unilever in May 2002 as 11-year non-call-five bonds as part payment for its DiverseyLever unit.

Meanwhile the roadshow begins Tuesday for Dobson Communications' offering of $600 million 10-year non-call-five senior notes (expected ratings B3/CCC), which are expected to price on Thursday.

Lehman Brother, Morgan Stanley and Bear Stearns & Co. are joint bookrunners for the Oklahoma City-based rural cellular telephone services provider's deal.

Dobson Communications also is seeking to obtain a $700 million senior credit facility, which isn't slated to hit the market until the bonds price.

"It's not typically that way," a capital markets source said, referring to the bonds pricing before the credit facility even hits the bank loan market. "But I think the company pushed to get into the bond market as fast as possible given the favorable conditions there."

In addition to Dobson, St. Louis-based Von Hoffman Corp. disclosed its intention of doing a $60 million add-on to either its 2007- or 2009-maturing notes. During a telephone interview with Prospect News, a company spokesman identified Credit Suisse First Boston as the likely bookrunner of the deal to help fund the acquisition Lehigh Press, Inc.

News also came in from the emerging markets corporates asset class, Monday, although one emerging markets sell-side official advised Prospect News that the pipeline for EM corporates is presently not extensive.

Nevertheless, Russian natural gas producer and exporter OAO Gazprom was heard to be in the market with a €500 million offering of with intermediate maturities via Deutsche Bank Securities and UBS Investment Bank. The deal will be on the road in Europe and Asia from Sept. 10-15.

The EM official said that market expects Gazprom to attempt to upsize - perhaps even double - that announced amount.

"People expect them to try to raise €1 billion but I don't believe they will be able to get that amount done in the euro market exclusively."

Last time Gazprom tapped the international bond markets in February it raised $1.75 billion in an offering of 10-year notes increased from the announced size of $1 billion.

Prospect News also pressed this source for color on what appeared to be an extremely tight-pricing bond sold last Friday by Hyundai Motor Co.'s issuing entity Equus Cayman Finance Ltd.

The company priced an upsized $400 million of 5½% senior guaranteed notes due Sept. 12, 2008 (Ba1/BB+) at 99.634 to yield 5.585%, via JP Morgan, Morgan Stanley and Credit Suisse First Boston.

"Hyundai had a good order book from Asian investors and from people here as well," said the U.S.-based source

"Certainly the Asian investors drove the pricing. But face it, Hyundai is a good automotive company: Ba1/BB+.

"The yield looked tight compared to the U.S. automotive companies," the official added. "But on the other hand Hyundai borrows once every five years, whereas GM and GMAC, between them, just filed $30 billion of shelf. And Hyundai doesn't have the pension baggage that the U.S. auto makers have. And Hyundai's sales are growing substantially without having to give the cars away with free financing and all of that stuff.

"Very little of that deal went into Korea," added the emerging markets source. "It did have good Asian demand but over half of that deal was sold in the U.S. and Europe."

Traders reported that they had not seen the new JohnsonDiversey zero-coupon/10.67% senior discount notes due 2013 freed for secondary dealings.

Among other recently priced offerings, a trader quoted the new Case New Holland Inc. 9¼% add-on senior notes due 2011, which had priced Friday at 104, as being quoted in the 104.5 bid, 105 offered area, but he added that there had been no real trading in the credit; "add-ons never really trade around much anyway," he noted.

Back among the existing issues, market participants and observers agreed that there wasn't that much real trading activity taking place, but what action there was - as well as most of the quoting - was to the upside.

Much of the day's action took place in bankrupt credits which may soon be emerging from Chapter 11.

Conseco - which had jumped around 10 points on Friday - was one name that stood out, with its extended bonds trading around the 82 level to which they had moved on Friday and its unextended bonds about a point or so better around 48-49 bid (Conseco early last year exchanged much of its then existing public bond debt for new notes with longer maturities, which trade at a considerable premium over the remaining older notes).

A trader called the recent rise in the company's debt "incredible," rhetorically asking "remember when this [unextended] stuff was trading in the teens?"

Another trader said "I wish I had bought some" back when it could have been had at levels 30 points below where it is right now.

The company - which slid into Chapter 11 in December after trying unsuccessfully to cope with the mountain of debt created with the debt-financed and ultimately disastrous acquisition several years before of Green Tree Financial, a/k/a/ Conseco Finance Corp. - has recently been the subject of speculation, cited Friday and again Monday, that it might be able to come out of bankruptcy sooner than originally anticipated, even though there was no firm news seen. Conseco submitted its fifth amended plan of reorganization in mid-August, and confirmation hearings on the plan were scheduled to begin Tuesday.

Bankruptcy plan confirmation hearings began Monday, meanwhile, for WorldCom Inc. - and then were just as quickly adjourned, to allow the Ashburn, Va.-based telecommunications operator and two creditor groups opposing its plan to hold more talks in hopes of resolving differences. The company had won a victory when the presiding judge rejected a creditor move to formally delay the hearings, which were scheduled to resume on Tuesday morning.

WorldCom's debt "was definitely up," said a trader, who quoted its benchmark 7½% notes due 2011 as having "powered up" to closing levels around 31.125 bid from the 29.5 level at which they had opened Monday's session. He also saw the bonds of WorldCom's MCI long distance unit moving up to 77.25 bid, 78.25 offered from around 75.25 bid, 76.25 offered at the opening.

Outside of the bankrupt issues, Qwest was seen better, its Qwest Corp. 8 7/8% notes due 2012 nearly two points ahead at 108.25.

At another shop, Qwest's 7¾% holding company paper due 2006 was quoted about a quarter point firmer at 93.25 bid, 94.25 offered, although a trader said he "didn't know if it was specifically something about Qwest or just the whole market going up today."

At yet another desk, Qwest's debt was termed "a mixed bag" and its 6¼% notes due 2005 actually seen half a point down at 94.25, while its 6 7/8% notes due 2028 lost half a point to close at 73.5.

On Friday, Qwest's bid to sell its QwestDex directory business to an investor group led by buyout firms Carlyle Group LP and Welsh, Carson, Anderson & Stowe was approved by state regulators in Arizona - the last of the 14 states in which the Denver-based telecom company operates to okay the deal.

Arizona's approval had been generally expected by analysts and telecom industry watchers - but having Phoenix finally aboard the bandwagon means the two-part sale ($2.75 billion for the eastern portion of the directory business and $4.3 billion for the western half) means the sale can finally be completed and should close, a company spokesman said in a statement "in the next several days." The more than $7 billion in total proceeds will be used by Qwest to pay down existing bank and bond debt, especially obligations coming due over the next few years.

A trader, while unable to provide specific levels, meantime said that he saw buyers out "for both tranches" of Dex Media West LLC debt - the 8½% senior notes due 2010 and 9 7/8% senior subordinated notes due 2013, which were sold on Aug. 14 by Dex Media West, the corporate entity which bought the western half of the Qwest directory business.

Also in the communications area, XM Satellite Radio Holdings Inc.'s zero-coupon notes due 2009 were seen up two points at 77 bid and its 12% notes due 2010 also two points higher at 103.75, after the Washington-based satellite radio broadcaster announced that it had sold about 11.3 million common shares, for anticipated total proceeds of $150 million.

XM said the money is expected to be used to fund the construction of XM-4, the company's new ground spare satellite, if insurance proceeds XM is due (arising out of the power degradation problems with its Boeing satellites) "are not received in a timely manner." XM expects to otherwise use the proceeds for working capital and general corporate purposes, which may include the repurchase or pre-payment of outstanding debt.

Nextel Communications Inc. reaffirmed its full-year 2003 guidance (expected per-share earnings of $1 a share, with 1.9 million net new subscribers), declaring it was "firmly on track" toward meeting its goals, as "robust" business trends seen during the second quarter, when the Reston, Va.-based wireless operator had record results, were likely to continue in the current third quarter.

The reaffirmation was hardly unexpected; accordingly, junk marketeers saw the Nextel bonds essentially unchanged, with its benchmark 9 3/8% notes due 2009 anchored at 108.25 bid and its 7 3/8% notes due 2015 perhaps half a point better at 100.25.

On the downside, Tenet Healthcare Corp. bonds were seen about a point weaker, in reaction to Friday's news that the Senate Finance Committee is investigating the troubled Santa Barbara, Calif.-based hospital operator's corporate governance practices.

Tenet's 7 3/8% notes due 2013 were seen at about 97.5 bid while its 6 3/8% notes due 2011 here half a point down at 92.5. A market source saw the company's 5 3/8% notes due 2006 half a point higher, at 97, so he called trading in the credit "kind of mixed."

A trader opined that Friday's news "was already incorporated" into the company's bond price levels and was thus limited in impact.

A trader said that overall that activity was quiet Monday, with "golf outings and conferences [including a Bear Stearns healthcare conference, a Lehman Brothers tech conference and Morgan Stanley's media and communications conference] keeping people kind of distracted."

What people were in the market, he continued, mostly "had their buy hats on - but at these prices, people are very, very selective." He also said that given the sharp run-up which some issues have undergone over the past few months, "some came in looking to sell."

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