Loral unit's notes jump on debt-swap plan; Chesapeake sells 7-year bonds

By Paul Deckelman and Paul A. Harris

New York, Oct. 26 - Loral CyberStar Inc.'s bonds were quoted solidly higher Friday, after the money-losing satellite company announced a plan to swap new debt and stock warrants for about $927 million of outstanding bonds.

In primary market action, Chesapeake Energy priced a quickly shopped "drive-by" deal late Thursday via bookrunners Bear Stearns & Co. and Credit Suisse First Boston.

But traders said despite the market's general affinity for the well-regarded oil and gas operator, the new deal did not trade well once it broke into the secondary sphere.

Chesapeake's $250 million of new 8 3/8% senior notes due 2008, which had priced at 99.871 "didn't trade well at all," a trader said, quoting it as having ended the session at 99 bid/99.5 offered, below its issue price.

"It was one of the few (recent) new issues which actually broke downward - most of the rest broke upward," he added, quoting InSight Acquisition's new 9 7/8% senior subordinated notes due 2011 at 103 bid/103.5 late Friday, well up from their par issue price.

Another trader concurred that the new Chesapeake paper turned in a lackluster performance once it appeared. "It was nice to see the deal get done. It's cheap money for them - but it didn't do very much for the rest of the market."

He said the Oklahoma City, Okla.-based energy exploration and production company's new bonds opened around 99 bid, below the issue price, and firmed to 99.5 bid/99.75 offered, before dropping back to end offered at 99.5 without any bids.

The trader said he didn't see much of any of the other recently priced issues; the only one he had seen really moving around the market was the Smithfield Foods Inc. 8% senior notes due 2009 which priced on Oct. 17 at par; he quoted them at 102.5 bid/103.5 offered.

Back among already extant issues, Loral Space & Communications Inc. announced that its LoralCyberStar unit (the former Orion Network Systems and, later, Loral Orion) will exchange its $443 million of 11¼% percent senior notes and its $484 million of zero-coupon/12½% senior discount notes, both due in 2007, for $675 million of new 10% percent senior notes due 2006, as well as five-year warrants to buy up to 6.7 million shares of Loral stock. The New York-based satellite telecommunications operator's 11¼% notes pushed up 10 points to 47 bid, while the discount notes also jumped to 47, up from 33 at Thursday's close.

Elsewhere, Chiquita Brands International Inc.'s 9 5/8% notes ended the session at 78.5 bid/79.5 offered, little changed on the day, a trader said, but up three points for the week. During the week, the Cincinnati, Ohio-based banana giant announced as part of its quarterly filing that talks with its bondholders were continuing and seemed to be progressing toward a debt restructuring agreement. Such an accord, should it occur, would be carried out via a Chapter 11 filing and leave Chiquita debtholders holding a sizable stake in the reorganized company.

Another gainer the trader saw was Hasbro Inc., whose 8½% notes due 2006 closed Friday at 98.5 bid/99.5 offered, up from 96 bid/97 offered a week earlier. The fallen-angel Pawtucket, R.I.-based toymaker announced during the week that it had returned to profitability during the third quarter. Hasbro reported worldwide net revenues of $893.4 million, down from $1.1 billion a year ago, but net earnings were $50.6 million (29 cents per share) in the latest quarter, versus $13.8 million (8 cents per share) last year. Third quarter EBITDA (earnings before interest, taxes, depreciation and amortization) was $161.3 million, well up from $120.4 million in the third quarter of 2000.

The trader also noted that while Kmart debt lost ground on the week, on investor angst over the Troy, Mich.-based discount giant's struggles in a difficult retail environment (its 9 3/8% notes ended at 92.5 bid, unchanged on the day but down four points on the week), Kmart's wholesale grocery distribution partner, Fleming Cos., was going the other way after the Dallas-based company reported better numbers. Its 10½% notes due 2004 closed at 101.75 bid/102.25 offered, up half a point on the session and up a point-and-a-half on the week.

Level 3 Communications, Inc.'s 9 1/8% senior notes due 2008 - subject to a short squeeze after the Broomfield, Colo.-based telecom operator's recent redemption of $570 million of the bonds - were quoted up a point-and-a-half Friday, a trader said, ending at 47.75 bid/48.75 offered.

In the primary, initial indications of another new issue surfaced Friday. Young Broadcasting Inc. announced that it intends to bring up to $250 million of new senior unsecured notes. The junk bond deal hinges on the acceptance by holder's of the company's 9% senior subordinated notes due 2006 of a tender offer. The tender is scheduled to expire on Nov. 5.

For the week of Oct. 29, the primary market will be watching for three new energy deals to price: Pennzoil-Quaker State's $250 million of seven-year senior notes scheduled for Monday via J.P. Morgan; Tesoro Petroleum's $215 million of seven-year senior subordinated notes due to price mid-week via Lehman Brothers; and Westport Resources minimum of $200 million senior subordinated notes scheduled for Friday via Credit Suisse First Boston.

"It's been kind of quiet," one investment banker said, as he inspected this schedule. "A few deals a week. Looks like it's going to be like that for the rest of the year, from what we hear.

"A lot of those deals that were sidelined by the attacks might be waiting until the new year, at least that's what we're hearing."

End

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