Host Marriott sells quickie offering, Tenneco heard to pull deal; Levi bonds firmer

By Paul Deckelman and Paul A. Harris

New York, July 27- Host Marriott Corp. said Tuesday that it would sell a $350 million offering of eight-year notes, with players anticipating a quick pricing. But at the end of the day, bad news about Tenneco Automotive Inc.'s planned $500 million note offering overshadowed everything else, with the deal heard to have been pulled off the table - the second time in nine weeks that the Lake Forest, Ill.-based auto parts maker apparently had second thoughts.

In the secondary market, Levi Strauss & Co. bonds were "just sneaking up there" on an otherwise not very remarkable session, a trader said.

Primary market sources reported that for the second day running the junk bond market was off during Tuesday's session, which produced a paltry amount of hard news.

And much of the new issue market news that did emerge was either bad, or partially so.

In addition to Tenneco's postponement, Host Marriott Corp. checked in Tuesday morning with a drive-by deal for $350 million of eight-year bonds which it completed by session's end, the notes coming with a yield that was on top of outwardly revised price talk.

Squishy market

Mike Difley, vice president and portfolio manager of the American Century High Yield Fund, told Prospect News on Tuesday afternoon that the market has been "squishy for the past couple of days."

Acknowledging that the equity market had rallied during the Tuesday session - the Dow Jones Industrial Average was up 123 points on the day - Difley said that neither the stock market nor the Treasury market have recently been doing high yield much good.

Difley also declined to take issue with recent sell-side color that the high-yield mutual fund flows picture, which has clocked off three consecutive inflows in as many weeks up to July 21, might be poised to turn the other way.

"The way the market is trading right now there is a potential for outflows," he said. "We definitely had a down day today."

The American Century High Yield Fund vice president and portfolio manager also said that the new issue forward calendar, with an even dozen dollar-denominated deals totaling $4.59 billion now in the market, is "fairly active for the summer.

"I think issuers are still finding high yield paper attractively priced, so they are trying to get done what they can," Difley added.

"We will just have to see how much of this stuff gets done."

Host Marriott on top of widened talk

Host Marriott Corp. completed Tuesday's sole transaction, a quick-to-market $350 million of eight-year senior notes (Ba3/B+) that priced at 98.49, coming with a coupon of 7% to yield 7¼%.

The Bethesda, Md.-based lodging real estate investment trust debt refinancing deal, via Deutsche Bank Securities and Banc of America Securities, came on top of price talk that had been revised outwardly to the 7¼% area, from 6 7/8%-7%.

Tenneco on blocks

Meanwhile for the second time in nine weeks Tenneco Automotive Inc. cited market conditions as it pulled off the road and lifted the hood on a junk deal that it had in the market.

On Tuesday the Lake Forest, Ill. company withdrew its $500 million offering of 10-year senior subordinated notes (B3/B-/B-).

On May 20, 2004, Tenneco pulled a $400 million offering, also citing market conditions.

As with the postponed deal in May, proceeds from the most recent offering were slated to fund the tender for $500 million of the company's 11 5/8% senior subordinated notes due 2009.

Word around the market was that among the accounts the latest Tenneco deal, which was talked at 8½%-8¾%, was seen as a little tight to the company's existing senior secured notes.

"We can't seem to get through the window while it's open," Tenneco chief financial officer Kenneth Trammell told Prospect News.

Had the company gone ahead the interest rate would still have been below the 11 5/8% on the bonds Tenneco was intending to refinance. But Trammell estimated the poor market conditions would have cost 50 basis points compared to talk.

The Tenneco 11 5/8% notes slated to have been taken out with the proceeds of the now shelved new offering have recently been trading around their 107.5 take-out level. Confirmation that Tenneco had again blinked came too late in the session to have much effect on the bonds movements Tuesday.

Sheffield shows up

News of a single roadshow start surfaced on Tuesday, as marketing got underway for Sheffield Steel Corp.'s $80 million offering of seven-year senior secured notes.

The roadshow is set to conclude on Friday, Aug. 6.

Jefferies & Co. has the books on the debt refinancing deal from the Sands Springs, Okla.-based mini-mill steel producer.

Levi resumes upward path

Elsewhere, Levi Strauss "has been sneaking back up," a trader said, after having been knocked down late last week when apparel giant VF Corp. said that buying the San Francisco-based blue jeans maker's Dockers casual clothing unit was not high on its priority list.

Speculation that VF, Jones Apparel Group Inc., Kellwood Corp. or another well-known clothing maker might buy Dockers for a price estimated at anywhere from $500 million to $1 billion, with proceeds to be used by Levi for debt reduction, had sent Levi's bonds solidly higher recently, with its 12¼% notes due 2012 and 11 5/8% notes due 2008 having pushed well above par levels - only to retreat to levels in the mid-to-upper 90s after VF's comments apparently signaled it is not very interested in Dockers, which makes a popular brand of non-denim, mostly khaki clothing.

But on Tuesday, the trader said, the Levi bonds "continued to improve," especially on the short end, where the Levi 7% notes due 2006 had spent the previous two sessions below the 95 mark.

On Tuesday, the 7s breached the 95 level, pushing up to above 96 bid, the trader said, while the 11 5/8s rose to 99.5 bid, 100.5 offered and the 12¼% notes were at 99.75 bid, 100.75 offered.

The trader predicted that the 7s "should get up to 97.5 [bid] on this run," and advised investors to then "take some profits - and get ready to reload."

Another trader, noting the ups and down Levi's notes have recently experienced - levels as high as 104 and then as low as 97-98 for the 121/4s - said the name is "such a crazy bond."

He saw the 7% notes "hanging in" at 94 bid, 96 offer, but then pushing as high as 95-96. He quoted the 121/4s going home at par bid, 101 offered - well below the levels it held last week, but still better than the recent 97-98 territory. He saw the 11 5/8s following the same pattern as the 12¼% notes.

At another desk, Levi's 121/4s were quoted at an even par bid, up 2½ points on the day, while its 11 5/8% notes were at 100.25, up a bit more than a point.

Oregon Steel, Domino's, others ignore earnings

Elsewhere, there seemed to be little response to issues which reported earnings, including Oregon Steel Mills Inc., whose 10% notes due 2009 were seen welded to the same 106.5 bid spot that the Portland, Ore.-based steelmaker has occupied for a couple of sessions.

Also pretty quiet, even with earnings out, were Domino's Pizza, whose 8¼% notes due 2011 hung in around the same 107 mark, Sonic Automotive's 8 5/8% notes due 2013, parked at 103.25, and USG Corp., whose 8½% notes due 2005 were still holding steady around 111.

Trump AC seen higher

A trader saw the Trump Atlantic City Funding 11¼% second mortgage notes due 2006 firm to 89 bid, 90 offered from 87 bid, 88 offered. But another trader said that he had only seen a bid of 87.5 on the notes.

"There were some odd lots offered at 89," he said. "They were as good as 88-89 the other days - so I didn't see much change in that."

But he said that some investors believe that "the way they are covered," the Atlantic City, N.J.-based gaming company's 11¼% notes "are going to be taken out somewhere around par. If that's the case they seem to gravitate that way. They were in the low 80s, mid 80s, and now we get close to the $90 handle again."

But he said that he had not seen a better bid Tuesday than 87.75, "so I can't confirm that they were up a couple."

Delta descends

Elsewhere, the trader said that Delta Air Lines notes are "gradually grinding lower" . He quoted the Atlanta-based air carrier's 7.70% notes due 2005 as having dipped to 63 bid, 65 offered, down two points on the session, while its 8.30% notes due 2029 lost nearly a point to close at 35.25 bid, 37.25 offered.

There was no fresh news out that would explain the retreat, traders said. Delta recently reported a quarterly loss and said that it continued to require major cost concessions from its pilots if it was to survive and remain viable for the long-term.

© 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.