Elan gains on Tysabri news; United Rentals on earnings; Dollarama, Lamar deals price

By Paul Deckelman and Paul A. Harris

New York, Aug. 9 - Elan Corp. plc bonds were better Tuesday, with the news that it is taking "preliminary steps" to resume clinical trials of its Tysabri multiple sclerosis drug - pulled from the market earlier this year after several unexpected patient deaths - acting as a welcome tonic for the Irish drugmaker's debt and equity investors.

Elsewhere, United Rentals Inc.'s bonds were seen on the upside, after the Greenwich, Conn.-based equipment rental company reported better preliminary second quarter earnings.

Overall sources marked high yield slightly softer on the Tuesday session.

One source said that thus far in the second week of August high yield players have been focused on the distressed end of the credit curve.

"There is still some decent yield there to be made there," one sell-side official commented.

Meanwhile the Federal Reserve's Federal Open Market Committee seemed to take no one by surprise as it bumped short-term interest rates by 25 basis points to 3½% Tuesday afternoon.

"The old man is just going to continue tightening at a measured pace," one sell-sider commented in the wake of the Fed move.

"I think they pretty much confirmed that they are going to continue to do what everybody is expecting them to do."

Meanwhile the primary market saw some drive-by business as Lamar Media Corp. zipped through with a $400 million deal that priced in the middle of talk. And Dollarama Group, trailing its investor roadshow, also priced its $200 million deal, Tuesday, at the middle of price talk.

And the rumor mill was cranking as sources professed expectations of issuance - perhaps sizable - on the horizon. The two names the seemed to be receiving the most liberal circulation were those of Charter Communications and Mediacom Communications Corp.

Lamar, Dollarama price mid-talk

Two issues totaling $600 million priced during the Tuesday session.

Driving through the junk market was Baton Rouge, Fla., billboard company Lamar Media Corp.

The company priced a $400 million issue of 10-year senior subordinated notes (Ba3/B) at par to yield 6 5/8%, in the middle of the 6½% to 6¾% price talk.

JP Morgan ran the books for the debt refinancing deal.

Elsewhere Dollarama Group, the Canadian dollar-store retail chain, priced a $200 million issue of seven-year senior subordinated notes (B3/B-) at par on Tuesday to yield 8 7/8%, also in the middle of talk of 8¾% to 9%.

Citigroup, JP Morgan and RBC Capital Markets were the bookrunners for the debt refinancing issue.

Charter and Mediacom

As the Tuesday session got underway one source told Prospect News that "the guys in the sales force" had been professing the expectation that issuance could soon be seen from two ultra-familiar names in the junk bond market: Charter Communications and Mediacom Communications Corp.

With a certain amount of variation, sources throughout the session said that either or both could show up with deals in September - possibly even before the Labor Day break.

Prospect News quizzed a source at a hedge fund who professed no knowledge of pending issuance from either Charter or Mediacom.

However, the source said, Charter in particular has reasons to bring a deal.

The hedge fund source said that the troubled St. Louis-based cable TV and broadband company needs to address near-term maturities as well as zero-coupon bonds that will turn cash-pay in the not-too-distant future.

"They've been doing a lot of exchanges for the newer maturity bonds for the more senior paper," the source said.

When asked whether the high-yield market could swallow a sizable chunk of issuance from Charter, the source said: "It depends how big it is.

"There is still some demand for the paper at the more senior level. I'm not sure they can do anything at the holding company level, even in terms of covenants.

"However they do have some carve-outs that would allow them to raise close to another $1 billion of debt.

"In terms of appetite it depends on pricing, and the size of the deal," the hedge fund source added.

The source went on to say that "extending maturities" is key to the survival of the company.

"They're just not going to get there in terms of operations," the source said. "They are still free cash flow negative, and will continue to be for years to come.

"The key is, can they get past '07, '08 and '09? In that time-frame there are notes that start turning cash-pay.

"That's why they need to get this refinancing done.

"To the extent they can take out the zeros that turn cash-pay in the next couple of years there will be a lot less concern about their ability to survive."

Elsewhere a sell-side source, speaking well after Tuesday's close, said that it's the kind of August in which the junk market is rife with rumors.

"I'm hearing that people are testing the waters on some deals for the after-Labor Day market," the source said.

Sierra Pacific driving through

Also coming in with a quick-to-market deal Tuesday was Sierra Pacific Resources.

The company plans to price a $225 million offering of 12-year senior unsecured notes (B2/B) on Wednesday via Merrill Lynch, with proceeds slated to repay debt.

Six weeks ago Sierra Pacific Resources sold approximately $200 million of short-term floating-rate notes.

Also expected to price Wednesday is Mac-Gray Corp.'s $125 million offering of 10-year senior notes (B1/B+).

The JP Morgan deal was talked at the 7¾% area on Tuesday.

And CitiSteel USA, Inc. will begin a roadshow on Wednesday for a $170 million offering of five-year senior secured floating-rate notes (B3) via Jefferies, with proceeds to be used to fund a recapitalization of the company.

Lamar, Dollarama up in trading

When the new Lamar Media 6 5/8% notes due 2015 were freed for secondary dealings, they were seen having moved up to 101.25 bid 101.75 offered from their par issue price earlier in the session.

Lamar's existing 7¼% notes due 2013 lost a point to 105.25.

The new Dollarama 8 7/8% notes due 2012 were heard to have pushed as high as 101 bid, before dropping off that peak to finish at 100.25 bid, 100.75 offered.

Elan higher

Back among the existing issues, Elan's 7¼% notes due 2008 were seen by a market source as having firmed to 97 bid from 95.5 on Monday, while its 7¾% notes due 2011 advanced to 90 bid from 87.25.

At another desk, a trader saw the 71/4s move up to 96 bid, 97 offered from 94.5 bid, 95.5 offered Monday and the 73/4s rise to 89 bid, 90 offered from 86 bid, 88 offered.

Yet another trader acknowledged that "they jumped," pegging the 71/4s at 96 bid, 97 offered, while the 73/4s ended at 89 bid, 90 offered, both "up a couple" of points.

Elan's New York Stock Exchange-traded American Depositary Receipts jumped $1.09 (13.63%) to $9.09. Volume of 39.7 million ADRs was four times the norm.

Elan and its American partner, Biogen Idec Inc. of Cambridge, Mass., said that an extensive screening of patients who had taken their Tysabri medication has turned up no further signs of the deadly nerve disease that several patients came down with earlier in the year, at least two of them fatally.

After those fatalities surfaced initially, Elan and Biogen jointly agreed to voluntarily withdraw the drug from the market pending the results of tests the two companies and the Food and Drug Administration are doing.

Elan and Biogen said about 2,000 patients who took the suspended drug in clinical trials have been screened for progressive multifocal leukoencephalopathy, or PML, a rare and frequently fatal brain disease. Buoyed by those initial results from the screenings, the two companies said that they were taking "preliminary steps" to resume clinical trials of Tysabri.

Besides MS, Tysabri was being used to treat Crohn's disease, a gastrointestinal disorder. One of the dead patients had been taking it in clinical trials for Crohn's and another was an MS sufferer.

Revelations about the deaths and the drug's removal from the market caused the Elan bonds to fall sharply, but they have since managed to recoup most of those losses, aided by recent revelations that the presence of a particular kind of virus in a patient is an early-warning indicator that the patient might be prone to getting PML - raising the possibility that patients could be screened before beginning use of Tysabri, to see if it is safe for the company.

United Rentals lifted by results

Elsewhere, a number of companies had earnings out, and United Rentals' appeared better, helping the bonds firm.

A trader saw the company's 7¾% notes due 2013 at 97.375, up from 95.75 bid on Monday, while its 6½% notes due 2012 ended at 96.75 bid, up from 95.5. United Rentals' 7% notes due 2014 were only up half a point to 93.5.

A market source at another desk, however, saw the 7s two points better at 94.25 bid, while the 61/2s closed at 96.5 bid, up 1½ points.

United Rentals released preliminary second-quarter numbers - but said it cannot finalize the results until it finishes an accounting inquiry and restates more than three years of earnings data.

The preliminary figures released Tuesday showed earnings of 53 cents per share on $896 million of sales during the quarter; Wall Street had been expecting a profit of 51 cents a share on sales of $857 million.

Six Flags better on earnings

Six Flags Inc.'s bonds were also somewhat better, helped by the theme park operator's swing to a second-quarter profit from a year-ago loss. The company earned $5.6 million (six cents per share), versus a loss of $12.3 million (13 cents per share) last year.

Its 9¾% notes due 2013 and 8 7/8% notes due 2010 moved up to 99 bid from 97.5 and 98.75, respectively, while the company's 9 5/8% notes due 2014 firmed smartly to 98.75 bid from 96.5.

NRG up

Also on the earnings front, NRG Energy Inc. reported that its second-quarter earnings fell to $23.9 million (22 cents per diluted share), down from $83 million (83 cents per share) in the year-ago quarter. It cited the impact of asset sales, particularly on its West Coast operations, as well as reduced generation due to outages.

However, the Princeton, N.J.-based power generating company also said that its liquidity picture is "strong" and cash-flow generating ability is robust, allowing it to buy back $250 million of stock, sell an equal amount of preferred shares, and use the proceeds from the latter deal to take out $229 million of 8% notes due 2013.

A market source saw those 8s moving up a point to 107.5 bid.

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