CBD Media prices; wireless gains as secondary holds firm tone

By Paul Deckelman and Paul A. Harris

New York, June 9 - Directory publisher CBD Media LLC closed the book on a $150 million offering of eight-year notes on Monday, which were quoted at smartly higher levels when the new bonds moved over into secondary dealings.

In the secondary sphere, apart from the new CBD notes, things were described as mostly quiet, though firm; bonds of wireless telecom companies continued to show the kind of strength they had displayed at the tail end of last week, in line with a generally firmer telecommunications group, although there was no fresh hard news about the sector as a whole.

Attempting to keep up with a cash conveyor that is reportedly being fed by mutual funds, pension funds and insurance companies, the primary got off the starting line running at a good clip as the week of June 9 got underway.

Terms emerged on a pair of junk bond deals, while news of half a dozen new offerings totaling an even $1.5 billion circulated the market.

Panting sell-side sources, late in Monday's session, without dissent, professed the belief that the high-yield rally appears to be continuing.

"It's a lot of deals," commented one, as the roll was called on new offerings that vied for parking places on the now-populous forward calendar.

They included minimill steel producer Gerdau Ameristeel Corp., which rolled onto the new issuance calendar with $400 million of new eight-year senior notes (expected ratings B2/B+). The roadshow on the deal, via JP Morgan and Banc of America Securities, is set to run June 10-19.

Meanwhile Tampa-based power producer Teco Energy, Inc. sparked into the market with an upsized, quick-to-market $300 million of seven-year unsecured notes (Ba1/BB+) that is expected to price Tuesday. Price talk is for a yield spot on 7¾%. Merrill Lynch & Co., Morgan Stanley and Citigroup are joint bookrunners. The deal was increased from $200 million.

MSW Energy Holdings expects to price its offering of $200 million of seven-year senior secured notes (Ba1/BB) on Wednesday, with price talk expected to emerge Tuesday. Credit Suisse First Boston will run the books.

Lafayette, La.-based Offshore Logistics, Inc. is scheduled to start roadshowing its $200 million of 10-year senior notes (Ba3/BB+) Tuesday. They are expected to price early in the week of June 16, via Credit Suisse First Boston.

Franklin, Tenn.-based Psychiatric Solutions, Inc. will attempt to allay any investor anxieties as it starts the roadshow Wednesday for $150 million of 10-year senior subordinated notes (B3/B-). The refinancing deal, via joint bookrunners Lehman Brothers and Merrill Lynch, is expected to price late in the week of June 16.

And finally Centennial Communications Corp., a Wall, N.J.-based wireless communications company, announced that it plans to sell $250 million of five-year senior notes, with proceeds pegged to repay bank debt, and for general corporate purposes.

No syndicate or timing information was disclosed by the company and further details could not be obtained by press time Monday.

One transaction was completed during Monday's primary market session - and terms emerged on an additional deal that had priced Friday.

Cincinnati yellow pages publisher CBD Media sold $150 million of eight-year senior subordinated notes (B3/B-) at par to yield 8 5/8%. That yield was at the tight end of the 8 5/8%-8 7/8% price talk. Lehman Brothers and Banc of America Securities were joint bookrunners.

And terms circulated the market, Monday, on Waterford Gaming, LLC and Waterford Gaming Finance Corp.'s deal. The joint issuers were reported to have sold $150 million of senior notes due Sept. 15, 2012 (B1/B+) at par during Friday's session to yield 8 5/8%. The Waterford transaction, via Deutsche Bank Securities and Bear Stearns, also came at the tight end of its price talk of 8 5/8%-8 7/8%.

In addition to Teco Energy, price talk - spanning an impressive range of possible interest rates - emerged Monday on several deals.

At one extreme of the range was Omincare, Inc. Its $250 million of 10-year senior subordinated notes (Ba2/BB+) were talked Monday at 6 1/8% to 6 3/8%. That deal, via joint bookrunners Lehman Brothers, JP Morgan and UBS Warburg, is expected to price Tuesday morning.

At the other extreme of the range was Quality Distribution, LLC/QD Capital Corp. The Tampa, Fla. tank trucking company's five-year senior secured notes (Caa1/B-) were heard talked at 12¾%-13%. That deal is expected to price on Wednesday, with Credit Suisse First Boston handling the books.

Finally, price talk of 10¼%-10½% emerged Monday on Tenneco Automotive Inc.'s $300 million of 10-year senior secured second lien notes (B2/CCC+/B). The Lake Forest, Ill.-based automotive parts supplier's deal, via JP Morgan, Morgan Stanley and Banc of America Securities, is expected to price on Tuesday.

When CBD Media's new bonds were freed for secondary dealings, they began moving up from their par issue price right out of the gate, breaking at about 101 bid in later-morning dealings, and firming up to 104.25 bid, 104.75 offered late in the session.

A trader remarked that there was "good demand" for the new bonds at that higher level.

Another trader, however, remarking on the relatively small size of the deal, $150 million, said that "there was virtually no trading in the Street that I saw" in the new issue - an indication that the bonds had likely been snapped up and put away.

The trader pointed out that CBD - the publisher of the Cincinnati Bell Yellow Pages - is "a much smaller company" than sector peer Dex Media East LLC, which took over the telephone directory publishing operations spun off by Qwest Communications International Inc. Dex priced almost $1 billion of new bonds in a two-part offering on Oct. 30.

The new Dex 9 7/8% senior notes due 2009 have since run up handsomely to about 121 bid, bringing the bonds' yield down sharply, so that the new CBD deal, despite its smaller coupon, "as a small-market, one-off type business, was [brought in] 100 [basis points] back of where the Dex Media bonds are trading," the trader said.

But he said that new CBD bonds had "tightened right up on the break" by 100 bps on the bid side.

"It'll probably always trade pretty well. But again, it's a one-off, much smaller version of Dex Media."

Away from the warm reception given to the new CBD bonds, he said, things were "generally firm across the board. We had some buyers in looking for paper, but there really wasn't much offered out there."

Another trader said that the market "wasn't exactly super hopping today. Stocks gave up a fair amount [the Dow Jones Industrial Average finished down 82.79, at 8980, dragging the bellwether stock index back under the psychologically significant 9000 mark], but high yield was probably a little resistant to that because of the inflow" of $1.45 billion into junk bond mutual funds reported late Thursday.

He added that "there was still a lot of hubbub about the inflow" - the largest improvement in the widely watched gauge of junk market liquidity trends since the end of February.

Accordingly, junk market prices, he said, were unchanged to slightly higher."

One area which continued to show some strength was telecom, with Time Warner Telecom's 10 1/8% notes due 2011 firming to 93.75 bid from Friday's closing levels around 91.5 bid, 92.5 offered.

The trader also saw Level 3 Communications Inc.'s 11% notes due 2008 "actually a bit better," firming to 90 bid, 91 offered from Friday's 88.5 bid, 89.5 offered.

A market source said "the whole wireless sector seems strong." He quoted American Cellular Corp.'s 9½% notes due 2009 as having firmed to 44.5 bid Monday, up a point from Friday, but well up from bid levels around 38 seen around the middle of last week.

Sprint PCS affiliate AirGate PCS Inc.'s zero-coupon notes due 2009 were seen up two points at 56 bid, while fellow Sprint affiliate Alamosa Holdings Inc's 13 5/8% notes due 2011 were a point better, at 83; the market source noted that the latter bonds had been in the mid-70s just a week earlier. Perhaps coincidentally, and perhaps not, Merrill Lynch upgraded its rating on Sprint PCS shares from "neutral" to "buy" and set a $7 target price; the Big Bull left open the possibility that Sprint PCS could move even higher, based on its assessment that the wireless carrier's sequential results will improve.

The source also saw AT&T affiliate Triton PCS Inc.'s new 8½% senior notes due 2013 - which priced at par on May 30 and which have been improving steadily since then - as having risen to 106.5 bid, "shooting up pretty quickly,"

Back among the established wireless names, he saw Nextel Communications Inc.'s benchmark 9 3/8% notes due 2009 up perhaps a quarter of a point, at 108 bid, although he opined that the Reston, Va.-based wireless carrier's bonds probably had not much further to go to the upside, since "they're already there."

A trader downplayed speculation that Nextel bonds might weaken any time soon based on the possibility of rival telecommers, such as Verizon, coming out with a push-to-talk feature that would compete with Nextel's currently unique walkie-talkie-like service.

The Kaufman Bros. brokerage on Monday indicated that Verizon might have such a service ready to offer customers by next month, which could impact Nextel investors.

While the trader said that introduction of such a feature by Nextel's rivals could "definitely" cut into their business down the line, for the moment such speculation is "just noise" that the junk market would likely not pay much attention to.

"Unless there's a solid date - definite information about the date, location, pricing" - this kind of talk is not new information" and would likely have little near-term impact.

The market source said that HealthSouth Corp.'s bonds continued to gain ground, in the wake of optimistic assessments last week from the troubled Birmingham, Ala.-based medical services provider's management. He quoted its 10¾% subordinated notes as having moved up to 49 bid from 46.5 previously, while its 6 7/8% notes due 2005 had firmed to 79.

But a trader disagreed. He said that he "had heard they were up and bonds were offered at higher levels - but I haven't seen those bids. My opinion is that somebody bought a lot of paper, and is moving the bonds higher to try to buy out of them."

He said that he had been told by one account that "when the paper came out [offered]. Guys were selling at these levels. They didn't believe the [company's] hype.

He said that 6 7/8% notes were being offered around 81, but had not seen a corresponding bid; he said that while someone else told him that he had heard those bonds bid around 78-79, "my comment was I heard they were lower. I've only seen low 70s-type bids, not high 70s bids.

"There's been no news," he continued, "so why would the bonds be up 10 points, from the high 60s to the high 70s? That doesn't make any sense."

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