WestPoint Stevens gains on improved guidance; Premcor, Allbritton price talk emerges

By Paul Deckelman and Paul A. Harris

New York, Jan. 27 - WestPoint Stevens Inc. bonds firmed several points on Monday in apparent response to improved guidance emanating from the struggling maker of textile products. It was one of the few issues seen firming on a day when most secondary names were quoted unchanged to a bit lower and market activity dried up.

Meanwhile sources characterized the high-yield primary market as "still hot" in spite of the continued fall in stock prices.

Although no deals priced during the day, the market learned of two drive-by offerings, both add-ons. Washington, D.C.-based TV company Allbritton Communications appeared on the screen with $180 million and Texas-based homebuilder Technical Olympic USA slapped up $100 million.

Price talk is 7 7/8%-8% on Allbritton's $180 million add-on to its 7¾% senior subordinated notes due Dec. 15, 2012 (B3/B-), according to a syndicate source. The deal is expected to price Tuesday via Deutsche Bank Securities. The original $275 million deal priced on Dec. 6, 2002.

And Technical Olympic will bring a $100 million add-on to its 9% senior notes due July 1, 2010 (expected ratings Ba3/B+) via underwriters Salomon Smith Barney, Deutsche Bank Securities, Fleet Securities and Credit Lyonnais. That deal is expected to price on Wednesday.

The Sugarland, Tex.-based company priced $200 million of eight-year senior notes as part of a two-tranche offering of $350 million on July 14. The deal also included $150 million of 10-year senior subordinated notes.

Also on Monday Premcor Refining Group Inc. issued price talk on both tranches of its $400 million Rule 144A senior notes deal (Ba3/BB-/BB-).

The notes are expected to price Tuesday. The 10-year-non-call-five piece is being talked at 9¼%-9½%, while the eight-year-non-call-three notes are being talked 25 basis point tighter than the 10-year notes. The Credit Suisse First Boston-led deal is set to price on Tuesday.

And timing and other details emerged Monday on Cascades Inc.'s $325 million of Rule 144A 10-year senior notes (BB), which were reported to be on the road headed toward a Friday pricing.

Salomon Smith Barney and Scotia Capital are bookrunners on the Quebec-based papermaker's Rule 144A notes, proceeds from which will be used to refinance bank debt.

One sell-side source who spoke to Prospect News minutes before the stock market closed on Monday afternoon said that the appearance of two drive-bys during the Jan. 27 week's opening session might not be a coincidence.

With the Dow Jones Industrial Average shedding over 141 points to close below 8,000 for the first time since October, this official suggested that issuers might be attempting to "strike while the iron is hot."

"That negative momentum has to start impacting our market sooner or later," this sell-sider said. "If the Dow continues to slip we're going to have problems in the high yield market."

However, this official added, conditions in high yield - with cash on the buy-side believed to be plentiful - continue to favor companies with transactions pending in the very near term.

"People are still pretty hungry for paper despite what's going on in the equity markets today and in the last two weeks," the source said. "I think the deals that are on the calendar, especially for the beginning of this week, will get executed, at relatively fair levels.

"The question is, 'What happens to the primary market two weeks from now?'

"All the negative announcements are going to start having an impact on the high-yield investors. I think you'll start seeing things get backed up a couple weeks from now provided that the equity markets continue to trade off," the official commented.

"People will start sitting on cash."

Another source from an investment bank, earlier in Monday's session, also suggested that if the stock market continues to decline high yield will feel the tug.

"Right now the primary market is on fire but if equities continue to fall we will run into trouble," the official said.

In its "One-Stop Weekly" high yield research report released Jan. 24 Deutsche Bank Securities set forth a scenario in which the money that has come into high-yield mutual funds ($2.756 billion since Dec. 11, 2002 according to a Prospect News analysis of numbers reported by AMG Data Services) might stay largely within the asset class.

"Fund flows, which have been exceptionally strong this year, were only slightly negative with a net outflow of just $81 million, reported David Bitterman and Andy Van Houten, co-heads of high yield research for Deutsche Bank Securities. "Given the stellar performance over the last two months we believe that being able to hold onto the current funds should be considered a major positive in the short term. Past fund flow data shows that sudden inflows have a tendency to flow out just as quickly and if mutual funds can retain the money they have attracted recently these resources have a significant chance of turning into longer-term investments."

Back in the secondary market, traders said that most of what dealings took place focused on recently priced issues, with one trader estimating as much as 90% of the activity took place there.

AMI Semiconductor Inc.'s new 10¾% senior subordinated notes due 2013, which priced Friday at par, had dipped to 99.25 bid/99.75 offered, a loss of about a quarter point from where the bonds traded Friday after having been freed for secondary dealings.

The trader saw Houghton Mifflin Co.'s 8¼% senior notes due 2011 trading at 101.5 bid, and quoted its new 9 7/8% senior subordinated notes due 2013 as having pushed as high as 103 bid/103.5 offered. Both had priced at par on Friday.

He also saw Georgia Pacific Corp.'s new 8 7/8% notes at 98 bid/98.5 offered, and its new 9 3/8% notes at 99 bid/99.5 offered. Both had hovered below par since their pricing last week.

Outside of the newly freed new deal issues, not much was going on in the secondary market. A trader noted that "you had Hans Blix doing his thing [the chief of the UN weapons inspectors delivered his report on Iraq's cooperation with the inspections - or lack thereof - to the world body], you have the State of the Union speech tomorrow [Tuesday], and you have [Alan] Greenspan on Wednesday," when the Federal Reserve Board's policy-making Federal Open Market Committee concludes its two-day meeting.

"There doesn't seem to be any reason to buy anything, because it'll be cheaper tomorrow," he said, noting the role that uncertainty was playing in driving the junk market down, along with other financial markets.

"You have plenty of stuff going on overseas" that put a damper on the market, another trader said. "You've got the [Blix] report today and the hubbub following the report, on the Iraq situation, and tomorrow you've got the State of the Union."

He also noted that Morgan Stanley was holding an investor conference in New Orleans "today, tomorrow and supposedly, they [attendees at the conference ] won't t be able to get back here until mid-Wednesday. So there's enough to keep people on the sidelines."

Traders were quoting most issues unchanged to a bit lower in quiet dealings, but a trader said that "there was some life" to WestPoint Stevens after the company put out improved guidance.

He saw its 7 7/8% notes having firmed to around 32 bid/34 offered from prior levels at 29.5 bid/31 offered, after the West Point, Ga.-based maker of towels and bed linens - including such well known brands as Martha Stewart, Joe Boxer and Ralph Lauren Home and Disney Home - said late Friday that it now expects fourth quarter sales growth of roughly 8% and approximately $55-$57 million of EBITDA - an improvement from its prior guidance of modest sales growth and $50-$55 million of EBITDA. The company plans to release results for the fourth quarter ended Dec. 31 on Feb. 11.

Chairman and chief executive officer Holcombe T. Green, Jr., said that the company's fourth-quarter performance "has exceeded our expectations, and we remain in compliance with all financial covenants and continue to enjoy strong liquidity."

At another desk, a trader pegged West Point's 7 7/8% notes due 2005 as high as 35 bid/39 offered and its 7 7/8% notes due 2008 at 33 bid/36 offered, both up two or three points on the day.

West Point stock was meanwhile going in the opposite direction, off four cents (7.14%) to 52 cents on volume of 630,000 shares, almost six times the usual. West Point also said on Friday that its shares - which have hovered in penny-stock territory for some time - were to be de-listed by the New York Stock Exchange and would henceforth trade on the over-the-counter bulletin board.

Elsewhere, Lear Corp.'s 7.96% notes due 2005 were half a point better, at 105 bid/105.5 offered, and its 8.11% notes were likewise up a half, at 108 bid/108.5 offered, after the Southfield, Mich.-based maker of automotive seats reported that it earned $118 million ($1.76 a share) in the fourth quarter, versus a year-earlier net loss of $48.8 million (76 cents a share) after a large restructuring charge. Analysts were expecting earnings to come in around $1.63 per share.

Lear also projected that in 2003, it would post first-quarter earnings of between 90 cents and $1 per share, and full-year profits of $5.20 to $5.40 per share, better than the 89 cents and $4.99, respectively, that analysts have forecast.

Outside of that relatively thin upside, "everything was off a point to a point-and-a-half," a trader said, quoting Lucent Technologies Inc.'s 7¼% notes due 2006 two points lower, at 75 bid/75.5 offered, and Level 3 Communications Inc.'s 9 1/8% notes due 2008 at 65.5 bid/66.5 offered, down a half point.

He likewise saw Time Warner Telecommunications' 10 1/8% notes due 2011 slipping to 58.5 bid/59.5 offered from 60 bid/62 offered on Friday, while bankrupt WorldCom Inc. - whose bonds were coming down from their recent peak levels in the upper 20s all of last week - continued on the slide, dropping two more points to 21.5 bid/22.5 offered.

And he saw bankrupt United Airlines paper "continuing to die on the vine," its 9 1/8% notes due 20102 at 4.75 bid/5.5 offered.

A trader at another shop saw Nextel Communications Inc.'s 9 3/8% notes due 2009 having dropped down to 94.25 bid in morning dealings, before "getting a little pop" on a U.S. Supreme Court decision overturning the Federal Communications Commission's efforts to strip fledgling wireless operator Next Wave Telecom Inc., currently in bankruptcy, of valuable radio spectrum licences worth at least $6 billion. The commission had moved to repossess the licenses after the start-up won them in a bidding auction but then could not pay up.

The High Court ruling brings to an end a more than two-year-long battle in and out of various courts which had tied up the licenses; Next Wave - which at one time was a takeover target of Nextel - could put the licences up for sale as part of its reorganization efforts, with Nextel and other major wireless players hungry for more spectrum for their burgeoning services seen as potential buyers.

After the ruling, the trader said, Nextel's bonds firmed to 95 bid/95.5 offered, leaving them unchanged on the session.

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