Conseco bonds up as insurer files reorganization plan; Hurricane Hydrocarbons prices upsized deal

By Paul Deckelman and Paul A. Harris

New York, Feb. 3 - Conseco Inc. bonds firmed on Monday after the troubled Carmel, Ind.-based insurance and financial services company filed its plan to emerge from Chapter 11, while Champion Enterprises Inc. debt firmed smartly and Beverley Enterprises Inc. fell.

In the primary market, two deals priced during a moderately paced primary market session, with Hurricane Hydrocarbons Ltd. issuing an upsized deal while Star Gas Partners, LP brought 10-year notes considerably wide of talk.

Meanwhile news of two new offerings surfaced during Monday's session: Rite Aid Corp. announced it will quickly prepare a tonic for the high yield buy-side that is said to still be laden with surplus cash despite two straight weeks of outflows. And The Old Evangeline Downs LLC was heard to have gotten out of the gate with $110 million.

Star Gas sold its $200 million of new 10-year 10¼% senior notes (B3/B) at 98.466 to yield 10½%, via JP Morgan and Wachovia Securities, Inc. on Monday. That yield was 100 basis points wide of the 9¼%-9½% price talk.

Two sell-side sources conceded Monday that the high-yield market might be backing up slightly.

One of those sources, commenting on the $648.9 million outflow from high-yield mutual funds reported for the week ending Jan. 29, said it was a substantial outflow.

"Throughout January we had a great market except last week," this official said.

"Deals are still getting done well in the primary market, which seems to be open and healthy," the source added. "We're seeing some weakness in the secondary market."

In addition to the Star Gas transaction, Monday's session produced terms from Hurricane Hydrocarbons, an energy exploration and production company that operates in Kazakhstan. Via financing subsidiary Hurricane Finance BV the company upsized to $125 million from $100 million its offering of seven-year 9 5/8% senior notes (B1/B+) and priced them at 98.389 to yield 9.95%, inside the 10¼% area price talk. JP Morgan was the bookrunner.

In a press release Monday the company stated that the transaction "establishes the longest dated bond transaction from a corporate issuer in the CIS and sets an important new regional benchmark."

It described the order book as "strongly oversubscribed and well diversified" thanks to a comprehensive roadshow in Europe and the U.S.

"The transaction strategically diversifies Hurricane's sources of funding and significantly lengthens its maturity profile," the company added.

One emerging markets source close to the Hurricane transaction told Prospect News on Monday that the emerging-markets sector continues to be dominated by sovereign credits at present.

"It's quieter than it has been," the source added. "We had a rush to market in January because people were worried about a war. But actually things like this, Kazakhstan, and Russia to some extent, are viewed as nice defensive plays, in the middle of all that.

"But definitely from a new issue standpoint it's getting quieter now."

Meanwhile two new offerings climbed aboard the high-yield primary market forward calendar on Monday.

Camp Hill, Pa. drugstore operator Rite Aid announced $200 million of eight-year second lien senior secured notes. Prospect News learned that the deal, via Salomon Smith Barney, is expected to price on Wednesday.

And the roadshow started Monday for a Rule 144A offering from The Old Evangeline Downs LLC. The company is selling $110 million of seven-year senior secured notes (B-), via Jefferies & Co. The Lafayette, La.-based, firm, a wholly owned, unrestricted subsidiary of Peninsula Gaming Co., plans to use the proceeds to help fund the construction and development of the company's planned pari-mutuel horse racetrack with slot machines, and to refinance existing debt.

Secondary traders said they had not seen the new Hurricane Hydro bonds trading around.

A trader saw another new deal - Cascades Inc.'s senior notes due 2013, which had priced at par on Friday - having pushed up to 101.75 bid/102.25 offered, in Monday's dealings. He said Anchor Glass Container Co.'s 11% senior notes due 2003, which also priced at par on Friday, were being quoted around 101.5 bid/102 offered, but with "no real trading" in the Tampa, Fla.-based glass container company's new bonds.

Back among already established junk bond names, Conseco's new exchange bonds and its older unexchanged bonds, were both quoted several points higher, apparently in response to the release of its reorganization plan (early in 2002, Conseco gave the holders of most of its existing bonds new debt with longer maturities but greater capital structure seniority in exchange for their outstanding paper; the new exchange bonds trade at about an eight-to-10-point premium over the remaining older bonds).

A trader quoted the exchange bonds at 26 bid and the untendered bonds in the 17-19 bid area, with everything up around two points on the session.

At another desk, the exchange bonds, such as the 6.80% notes due 2007, were seen having risen as much as five points, to 29 bid, while the untendered bonds, like the 9% notes due 2006, were four points better, at 19.

A market source elsewhere pegged the 10¾% and 8¾% exchange notes due 2009 and 2006, respectively, in the 28-30 bid range.

Conseco, which filed for Chapter 11 protection from its junk bond holders and other creditors in December, outlined plans late Friday for its emergence from the throes of bankruptcy.

The strategy essentially calls for Conseco to shed its Conseco Finance white elephant, which chiefly makes loans in the risky mobile home and manufactured housing business, and to emerge as an insurance-only concern. The acquisition of Conseco Finance - then known as Green Tree Financial - back in the late 1990s is seen by analysts as the key blunder that dragged the once high-flying Conseco down to bankruptcy. Proceeds from the sale would go to pay off some of its $6.5 billion of debt, with the banks and bondholders owning most of the reorganized company and shareholders being mostly frozen out.

On Monday, lawyers representing creditors holding $1.9 billion of trust preferred securities said that their clients vehemently rejected the plan as unfair.

Other bankrupt high-yield companies making news included WorldCom Inc., which on Monday announced plans to cut 5,000 jobs as the stricken Clinton, Miss.-based telecommunications giant attempts to chop expenses down to manageable levels and emerge from Chapter 11.

But WorldCom's bonds remained anchored in the lower 20s, with traders quoting them around the 21-22 range. The bonds of WorldCom's MCI long-distance subsidiary were meanwhile being quoted in the "high 50s and lower 60s," a market source said. News of the upcoming workforce cuts "didn't move them much at all."

A trader quoted the bonds of Federal-Mogul Corp., such as the 7½% notes due 2004, as having risen a point to around 19 bid; on Friday, the Southfield Mich.-based auto parts maker announced that it will file a reorganization plan in early March to emerge from Chapter 11.

That reorganization plan would convert all claims from creditors and asbestos claimants into equity in the reorganized company, with junk bond holders slated to get 49.9% of the new common stock and the rest going into a trust that will benefit current and future asbestos claimants. It was a flood of potentially ruinous asbestos damage claims that forced the company into bankruptcy in 2001.

But another market-watcher saw the company's bonds, which had been unchanged around 18 bid on Friday, as having fallen to 15 by Monday.

He agreed with the proposition that such movement could be linked to investor wariness over the other bit of Federal-Mogul news, also announced Friday, that it will acquire most of Honeywell International Inc.'s Bendix friction materials business in exchange for taking on all current and future Bendix liability in asbestos lawsuits. Honeywell will give Federal-Mogul about $2 billion of insurance, which it expects will cover most of the Bendix-related asbestos claims.

The market-watcher also quoted bankrupt United Airlines' 9¾% notes due 2021 as hovering "in the high 6s," while its 10.67% notes due 2004 continue to languish at 5.5 bid.

Outside of the bankrupt credits, a trader saw "an uptrend in telecom," and he quoted Nortel Networks Corp.'s debt and that of Lucent Technologies Inc. as having "opened stronger out of the box but then tempers off later on."

He saw Brampton, Ont.-based telecom equipment maker Nortel's 6 1/8% notes due 2006 as having firmed about two points to 87 bid/88 offered from around 85 bid/86 offered at the open, "a pretty big move." Lucent's 7¼% notes due 2006 opened at 77 bid/79 offered, pushed up to 79 bid during the session and then came off that peak to close at 78.5 bid/80.5 offered.

Otherwise, he said, things were pretty quiet, with Nextel Communications Inc.s' benchmark 9 3/8% notes due 2009 at 96 bid/97 offered, "how they opened and how they closed."

A market source quoted Auburn Hills, Mich.-based homebuilder Champion Enterprises' 7 5/8% notes due 2009 as having risen to 56 bid/from 45 previously, despite the lack of news about the company.

On the downside, he saw Beverley Enterprises' 9 5/8% notes due 2009 dropping to 79 bid from 81.5 offered earlier, along with the healthcare facilities operator's 9% notes due 2006.

Another observer saw the bonds trading several points below those levels, but agreed that they had retreated about two or three points on the day.

He also saw AES Corp.'s 9 3/8% notes due 2010 unchanged at 68. At another desk, the Arlington, Va.-based power producer's 8 3/8% notes due 2007 were quoted two points higher, at 53.5 bid.

Vintage Petroleum Inc.'s 9% notes due 2005 were unchanged at 101.25 bid; the independent oil and gas producer's paper had risen to that level in anticipation of being called - and the company announced Monday that it would be redeemed next month.

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