Valor, Builders FirstSource price upsized deals; Level 3 lower on "uncertain" 2005 outlook

By Paul Deckelman and Paul A. Harris

New York, Feb. 8 - Valor Telecommunications Enterprises LLC and Builders FirstSource Inc. priced upsized bond offerings on Tuesday, leading a new-deal parade that also included American Commercial Lines LLC and Innophos Investment Holdings Inc.

In the secondary market, Level 3 Communications Inc.'s bonds were on the slide after the Broomfield, Colo.-based telecom company reported fourth-quarter and full-year 2004 earnings. Even though the company managed to narrow its quarterly loss from a year earlier, and is in good shape in terms of debt and liquidity (see related story elsewhere in this issue), its bonds, and shares, fell sharply as company executives warned that 2005 would be "challenging" and filled with "uncertainty" for the company, as revenues from its older businesses taper off, and while it waits for earnings from newer and potentially more lucrative areas like voice-over-internet protocol (VoIP) to fully kick in.

Elsewhere, Levi Strauss & Co. bonds were seen up after Standard & Poor's put the San Francisco-based apparel company's ratings on CreditWatch with positive implications. And a trader said market rumors - so far strictly unsubstantiated - that electronics giant Motorola Inc. might be interested in acquiring Lucent Technology Inc. were giving the Murray Hill, N.J.-based telecom equipment maker's bonds and shares a nice rise.

The primary market topped $1 billion Tuesday with five issuers bringing bonds that priced just about every-which-way relative to respective price talk: one inside, one at the tight end, one on top of and one at the wide end of price talk.

Leading the way was Valor Telecommunications Enterprises, LLC/Finance Corp. which completed an upsized $400 million issue that came at the wide end of talk.

Also on Tuesday, dates were heard on two deals that will both be marketed via very brief roadshows and figure to be priced on either end of the coming weekend.

A dwindling calendar?

Despite a pair of prospective issuers showing up on Tuesday, one sell-side official pronounced the new issue calendar - now just barely topping $1 billion spread across half a dozen dollar-denominated deals - as unimpressive.

"The pace has slowed," the official observed.

"You can't have a liquidity picture that has been dominated by negative news, the way the high yield has been. We had a small inflow last week [AMG reported a $118.5 million inflow to high-yield mutual funds over the week to Feb. 2] but mostly we have been having outflows.

"And right now the forward calendar is not very impressive."

Upsized Valor heard oversubscribed

Late last week Irving, Tex.-based Valor Telecommunications shifted $120 million to its bond deal from its term loan, upping the bond offer to $400 million from $280 million, and subsequently talking its 10-year notes (B1/B) at 7 5/8% area.

Valor priced the deal Tuesday to yield 7¾%, at the wide end of talk, via Banc of America Securities, JP Morgan and Merrill Lynch & Co.

A market source advised Prospect News that the order book on Valor was 2.5 times oversubscribed and that the deal was seeing wide participation "from the usual suspects in addition to some out of the way accounts."

Builders Firstsource upsized by $25 million

Dallas-based building materials company Builders Firstsource priced an upsized $275 million issue of seven-year second-priority senior secured floating-rate notes (B3/B-) at par on Tuesday to yield three-month Libor plus 425 basis points.

The Price UBS Investment Bank/Deutsche Bank Securities-led dividend payment and debt refinancing deal came at the tight end of the Libor plus 425 to 450 basis points price talk and was increased from $250 million.

A buy-side source told Prospect News that while the building materials sector is attractive the second-priority structure was not.

American Commercial inside of talk

UBS was also in the lead for the American Commercial Lines LLC/ACL Finance Corp. offering of $200 million of 10-year senior notes (B3/B-).

The deal priced at par to yield 9½%, inside of the 9 5/8% to 9 7/8% price talk.

Banc of America Securities was the joint bookrunner for the debt refinancing deal from the Jeffersonville, Ind.-based marine transportation and services company.

A market source told Prospect News that the deal was three-times oversubscribed and enjoyed "pretty wide participation."

Innophos restructured $120 million prices at talk

Elsewhere Tuesday Innophos Investments Holdings Inc., a Cranbury, N.J.-based producer of phosphoric acid, priced a restructured $120 million issue of 10-year senior floating-rate PIK notes (Caa2/CCC+) at par to yield three-month Libor plus 800 basis points.

The Bear Stearns & Co.-led dividend deal came right on top of price talk.

Call protection was extended to two years from one year.

And finally on Tuesday TWC Holdco, in conjunction with The Wornick Co., priced $26 million of 13 7/8% senior PIK notes due Aug. 15, 2011 at 99.00 on Tuesday to yield 14.04%.

The "rifle-shot" deal came without price talk, according to an informed source.

CIBC World Markets ran the books for the dividend funding issue from the Cincinnati, Ohio-based food processing and packaging company.

Two for the road

With sources remarking last Friday and again on Monday that the forward calendar contained no issues that were expected to price in the week to come, one such contender finally showed up on Tuesday.

Bear Creek Corp., the Medford, Ore.-based operator of gift catalogs and websites, will begin a roadshow late this week in Los Angeles for a two-part $245 million offering of notes (B3/B-).

The company plans to offer $145 million of eight-year non-call-four senior fixed-rate notes and $100 million of seven-year non-call-two floating-rate notes.

A New York roadshow is set for early in the Feb. 14 week, with pricing to follow shortly thereafter.

The notably active UBS Investment Bank has the books for the dividend deal.

Elsewhere Greek TV and radio broadcaster Antenna TV SA beamed in with a €120 million offering of 10-year senior notes (expected ratings B1/B+), expected to price by the end of the present week, via Citigroup.

The talk on Hydrochem

Price talk of 9¼% to 9½% emerged Tuesday on Hydrochem Industrial Services' $150 million offering of eight-year senior subordinated notes (Caa1/B-) which are expected on Wednesday via Morgan Stanley and Credit Suisse First Boston.

A buy-side source, who owned to liking the credit and the sponsor of the acquisition deal, Oak Tree Capital Management, said that the New York roadshow went well, and professed the expectation that the deal would do likewise.

And although some sources had anticipated hearing terms Tuesday on Mercer International's $300 million offering of eight-year senior notes (Caa1/B) via RBC Capital Markets and Credit Suisse First Boston, the Seattle-based pulp producer's bonds were heard - very late in Tuesday's session - to be Wednesday business.

Talk is 9%-9¼% on the Mercer notes.

A market source said that the deal is three-times oversubscribed.

American Commercial up in trading

When the new American Commercial Lines 9½% senior notes due 2015 were freed for secondary market dealings, "they did very well," a trader said, quoting the new bonds as having moved up to 103 bid, 104 offered from their par issue price earlier in the session.

Another trader saw those notes even higher and tighter, quoting them as having gone home at 103.375 bid, 103.625 offered.

On the other hand, Builders First Source's new second priority senior secured floating-rate notes due 2012 were seen having attracted little aftermarket interest. While one trader had them at 100.5 bid, 101.5 offered, up from their par issue price, another saw them no better than 100.125 bid, 100.5 offered.

And Innophos Investments Holdings' 10-year floaters were seen having gotten as good as 100.75 bid, 101.25 offered.

A trader also saw Valor Telecommunications' new 7¾% notes due 2015 as having broken very late in the day at 101 bid, 102 offered, up from their par issue price, but he said that given the lateness of the hour when the deal finally got done, secondary trading was quite thin.

Worldspan LP's new floating-rate notes due 2011, which priced Monday, were seen struggling in the secondary; those bonds, after having been issued at par on Monday and then firming a tad to 100.25 bid, 101.25 offered, were "not doing very well" Tuesday, a trader said, quoting them as having fallen back to 99.125 bid, 99.875 offered.

Level 3 plunges

Back among the established issues, Level 3 "got clobbered," said a trader, who added that he "can't remember the last time" that the company had "friendly numbers."

He saw the company's benchmark 9 1/8% notes due 2008, which had ended Monday at 83.5 bid, 84.5 offered "actually going up a little right after the numbers were released," with bid levels in the high 83s - but then they tumbled from that perch to end at 79.5 bid, 80.5 offered.

"I think people initially liked that the numbers for the quarter came in a little better than expected," he opined, "but then, on the guidance, they kind of caved in."

The company's 11% notes due 2008 also got whacked, falling to 84.5 bid, 85.5 offered from Monday night levels around 88.5.

At another desk, a trader saw the 9 1/8s down a full five points on the session, having quoted them going home Monday at 84.5 bid, 85.5 offered, before sinking like a stone to 79.5 bid, 80.5 offered.

"The quarter was in line" with market expectations, he said, "but the outlook was negative."

Level 3's Nasdaq-traded shares meantime fell 35 cents (11.71%), to $2.64, on volume of 43 million shares, more than five times the norm.

Amkor drops

Another bond that the second trader saw following that same path Tuesday was Amkor Technology Inc., which released its fourth quarter earnings data just as the market was closing.

"They were out after the close, in line with estimates but a negative outlook," he said, which caused the bonds of the West Chester, Pa.-based provider of testing and packaging services to the semiconductor industry to drop two points "post stock market close." Amkor's 7¾% notes due 2013 dipped to 87 bid, 88 offered from 89.5 previously.

At another desk, the 9¼% notes due 2008 were seen down more than three points on the day, ending at 97 bid.

Amkor reported a fourth-quarter loss of $36 million (21 cents per share), a sharp deterioration from its year-earlier profit of $23 million (13 cents per share). The latest quarter's per-share loss was slightly larger than the 19 cents a share that Wall Street had been looking for.

On a full-year basis, Amkor swung to a $37.5 million loss (21 cents per share), from a 2003 profit of $2.2 million (one cent a share). The full-year per-share loss was actually smaller than the 27 cents that the analysts had predicted.

But company chairman and chief executive officer James Kim said in a statement that accompanied the earnings release that "weakening business conditions in the semiconductor industry" blunted company efforts to improve by expanding its operations, making acquisitions and entering new agreements.

And in 2005, Amkor warned, the company will show a first-quarter loss of 34 cents to 40 cents per share - analysts had been expecting a loss of around 23 cents a share. The company also expects a drop in revenue of 8% to 12%.

Levi Strauss higher

On the upside, Levi Strauss bonds were better, following S&P's placement of the company's ratings on CreditWatch with positive implications.

The ratings agency said that the move "reflects Standard & Poor's expectation that full year results will demonstrate improvement in the company's operating results and liquidity position."

S&P said that its analysis "will focus on the benefits from the cost-reduction and restructuring efforts in the past year, sustainability of revenues, and the ability to reduce debt and extend maturities." The company's bonds and corporate credit are rated CCC.

Levi's recently issued 9¾% notes due 2015 were seen having jumped to 101 bid, 101.5 offered from 98.5 bid, 99.5 offered previously, while its 12¼% notes due 2012 improved to 110.75 bid, 111.75 offered from 109 bid, 110 offered.

A trader declared that "those things popped up" on the S&P news, pegging the Levi 11 5/8% notes due 2008 half a point better at 105.75 bid, 106.75 offered, and seeing the 121/4s having risen a point on the session to 109.75 bid, 110.75 offered.

Lucent up on rumors

Also on the upside, the trader said, was Lucent. He cited "rumors about Motorola acquiring them," in quoting the telecom equipment company's 6.45% notes due 2029 as having firmed to 93.5 bid, 94 offered from prior levels at 90.25 bid, 91.25 offered. However, he said that the shorter-dated paper, like the flagship 7¼% notes due 2006, already hovering well above par, had not moved much at all.

Another trader had been unaware of the Motorola rumor - which was not confirmed by either company, even though it was making the rounds of internet investment bulletin boards - but he offered that "that could explain" why the company's bonds and shares were both up. He saw the 6.45% notes having gone from about 90.5 bid, 91.5 offered around midday Monday, to 92.5 by Monday's close, and then having added an additional nearly a point to end at 93.25 bid, 94.25 offered Tuesday,

Lucent's New York Stock Exchange-traded shares were up 10 cents (3.04%) to $3.39, on volume of 88 million shares - tops on the NYSE - well up from the usual 51 million-share activity level.

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