Barrage of drive-by deals pushes day's issuance to $1.29 billion; Delta moves up

By Paul Deckelman and Paul A. Harris

New York, Nov. 15 - New deals were "coming out of the woodwork" Monday, a trader said, in describing the a surge of new-issue activity - much of it in the form of quickly shopped "drive-by" offerings from issuers looking to opportunistically take advantage of favorable market conditions to lock in their financing.

Other new-dealers striking while the iron was hot included including KI Holdings Inc. - the holding company for Koppers Inc. - William Lyon Homes, Hovnanian Enterprises and Smithfield Foods Inc. There was also one regular calendar deal - an add-on offering from Videotron Ltee.

Apart from the new-deal arena, traders described Monday's activity as relatively slow - a little surprising, considering this was the first day back after an abbreviated trading week which saw a lot of participants cutting out early ahead of Thursday's market holiday and not even bothering to show up Friday to complete the truncated week. However, there was some movement seen in Delta Air Lines Inc. paper, as market players who had been absent at the tail end of last week - when Delta announced that it had achieved its long-desired $1 billion package of pay concessions from its pilots - took the bonds higher in a belated response.

The high-yield primary market saw land office business during the opening session of the Nov. 15 week as issuers appeared in something of a rush to complete deals, without roadshows, in time to baste the bird.

Six deals with seven tranches totaling $1.29 billion were priced during the session. All were quick-to-market deals. And the market at large knew of only one of those seven tranches when Monday's session got underway.

The message

One investment banker, pausing to catch a breath well after the session had come to a close, spoke with an air of inevitability.

"People finally got the message that the market was hot," the banker said.

Of the seven tranches, the source said that four were upsized and three priced at the tight end of price talk.

And, said the sell-sider, the market on Monday heard another $2.5 billion of junk bond deals announced.

"It was a very busy day," the source said. "People are trying to get in as much as they can before Thanksgiving.

"And this level of activity is likely to be kept up right through next Monday [Nov. 22].

"I think it's going to be extremely active, perhaps not $1.3 billion per day, but we have more than $6 billion on the calendar, all of which is scheduled to clear before Thanksgiving.

"That alone is $6.1 billion in five-and-a-half days."

Monday's deals

Monday's only expected deal - an add-on that was announced late last week - came from Montreal-based cable television operator Videotron Ltee.

The company priced an upsized $315 million add-on to its 6 7/8% senior notes due Jan. 15, 2014 (Ba3/B+) at 105, resulting in a yield to worst of 6.004%, according to an informed source.

The deal, led by Banc of America Securities and Citigroup, came on top of the 105 area price talk.

Hovnanian Enterprises priced a quick-to-market $300 million of bonds in two tranches on Monday.

The Yardley, Pa. homebuilder sold $200 million of senior notes due Jan. 15, 2015 (Ba2/BB/BB+) at par to yield 6¼%, on top of the 6¼% area price talk.

Hovnanian also sold $100 million of senior subordinated notes due Jan. 15, 2010 (Ba3/B+/BB-) at par to yield 6%, at the tight end of the 6% to 6¼% price talk.

Credit Suisse First Boston, Citigroup, UBS Investment Bank and Wachovia Securities ran the books for the debt refinancing and general corporate purposes deal.

Smithfield Foods, Inc. priced an upsized $200 million add-on to the 7% senior notes due Aug. 1, 2011 (Ba2/BB) at 106 on Monday, resulting in a 5.901% yield to worst.

The JP Morgan-led deal came toward the tight end of the 105.5-106.125 price talk.

Allegheny Energy subsidiary Potomac Edison sold $175 million of 5.35% 10-year first mortgage notes (Ba2/BB+) at 99.955 to yield 5.356%.

The issue priced at a spread of 115 basis points, at the tight end of the 115-120 basis points price talk, via Citigroup.

William Lyon Homes, Inc. priced an upsized, quick-to-market $150 million of eight-year senior notes (existing ratings B2/B) at par to yield 7 5/8%, right on top of the 7 5/8% area talk.

UBS Investment Bank ran the debt refinancing deal that was upsized from $150 million.

Finally KI Holdings, Inc., parent of Pittsburgh, Pa. chemical-maker Koppers, Inc., upsized to $125.5 million proceeds its quick-to-market offering of 10-year senior discount notes (Caa2/B-).

The company sold a face amount of $203 million of the four-year 0% coupon notes at 61.808, yielding 9 7/8%.

Credit Suisse First Boston ran the books for the dividend-funding and general corporate purposes deal that was upsized from $100 million proceeds.

Calendar builds impressively

One prospective issuer announced a $1 billion-plus deal on Monday and one megadeal was restructured.

Late in the session Nashville, Tenn. hospital operator HCA Inc. restructured its $1.25 billion of bond offering (Ba2/BB+), dropping a proposed seven-year tranche. Pricing is expected on Wednesday.

The bonds will be sold with five- and 10-year maturities, each one callable with a make-whole call.

Initially the deal had been announced as a three-tranche offering.

JP Morgan and Merrill Lynch & Co. are the bookrunners.

Elsewhere, the roadshow started Monday for Wynn Las Vegas' $1.1 billion of 10-year non-call-five senior first mortgage notes (existing ratings B2/B), which are expected to price on Monday, Nov. 22.

Deutsche Bank Securities, Banc of America Securities, Bear Stearns, JP Morgan and SG Securities are joint bookrunners for the debt refinancing and construction-expansion deal from the Las Vegas-based entertainment, gaming and lodging company.

Also Propex Fabrics Inc. announced it will run a roadshow through the present week for its offering of $150 million of eight-year senior notes (B-).

Pricing is expected during the week of Nov. 22.

BNP Paribas has the books for the acquisition financing.

And late in the session Owens-Brockway Glass Container Inc. announced in a press release that it plans to make an offering of Rule 144A senior notes.

No timing, structure or syndicate names were disclosed in the release form the Toledo, Ohio based container company.

New deals hold steady

When the new Videotron 6 7/8% senior add-on notes due 2014 were freed for secondary dealings, they were heard to have opened right at their 105 issue price. A trader saw them going out around 105 bid, 105.5 offered.

William Lyons, he said, was also "right at new issue," the 7 5/8% notes due 2012 a par lock. Also in the hombeuilding sector, Hovnanian Enterprises' new 5-year notes were being quoted at 100.75 bid, while its 10-year tranche hung in around par.

"There were a lot of deals pricing," he noted, "but just not trading higher." The Videotron deal, "at 6% [yield] is pretty fully priced."

Looking at the recently priced Dex Media West LLC 5 7/8% senior notes due 2011, he said the bonds "were softer," offered at their par issue price. The existing Dex Media East 9 7/8% notes, he said were 114.25 bid, 114.75 offered, down a little, while the phone directory company's 12 1/8% notes were at 123.5 bid, 124 offered, "a little bit softer."

He further said that Charter Communications' plans to offer $750 million of new convertible notes and use the proceeds to refinance its existing converts "should boost the [straight] bonds a little bit."

Another trader looking over the new issues saw the William Lyons bonds "doing a little better," at 100.5 bid, 101 offered, versus the notes' par issue price earlier.

Smithfield's new add-on to its 7% notes due 2011 didn't really go anywhere; at its 106 issue price, in line with the existing tranche, the deal "looks pretty rich to me," he said.

Delta rises

Back among the existing issues, Delta's bonds "did something," a trader said, acknowledging that there may have been some pent-up demand for the Atlanta-based air carrier's notes among market players who may not have been around late last week, when Delta announced that its unionized pilots had okayed the $1 billion of pay cuts that the airline had been seeking.

He saw Delta's benchmark 7.70% notes due 2005 up one point on the session at 87 bid, 89, and well up from the 81 bid, 83 offered level that those bonds had been at just a couple of sessions ago, before the airline announced its good news.

Also up, he said, were Delta's 10% notes due 2008, which winged their way up to 65 bid 67 offered from 62 bid, 64 offered on Friday; its 7.90% notes due 2009, which gained two points to go home at 55 bid, 57 offered; and its 8.30% notes due 2029, two points better at 44 bid, 46 offered.

Northwestern Airlines Corp.'s 7 7/8% notes were likewise a point higher at 78 bid, partly on Delta's gains, as well as on the continued fall in world oil prices, which should manifest itself soon in the form of cheaper fuel costs for the airlines. Light sweet crude for December delivery settled at $46.87 per barrel, down 45 cents on the New York Mercantile Exchange - more than $8 a barrel down from its recent peak level at $55.17 in mid-October. Oil prices eased after the union representing Nigerian oil workers indefinitely suspended a threatened nationwide strike, which would have crippled exports from the African nation, a major OPEC exporter.

Level 3 mixed

Elsewhere, a market source saw Level 3 Communications Inc.'s bonds mixed, after the Broomfield, Colo.-based telecommunications company announced that its current tender offer for up to $450 million of its various notes maturing in 2008 had been well over-subscribed. But, he said, the only issue heading upward was the company's 9 1/8% senior due 2008, Level 3's top priority to take out in the tender offer. Those notes were up half a point at 84 bid.

However, the other two dollar-denominated issues being tendered for, somewhat lower down in the priority hierarchy the company established, were easier, with the 11% senior notes due 2008 a point lower at 86 bid and its 10½% notes due 2008 at 82.5, down 1¼ points. Level 3's zero-coupon notes due 2010 lost one-quarter points to 79.75.

A trader at another shop said that Level 3 "had been kind of bid up on the tender news, and they're lower now."

M&A names quiet

There was no further movement among the bonds which had pushed up at the tail end of last week on merger and acquisition news, such as clothier Barney's Inc., being acquired for $400 million by Jones Apparel; Barney's 9% notes due 2008 were steady at 107 bid.

GenCorp's 9 ½% notes due 2013 hung in at 109.5 bid, even as the California-based technology company rejected shareholder Steel Partners II's $17 per share takeover bid as "inadequate."

Nor was there any movement in Hollywood Entertainment Corp., whose bondholders - though not shareholders - gave poor reviews to rival video rental-chain Blockbuster Inc.'s $700 million offer to buy out its smaller competitor. After having fallen to the 108 level from pre-news levels around 114, Hollywood's 9 5/8% notes due 2011 were unchanged at that level.

All told, said a trader, the market was "very quiet," with "stuff marginally better."

One issue he saw firmer was Tenet Healthcare's 6 3/8% notes due 2011 and 6½% notes due 2012, both half a point better at 94.5 bid, 95 offered and 94.25 bid, 94.75 offered, respectively.

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