Delta Petroleum deal prices, Telcordia cancelled; Crompton up on merger, Radnor dives

By Paul Deckelman and Paul A. Harris

New York, March 9 - Delta Petroleum Corp. priced a new 10-year bond offering Wednesday, the only pricing seen by the close. However, there was much bigger news on the downside, with Telcordia Technologies Inc.'s recent sale of $300 million eight-year notes wiped off the books as if it never happened, due to "disclosure issues."

In secondary dealings, Crompton Corp.'s bonds shot up on the news that the Middlebury, Conn.-based specialty chemicals manufacturer will acquire Great Lakes Chemical Corp. in a $1.55 billion deal that may result in Crompton's credit ratings being raised, while split-rated Great Lakes may see a downgrade.

On the downside, potential interest payment woes were being blamed for a slide in Radnor Holdings Corp.'s 11% notes due 2010, as well as for a two-day freefall in aaiPharma Inc.'s 11s, also due 2010.

A notable sell-off in U.S. Treasuries, along with lower equity prices and rising crude oil costs caused the high-yield market to see "better sellers" during the mid-week session, according to one source.

The new deal market saw one issue price as Delta Petroleum sold $150 million at a slight discount, pricing its deal toward the wide end of the price talk.

Meanwhile details emerged on the $2 billion plus of business that is expected to price in the primary market before Friday's close.

And in a rare event, bookrunner JP Morgan canceled Telcordia Technologies Inc.'s $300 million issue of junk bonds that were scheduled to settle Wednesday. At issue was a disagreement involving the company's compliance with a disclosure clause.

The market followed Treasuries

"It was kind of ugly out there," commented a market source late Wednesday, adding that high yield was down three-eighths of a point to half a point.

The source pointed to a significant sell-off in U.S. Treasuries, sending the yield on the 10-year bond to an eight-month high, partially on fears that foreign investors are losing their appetite for the paper.

"No high-yielding asset class can shake off a move like that," the source added.

A-deal-a-day pace

Nevertheless, the new issue market carried on the deal-a-day pace that has prevailed since Monday.

Wednesday's sole issuer was Delta Petroleum Corp., which sold $150 million of 7% 10-year senior notes (B3/B) at 99.50 to yield 7.07%.

The transaction priced wide of the mid-point of the 7% area price talk.

The debt refinancing deal, led by JP Morgan and Citigroup, generated $149.25 million of proceeds.

Telcordia deal canceled

As the Wednesday session got underway news rumbled through the market that Piscataway, N.J. telecommunications software company Telcordia Technologies Inc.'s senior subordinated notes due March 2013 (B3/B-) was canceled.

JP Morgan pulled the plug on the $300 million issue because of questions about the company's compliance with a "material adverse conditions" clause.

"JP Morgan said that all trades had been canceled due to material adverse conditions," the source said.

"My understanding is that the company did not disclose what those conditions were, and JP Morgan told them if they did not disclose those conditions the deal is canceled.

"This is rare, and I've never heard of a deal being canceled due to a disclosure issue," the source added.

"The deal will be wiped off the books as though it never took place."

Late Wednesday a market source told Prospect News that the issue will come under discussion during a conference call that is scheduled to take place at 11 a.m. ET Thursday

Pace to pick up Thursday and Friday

The above-mentioned deal-a-day pace figures to give way to considerably heavier volume as the market anticipates transactions totaling well north of $2 billion to price during the final two sessions of the March 7 week.

For Thursday, the two biggest issuers are likely to be Asian companies.

Noble Group Ltd., a Singapore-based trading and shipping firm, talked its $500 million of 10-year senior notes (Ba1/BB+) at Treasuries plus 225 to 237.5 basis points, on Wednesday.

Sources have advised Prospect News that the JP Morgan-led deal has well over $1 billion in the order book. A buy-sider said that given the demand the deal should be priced at 225.

Titan Petrochemicals Group Ltd.'s $400 million of seven-year senior unsecured notes (B1/B+), which are talked at the 8½% area, are also receiving a warm reception from investors.

The Hong Kong commodities trading firm's Morgan Stanley-led deal is also expected to price on Thursday.

Elsewhere AEP Industries Inc.'s $175 million of eight-year non-call-four senior notes (B2/B) via Merrill Lynch & Co. are talked at 7¾% to 8%.

And Activant Solutions Inc.'s $120 million offering of five-year senior floating-rate notes (B2/B+), via JP Morgan and Deutsche Bank Securities is talked at three-month Libor plus 600 to 625 basis points.

Both deals are expected to price on Thursday.

One roadshow start

Finally, one roadshow announcement was heard during the mid-week session.

Affinity Group Holding Co. will kick off a roadshow on Thursday for $75 million of senior notes due Feb. 15, 2012.

The notes will come with a pay-in-kind coupon for the first three years.

CIBC World Markets has the books.

Proceeds will be used to fund a preferred share investment in FreedomRoads LLC.

According to a market source, FreedomRoads, a recreational vehicle retail network, was founded in 2003 by Affinity Group's non-executive chairman Stephen Adams along with current chairman CEO Marcus Lemonis.

Affinity Group Holding is a Ventura, Calif., membership-based direct marketing organization selling club memberships and publications to select recreational groups.

Delta up in trading

When the new Delta Petroleum 7% notes due 2015 were freed for secondary trading, they were heard to have moved up to 100.25 bid, 100.625 offered, from their 99.5 issue price earlier in the session.

Corrections Corp. of America's 6¼% notes due 2013, which priced at par Tuesday but came too late for aftermarket activity that day, were quoted at par bid, 100.25 offered. A trader said that the Nashville, Tenn.-based private prisons operator's new bonds "were a little bit firmer early in the morning, but then weakened in the afternoon as Treasuries sold off" on renewed inflation fears generated by rising oil prices and the falling dollar, "but not below par."

Crompton higher on merger

Back among the established issues, Crompton's bonds were heard to have firmed smartly on the news of the impending merger with the higher-rated Great Lakes Chemical. A market source pegged the Crompton 6 78% debentures due 2026 at 103 bid, up from 95 on Tuesday before the merger news was announced. He also saw its 7¾% debentures due 2023 at 103 bid, up from par, while its 9 7/8% notes due 2012 were estimated to be at 117.875, well up from 113.5 previously.

By way of contrast, Great Lakes' 7% split-rated (A3/BB+) notes due 2009, which generally trade off the high-grade desks at most shops on a spread-versus Treasuries basis, were seen to have widened out to bid levels of 120 basis points over Treasuries versus 88 bps over previously; the source calculated that to be the equivalent of a retreat to 106.375 from 108 previously.

Crompton is acquiring Indianapolis-based Great Lakes in an all-stock deal, which also includes its assumption of some $250 million of Great Lakes net debt (see related story elsewhere in this issue).

Moody's Investors Service said that because the combined company would have better credit metrics than Crompton does on a stand-alone basis, it would consider the company's ratings for an upgrade. By the same token, the ratings agency, which had been already considering Great Lakes for a downgrade, said that it would continue eyeing it for a possible ratings cut for the company.

Radnor plunges

Elsewhere, Radnor Holdings' 11% notes "got mowed," a trader said, quoting the bonds as having dropped to 83 bid, 84 offered, down from 88.5 bid, 89.5 offered on Tuesday before Standard & Poor's downgraded the company's credit ratings, which were lowered to CCC+ from B- for the corporate credit and senior secured notes, and to CCC- from CCC for the unsecured bonds.

S&P cited the Radnor, Pa.-based plastic cup manufacturer's deteriorating financial performance and business challenges, noting "Radnor's inability to materially improve its already weak liquidity position ahead of about $9 million in interest payments due within the next 45 days on its debt obligations."

The interest payment on its $135 million of notes is specifically due on March 15, although there is the standard 30-day grace period should it not make it; the trader said that payment "apparently is in jeopardy."

aaiPharma down again

He also cited interest payment concerns as the catalyst behind the sharp fall Tuesday and the continued retreat Wednesday of aaiPharma's 11% 2010 notes, in absence of any other news about the Wilmington, N.C.-based pharmaceuticals company, which has a $9.625 million coupon payment due April 1 on the $175 million of outstanding bonds.

He saw the bonds, after having been traded "in the low 70s a week ago," ending at 59.5 bid, 61.5 offered Wednesday, "down significantly in the last three or four days. They botched up one [interest payment], although they finally paid, and now they've got another payment coming up April 1, and I guess people are concerned about them."

At another desk, the bonds were seen having dipped to 59 bid, 60 offered, off a point, after having lost six points on Tuesday to end at 60 bid, 61 offered.

Yet another trader, in quoting the bonds as having "gotten crushed" and falling into the 50s, cited sector fallout from the troubles of another pharmaceuticals company, Elan Corp.

The Irish drugmaker's 7¼% notes due 2008 had been beaten down to as low as the high 80s from prior levels above par due to complications arising from Tysabri, a multiple sclerosis drug Elan makes with U.S.-based Biogen Idec Inc. which forced the companies to pull the drug off the market after one patient died and another developed a serious and rare nervous system disorder.

But they were seen having come partly back, and the company's benchmark 7¼% notes due 2008 were seen at 92.75 bid Wednesday, "a new recent high," a trader said.

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