Primus, Alamosa, KB Home price deals; Lucent steady despite China contracts

By Paul Deckelman and Paul A. Harris

New York, Jan. 13 - Primus Telecommunications Holding Inc., Alamosa (Delaware) Inc. and KB Home were heard by high yield syndicate sources to have priced new deals on Tuesday; the Primus and Alamosa offerings were heard to have been upsized.

In the secondary market, the major news was the surprising lack of movement in Lucent Technologies Inc. bonds, despite clearly positive news about the telecom equipment maker receiving a pair of big contracts from China. Several distressed names were the only issues really moving.

Market observers anticipating a busy week in the new issue market were likely not taken buy surprise on Tuesday, as four deals from U.S.-based issuers - two of them quick-to-market offerings -priced.

And sources told Prospect News that the interest rates printed on this and other recently priced new paper continue to reflect the "hot" conditions of the high yield market.

Texas wireless firm Alamosa (Delaware) Inc. upsized its eight-year senior notes offering to $250 million from $225 million and priced the Caa1/CCC rated bonds at par to yield 8½%, via UBS Investment Bank.

Price talk on the notes had been revised to 8½% from 8 5/8%-8 7/8%.

Nor was Alamosa the only telecom to sell an upsized offering during Tuesday's session.

Primus Telecommunications Holding, Inc. priced an upsized $240 million from $200 million of 10-year senior notes (B3/CCC) at par to yield 8%.

Lehman Brothers and Morgan Stanley Dean Witter led the offering from the McLean, Va.-based telecommunications services provider, which came at the tight end of the 8%-8¼% price talk.

KB joins the "5" club

Whereas yields in the low-to-mid eights proved to be the rule Tuesday for telecom companies, high-yield investors have lately demonstrated a willingness to settle for dramatically less compensation from homebuilders.

That continued Tuesday as KB Home sold $250 million of 5¾% 10-year senior notes (Ba1/BB+) at 99.474 to yield 5.82%.

The Banc of America Securities-led deal, which mobilized the resources of both the high-yield and high-grade syndicate teams, priced at the tight end of the 5 7/8% area price talk, also put as a 175-180 basis points spread to Treasuries.

Hence the Los Angeles-based homebuilder joined Texas builder D.R. Horton in the exclusive "five-handle" junk bond club. Horton priced an upsized $200 million issue of 5% five-year senior notes (Ba1/BB/BB+) at 99.72 on Jan. 6 to yield 5.064%.

As was the case with KB Homes, D.R. Horton also priced its deal at a spread, a custom most often seen in high-grade bond deals.

Finally on Tuesday Star Gas Partners, LP and Star Gas Finance Co. priced a $35 million add-on to their 10¼% senior notes due Feb. 15, 2013 (existing ratings B3/B) at 110.5, resulting in a yield of 8.23%.

Wachovia Securities was the bookrunner.

The Stamford, Conn.-based energy distributor priced its original $200 million at 98.466 on Feb. 3, 2003 to yield 10½%, and hence walked away from Tuesday's transaction beating that rate by better than 225 basis points.

Exco, American Casino talk

Price talk of 7½%-7¾% emerged Tuesday on Exco Resources' upcoming $300 million of senior notes due 2011 (B), expected to price on Wednesday.

Credit Suisse First Boston is the bookrunner for acquisition financing from the Dallas-based oil and gas exploration and production company, which is acquiring Nuon Energy & Water.

And price talk of 8 1/8% area was heard on American Casino & Entertainment Properties LLC's $200 million of eight-year senior secured notes (B2/B), expected to price on Thursday via Bear Stearns & Co.

Proceeds from that deal will be used to fund the acquisition of two casinos in Las Vegas from American Real Estate Partners, LP chairman Carl Icahn.

Atlantic Broadband, Vail heard coming

Atlantic Broadband Finance, LLC is expected to sell $150 million of 10-year senior subordinated notes (Caa1) via Merrill Lynch & Co., although no timing on the deal was heard during Tuesday's session.

The Quincy, Mass. multiple system cable operator will use the proceeds to fund the acquisition of cable TV assets from Charter Communications. Abry Partners is the equity sponsor.

And Vail Resorts, Inc. is expected to slide into the market with an offering of as yet unspecified size, to fund its tender for up to $200 million of senior subordinated notes due 2009.

Banc of America Securities and Deutsche Bank Securities are dealer managers for the tender offer. The consent solicitation expires on Jan. 27.

When the new Alamosa (Delaware) 8½% senior notes due 2012 were freed for secondary dealings, they were seen to have traded as high as 102.375 bid, 102.875 offered from their par issue price earlier in the session. However, a trader said, by the end of the day, they had come down from those peak levels to end around 101.25 bid, 101.75 offered.

He said that the Primus deal came too late in the session to do any secondary trading. "Allocations were very skinny," he said. "Looks like demand was strong."

At another desk, a trader pegged the new Alamosa bonds at 101.75 bid, and the new KB Home 5¾% senior notes due 2014 at 99.625 bid, 99.875 offered, "a little bit up" from their 99.474 issue price.

Lucent little changed

Back among the established names, it isn't often that the absence of anything happening is big news - but that was the case with the bonds of Lucent Technologies, virtually unchanged despite the very good news that the Murray Hill, N.J. -based telecom equipment maker had scored supply contracts totaling $350 million from China Unicom and China Telecom.

A market source quoted Lucent's benchmark 7¼% notes due 2006 up ¼ point to 105 bid, while its 6.45% bonds due 2029 were likewise up a quarter point at 85.

At another desk, the 71/4s were seen unchanged on the day at 104.5 bid, 105 offered.

A market watcher opined that with Lucent's bonds having had a terrific run-up toward the end of 2003, moving to around par bid from levels as low as the 60s earlier in the year, "there isn't much room for them to go further."

However, a trader suggested that the lack of market enthusiasm was perhaps due to the fact that this might not be that big a deal.

"How many years do these contracts cover? If they stretch out over several years, it won't really help earnings in any particular quarter or year," the trader said.

"To be sure, it's nice - it's good news, but it won't be such a dramatic change."

The news, he said, "had already been anticipated last week," when Lucent bonds rose about five points. He quoted Lucent's 2028 and 2029 bonds perhaps half a point better at 84.5 bid, 85.5 offered.

Lucent shares were six cents (1.55%) better in busy New York Stock Exchange dealings, closing at $3.93. Volume was 120 million shares, about double the norm.

There was very little movement seen among regular, non-distressed junk names; most of what movement there was came from the distressed sector, with Mirant Corp. notes heard mostly a few points higher on news that its Philippine unit may be looking to raise capital by selling stock; Mirant's 7.90% notes due 2009 were seen up about three points to around a 70-72 context.

Another distressed mover was Exide Technologies Inc., whose 10% notes were quoted as high as 29 bid, 31 offered, up from recent levels at 26 bid. And Doman Industries Ltd.'s bonds, such as its 8¾% notes nominally coming due in March, were seen trading in a 27-28 context, up at least five points from recent levels over the past two sessions.

Overall, a trader said, "it was not a very exciting day. It was very slow, with pockets of profit-taking and pockets of weakness."

Still, he said, "the market did OK, considering what happened to stocks" (all of the major indices were lower, with the Dow Jones Industrial Average dropping 58 points to end at 10,427.18).

"The market was pretty quiet," another trader said. "It traded up. There was a problem in healthcare early in the day, but the market shook that up."

However, he noted "everything's been extremely quiet" over the past few sessions, perhaps because investors are reluctant to step in with prices as high as they are. Should the market step back and prices ease a little, it might encourage more investors to come in at lower levels, "but they don't seem to be backing up yet."

Russian, Ukrainian corporates roll into emerging markets

In emerging markets action Tuesday, three new corporate offerings took shape, including a pair from Russia and one from the Ukraine.

Sistema Capital SA is expected to launch $250 million of senior unsecured obligations due 2011 (//B-/B-) later this week via Credit Suisse First Boston.

The paper will be putable in three years, sources said, and will be guaranteed by Sistema JSFC.

One market source told Prospect News that a yield-to-put in "the low nines" is anticipated.

Also Gazprombank is expected to price an add-on to its 7¼% notes due 2008 (Ba2/B+), possibly by the end of Wednesday's session.

The size of the sale, which will be led by JP Morgan, remains to be determined.

And from the Ukraine, rocket-maker Yuzhmash is heard to be heading into the market with $107.5 million of bonds due 2011 (B1/B).

The issuer, according to ratings information from Moody's Investor Services, will be Colvis Finance Ltd., a special purpose entity based in the United Kingdom.

JP Morgan is also heard to be the bookrunner for that offering.

Roberto Sanchez-Dahl, a portfolio manager at Federated Investors, told Prospect News on Tuesday that at present the emerging markets are hot.

"They have been for the last month," Sanchez-Dahl added.

"It is very difficult to find bonds right now. Everything that comes to market is absolutely oversubscribed.

"And there are a lot of new deals coming."

A case in point, said Sanchez-Dahl, was Brazil's $1.5 billion 30-year sovereign deal that priced Monday at 94.723 with an 8¼% coupon and an 8¾% yield, via Citigroup and Deutsche Bank Securities.

"We did not participate but it did very well," said the Federated Investors portfolio manager.

"We heard it was five to six times oversubscribed."

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