Abitibi-Price Inc. has benched the $150 million junk bond offering it planned for this month until early next year, sources familiar with it said Friday.
"The December time frame was the original time frame, and right now we are looking at January," Bob Tait, manager of investor relations at the Canadian company, said Friday.
A spokeswoman for underwriter First Boston Corp. cited "market conditions" as the reason the offering's schedule was changed. She said a full road show is expected to be held for the newsprint and groundwood paper company's deal sometime next month.
Standard & Poor's Corp. has assigned a BB rating to the proposed seven-year issue, derived from a $300 million shelf registration.
"The entire industry is under a lot of pressure, and that's a good part of the rating," William J. Chambers, director of the international ratings group at Standard & Poor's, said Friday.
He described Abitibi-Price as "an old company that's now coming around." The company has sold off some non-core assets and is working on restructuring its debt.
"We feel very much that turning around is an apt description," Tait said, adding that those asset sales have helped the company achieve one of the strongest balance sheets in the industry.
Troubled real estate giant Olympia & York controls approximately 82% of Abitibi-Price's shares and has pledged them to its banks, Chambers and Tait said. Though that situation adds a hint of uncertainty, it was not a big concern for Standard & Poor's when it came to rating the offering, according to Chambers.
Robert E. Lupo, director of high-yield research at Paine Webber Inc., said double-B or better deals such as Abitibi-Price's dominated the high-yield market's new issue calendar earlier this year. But single-B offerings have become more evident since the summer, he said, particularly since early November.
"I think there's a more speculative flavor to the market than there was earlier this year," he said. Earlier this year, buyers were not yet ready to accept the more speculative paper, "so Wall Street offered the better merchandise first," Lupo said.
Those buyers are now hungry for higher-yielding paper, storied issues, and deals that include equity, he said.
As more money flows into mutual funds that promise dividend payouts of 10% to 11%, those funds need to find yield, Lupo said.
The average weighted coupon for the $36.5 billion of new high-yield issues priced so far this year is 10.56%, Lupo said.
The B-rated issues arriving since early November have tended to be priced in the 12% to 12 3/4% coupon range, he said.
In secondary trading yesterday, a severe winter storm that buffeted
New York's financial district cut short trading.
"The weather has brought everything to a standstill," one high-grade trader said, adding that spreads finished unchanged.
High-yield bonds also finished unchanged.
Time Warner Inc. issued $1.5 billion of liquid yield option notes due 2012.
Noncallable for five years, the notes have a 6.25% yield to maturity. Each lyon is exchangeable into 7.301 shares of Hasbro common stock at $40 a share, 1 21.21% conversion premium over the $33 closing price of Dec. 10. Merrill Lynch & Co. lead-managed the offering. A source familiar with the offering said it was trimmed from $1.55 billion because of a drop in the price of Hasbro stock, to which the offering was linked.
Wal-Mart Stores issued a two-part asset-backed offering totaling $273 million. The A-1 piece consisted of $201 million of 7.49% pass-through certificates due 2007 at par. The certificates were priced to yield 70 basis points over comparable Treasuries and have an 11-year average life. The A-2 piece consisted of $72 million of 8.07% pass-through certificates due 2012 at par. The certificates were priced to yield 63 basis points over comparable Treasuries and have an 18-year average life. Goldman, Sachs & Co. sole-managed the offering.
The Kroger Co. issued $175 million of 6.375% convertible junior subordinated notes due 1999. Non-callable for three years, the notes convert into common stock at $18.68, a 23.5% conversion premium. Goldman Sachs lead-managed the offering.
Delta Air Lines Inc. issued $175 million of 10.375% debentures due 2022. The noncallable debentures were priced at 99.887 to yield 10.387% or 295 basis points over comparable Treasuries. Moody's Investors Service rates the offering Baa2, while Standard & Poor's rates it BBB. Goldman Sachs lead-managed the offering.
Standard & Poor's has downgraded Navistar International Transportation Corp.'s and Navistar Financial Corp.'s senior debt to B-minus from BB.
It has also lowered Navistar Financial Corp.'s subordinated debt and holding company Navistar International Corp.'s preferred stock to CCC from B-plus. Standard & Poor's has placed the ratings on Credit Watch with developing implications. The actions affect approximately $1 billion of securities.
"The downgrades and CreditWatch action reflect high risk to security holders stemming from uncertainty regarding the firm's ability to substantially reduce post-retirement benefit obligations," a Standard & Poor's release says. "With three times as many retirees as active employees, Navistar's cost disadvantage versus its competition is about $150 million annually."