Stone Container Corp. may get a much needed price increase this month that looked doubtful earlier this year, one high-yield analyst said yesterday.
While Brian Bogart, a group vice president at Duff & Phelps Investment Research Co. doesn't think the containerboard industry will et the full $25 a ton increase it is seeking, "it looks like they'll get part of the October price increase," he said. "It also indicates that it's more likely that they'll get price improvement next Spring."
A price increase would help improve the Chicago-based pulp and paper company's financial outlook and make it easier for Stone to tap the debt market for refinancing, Bogart said.
Stone, which was the subject of unfounded bankruptcy rumors not long ago, has a heavy debt maturity schedule for the next several years, Bogart said.
"I think it will go through," said Brian Doyle, vice president and director of high-yield research at Citicorp Securities Inc. Doyle estimated that the increase has a roughly 80% chance of sticking.
"Which is a hell of a lot better odds than I would have given you five weeks ago," he said.
Both Doyle and Bogart cited an article in Pulp & Paper Week, which reported that U.S. containerboard producers appear to be making headway in getting their $25 a ton price increase through this month.
"Most mills have been invoicing at the new price levels, and the increase has reportedly been accepted by a number of large independent converters," the article says. "One indication of this is that several major southern and eastern independents have reportedly announced 6% to 7% price increases on corrugated sheets and boxes effective with shipments in early November."
The article also said that some independents still appear to be holding out until they see more activity by integrated producers in raising box prices.
Bogart said production cutbacks and an improving economy combined with demand that has remained relatively healthy are helping boost chances for a price increase survival.
The last time the industry succeeded in getting a price increase was 1991. At least three other attempts failed largely because because supply exceeded demand, Bogart said.
The success of the price increase also depends on industry restraint. Rapidly increased production could flood the market and depress prices, Bogart said.
Yesterday found prices on Stone Container's 11 7/8% debt of 1998 ending at roughly 93 3/4 cents on the dollar, up from 93. The company's 11 1/2% debt of 1999 gained nearly two points to end at 791/4 after starting the day at 77 3/8.
In the past week or two, the 11 7/8% debt has lost four points, while the 11 1/2% debt has lost about six points, one high-yield source said. The source attributed the losses to jitters over the company's third-quarter results. Stone Container on Tuesday reported a net third quarter loss of $99.2 million, or $1.42 per common share. That compares to with net loss of $43.2 million or 64 cents a common share for the 1992 third quarter.
In the release, Stone also said that the company "continues to move forward" on the planned initial public offering of its Canadian and United Kingdom newsprint and groundwood papers company, Stone Consolidated Corp. The company is also looking into the sale of other assets.
On Sept. 24, the bonds lost 10 points early in the day but then rebounded to ended unchanged to slightly better for the day. A theory held that short sellers may have spread bankruptcy rumors hoping to drive prices down.
In other news, Comcast Corp. yesterday said it has filed a registration statement with the Securities and Exchange Commission to issue up to $1 billion of new debt and equity.
The securities can be issued at any time after the registration statement's effective date. The company can issue a variety of securities including senior debentures, senior subordinated debentures, subordinated debentures, preferred stock, Class A special common stock, Class A common stock, and warrants.
In addition to the $1 billion filing, the company also has about $345 million already on the shelf that can be issued as debt, equity, or a combination of the two.
In other news, Milwaukee-based mining manufacturer Bucyrus Erie Co. has been added to the defendant list in a securities fraud lawsuit brought on behalf of Jackson National Life Insurance Co., its biggest debt investor.
Chicago-based investment advisor PPM America filed the suit on Jackson's behalf in U.S. District Court in New York, according to a release from PPM's law firm, Anderson Kill Olick & Oshinsky. The suit, which names Goldman, Sachs & Co. and Greycliff Partners Ltd. among others, stems from a 1988 Goldman-led buyout. The buyout, along with subsequent transactions, led the 113-year-old Bucyrus Erie Co. to "the brink of financial ruin," an Anderson Kill release says.
David M. Goelzer, vice President and general counsel at Bucyrus Erie, said while he has not seen the amended suit or the press release, he is familiar with the earlier version. The company's outside counsel advised him that the earlier version is without merit, Goelzer said, saying that he doubts the suit has been improved by adding the company as a defendant.
Bucyrus Erie currently has a restructuring plan that calls for a prepackaged bankruptcy, Goelzer said.
In secondary trading, spreads on high-grade issues ended slightly wider overall, with utilities widening about 10 basis points after Standard & Poor's Corp. said a review of the U.S. investor-owned utilities revealed that "more stringent financial risk standards are appropriate to counter mounting business risk." The rating agency said it has placed several utility ratings under review for a possible downgrade.
PNC Bank issued $500 million of 3.53% bank notes due 1994 at par. The noncallable notes were priced to yield 3.547% or 9.5 basis points more than comparable Treasuries. Moody's Investor's Servicerates the offering Aa3, while Standard & Poor's rates it A-plus. Salomon Brothers Inc. Managed the offering.
Wells Fargo & Co. sold $250 million of 6 1/8% subordinated notes due 2003. The noncallable notes were priced at 99.45 to yield 6.2% or 77 basis points more than comparable Treasuries. Moody's rates the offering Baa2, while Standard & Poor's rates it BBB-plus. Salomon Brothers Inc. managed the offering.
OMI Corp. issued $170 million of 10.25% senior notes due 2003 at par. They after five years at a premium. Moody's rates the offering B1, while Standard & Poor's rates it B. Goldman Sachs was lead manager on the offering.
Sonoco Products came to market with $100 million of 4.875% noted due 2003. The noncallable notes were priced at 99.329 to yield 53 basis points more than comparable Treasuries. Moody's rates the offering A2, while Standard & Poor's rates it A-plus. J.P. Morgan Securities Inc. was lead manager.