William Geknerates Interest; Kirch Pulled from Market


While the recent buzz seems to be that the European market feels healthier than its larger U.S. cousin does, last week Tulsa, Okla.-based Williams Communications was being well-received in the market while Munich, Germany-based Kirch Media was yanked.

Both were large offerings and were said to be potential bellwethers when they first hit the scene.

Williams, which has been on the radar screen for weeks with its $2 billion fiber optic transaction, was being marketed well, according to one investor.

Price talk pegged the spread at 490 basis points over Treasurys, said Dick Cryan, portfolio manager at Keystone Investment Management. And for a company with its rating, a spread of 350 to 400 would have been normal, he said.

"That's exactly what they should do," he said, because of the skittish market the issuer is simply adding some necessary juice to ensure the deal gets priced.

The B2/BB-minus offering, led by Merrill Lynch and co-managers Lehman Brothers and Salomon Smith Barney, will include $1.5 billion in 10-year notes and $500 million in non-callable, eight-year notes, market sources said.

On the other side of the Atlantic, Kirch Media postponed its $1.1 billion high yield offer until after New Year, and one buy-sider in London said he was wary of whether it will be back even then.

The previous week, Kirch increased the coupon by half a percent in an attempt to entice investors but to no avail.

The investment bank handling the deal, Morgan Stanley Dean Witter, was said to be extending a current bridge loan for Kirch.

It simply was in the wrong market, the investor said. "That's not a bondholder profile," he said. "It's an equity profile."

Meanwhile, there were a few others that priced last week.

Better Minerals & Aggregates sold $150 million of notes structured as senior subordinated notes. The 10-year notes were rated B3/B- and priced at par to yield 13%. There was a non-call, five-year provision.

EOTT Energy Partners also issued 10-year, non-call five-year notes. The deal was rated BB and featured a spread over Treasurys of 515 basis points, and an 11% coupon. EOTT, an affiliate of Enron Corp., specializes in the purchasing, gathering, transporting, trading, storage, and resale of crude oil.

Knowles Electronics also issued 10-year, non-callable five-year paper last week. The notes, rated B3/B-, were structured as senior subordinated notes with an initial coupon of 13.125%. They priced at 97.954 for a final yield of 13.5%, or 765 basis points over Treasurys.

The Illinois-based company manufactures hearing aid and automobile components and other sound technologies including headsets and mini microphones.

InsightMidwest, for its part, priced a $200 million transaction that carried a rating of B1/B+. The notes were structured as senior notes and the priced at par to yield 384 basis points over comparable Treasurys, or 9.75%.

The deal is initially callable in 2004 at 104.875, and then prices fall in subsequent years to 103.25, 101.625 and par.